the cumulation of information on the taxpayers computer
system is not available to all of the taxpayers customers,
the system does not qualify for the capital-equipment
exemption in Minn. Stat. § 297A.68, subd. 5 (2018).
Pridgeon, Pridgeon & Zoss, PLLC, Edina, Minnesota; and Doug
Sigel, Ryan Law Firm, LLP, Austin, Texas, for relator.
Ellison, Attorney General, Kristine K. Nogosek, Assistant
Attorney General, Saint Paul, Minnesota, for respondent.
question is this case is whether the sales tax exemption in
Minn. Stat. § 297A.68, subd. 5 (2018), for the purchase of
capital equipment, applies to items that relator Kroll
Ontrack, LLC purchased. The Commissioner of Revenue concluded
that the exemption did not apply, and the tax court affirmed.
Because we agree that Kroll does not qualify for the
exemption, we affirm the tax court.
Ontrack, LLC, is a Minnesota limited liability company that
sells technology-driven services to law firms, corporate law
departments, and government entities. At issue in this case
are Krolls electronic-discovery and document-review
services. To provide these services, Kroll uses two
internet-based programs that allow its customers to maintain
private databases of litigation documents and to sort,
search, and produce relevant documents from those databases.
Krolls programs are called Advanceview and Inview, and they
Through Advanceview, Krolls customers upload their documents
to Krolls servers. If any documents are in a format that
Advanceview cannot recognize— for example, an e-mail
file— Advanceview will convert the format of the
documents into something it can recognize. Using Advanceview,
customers can then cull down the number of relevant documents
in their individual databases using keyword searches. For
example, this process can narrow the number of documents that
would be responsive to a discovery request from 100,000 to
documents identified in Advanceview are then transferred to
the Inview system where customers can further sort the
documents using several tools. With Inviews
"Workflow Automation" tool, customers can find
documents that they want distributed for further processing
and have those documents automatically distributed to a
reviewer. For example, foreign-language documents could be
distributed to a translator fluent in that language or
technical documents could be distributed to a person with the
required technical background. In addition, Inview allows
customers to use a form of machine learning to search and to
categorize their documents. To use this tool, the customer
must set up a number of categories— for example,
responsive, nonresponsive, and privileged— and then
organize a sample of documents into each category. Inview
observes how the customer organized the sample of documents
and sorts the rest of the database in the same way.
the customer has completed its document review, Inview ...