Understanding Wisconsin Sales and Use Taxes
Understanding and complying with the sales tax requirements in the states in which you do business is absolutely essential. More states are taxing services, as well as retail sales, so no business owner can afford to be in the dark. In addition, you may find that you are liable for use taxes for products purchased out of state. This article answers some of the basic questions regarding sales tax in Wisconsin.
In Wisconsin a tax is imposed on all retailers for the privilege of selling, leasing or renting tangible personal property. The tax is also imposed on the following services:
- furnishing of rooms or lodging to transients (less than one month)
- admissions to amusement, athletic, or entertainment events, and access fees to clubs,
- sales of telecommunication services
- qualified laundry, dry cleaning, pressing, and dyeing services
- photographic services, processing, printing, and enlarging film
- parking or providing parking space for motor vehicles, aircraft, and boats
- the repair, service, or maintenance of taxable tangible personal property
- producing, printing, imprinting, fabricating, or processing of tangible personal property for consumers who furnish the materials used
- the sale of cable television services including installation charges
- landscaping and lawn maintenance services
Leases. In Wisconsin the lease or rental of tangible personal property at retail in Wisconsin is subject to sales tax. Tax is due on rental receipts for any period of time leased property is in Wisconsin. The lease is considered a continuing sale for the duration of the lease while the leased property is situated in the state.
Sales and use tax rate. The Wisconsin sales and use tax rate is 5 percent. In addition, make sure you contact your local governments in Wisconsin because they are allowed to assess a local sales and use tax.
Tax Is Imposed on Sellers
In Wisconsin the sales tax is imposed on retailers and persons providing taxable services. However, the retailer, service provider, or the Department of Revenue can collect the sales tax from the consumer or user.
Absorbing sales tax is illegal. It is against the law to refund or offer to refund all or any part of the amount collected, or to absorb the amount of sales tax required to be added to the sales price and collected from the purchaser. As a seller, it is also against the law for you to advertise directly or indirectly that you will absorb the sales tax that is required to be added to the sales price.
Obtaining tax permits in Wisconsin
The Wisconsin Department of Revenue will issue a permit for each place of operation in the state to any person who requests one and who holds a valid business registration certificate. The permit is valid indefinitely.
Many Items Are Tax Exempt
Wisconsin has many specific items that are exempt from sales tax — for example, certain prescription medications are exempt from Wisconsin sales tax. Resale exemptions and blanket exemptions are two of the most important exceptions to sale tax liability. You'll want to check and see if you are exempt from the sales tax.
An exemption certificate may be issued by a purchaser of a nontaxable item. The exemption certificate may be based on the type of transaction (such as a resale exemption) or on the item itself.
Items Purchases for Resale Are Tax Exempt
In Wisconsin, the sales tax does not apply to sales or purchases of tangible personal property or services for resale.The buyer must provide a resale certificate to the seller to document a transaction is exempt under the resale exemption.
Resale exemption certificate. Buyers may use the Department of Revenue Form S-205 (Resale certificate), or a substitute exemption certificate. A resale certificate must contain the following information to relieve a seller from proving a sale is not taxable:
- buyer's name, address, and signature
- a description of the general character of the tangible personal property or service sold by the buyer
- a general description of the property or service purchased for resale if a continuous resale certificate is used, or an itemization of the property or service purchased if a single-purchase certificate is used
- the buyer's retail permit number
- an indication of the general character of the buyer's business.
Blanket Resale Certificates Are Permitted
Wisconsin refers to blanket certificates as continuous resale certificates. Sellers may accept blanket certificates from a purchaser who repeatedly purchases the same type of property or service for processing or resale. However, blanket certificates may not be used to purchase property or services not covered by a blanket certificate. Continuous resale certificates do not expire and they do not need to be renewed at any prescribed interval. If a seller has not accepted a blanket certificate in good faith, liability for the tax does not shift from the seller to the purchaser.
Physical Presence Triggers Sales Tax Liability
Wisconsin has a statute that specifically taxes out-of-state mail order and catalogue sellers. However, you will be responsible for paying this tax only if you have physical presence within Wisconsin. To determine if you have physical presence, ask yourself the following:
- Do I have retail facilities, a warehouse, or any office space in Wisconsin? Maintaining retail or warehouse facilities will give you physical presence. Also, having an office for employees, even for business activities unrelated to mail order sales, will give you physical presence.
- Do my employees or I enter Wisconsin for purposes of taking and transmitting orders from Wisconsin? If your employee or independent contractor goes into Wisconsin to take or transmit orders, your business may have physical presence in Wisconsin. However, contracting with a common carrier to deliver mail order goods does not constitute physical presence.
- Do my delivery vehicles frequently enter Wisconsin for purposes of delivering property? Frequent deliveries in Wisconsin by your trucks will give you physical presence in Wisconsin.
Sales Tax "Bracket System" Is Permitted
The bracket system may be followed by sellers in computing the sales tax. The 5 percent state tax is computed on each dollar and/or fraction of a dollar according to the following table:
|Amount of Sale ||Tax |
|$0.00 to $0.09 ||no tax |
|0.10 to 0.29 ||$0.01 |
|0.30 to 0.49 ||0.02 |
|0.50 to 0.69 ||0.03 |
|0.70 to 0.89 ||0.04 |
|0.90 to 1.09 ||0.05 |
|and so forth |
An excise tax (use tax) is imposed on the storage, use or other consumption in Wisconsin of tangible personal property or taxable services purchased from any retailer. The use tax is a complementary tax and does not apply in situations where the sales tax is collected. Thus, property brought into Wisconsin on which a sales or use tax has been paid in another state equal to or in excess of the Wisconsin tax is not subject to tax in Wisconsin.
The use tax is imposed on any person who stores, uses, or otherwise consumes tangible personal property or taxable services in Wisconsin. However, this liability is extinguished with a receipt from a retailer showing that the tax has been paid.
Claiming Refund for Excess Tax Payments
You may file a refund claim within four years of the due date of your corresponding Wisconsin income or franchise tax return. Gross receipts subject to tax doesn't include sales refunded as a result of property returned or adjustments in the sales price after sales have been completed. In order to deduct amounts refunded from gross receipts, you must have:
- included the refunded receipts in a prior return
- paid the tax and
- refunded all tax previously paid to the purchaser