NOTICE: All DRS offices will be closed on Monday, January 21st, in observance of Martin Luther King Jr. Day. We will reopen on Tuesday, January 22nd.

Search Department of Revenue Services Filtered Topic Search

This Ruling has been obsoleted by AN 94(4)

Ruling 90-55

Mortgage Services
Exemptions - Governmental


Whether the exemption from sales and use tax provided in Section 12-412(1) of the General Statutes applies to the servicing fee that a bank or mortgage company ("Lender") collects on the home mortgage loans which it services for the Connecticut Housing Finance Authority (CHFA).


THE CHFA is a political subdivision of the State of Connecticut pursuant to Section 8-244. Lenders originate home mortgage loans in Connecticut on behalf of the CHFA which are then assigned to the CHFA. The CHFA and each Lender have a servicing agreement whereby the Lender will service loans on behalf of the Authority. After collecting and processing the monthly mortgage payments from the borrowers, the Lender deducts a certain percentage of the servicing fee and transmits the balance of the funds to the CHFA.


Mortgage servicing fees are taxable as a business management service under Sections 12-407(2)(i)(J). However, because the CHFA is a political subdivision of the State of Connecticut, the mortgage servicing fees are exempt from the sales and use tax pursuant to Section 12-412(1).


July 9, 1990