TSSN-41

Taxability of Electronic Filing

This TSSN is obsoleted in part by AN 94(6); cited in Ruling 91-19

Electronic filing of tax returns is a computer and data processing service. In accordance with Conn. Gen. Stat. Section 12-407 (2) (i) (A) and Section 12-426-27 (b) (1) of the Regulations of Connecticut State Agencies, the total charges for the electronic filing of tax returns, including but not limited to any separately stated amounts for transmission costs, software, hardware, administrative cost, trunk lines, and formatting, are subject to Sales and Use Taxes.

All service providers of the electronic filing of tax returns must be in compliance with this Special Notice on or before March 1, 1991.

SERVICE PROVIDERS

Tax Preparer - Where a tax preparer prepares the client's tax return and delivers the tax return to a third party transmitter, who formats the electronic return and electronically transmits it to the Internal Revenue Service (IRS), the transmitter is rendering a computer and data processing service to the tax preparer and must apply Sales and Use Taxes to the total charge to the tax preparer for electronically filing the tax return. Because the tax preparer is the consumer of the electronic filing service, the electronic filing service may not be purchased with the use of a resale certificate. The tax preparer's charge to the client for the electronic filing of the tax return is not subject to Sales and Use Taxes.

Tax Preparer/Transmitter - Where a tax preparer/transmitter prepares the client's tax return, formats the electronic return and electronically transmits it to the IRS, the tax preparer/transmitter is rendering a computer and data processing service and must apply Sales and Use Taxes to the total charge billed to the customer unless the charge for tax return preparation is separately stated from the charge for electronic filing. The charge for tax return preparation is not taxable if separately stated from the charge for electronic filing as long as the charge for electronically filing the return is reasonable, as determined by the prevailing rate in the area.

Service Bureaus - Where a service bureau is hired by an accepted electronic filer to format a tax return for electronic filing and to file the tax return with the IRS through a transmitter, the service bureau is rendering a computer and data processing service and must apply Sales and Use Taxes to the total charge billed to the customer for electronic filing, including the charge by the transmitter for filing the return electronically. The service bureau may purchase the electronic tax return filing service from the transmitter without payment of Sales and Use Taxes by issuing a bona fide Resale Certificate, Section 12-426-1 of the Regulations of Connecticut State Agencies, to the transmitter.

Service Bureau/Transmitter

Where a service bureau/transmitter is hired to format and transmit electronic tax returns directly to the IRS, the service bureau/transmitter is rendering a computer and data processing service and must apply Sales and Use Taxes to the total charge billed to the customer for electronically filing a tax return.

Transmitter

Where a transmitter transmits electronic tax returns directly to the IRS, the transmitter is rendering a computer and data processing service and must apply Sales and Use Taxes to the total charge billed to the client for electronically filing the tax return directly to the IRS, including any charge for formatting the return if the transmitter is also hired to format the return electronically.

ELECTRONIC FILING SERVICE PROVIDERS AS CONSUMERS

Electronic filers are the final consumers of any materials, supplies, software, equipment, and taxable services used in rendering electronic filing services and they must pay the applicable Sales and Use Taxes on these purchases.

OUT-OF-STATE PURCHASES OF ELECTRONIC FILING SERVICES

The purchase of electronic tax return filing service by a Connecticut individual or business from an out-of-state electronic filing service provider that is not authorized to collect Connecticut Sales and Use Taxes is subject to Connecticut Use Tax.

PLEASE NOTE THE FOLLOWING NEW INFORMATION ABOUT DRS.

FOR FURTHER INFORMATION: To order forms and publications or for further information, call the Department of Revenue Services at 860-297-5962 (Hartford area or out-of-state) or 1-800-382-9463 (in-state). Forms and publications may be ordered through voice-mail 24-hours a day by choosing Option 3 on your touch tone telephone.

Electronic Delivery Options: You can also obtain tax forms and publications 24-hours a day from our Web home page. Telecommunications Device for the Deaf (TDD/TT) users only call 860-297-4911 during business hours.

TSSN-41 (New 2/91)