The Complete Guide to
Interim Update
Covering the Period September 1, 2001 through September 1, 2006
Prepared by:
Note: For Updates Covering the Period July 1, 2000 through
September 1, 2001, click here.
©2001-2006 Michael Best & Friedrich LLP.
All rights reserved
Section 1.1. History of Tax; Rates; Application to Property
and Services; County and Stadium Taxes; Other Limited Sales-Type Taxes.
The Department of Revenue
has issued Publication No. 229, Brackets for Collecting
The following have joined
those
|
County |
Effective
Date |
|
Marinette |
October
1, 2001 |
|
Grant |
April 1,
2002 |
|
Green |
January
1, 2003 |
|
Wood |
January
1, 2004 |
|
|
July 1,
2006 |
Effective January 1, 2003, the
0.5% premier resort area tax took effect in the City of
Effective October 1, 2006,
the 0.5% premier resort area tax will take effect in the City of Eagle River.
Effective
September 1, 2005, the list of businesses subject to the premier resort area tax
(in those cities where it is or will be in effect) has been significantly
expanded. 2005
Recent
legislation provides that the villages of Ephraim and
Effective
for rental or lease agreements entered into on or after October 1, 2005, the state
rental vehicle fee is increased from 3% to 5% of the gross receipts on the
rental of specified vehicles by specified vendors. 2005
Effective June 1, 2006, a new
“regional transit authority fee” is imposed for certain automobile rental
transactions in
Proposed legislation
relating to the Streamlined Sales and Use Tax Agreement was introduced in the
Section 1.2. Sources and Authority of Statutes, Rules, and
Principles Governing Sales and Use Taxes.
The Wisconsin Court of
Appeals has affirmed the decision of the Wisconsin Tax Appeals Commission in
the Amusement Devices case. In
reviewing the Commission’s decision, the Court of Appeals stated that the
Commission’s decision was entitled to deference “because of the commission’s
experience construing and applying the sales and use tax statutes, even if the
commission has not applied a specific subsection or faced precisely these
facts.” Amusement Devices, Inc. v.
Wisconsin Department of Revenue, 2002 WI App 1, 249
In Wisconsin
Department of Revenue v. Gagliano, Inc., the
In DaimlerChrysler Services North America LLC v.
Wisconsin Department of Revenue, the Dane County Circuit Court
applied the "due weight" (middle level) standard of review, affirming
the decision of the Tax Appeals Commission that an assignee of installment
contracts could not claim a bad debt deduction with respect to those contracts
for Wisconsin sales tax purposes. Case
No. 04 CV 3121 (December 21, 2005). For
additional information concerning the Daimler
Chrysler case, see Section 6.3 below of this Update.
The
In a case involving the
manufacturing exemptions under Wis. Stat. § 77.54(2) and (6), the
In a case involving the
questions of whether a transferor was a taxable “retailer,” and whether there
was “consideration” for the transfers, the Wisconsin Court of Appeals applied
the “due weight” deference standard of review.
The Court, however, applied the “great weight” standard of review with
respect to the Commission’s conclusions concerning application of the
negligence penalty. River City Refuse
Removal, Inc. v. Department of Revenue, 2006 WI App 34, 712 N.W.2d 351 (Ct.
App. 2006). The Court of Appeals opinion
in River City can be reviewed
at: http://www.courts.state.wi.us/ca/opinion/DisplayDocument.pdf?content=pdf&seqNo=21209. The State Supreme Court accepted the
Department’s Petition for Review in May 2006, and the case currently is pending
before the Supreme Court. For additional
information concerning the
In Freight Lime and Sand
Hauling, Inc. v. Wisconsin Department of Revenue, WTAC (November 20, 2002),
CCH Wisconsin Tax Reporter ¶ 400-646, Commissioner Boykoff stated (in a
concurring opinion) that the Tax Appeals Commission is not bound by the
principle of stare decisis; that is, the Commission is not required to
follow its own holdings from previous cases.
See Section 9.16 below of this Update.
If the taxpayer prevails
before the Tax Appeals Commission and the Department’s position is
unreasonable, the taxpayer may be entitled to recover certain costs and
attorneys fees. A variety of statutes
cover the possibility of obtaining costs and attorneys fees in these rare cases. See Wis. Stat. § 227.485, providing
for recovery by certain “small nonprofit corporations,” certain “small
businesses,” and individuals (although an individual whose “properly reported”
federal adjusted gross income was $150,000 or more in each of the three
calendar (or corresponding fiscal years) immediately prior to the commencement
of the case is precluded from recovery under this statute). And see
Wis. Stat. § 814.025, as applied by the Commission against the Department in The
Newark Group, Inc. v. Wisconsin Department of Revenue, WTAC (March 22,
2004), CCH Wisconsin Tax Reporter ¶ 400-740. On appeal, the Dane Circuit Court reversed the
Commission’s findings, on the attorney fee issue, holding that attorneys’ fees
may be granted against the state only if the statutes expressly so provide
(January 31, 2005), CCH Wisconsin Tax Reporter ¶ 400-809.
An appeal to the Tax
Appeals Commission (from a denial of a Petition for Redetermination) must be
filed within 60 days after receipt of the Department’s denial of the Petition. A Petition is timely filed if it is (i)
actually received by the Commission within 60 days of the date the taxpayer
received the Department’s decision; or (ii) mailed to the Commission by
certified mail in a properly addressed envelope with postage prepaid by the
60th day after the taxpayer received the Department’s decision. For a recent case where the Tax Appeals
Commission held that a Petition for Redetermination sent by regular
mail and postmarked on the due date was untimely, see Magree v. Wisconsin
Department of Revenue, WTAC (December 21, 2004) CCH Wisconsin Tax Reporter
¶ 400-196.
In certain situations, it
may be helpful for a taxpayer to obtain a “declaratory ruling,” in the Circuit
Courts, prior to the assessment (or even an audit) of a particular tax. For example, the taxpayer may want to expedite
the judicial process (by bypassing the audit process), or for whatever reason
may want to skip review by the Wisconsin Tax Appeals Commission. It appears that the Circuit Court has
discretion to hear such an action, although in one published case it declined
to exercise this authority because the taxpayer had not first pursued
administrative remedies with the Department of Revenue. See Wisconsin Bell, Inc. v. Wisconsin
Department of Revenue, 164
Section 2.22. Transfers of Property Where Ownership is
Substantially Unchanged.
The Wisconsin Court of Appeals,
applying the “due weight” standard of review, has affirmed a decision of the
Tax Appeals Commission (and reversed a decision of the Dane County Circuit
Court), finding that certain intercompany transfers are not subject to
Wisconsin sales and use tax. River
City Refuse Removal, Inc. v. Department of Revenue, 2006 WI App 34, 712
N.W.2d 351 (Ct. App. 2006). The Court of
Appeals opinion in River City can be
reviewed at: http://www.courts.state.wi.us/ca/opinion/DisplayDocument.pdf?content=pdf&seqNo=21209. In River
City, a corporation transferred otherwise taxable property to an affiliated
corporation (River City), and the corporations then debited and credited their
respective intercompany accounts, generally at cost, without the intent to make
a profit. The Tax Appeals Commission
held that the intercompany transactions were not taxable because (i) there was
no payment of consideration (i.e., the debiting and crediting of
accounts did not rise to the level of “consideration”); and (ii) the
transferors were not “retailers” within the Kollasch and Frisch Dudek
line of cases, as the transferors lacked mercantile (profit-making) intent with
respect to the transfers (prior to the January 1, 2006 law change noted
below). In May 2006, the State Supreme
Court accepted the Department of Revenue’s Petition for Review, and the case
currently is pending before the Supreme Court.
Effective January 1, 2006, the
Section 3.1. Statutory and Regulatory Definitions of
“Leases” and “Rentals.”
The Wisconsin Court of
Appeals has affirmed the decision of the Tax Appeals Commission in the All
City Communication case. All City
Communication Company, Inc. and
Section 3.2. General Requirements for Classification as a
Lease – Possession, Consideration, and Relevance of Having Written Document.
The Wisconsin Court of
Appeals has affirmed the decision of the Wisconsin Tax Appeals Commission in
the Amusement Devices case. Amusement
Devices, Inc. v. Wisconsin Department of Revenue, 2002 WI App 1, 249
Section 3.3. Taxation of Leases – General Rules.
The Wisconsin Court of
Appeals has found that a taxpayer made a taxable “use” of aircraft purchased
for lease to a charter company in G & G Trucking, Inc. v. Wisconsin
Department of Revenue, 2003 WI App 228, 269 Wis. 2d 199 (October 9, 2003). In G
& G Trucking, the taxpayer (G & G) purchased several aircraft and,
prior to such purchases, entered into oral lease agreements with charter
companies, which in turn leased the aircraft from G & G. G & G then from time-to-time chartered
the aircraft from the charter companies to transport G & G employees on
business trips, with such G & G charters constituting approximately 10-20%
of the aircraft’s use, depending on the year at issue. The Department assessed use tax on G & G’s purchase price of the aircraft,
arguing that G & G used the aircraft other than “solely for lease or
rental.” G & G countered that it did
not “use” the aircraft because, under the well-accepted Wisconsin definition of
use, G & G did not exercise any right or power over the property – G &
G pointing out, among other things, that it did not have the right to select
pilots, control the performance of aircraft or take responsibility for a trip
to an extent greater than any other charter customer. The Court of Appeals, affirming decisions of
the Circuit Court and Tax Appeals Commission, concluded that G & G
exercised a right or power over the aircraft because G & G was, in the
Court’s opinion, a preferential charter user of the aircraft. The preferential terms, according to the
Court, included not having to pay an initial charter fee, paying a lower hourly
rate for use of its aircraft, and having the ability to “trade” hours with
owners of certain other aircraft – terms not available to other customers of
the charter companies. The Court of
Appeals decision can be reviewed at www.wisbar.org/res/capp/2003/02-2648.htm. The Wisconsin Supreme Court declined to
review this case.
The Department, correcting
a previous position statement, says that fees charged for locker rentals (e.g.,
at health clubs, airports, bus stations or other facilities) are not subject to
Section 3.9. Leases of Personal Property in Conjunction
with Real Estate Rentals.
The Wisconsin Court of
Appeals has affirmed the decision of the Tax Appeals Commission in the All
City Communication case. All City
Communication Company, Inc. and
Section 3.10. Leases of Tangible Personal Property in
Conjunction with Services.
The Department of Revenue
has stated that separate charges made by a motel for rentals of “roll-away”
beds are subject to
Section 4.1. General Rules.
The Wisconsin Court of
Appeals has affirmed the decision of the Wisconsin Tax Appeals Commission in
the Amusement Devices case. Amusement
Devices, Inc. v. Wisconsin Department of Revenue, 2002 WI App 1, 249
Section 4.6. The Principle of “Incidentality” – Meaning of
“Incidental.”
The Wisconsin Tax Appeals
Commission has ruled that (i) the “lifeline” emergency response service is not
a taxable telecommunications service under Wis. Stat. § 77.52(2)(a)5 or certain
predecessor versions of that statute and (ii) certain equipment provided with
the service is “incidental” to the service.
SSM Health Care v. Wisconsin Department of Revenue, WTAC
(February 22, 2002), CCH
The
Department of Revenue has issued a Tax Release involving the
The Department of Revenue
has issued a private letter ruling addressing the sales and use tax consequences
of the sale of a web-based information service, together with the rental of a
related keyboard and computer screen. The
Department ruled that the sale of the web-based information service was a
non-taxable service, but that the rental of the related equipment was not
incidental to the service. Private
Letter Ruling W 0142007 (June 28, 2001), Wisconsin Tax Bulletin No. 128, pp.
35-36 (January 2002), CCH
Section 4.9. Non-“Incidental” Sales or Leases – Issues of
Price Allocation.
The Department of Revenue
has issued a private letter ruling addressing the sales and use tax
consequences of the sale of a web-based information service, together with the
rental of a related keyboard and computer screen. The Department ruled that the sale of the
web-based information service was a non-taxable service, but that the rental of
the related equipment was not incidental to the service – meaning that, in the
Department’s view, the charge relating to the equipment was taxable. In holding that the equipment was not
incidental to the service, the Department appeared to focus on the fact that
the rental of the equipment was “optional.” The Department also stated that if the seller
makes only a single charge for both the non-taxable service and taxable rental,
the entire charge is presumed to be taxable; however, the Department also said
(citing Rule Sec. Tax 11.67(2)(c)) that it is authorized to accept a reasonable
allocation methodology. In the ruling,
the Department stated that a reasonable allocation methodology to determine the
taxable portion of the overall charge would be to take the overall charge and
subtract from it the amount that the seller charges for the service alone. Private Letter Ruling W 0142007 (June 28,
2001), Wisconsin Tax Bulletin No. 128, pp. 35-36 (January 2002), CCH
Section 4.10. Distinguishing Services from Property.
In Department of Revenue
v. Menasha Corporation, the Dane County Circuit Court, reversing the Tax
Appeals Commission, held that the SAP R/3 software purchased by Menasha
Corporation was canned (rather than “custom”) software, and thus subject to
Wisconsin sales or use tax. Case No. 03
CV 3922 (October 26, 2004), CCH
In an October 2004 Tax
Release, the Department of Revenue has stated its views with respect to the
sales and use tax consequences of the purchase of telephone support for
computer software:
Tax Release,
Section 5.1. "Retail" – Introduction.
The Department of Revenue
has published its views as who is considered the “operator” of video gambling
machines (and thus responsible for remitting
The Wisconsin Court of
Appeals has affirmed the decision of the Wisconsin Tax Appeals Commission in
the Amusement Devices case. Amusement
Devices, Inc. v. Wisconsin Department of Revenue, 2002 WI App 1, 249
Section 5.6. Resale Certificates – General Rules.
The Department of Revenue
has stated that, in Wisconsin, the Streamlined Sales Tax exemption certificate
(as well as the Multistate Tax Commission’s exemption certificate) are
acceptable only when a purchaser is claiming a resale exemption, and for no
other purpose. Sales and Use Tax Report,
pp. 3-4 (June 2006).
The Department of Revenue
has amended Rule Sec. Tax 11.14 (Exemption Certificates), effective August 1,
2003, to state that a purchaser is subject to a sales tax rather than a use tax
when it gives an exemption certificate claiming resale, but then makes a
taxable use of the purchased item.
Section 5.9. “Retailer” – Requirement of Profit-Making
Intent.
The Wisconsin Court of Appeals,
applying the “due weight” standard of review, has affirmed a decision of the
Tax Appeals Commission (and reversed a decision of the Dane County Circuit
Court), finding that certain intercompany transfers are not subject to
Wisconsin sales and use tax. River
City Refuse Removal, Inc. v. Department of Revenue, 2006 WI App 34, 712
N.W.2d 351 (Ct. App. 2006). In
Effective January 1, 2006, the
In an opinion dealing with
a discovery dispute between the parties, the Tax Appeals Commission held, among
other things, that taxpayer’s holding of a CES was relevant to the question of
whether the taxpayer was a “retailer” under the Kollasch line of cases. Milwaukee Symphony Orchestra, Inc. v.
Wisconsin Department of Revenue, Docket No. 98-S-130 (January 27,
2003). The Department is contending in
the Symphony case that the sale of admissions to the Symphony’s concerts
is subject to sales or use tax under Wis. Stat. § 77.52(2)(a)2 (as an
admission); the Symphony is arguing in part that the sales are not taxable
under Kollasch and its progeny.
Section 5.11. “Retailer” – Other Multiple Party Sellers.
Effective July 30, 2002,
Wis. Stat. § 77.54(46m) has been created to provide that telecommunications
services furnished through the use of prepaid telephone calling cards and
authorization numbers are exempt if Wisconsin sales or use tax previously was
paid on the sale or purchase of such rights.
For further information, see Wisconsin Tax Bulletin No. 131, pp. 7-8
(August 2002). The Department of Revenue
considers this a “clarification” of the law.
Section 5.13. “Tangible Personal Property” – Introduction.
In Department of Revenue
v. Menasha Corporation, the Dane County Circuit Court, reversing the Tax
Appeals Commission, held that the SAP R/3 software purchased by Menasha
Corporation was canned (rather than “custom”) software, and thus subject to
Wisconsin sales or use tax. Case No. 03
CV 3922, October 26, 2004, CCH
In an October 2004 Tax
Release, The Department of Revenue has stated its views with respect to the
sales and use tax consequences of the purchase of telephone support for
computer software:
Tax Release,
Section 6.0. Overview of Chapter.
The Department of Revenue
has issued guidance, setting forth its view with respect to purchases made with
FEMA and Red Cross cards (and funds) issued to victims of Hurricane Katrina and
other disasters. The guidance can be
found at http://www.dor.state.wi.us/faqs/ise/disaster.html.
Effective September 3,
2003, the tax base for sales of wireless service do not include the surcharge
imposed by a wireless service provider that is to be deposited into the 911
wireless fund. 2003
Section 6.3. Sales on Credit – Assignments of Receivables.
In Private Letter Ruling W
0318003 (February 10, 2003), published in Wisconsin Tax Bulletin No. 136
(October 2003), CCH Wisconsin Tax Reporter ¶ 400-712, a seller of used cars
(“A”) sold its installment notes at full face amount to its wholly-owned
Subchapter S Subsidiary (“C”), which in turn sold them at a discount to either
another related party (“B”) or unrelated parties. The seller of the used cars (A) bore the risk
of nonpayment, i.e., A was required by contract to compensate the holder
of the note if the note became worthless.
Based on these facts, the Department ruled that the original seller (A)
may claim a bad debt deduction when an assigned note becomes worthless, even
though the assignment may ultimately be to (i) a related party (here, “B”) at a
discount or (ii) an unrelated party at a discount. In the ruling, the parties represented that
there were non-tax business reasons for the related party structure, and that
the structure and transactions were common in the industry. The significance of these representations in
obtaining the ruling (if any) is unclear.
The Dane County Circuit
Court, applying the “due weight” standard of review, has affirmed the decision
of the Tax Appeals Commission, to the effect that an assignee/purchaser of
installment receivables is not allowed to claim a bad debt deduction for
Wisconsin sales tax purposes with respect to those receivables. The Commission had held that, under
Section 6.6. Advance Payments.
Effective July 30, 2002,
Wis. Stat. § 77.54(46m) has been created to provide that telecommunications
services furnished through the use of prepaid telephone calling cards and
authorization numbers are exempt if Wisconsin sales or use tax previously was
paid on the sale or purchase of such rights.
For further information, see Wisconsin Tax Bulletin No. 131, pp.
7-8 (August 2002). The Department of
Revenue considers this a “clarification” of the law.
Section 6.7. Discounts, Refunds, Patronage Dividends,
Certificates, Stamps, Coupons and Rebates.
Effective July 30, 2002,
Wis. Stat. § 77.54(46m) has been created to provide that telecommunications
services furnished through the use of prepaid telephone calling cards and
authorization numbers are exempt if Wisconsin sales or use tax previously was
paid on the sale or purchase of such rights.
For further information, see Wisconsin Tax Bulletin No. 131, pp.
7-8 (August 2002). The Department of
Revenue considers this a “clarification” of the law.
The Department of Revenue
has again stated that the Wisconsin sales tax is computed on the selling price
of tangible personal property before subtracting the amount of a coupon or a
rebate given to the seller if the seller is reimbursed by a third party for the
amount of the coupon or rebate. Sales
and Use Tax Report, p. 2 (December 2001); Tax Bulletin No. 129, p. 8 (April
2002), CCH
In Braeger Chrysler
Plymouth Jeep Eagle, Inc. v. Wisconsin Department of Revenue, WTAC (October
12, 2004), CCH Wisconsin Tax Reporter ¶ 400-785, the Tax Appeals Commission
held that certain “program payments” received by the taxpayer from the
manufacturer were taxable gross receipts, rather than nontaxable adjustments to
the purchase price paid by the dealer for cars sold. The case also addressed the taxpayer’s claim
that the assessment in question was a violation of due process because (under
the case of Elections Board v. WMC, 227
Section 6.9. Reduction of Gross Receipts for Costs of
Goods Sold and Other Seller Costs.
Effective July 30, 2002,
Wis. Stat. § 77.54(46m) has been created to provide that telecommunications
services furnished through the use of prepaid telephone calling cards and
authorization numbers are exempt if Wisconsin sales or use tax previously was
paid on the sale or purchase of such rights.
For further information, see Wisconsin Tax Bulletin No. 131, pp.
7-8 (August 2002). The Department of
Revenue considers this a “clarification” of the law.
Section 6.11. Transportation Charges.
In Paul Bugar Trucking,
Inc. v. Department of Revenue, WTAC (April 10, 2003), CCH Wisconsin Tax
Reporter ¶ 400-682, the Tax Appeals Commission again addressed the sales and
use tax treatment of transportation charges.
In Paul Bugar, the taxpayer sold certain tangible personal
property to its customer at retail, with the taxpayer arranging for the
transportation to the customer via common carrier, and billing the customer
separately for the transportation. The
Department argued that the transportation charges were part of the gross
receipts for the sale of property, relying on Wis. Stat. § 77.51(14r) to
contend that when a seller of property retains a common carrier, the sale does
not occur until the buyer receives possession of the property. The taxpayer, on the other hand, argued that
the taxpayer and its customer had agreed that the sale was complete at the
seller’s premises. The Commission held
in favor of the Department. The
Commission also distinguished the Paul Bugar case from the Trierweiler
and Rhinelander Paper cases, which had held that transportation charges
are not part of the sales price when the buyer arranges for and hires
the common carrier.
The Department has again
stated that when a seller charges a purchaser for the delivery of tangible
personal property, the seller’s total charge, including any transportation and
service charges, is subject to sales or use tax, and that it is immaterial
whether the delivery is made by the seller’s vehicle, a common or contract
carrier, or the United States Postal Service.
The Department further states that if a shipment contains both taxable
and nontaxable property, the seller must make a reasonable allocation of the
shipping charges attributable to the taxable and nontaxable property (with the
portion attributable to nontaxable property not being subject to tax).
Section 6.13. Warranties and Maintenance Charges.
The Department of Revenue
has published advice with respect to the sale of certain extended service
contracts. The Department states that
the sale of the service contract is subject to
Section 6.14. Exchanges, Trade-Ins and Other Non-Monetary
Consideration.
Recent
Section 7.1. General Description of Use Tax.
The Department of Revenue
has reported that its auditors assessed over $25 million in use taxes (not
including interest and penalties) in the fiscal year ending June 30, 2005.
Section 7.4. Exceptions and Exemptions.
The Department of Revenue
has issued a favorable letter ruling, holding that the use tax exception for
certain aircraft under Wis. Stat. § 77.53(17r) applied, under the given
facts. Private Letter Ruling W 0625001
(April 3, 2006), published in Wisconsin Tax Bulletin No. 148, pp. 32-34 (July
2006).
The Department of Revenue
has addressed the Wisconsin sales and use tax consequences of certain
out-of-state motor home purchases, through single-owner entities, where the
motor home ultimately is kept in
In Thornton v. Wisconsin
Department of Revenue, WTAC (February 22, 2002), CCH Wisconsin Tax Reporter
¶ 400-592, the Wisconsin Tax Appeals Commission rejected certain constitutional
challenges made by the taxpayer to the use tax exception, set forth in Wis.
Stat. § 77.53(17m), for a boat purchased in a state contiguous to Wisconsin by
a person domiciled in that state (provided certain other conditions are met). The taxpayer in
A recent Tax Release
addresses the Wis. Stat. § 77.53(17m) exception from the definition of “use”
use for boats berthed in
Section 7.7. Definition of "Use" – Introduction.
The statutory amount in
Wis. Stat. § 77.53(1m)(a) was increased from $116 to $118 per month effective
January 1, 2004 with respect to motor vehicles used by employees of motor
vehicle dealers and by persons with an ownership interest in the dealership who
actively participate in daily business operations.
The Wisconsin Court of
Appeals has found that a taxpayer made a taxable “use” of aircraft purchased
for lease to a charter company in G & G Trucking, Inc. v. Wisconsin
Department of Revenue. See
Section 3.3 above of this Update.
The Department of Revenue
has addressed the Wisconsin sales and use tax consequences of certain
out-of-state motor home purchases, through single-owner entities, where the
motor home ultimately is kept in
Section 7.8. Definition of "Use" – Meaning of
"Right or Power."
The Wisconsin Court of
Appeals has found that a taxpayer made a taxable “use” of aircraft purchased
for lease to a charter company in G & G Trucking, Inc. v. Wisconsin
Department of Revenue. See
Section 3.3 above of this Update.
Section 7.11. Credit for Out-of-State Taxes.
The Department of Revenue
has published a Tax Release which provides, in part, that a purchaser of taxable
telecommunications message services is allowed a credit against Wisconsin sales
or use tax properly paid to another state on such services, limited to the
amount of
Section 8.0. Overview of Chapter.
In several recent audits,
the Department has taken the position that the provision of services by temporary
help employees are subject to Wisconsin sales and use tax; specifically, that
such services are taxable to the extent the work performed by the employees
constitutes an otherwise taxable service under
Section 8.3. Rooms or Lodging.
The Department of Revenue
has stated that separate charges made by a motel for rentals of “roll-away”
beds are subject to
The Department of Revenue
has published a Tax Release, setting forth the Department’s views concerning
the sales and use tax consequences of a campground’s purchase of camping cabins,
trailers, campers, tents and related equipment. Tax Release, Wisconsin Tax Bulletin No. 132,
pp. 28-29 (October 2002), CCH
2003 Wisconsin Act 33
corrects certain statutory language in Wis. Stat. § 77.52(2)(a)1, as it had
been amended by 1999 legislation that eliminated sales and use taxation of the
sale of timeshares where the starting date and lodging unit were not fixed at
time of sale. The correction is
effective for sales of lodging after November 30, 1999 (i.e., the
effective date of the 1999 legislation).
In Associated Training Services Corp. and Diesel Truck Driver Training
School, Inc. v. Department of Revenue, WTAC (November 8, 2006), CCH
Wisconsin Tax Reporter ¶ 400-854, the taxpayers owned and operated schools with
respect to the operation of certain machinery, and the operation of diesel
trucks. The taxpayers purchased rooms
and lodging from a motel, which itself was open to the public. The taxpayer made its block of purchased
rooms available only to its students, itemizing the charges on its invoices to the
students. The Department asserted that
the taxpayer owed sales tax on the room charges (under Wis. Stat. § 77.52(2)(a)1). The taxpayer argued that it did not, arguing
that the rooms were not “available to the public,” as required by the statute,
because the rooms were made available only to a limited class (i.e., the
students). The Commission concluded
that, based on the facts of the case, the rooms provided to the students were
in fact available to the general public at the time they were being sold to the
taxpayer’s students. The opinion of the
Tax Appeals Commission in Associated Training can be reviewed at http://www.wisbar.org/res/txap/2005/03s286(p).htm.
Section 8.4. Admissions.
The Department of Revenue
has issued a letter ruling, providing that certain shareholder contributions to
a corporation were taxable admissions under Wis. Stat. § 77.52(2)(a)2. The Department reasoned that the
contributions were “dues, fees or other consideration” for the privilege of
having access to the corporation’s property, which was a sports field, and that
the sports field was used “primarily” as amusement, athletic or entertainment
or recreational facilities. Private
Letter Ruling W 0147008 (August 31, 2001), Wisconsin Tax Bulletin No. 128
(January 2002), CCH
The Tax Appeals Commission
has held that certain fees charged to hunt on a game ranch (including fees charged
based on the number and/or weight of the animals taken) are taxable admissions
pursuant to Wis. Stat. § 77.52(2)(a)2. Granite
Ridge Ranch v. Department of Revenue, WTAC (April 7, 2004), CCH
The Department of Revenue
has stated that (i) the gross receipts of a concessionaire from operating
recreational devices or facilities at a fair, carnival, festival or other event
are subject to
The Department of Revenue
has stated that gross receipts from providing access to video gambling machines
are subject to
The Department of Revenue
has stated that cover charges made by a tavern are subject to sales as admissions
pursuant to Wis. Stat. § 77.52(2)(a)2.
The Department of Revenue
has stated that amounts paid by a tavern to a band performing at the tavern are
not subject to
Section 8.5. Telecommunications Services.
The Department of Revenue
has issued a Tax Release involving the
Effective for customer
bills issued after August 1, 2002,
Effective July 30, 2002,
Wis. Stat. § 77.54(46m) has been created to provide that telecommunications services
furnished through the use of prepaid telephone calling cards and authorization
numbers are exempt if Wisconsin sales or use tax previously was paid on the
sale or purchase of such rights. For
further information, see Wisconsin Tax Bulletin No. 131, pp. 7-8 (August 2002). The Department of Revenue considers this a
“clarification” of the law.
On November 28, 2001,
President Bush signed into law H.R. 1552, which extended, for two years (until
November 1, 2003), the Internet Tax Freedom Act’s moratorium on “multiple and
discriminatory” taxes on the Internet as well as taxes on Internet access
charges (subject to the “grandfather” provision for states that had taxes on
access charges that were generally imposed and actually enforced prior to
October 1, 1998). On December 3, 2004,
President Bush signed into law the Internet Nondiscrimination Act (S 150),
which extended the moratorium on Internet access taxes (as well as “multiple or
discriminatory taxes on electronic commerce”), retroactively to November 1,
2003 and prospectively to November 1, 2007.
The Wisconsin Department of Revenue continues to take the position that
The Wisconsin Tax Appeals
Commission has ruled that (i) the “lifeline” emergency response service is not
a taxable telecommunications service under Wis. Stat. § 77.52(2)(a)5 or certain
predecessor versions of that statute and (ii) certain equipment provided with
the service is “incidental” to the service (meaning that no tax is due with
respect to the provision of the equipment).
SSM Health Care v. Wisconsin Department of Revenue, WTAC
(February 22, 2002), CCH
The Department of Revenue
has published a Tax Release, providing the Department’s views as to whether
certain types of services are “telecommunications message services” and when
such services became taxable – either as a telecommunications message service
(effective as of the effective date of Wis. Stat. § 77.52(2)(a)5m; i.e.,
December 1, 1997) or possibly prior thereto under the statute (Wis. Stat. §
77.52(2)(a)5) governing taxation of telecommunications services generally. The Department provides examples dealing with
voice mail, e-mail, telephone answering, security monitoring, and emergency
response services (although not mentioned in the Tax Release, the taxability of
one of the services (i.e., emergency response service) was at issue in
the SSM Health Care v. Wisconsin Department of Revenue case, discussed
in the immediately preceding paragraph).
The Tax Release then goes on to provide that a purchaser is allowed a
credit against Wisconsin sales or use tax owed on telecommunications message
services for state sales or use taxes properly paid to another state on such
services, limited to the amount of Wisconsin tax due on the transaction. Tax Release, Wisconsin Tax Bulletin No. 127,
pp. 29-32 (October 2001), CCH
The Department of Revenue
has issued a private letter ruling addressing the sales and use tax
consequences of the sale of a web-based information service, together with the
rental of a related keyboard and computer screen. The Department ruled that the sale of the
web-based information service was a non-taxable service, but that the rental of
the related equipment was not incidental to the service – meaning that, in the
Department’s view, the charge relating to the equipment was taxable. In holding that the equipment was not
incidental to the service, the Department appeared to focus on the fact that
the rental of the equipment was “optional.” The Department also stated that if the seller
makes only a single charge for both the non-taxable service and taxable rental,
the entire charge is presumed to be taxable; however, the Department also said
(citing Rule Sec. Tax 11.67(2)(c)) that is authorized to accept a reasonable
allocation methodology. In the Ruling,
the Department stated that a reasonable allocation methodology to determine the
taxable portion of the overall charge would be to take the overall charge and
subtract from it the amount that the seller charges for the service alone. Private Letter Ruling W 0142007 (June 28,
2001), Wisconsin Tax Bulletin No. 128, pp. 35-36 (January 2002), CCH
Effective September 3,
2003, the tax base for sales of wireless service do not include the surcharge
imposed by a wireless service provider that is to be deposited into the 911
wireless fund. 2003
The Department of Revenue
has issued guidance to the effect that the following services generally are not
taxable if no tangible personal property is transferred: hosting websites, domain name registration,
website maintenance and update services, designing websites and home pages,
website database charges, and charges for advertising or listing space on a
website. See
Section 8.6. Telecommunications Message Services.
Effective for customer
bills issued after August 1, 2002,
Effective July 30, 2002,
Wis. Stat. § 77.54(46m) has been created to provide that telecommunications
services furnished through the use of prepaid telephone calling cards and
authorization numbers are exempt if Wisconsin sales or use tax previously was
paid on the sale or purchase of such rights.
For further information, see Wisconsin Tax Bulletin No. 131, pp.
7-8 (August 2002). The Department of
Revenue considers this a “clarification” of the law.
On November 28, 2001,
President Bush signed into law H.R. 1552, which extends the provisions of the
Internet Tax Freedom Act for two years (i.e., to November 1, 2003). On December 3, 2004, President Bush signed
into law the Internet Nondiscrimination Act (S 150), which extended the
moratorium on Internet access taxes (as well as “multiple or discriminatory taxes
on electronic commerce”), retroactively to November 1, 2003 and prospectively
to November 1, 2007. The Wisconsin
Department of Revenue continues to take the position that
The Department of Revenue
has published a Tax Release, providing the Department’s views as to whether
certain types of services are “telecommunications message services” and when
such services became taxable – either as a telecommunications message service
(effective as of the effective date of Wis. Stat. § 77.52(2)(a)5m; i.e.,
December 1, 1997) or possibly prior thereto under the statute (Wis. Stat. §
77.52(2)(a)5) governing taxation of telecommunications services generally. See Section 8.5 above of this Update.
Section 8.8. Photographic Services.
The Department of Revenue
has issued guidance to the effect that charges for taking photographs, which
are then delivered to a customer electronically,
are subject to Wisconsin sales or use tax (absent an applicable
exemption). An interesting aspect of the
guidance is the Department’s view that photographic services (which are taxable
by statute) are taxable even absent the delivery of photographs in tangible form. Wisconsin Tax Bulletin No. 143 (July 2005);
Section 8.10. Services on Tangible Personal Property.
In an October 2004 Tax
Release, The Department of Revenue has stated its views with respect to the
sales and use tax consequences of the purchase of telephone support for
computer software:
Tax Release,
In Wisconsin Tax Bulletin
No. 127, p. 16 (October 2001), CCH Wisconsin Tax Reporter ¶ 400-571, the
Department states that labor charges for installing shelves, counters and
display cases “used to carry on a trade or business” (e.g., holding
merchandise in Wisconsin retail stores) is subject to Wisconsin sales or use
tax. In the example, a general
contractor or the customer purchased the supplies and fixtures, which were then
installed by a subcontractor. The
Department noted that because the subcontractor is providing these services to
a general contractor, the general contractor may provide a resale certificate,
as the general contractor will then presumably charge its customers sales tax
on the sale and installation of the store fixtures.
The Department has stated
that gross receipts received by a landlord from a former tenant for cleaning or
repairing tangible personal property after the tenant vacates the
premises are not subject to sales or use tax, but that gross receipts received
for these activities while the tenant is still on the premises are taxable. Sales and Use Tax Report (September 2002).
The Department of Revenue
has stated that the application of pesticides to real property (such as
buildings) is a non-taxable service, but that the application of pesticides to
tangible personal property (such as a motor vehicle) is taxable, unless the
tangible personal property would itself qualify for a Wisconsin sales or use
tax exemption if sold. Wisconsin Tax
Bulletin No. 129, p. 8 (April 2002), CCH
In Department of Revenue
v. Menasha Corporation, the Dane County Circuit Court, reversing the Tax
Appeals Commission, held that the SAP R/3 software purchased by Menasha
Corporation was canned (rather than “custom”) software, and thus subject to
Wisconsin sales or use tax. Case No. 03
CV 3922, October 26, 2004, CCH
The Department of Revenue
has amended Rule Sec. Tax 11.84 (Aircraft), effective August 1, 2003, to
reflect the Department’s position that taxable transactions include towing of
(i) banners that are not provided by the person towing them and (ii) hang
glider pilots.
The Department of Revenue
has ruled that the installation of certain small (18-20 inch diameter)
satellite dishes for home use is a tangible property improvement, rather than a
real property improvement. As a
consequence, the installer generally is entitled to purchase the satellite dish
for resale, but must collect and remit Wisconsin sales and use tax on the
entire amount charged its customer (plus in some situations amounts received
from third-party satellite service providers as incentives) for the
installation. The Department
acknowledges that Rule Sec. Tax 11.68(7)(a)2 provides that the installation of
satellite dishes is a real property improvement, but claims that the Rule is
meant to apply only to larger (8 to 10 feet in diameter) dishes. Tax Release, Wisconsin Tax Bulletin No. 138,
pp. 30-33, CCH
In Hammersley Stone Co., Inc. v. Wisconsin Department of Revenue, WTAC (August 13, 2003), CCH Wisconsin Tax Reporter ¶ 400-698, the Tax Appeals Commission held that the activities of blasting rock from quarry walls, gathering it with end loaders, and crushing shot rock into gravel is “manufacturing,” and that this is true regardless of whether the activities also constitute “mining.” The Commission also found that the taxpayer had entered into valid oral agreements to lease the stone crushing equipment (exempt pursuant the manufacturing machinery and equipment exemption) and operators from a third party, as opposed to simply retaining a third party to crush stone, which could be considered a taxable service. The Commission also found that the taxpayer was not bound by the Commission’s decision in a previous (1998) case, also involving but adverse to the taxpayer, because the previous case did not raise the potential applicability of the manufacturing exemption or that the taxpayer had leased the equipment and operators. The Departm