Kroll's Advanceview and Inview Not Exempt from Minnesota Sales Tax

This past Friday, Judge Joanne Turner granted the Defendant's Motion for Summary Judgment in Ontrack v. Comm'r of Revenue, No. 8977-R, 2018 Minn. Tax LEXIS 50 (Minn. T.C. Sept. 14, 2018). This case before the Minnesota Tax Court for the County of Hennepin concerned whether Kroll's Advanceview and Inview systems were "used primarily to electronically transmit results retrieved by a customer of an online computerized data retrieval system," under Minn. Stat. § 297A.68 which makes such systems exempt from sales tax. Kroll also sought a refund for sales tax paid on electricity used to produce personal property.

Advanceview is early case assessment software which is used to narrow down raw data sets of 100 GBs down often by 50% or more by filtering by file types and keywords. Inview is a document review platform which can automatically categorize and prioritize documents. Inview includes the ability to prepare electronic files for production as either tiff images or native files.

Kroll filed a refund claim for more than $1 million for cost of its capital equipment which the Commission denied in full. Judge Turner noted that subdivision 5(d)(8) of Minn. Stat. § 297A.68 specifies that the information on a data retrieval system must be equally accessible and available to all users of the system. Her opinion states that, "a customer of the Kroll system can access only the database of documents it has uploaded to and stored on the Kroll system and cannot access the database of documents uploaded and stored by other customers", and so cannot be considered a data retrieval system under the statute. Ontrack, 2018 Minn. Tax LEXIS 50 at *12. Judge Turner rejected Kroll's argument that only the search tools used in Advanceview and Inview need to be accessible to all customers.

The Court also held Kroll did not engage in the industrial production of personal property. "Kroll describes itself here as in the business of providing'technology-driven services.' Kroll makes no mention of providing its client with products, or anything resembling personal property as defined in Minn. Stat. §297A.61, subd. 10(a)." Id. at *18. Kroll did not qualify for a sales tax refund for its electrical bills.