11-10-5r and TAA 86-001. The facts provided are, in pertinent part, as follows: Section 89 of the Internal Revenue Code imposes testing requirements on certain employee benefit plans. X, Inc. provides computerized testing services which consist of analyzing companies' employee benefit data in conjunction with payroll data. X, Inc. is a West Virginia corporation which owns and operates computer equipment and software. Its software is designed to accept employee payroll and benefit data from an employer. The software program then analyzes this data and provides numerical outputs to show which of the Section 89 tests are met by the employer's present benefit structure. The software also provides the employer with information about the "excess benefits" that have accrued to "highly compensated employees" as defined by Section 89. X, Inc. offers alternative methods by which the employer can supply its payroll and benefit data for processing. In the simplest form, the employer can provide this raw data on paper forms. However, most employers will provide this data on computer floppy disks that can be transferred from the employer's computer to the computers of X, Inc. In some instances, X, Inc. will loan a short "capture" program to the employer that the employer can run on its own computer. This short "capture" program allows the employer's own employees to input the data in a format acceptable to the software owned and operated by X, Inc. The short "capture" program is otherwise useless because it provides no function other than facilitating the transfer of data from the employer's computer to the computers of X, Inc. X, Inc. does not provide legal services and does not complete or file any state or federal tax forms on behalf of its clients. The West Virginia consumers sales and service tax is imposed on sales of tangible personal property and selected services in this State. See W.

Va. Code §

11-15-3. "Sales" is defined to include a lease or license to use tangible personal property. See W.

Va. Code §§

11-15-2(d), 11-15A-1(3) and 110 C.S.R. 15, §

2.70. "Services" or "selected services" is defined to include "all nonprofessional activities engaged in for other persons for a consideration, which involve the rendering of a service as distinguished from the sale of tangible personal property, but shall not include contracting, personal services or the services rendered by an employee to his employer or any service rendered to resale." See W.

Va. Code §

11-15-2(i) and 110 C.S.R. 15, §

2.74. All such sales are subject to the sales tax unless specifically excepted or exempted. See W.

Va. Code §

11-15-6. The sales which are excepted from taxation are sales of professional services, personal services and services provided by corporations subject to regulation by the Public Service Commission. See W.

Va. Code §

11-15-8. The sales which are exempted from taxation are listed in W.

Va. Code §

11-15-9 and in the corresponding regulations, 110 C.S.R. 15, §

9.2, "Per Se Exemptions;" 110 C.S.R. 15, §

9.3, "Exemptions for which Exemption Certificate or Material Purchase Certificate Required;" and 110 C.S.R. 15, §

9.4, "Refundable Exemptions." It is presumed that all sales and services are subject to the tax until the contrary is clearly established. See W.

Va. Code §

11-15-6. The exemption for electronic data processing (hereinafter EDP) services contained in W.

Va. Code §

11-15-9(z) is as follows: (z) Sales of electronic data processing services and related software: Provided, That for the purpose of this subsection (z) "electronic data processing services" means (1) the processing of another's data, including all processes incident to processing of data such as keypunching, keystroke verification, rearranging or sorting of previously documented data for the purpose of data entry or automatic processing, and changing the medium on which data is sorted, whether these processes are done by the same person or several persons; and (2) providing access to computer equipment for the purpose of processing data or examining or acquiring data stored in or accessible to such computer equipment; The EDP services exemption is classified as an exemption for which an exemption certificate is required. Consequently, even if it were applicable to the services described above, X, Inc. would still be obligated to collect sales tax except when the customer presents either a properly completed exemption certificate or a direct pay permit number issued by the Tax Department. See W.

Va. Code §

11-15-9c. We reiterate, however, that the EDP services exemption is not applicable to the services provided by X, Inc. As defined by Longman Illustrated Dictionary of Computing Science, 80 (1987), data processing is "the work necessary to prepare data, operate machines, run programs on a computer and send the results back to the users." This technical definition is equivalent to the processes enumerated in the statutory definition of "electronic data processing," and does not encompass computerized analysis as performed by X,

Inc. "Analysis" is "the methodical investigation of a problem, and the separation of the problem into smaller related units for further detailed study." Dictionary of Information Technology, 10 (1982). Thus, while computerized analysis may involve EDP, it is clearly something more than mere EDP. The fact that a computer is utilized does not result in a service being exempt. See 110 C.S.R. 15, §

7.6.1.1. The EDP services exemption applies only when the EDP services are performed for another person who is in no manner a part of the entity performing the service, and only when the charge is actually and solely for the sale of EDP services and not for any other activities. See 110 C.S.R. 15, §

9.3.11. Not all computer activities which involve EDP are exempt under the applicable statute. For example, word processing involves EDP but is not EDP as such. Similarly, computerized information management systems are not EDP, although EDP may be utilized in such systems. Although X, Inc. may perform EDP incidental to providing its computerized testing services, it is not performing EDP services as contemplated by the statutory exemption. It is necessary to determine the nature of what is being purchased by the customer. See 110 C.S.R. 15, §

76.1.1. If the services provided by X, Inc. consisted solely of using EDP to process other companies' employee payroll and benefits, then it would indeed be selling EDP services exempt from sales tax. "Processing" of another's data includes such things as "key punching, keystroke verification, rearranging, or sorting of previously documented data for the purpose of data entry or automatic processing, and changing the medium on which data is stored." See W.

Va. Code §

11-15-9(z). Processing other companies' employee payroll and benefits, then, would consist of those EDP functions necessary to issue the payroll and provide employment benefits to employees. Rather than merely processing payroll and benefits for employers, X, Inc. analyzes the employers' payroll and benefit data to provide the employers with specialized management information. Even if X, Inc. processed payroll and benefits, but also provided computerized testing services, the computerized testing service would not qualify for the EDP services exemption because, as noted above, that exemption applies only to charges for EDP services and does not include any other services, such as computerized analysis of employee benefit data. In short, X, Inc. has not clearly established that its computerized testing services are not subject to tax as required by W.

Va. Code §

11-15-6. A tax law under which a person claims an exemption is to be strictly construed against the person claiming the exemption. Wooddell v. Dailey, 160 W.

Va. 65, 230 S.E.2d 466 (1976). Thus, X, Inc. is obligated to collect and remit sales tax on the sale of its computerized testing services, unless its customer presents a properly completed exemption certificate claiming some other exemption for which the customer may be eligible, or presents a direct pay permit number issued by this Department. Prior to July

1, 1989, X, Inc. was exempt on its purchases of tangible personal property and taxable services purchased for use or consumption in connection with the conduct of its business of dispensing computerized testing services, which are subject to the sales tax. See W.

Va. Code §

11-15-9(i) (prior to 1989 amendments) and 110 C.S.R. 15, §

9.3.9.2 (1988). Beginning July

1, 1989, X, Inc. is no longer entitled to claim that exemption because it was eliminated by Committee Substitute For Senate Bill No. 303 (1989 Regular Session) which took effect July

1, 1989. See W.

Va. Code §

11-15-9(i) (1989). Purchases of tangible personal property or taxable services for resale remain exempt from tax. This exemption may be claimed by timely issuing a properly executed exemption certificate to the vendor of the property or service. See 110 C.S.R. 15, §

76.2. This Technical Assistance Advisory is based on the laws, regulations and court decisions currently in effect and any change in such authority may render this ruling as null and void at the time such change becomes effective. _________________________________ Charles O. Lorensen Secretary of Tax and Revenue Date: October 19, 1989