This Ruling has been obsoleted by AN 94(4)
Business Analysis and Management Services
Banks originate residential mortgage loans. In most cases the loans are secured by Connecticut real estate. The mortgage loans are often sold to federal or state agencies, private financial institutions or other private investors. After selling a mortgage, the bank may continue to service it by collecting and processing the payments and remitting the payments to the mortgage holder less a percentage for the bank's fee.
Section 12-407(2)(i)(J) provides that sales subject to Connecticut sales and use tax include "business analysis and management services." The taxable incident is the rendering of the services.
The Department considers mortgage servicing to be a service that falls within the definition of business analysis and management services. Section 12-426-27(10)(b) of the Regulations of Connecticut State Agencies includes "specialized management consulting services" within the definition of business management services.
Services taxable pursuant to Section 12-407(2)(i) of the Connecticut General Statutes are taxable where rendered. Pursuant to Section 12-411 of the Connecticut General Statutes, services are deemed to be used within the state if they are accepted or received within the state.
The acceptance or receipt of mortgage servicing is deemed to occur where the underlying mortgage loans are maintained. This would normally be at the bank who holds the portfolio of mortgage loans.
Accordingly it is hereby ruled that mortgage servicing is a taxable service pursuant to Section 12-407(2)(i)(J) of the Connecticut General Statutes. Those services are taxable when rendered to or received by a Connecticut bank who holds the mortgage loans.
April 16, 1990