Which SAQ type applies to merchants with standalone payment applications connected to the internet?

The correct answer is SAQ C. This Self-Assessment Questionnaire (SAQ) is specifically designed for merchants who process cardholder data through standalone payment applications that are connected to the internet. Such merchants are not fully integrated with a payment system but use specific applications to accept credit card payments, and because these applications are connected to the internet, they pose a certain level of risk that needs to be addressed with specific security requirements.

SAQ B is geared towards merchants that use standalone terminal systems, but these systems do not connect to the internet and therefore have a different set of validation requirements. The focus here is on environments where cardholder data is processed, but without the complexity that direct internet connection brings.

SAQ D is applicable to merchants with more extensive payment processing environments that do not fit into the simpler categories, usually involving multiple systems or channels for processing transactions.

SAQ A is intended for merchants who only accept card-not-present transactions, with no electronic storage or transmission of cardholder data, which is quite different from the context of standalone payment applications connected to the internet.

Understanding the context and definitions of each type of SAQ and their applicability to different merchant environments is crucial for maintaining PCI DSS compliance and effectively securing cardholder data.