Connecticut State Department of Revenue Services

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Ruling 91-19

Sales and Use Taxes
Computer and Data Processing Services

ISSUE:

Where a tax return preparer both prepares and electronically files a client's federal income tax return, but, in accordance with its advertisements, makes no charge to the client for electronic filing and charges no less where it does not electronically file the return, are its charges wholly subject to sales and use taxes, if the bill or invoice to the client does not separately state a charge for electronic filing?

FACTS:

  1. A person [hereinafter, "the Tax Preparer/Transmitter"] is engaged in the business of preparing federal income tax returns.
  2. In its advertisements, the Tax Preparer/Transmitter states, that, if engaged to prepare a federal income tax return, it will, for no additional charge, electronically file the return with the Internal Revenue Service.
  3. The Tax Preparer/Transmitter's records substantiate that it does not charge less for preparing a client's federal income tax return where its client does not wish it to file the federal income tax return electronically

DISCUSSION:

"Sale", as defined in Conn. Gen. Stat. §12-407(2), includes the rendering of computer and data processing services; Conn. Gen. Stat. §12-407(2)(i)(A). "Such services mean and include ...storing and filing of information, retrieving or providing access to information ...." Conn. Agencies Regs. §12-426-27(b)(1). "Electronic filing of tax returns is a computer and data processing service." TSSN-41 (NEW 2/91).

Where a tax preparer/transmitter prepares and electronically files a client's tax return, sales and use taxes apply "to the total charge billed to the [client] unless the charge for tax return preparation is separately stated from the charge for electronic filing." TSSN-41.

However, where the same charge is made to a client, whether the tax preparer/transmitter only prepares the federal income tax return or both prepares and files electronically the tax return, then no charge is being made for electronic filing of the tax return. If so, then no charge is being made for computer and data processing services.

RULING:

Where a tax return preparer both prepares and electronically files a client's federal income tax return, and, in accordance with its advertisements, makes no charge to the client for electronic filing, and its records substantiate that it charges no less where it does not electronically file the return, then its charges are not subject to sales and use taxes. In such event, the Department would recommend that the tax return preparer's bill or invoice to its client contain the words "NO CHARGE FOR ELECTRONIC FILING".

LEGAL DIVISION

May 9, 1991