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Wisconsin Department of Revenue

 Computer Software - Information Regarding Menasha Decision

(Request for Computer
Software Determination)

  1. What was the decision issued by the Wisconsin Supreme Court in the case of Wisconsin Department of Revenue vs. Menasha Corporation (Menasha)?
  2. Who is eligible for a refund based on this decision?
  3. Is there a deadline for filing a claim for refund?
  4. Does my extension of time to file a claim for refund based on this decision allow me to file a claim for refund on other issues where tax was overpaid for periods that would otherwise be closed to adjustment?
  5. What form do I use to file a claim for refund with the Wisconsin Department of Revenue?
  6. What type of supporting information/documentation do I need to furnish with my claim for refund?
  7. Can I fax or e-mail my claim?
  8. How soon can I expect to receive my refund?
  9. Is there anything I can do to help speed up the process?
  10. Will I receive interest on my refund?
  11. What happens if I do not agree with the determination issued by the Wisconsin Department of Revenue regarding my claim for refund?
  12. Who can I contact if I have questions regarding my claim for refund?
  13. Under what circumstances may a buyer file a claim for refund with the Wisconsin Department of Revenue?
  14. As a buyer, what can I do to receive a refund of tax paid in error if the period is closed to adjustment?
  15. What can I do if the seller is out of business or refuses to sign the buyer’s claim for refund?
  16. I understand that I am not allowed to file a claim for refund for closed period(s) unless the period(s) are open to adjustment under an extension agreement with the Wisconsin Department of Revenue. Am I allowed to file a claim for refund for tax paid on a service contract or agreement for periods still open to adjustment, even though the service contract or agreement relates to software that was purchased in a period closed to adjustment?
  17. What should I do if I am currently undergoing a Wisconsin field audit and I purchased software or a related service contract that should not have been taxed during the period under audit?
  18. What should I do if I am currently undergoing a Wisconsin field audit and I purchased software or a related service contract that should not have been taxed in a period prior to or after the periods under audit?
  19. What should I do if I purchased or sold software and/or a related service contract that should not have been taxed in a period covered by a field audit that is under appeal?
  20. What should I do to avoid paying tax on future purchases of software and related service contracts that are not taxable based on the Menasha decision?
  1. What was the decision issued by the Wisconsin Supreme Court in the case of Wisconsin Department of Revenue vs. Menasha Corporation (Menasha)?

    The Wisconsin Supreme Court held in the case of Wisconsin Department of Revenue vs. Menasha Corporation (No. 2004AP3239, July 11, 2008), that the SAP R/3 System software purchased by Menasha was custom software that is not subject to Wisconsin sales or use tax when sold, leased, or licensed. The basis for this determination was the specific facts and circumstances relating to the following criteria found in sec. Tax 11.71(1)(e), Wis. Adm. Code (April 1993 Register):

    • The extent to which the vendor or independent consultant engages in significant presale consultation and analysis of the user's requirements and system.
    • Whether the program is loaded into the customer's computer by the vendor and the extent to which the installed program must be tested against the program's specifications.
    • The extent to which the use of the software requires substantial training of the customer's personnel and substantial written documentation.
    • The extent to which the enhancement and maintenance support by the vendor is needed for continued usefulness.
    • There is a rebuttable presumption that any program with a cost of $10,000 or less is not a custom program.
    • Custom programs do not include basic operational programs or prewritten programs.
    • If an existing program is selected for modification, there must be a significant modification of that program by the vendor so that it may be used in the customer's specific hardware and software environment.

  2. Who is eligible for a refund based on this decision?

    If you are the seller or buyer of computer software or a related service contract that should not have been taxable based on the Menasha decision, you may file a claim for refund with the Wisconsin Department of Revenue for period(s) still open to adjustment under the statute of limitations, including open to adjustment by an extension agreement you have entered into with the Wisconsin Department of Revenue.

    Note: If a seller is refunded tax and interest by the Department of Revenue for tax collected from a buyer in error, the seller must return the tax and interest to the buyer or to the Department of Revenue within 90 days after the date of the refund.

  3. Is there a deadline for filing a claim for refund?

    Deadlines vary depending on the specific facts and circumstances. This is explained in Publication 216, Filing Claims for Refund of Sales or Use Tax, Part IV, on pages 4-10.

    If you have entered into a sales and use tax extension agreement with the Wisconsin Department of Revenue, a claim for refund may be filed based on the terms/deadlines established by that agreement. For extensions filed solely for this issue, you have until January 11, 2009 to file your claim for refund with the Wisconsin Department of Revenue.

  4. Does my extension of time to file a claim for refund based on this decision allow me to file a claim for refund on other issues where tax was overpaid for periods that would otherwise be closed to adjustment?

    In most cases, no. If the signed extension agreement makes reference only to the Menasha decision, only those purchases and/or sales directly related to the issues of this case may be filed under this agreement for those periods addressed in this agreement.

    If the extension agreement keeps all sales and use tax issues open for the periods covered by the agreement, then yes, those periods covered by the agreement are open for other types of adjustments as well. However, to help speed up the processing of your claim for refund, please file a separate claim for refund for issues pertaining to Menasha.

  5. What form do I use to file a claim for refund with the Wisconsin Department of Revenue?

    Sellers:

    Sellers claiming a refund of sales or use tax paid to the Department of Revenue may use Form ST-12, Wisconsin Sales and Use Tax Return, as an amended return. Refer to page 6 of the instructions for Form ST-12 for information about how to file Form ST-12 as an amended return. Amended returns should be sent to: Wisconsin Department of Revenue, Mail Stop 5-144, PO Box 8906, Madison, WI 53708-8906.

    In lieu of Form ST-12, a seller may file a claim for refund by sending a letter to the Department of Revenue. Claims for refunds submitted in this manner must indicate the claimant’s name and address, seller’s tax account number, amount of the claim for refund, reporting period for which the overpayment was made, and a reason for the claim for refund. Also see Question 6.

    Buyers (also see Questions and Answers 13, 14, 15, and 20):

    • Tax Paid to a Seller:

    Buyers claiming a refund of sales or use tax paid to a seller are required to use Form S-220, Buyer’s Claim for Refund of Wisconsin State, County, and Stadium Sales Taxes (also known as Form BCR), and Form S-220a, Schedule P, Attachment to Buyer’s Claim for Refund of Wisconsin State, County, and Stadium Sales Taxes.

    Note: A separate Schedule P must be completed and attached to Form S-220 for each seller to whom the buyer paid sales or use tax in error.

    • Tax Paid to Department of Revenue:

    Buyers claiming a refund of use tax paid directly to the Department of Revenue may use Form ST-12. Refer to page 6 of the instructions for Form ST-12 for more information about how to file Form ST-12 as an amended return. Amended returns should be sent to: Wisconsin Department of Revenue, Mail Stop 5-144, PO Box 8906, Madison, WI 53708-8906.

    In lieu of Form ST-12, a buyer may file a claim for refund by sending a letter to the Department of Revenue. The letter must indicate the claimant’s name and address, tax account number, amount of the claim for refund, reporting period for which the overpayment was made, and reason for the claim for refund. Claims for refund should be sent to: Wisconsin Department of Revenue, Mail Stop 5-144, PO Box 8906, Madison, WI 53708-8906.

  6. What type of supporting information/documentation do I need to furnish with my claim for refund?

    The following items should be included with your claim for refund:

    1. A properly completed and signed request:
      • Forms S-220 and S-220a for a buyer’s claim for refund
      • Form ST-12 for a seller’s claim for refund on retail sales
      • Form ST-12 for claims for refunds of use tax you reported on your Wisconsin Sales and Use Tax Return, Form ST-12;

    2. Include all required documents with the claim for refund. For a listing of the required documentation, see Request for Computer Software Determination

      3. Exception: If you purchased any of the following, it is presumed, based on the Menasha decision, that the software is custom software. In support of your claim, include the sales or purchase invoice for the software and related services upon which a refund is being claimed.

      PRODUCT
      VENDOR
      Epicor Enterprise Epicor
      ERP LN (aka Baan) Infor Global Solutions
      ERP SL (aka SyteLine) Infor Global Solutions
      ERP SX Enterprise (aka SX Enterprise) Infor Global Solutions
      ERP XA (aka MAPICS) Infor Global Solutions
      IFS Applications Industrial and Financial Systems
      JD Edwards One World JD Edwards
      JD Edwards EnterpriseOne Oracle
      JD Edwards World Oracle
      Lawson M3 Lawson Software
      Lawson S3 Lawson Software
      Microsoft Dynamics AX (formerly Axapta) Microsoft
      Microsoft Dynamics GP (formerly Great Plains) Microsoft
      Oracle e-Business Suite Oracle
      Peoplesoft HRMS Peoplesoft
      Peoplesoft Financials Peoplesoft
      Peoplesoft HR Payroll Peoplesoft
      SAP R/3 SAP
      mySAP SAP
       
    3. For buyer claims for refunds, proof of payment for each invoice;
    4. Any extension agreements filed with the Wisconsin Department of Revenue for one or more periods included in your claim for refund open for adjustment; and
    5. A properly completed Power of Attorney (POA) form (Form A-222), if, in acting on your claim for refund, you want the Department of Revenue to work with someone that is not an employee of your business.

  7. Can I fax or e-mail my claim?

    No. Claims and documentation should be mailed to:

    Wisconsin Department of Revenue
    Mail Stop 5-144
    P.O. Box 8906
    Madison, WI 53708-8906

  8. How soon can I expect to receive my refund?

    Refunds will be processed on a case-by-case basis, generally in the order they are received. Every effort will be made to act on claims as soon as possible. Based on the provisions of the law and the extension agreements, the department may take up to the later of the following dates to act on your claim:

    • July 11, 2009, or
    • One year from the date your claim was actually received by the department.


  9. Is there anything I can do to help speed up the process?

    There are several things you can do that will help speed up the processing of your claim for refund:

    1. Limit your claim for refund to issues related only to the Menasha decision. File a separate claim for refund for any unrelated issues.
    2. Include all required documents with the claim for refund. For a listing of the required documentation, see the answer to Question 6.
    3. Ensure your claim for refund is legible, complete, filed on the correct form, signed, dated, and sent to the correct address.
    4. Attach all supporting information and documentation with the claim for refund when it is filed.
    5. Inform us of any issues that you believe may affect your claim for refund. For example, inform us if a period covered by your claim for refund or an issue in your claim for refund is or was under audit or appeal.

  10. Will I receive interest on my refund?

    Yes.

    Taxes refunded to a seller bear interest at 9% per year from the unextended due date of the return upon which the tax being refunded was remitted to the Department of Revenue to the date the refund is issued.

    Taxes refunded to a buyer bear interest at 9% per year from the last day of the month following the month during which the buyer paid the tax to the date the refund is issued.

  11. What happens if I do not agree with the determination issued by the Wisconsin Department of Revenue regarding my claim for refund?

    The Wisconsin Department of Revenue will inform you if your refund is not granted in full. You will have 60 days from the date you receive the determination to file an appeal with the department. If your appeal is not received within the 60 days, the department’s determination becomes final. For more information regarding your appeal rights, see Wisconsin Publication 505, Taxpayer’s Appeal Rights of Office Audit Adjustments.

  12. Who can I contact if I have questions regarding my claim for refund?
    • If the issue is being addressed as part of an appeal, you should contact the resolution officer handling your appeal.
    • If you are undergoing a field audit for the periods of your request, you should contact the auditor conducting the field audit.
    • In all other situations, contact the auditor identified in your acknowledgement letter. If you have not received an acknowledgement within one month of submitting your claim, please contact Kurt Flechtner at (608) 266-3503. He will direct you to the auditor assigned to process your claim.
    • Inquiries regarding which software transactions are not taxable based on the Menasha decision, or other general questions, should be directed to the department’s Business Tax Customer Service Unit or (608) 266-2776.
    13.  
  13. Under what circumstances may a buyer file a claim for refund with the Wisconsin Department of Revenue?

    A buyer may file a claim for refund of sales and use tax paid in error to a seller under any of the following four conditions:

    1. The claim for refund totals $50 or more of tax (i.e., the total tax relating to all transactions contained in the claim for refund filed with the Department of Revenue is $50 or more).

      2. Example: Buyer A erroneously paid $40 of sales tax to Seller B and $30 of sales tax to Seller C. Buyer A may file a claim for refund with the Department of Revenue for the $70 of overpaid sales tax because the total tax paid in error is $50 or more.

      Important: For conditions b., c., and d. below, the $50 requirement does not apply.

    2. Seller has ceased operating business.

      3. If at the time of filing the claim for refund the seller has ceased business, the buyer may file a claim for refund with the Department of Revenue.

      Example: Buyer D erroneously paid $45 of sales tax to Seller E in January 2006. In April 2008, Seller E terminated the business. Buyer D may file a claim for refund with the Department of Revenue for the $45 of overpaid sales tax.

      If the buyer also paid sales or use tax in error to sellers who have not ceased business, only the seller may file a claim for refund with the Department of Revenue for such tax, unless the buyer meets one of the other conditions described in a., c., or d.

    3. Buyer is being field audited.

      4. If a buyer being field audited by the Department of Revenue paid sales or use tax in error to sellers or to the Department of Revenue, the buyer may file a claim for refund with the Department of Revenue.

      Example: Buyer F is being field audited for the period of January 2004 through December 2007. Buyer F erroneously paid $1,000 of sales tax to Seller G in November 2005.

      While Buyer F is being field audited, Buyer F may file a claim for refund for the $1,000 of sales tax erroneously paid in November 2005. The auditor will include this overpayment in the audit determination.

    4. Periods covered in the claim for refund are within the statute of limitations for the buyer, but are closed to the seller.

      5. Example: In May 2008, Buyer H discovers that it erroneously paid sales tax to Seller I in February 2004. Seller I reported the sales tax on its February 2004 sales and use tax return and paid the tax to the Department of Revenue in March 2004.

      Seller I files its Wisconsin corporate franchise tax return on a fiscal year basis, with its fiscal year ending March 31. Buyer H files its Wisconsin corporate franchise tax return on a calendar year basis.

      The statutory deadline for Seller I to file a claim expired on June 15, 2008, which is four years from the unextended due date (i.e., June 15, 2004) of its corporate franchise tax return for the period of April 1, 2003 through March 31, 2004.

      Buyer H may file a claim for refund of tax it paid to Seller I in February 2004. Buyer H must file this claim by March 15, 2009, which is four years from the unextended due date (i.e., March 15, 2005) of Buyer H’s 2004 corporate franchise tax return.

      Note: If the buyer also paid sales or use tax to sellers in error which pertains to a period that is within the statute of limitations for both the buyer and seller, only the seller may file a claim for refund with the Department of Revenue for such tax, unless the buyer meets one of the other conditions described in a., b., or c.

  14. As a buyer, what can I do to receive a refund of tax paid in error if the period is closed to adjustment?

    If you are the buyer and tax was remitted to the seller in error, you should contact the seller to determine if the period(s) are open to adjustment for the seller. If so, you should request that the seller file a claim for refund on your behalf.

    If you are the buyer, you remitted use tax directly to the Department of Revenue and you do not have a signed extension agreement with the Department of Revenue to hold the period(s) open for adjustment, you are not eligible for a refund of overpaid sales and use taxes for these periods.

  15. What can I do if the seller is out of business or refuses to sign the buyer’s claim for refund?

    If the seller is out of business, you should still make a reasonable effort to contact the seller to review and sign your claim for refund. The seller’s signature confirms that it has reviewed the sales included in your claim for refund, remitted the associated tax to Wisconsin on those sales to you, and not received, nor will it request, a refund of this tax.

    If the seller refuses to sign your claim for refund, you should (a) request that the seller contact the Wisconsin Department of Revenue for clarification of what is required of the seller, or (b) include a letter with your claim for refund documenting your attempts to obtain the seller’s signature and the seller’s refusal to do so. If you are unable to locate the seller, you should document your attempts to locate the seller in a letter included with your claim for refund. Please understand that it may take longer to process your claim for refund if you are not able to obtain the seller’s signature.

  16. I understand that I am not allowed to file a claim for refund for closed period(s) unless the period(s) are open to adjustment under an extension agreement with the Wisconsin Department of Revenue. Am I allowed to file a claim for refund for tax paid on a service contract or agreement for periods still open to adjustment, even though the service contract or agreement relates to software that was purchased in a period closed to adjustment?

    Yes, provided (a) the software is not taxable based on the Wisconsin Supreme Court’s decision in Menasha, and (b) the service contract or agreement was purchased during a period open to adjustment.

  17. What should I do if I am currently undergoing a Wisconsin field audit and I purchased software or a related service contract that should not have been taxed during the period under audit?

    You should immediately bring this to the auditor’s attention so any allowable refund can be included in the audit.

  18. What should I do if I am currently undergoing a Wisconsin field audit and I purchased software or a related service contract that should not have been taxed in a period prior to or after the periods under audit?

    You should immediately bring this to the auditor’s attention. The auditor will help you determine if the period is still open for adjustment and will discuss your options for filing a claim for refund.

  19. What should I do if I purchased or sold software and/or a related service contract that should not have been taxed in a period covered by a field audit that is under appeal?

    You should contact the resolution officer handling your appeal. The resolution officer will help you determine if the period is still open to adjustment and determine whether the purchase or sale can be addressed as part of the appeal process.

  20. What should I do to avoid paying tax on future purchases of software and related service contracts that are not taxable based on the Menasha decision?

    The seller should not charge sales tax if it knows the software is custom computer software at the time of sale of the software or related service. No exemption certificate is required. If the seller is uncertain as to whether the computer software would be considered custom computer software because of activities that may occur after the sale, the buyer should provide a properly completed Wisconsin Sales and Use Tax Exemption Certificate (Form S-211) to the seller at the time of purchase claiming that the software is custom under the Menasha decision.

    Example: Seller A sells computer software to Buyer B. Buyer B contracts with Service Provider C to make modifications to the software so that Buyer B can use the software in its business. Seller A does not know at the time of sale that significant modifications by Service Provide C or other factors would result in the software being considered custom software under the Menasha decision. Seller A should charge sales or use tax on the sale of the software to Buyer B unless Buyer B provides Seller A with a properly completed Wisconsin Sales and Use Tax Exemption Certificate (Form S-211) claiming that the software sold is custom software or services related to custom software.

Contact the Department of Revenue to submit information or if you have questions:

If you have not filed a claim for refund, and have general questions about taxability: To file a claim for refund or if you previously filed a protective claim for refund, send additional information to:

Write: Wisconsin Department of Revenue
Mail Stop 5-77
P.O. Box 8949
Madison, WI 53708-8949

Wisconsin Department of Revenue
STOA - Mail Stop 5-144
P.O. Box 8906
Madison, WI 53708-8906
Telephone: (608) 266-2776
FAX: (608) 267-1030
E-Mail: sales10@revenue.wi.gov
Web site: www.revenue.wi.gov 		Do not FAX or e-mail refund claim or additional information.

Last updated May 29, 2009