It is tax time, and that means Fleet Financial Group is busy.

This week, nearly 2,500 seasonal employees at Fleet's Kingston, N.Y., processing center will handle an influx of 10 million New York State tax returns for 1997.

On peak days this week and next, Fleet will sort, scan, and process 600,000 returns a day through its $22 million-dollar computer imaging system, dubbed FleetWorks.

Fleet also handles 10 million New York State tax returns filed by corporations at another center outside Albany, N.Y. Fleet executives said they hope more fee-income opportunities will arise out of their $200 million, 10-year contract with New York State.

"We know that this platform has obvious applications elsewhere in the private sector," said John B. Robinson Jr., managing director of government banking at $85.5 billion-asset Fleet, based in Boston.

The company has placed great emphasis on fee-based businesses, analysts said. Fee revenue made up 41% of Fleet's $5.55 billion total revenue in 1997, up from 38% in 1996 and 36% in 1995.

Processing businesses are seen as stable income generators that can help offset credit-market fluctuations, analysts said.

"Fleet wants to have steady sailing even if turbulent waters hit again," said Michael Mayo, an analyst at Credit Suisse First Boston. "One way to do that is to build a processing business."

The tax system, which was built and installed in 1994 after Fleet won the New York contract, sits mostly idle from June through December. Mr. Robinson said Fleet hopes to win additional business from other processing- intensive industries like mutual funds, insurers, and brokerages to fill the gap.

Fleet is the Northeast's largest depository for governments, according to Sheshunoff Information Services. Fleet holds $4.3 billion in deposits for nearly 4,000 municipalities in New York, New Jersey, and New England, as well as for state and federal agencies.

Chase Manhattan Corp. is the region's second-largest government depository, with $3.9 billion, according to Sheshunoff's September 1997 data, the most recent available.

New York State, which is Fleet's biggest customer, used to do its own tax processing, Mr. Robinson said. It turned to outsourcing in 1994, saving an estimated $75 million a year.

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