Ruling 90-46

Business Analysis and Management Services
Mortgage Services

This Ruling has been obsoleted by AN 94(4)

FACTS:

X Corporation is a foreign corporation with its place of doing business in Connecticut. Pursuant to a "servicing agreement", X Corporation acts as a mortgage servicing agent for the holders of certain commercial mortgage loans. X Corporation collects mortgage payments from the borrowers and forwards these payments to the mortgage holders after deduction of its fees. In addition, X Corporation oversees periodic inspections of the mortgaged properties, monitors the payment of real estate taxes and insurance premiums in connection with the properties, levys any late charges due, and takes such other action as may be necessary in the event of a default by any of the borrowers.

X Corporation renders mortgage servicing to mortgage holders located outside Connecticut with respect to real estate located both within and without Connecticut.

RULING:

Section 12-407(2)(i)(J) of the Connecticut General Statutes imposes the sales and use tax on "business analysis, management, consulting and public relations 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. The Department considers mortgage servicing to be a taxable management service under the above statute and regulation.

Services taxable pursuant to section 12-407(2)(i) are taxable where they are rendered, and, under section 12-411(1), services are deemed to be used within this state if they are accepted or received within the state. Accordingly, the acceptance or receipt of mortgage servicing is deemed to occur where the underlying mortgage holder is located.

Therefore, it is ruled that the mortgage services rendered by X Corporation to mortgage holders located outside the State of Connecticut are not subject to sales and use taxes. Similarly, the Department considers X Corporation's other services, including overseeing periodic inspections of the mortgaged properties, monitoring the payment of real estate taxes and insurance on the properties, levying any late charges due, and taking such other action as may be necessary in the event of default by the borrowers, to be rendered to the mortgage holder and not subject to sales and use tax when the mortgage holder is located outside Connecticut.

However, with respect to payments made by X Corporation for restoration or repair services to mortgaged property located in Connecticut, the Department considers these services to be rendered directly to industrial, commercial and income-producing property under section 12-407(2)(i)(I) of the Connecticut General Statutes and section 12-426-26 of the Regulations of Connecticut State Agencies. Accordingly, the provider of such services must charge sales tax to X Corporation. Similarly, the provider of any protective services must charge sales tax to X Corporation pursuant to section 12-407(2)(i)(D) of the Connecticut General Statutes and section 12-426-27(b)(5) of the Regulations of Connecticut State Agencies.

LEGAL DIVISION

May 2, 1990