Sales and Use Tax Treatment

  1. I have visited a car dealer recently and he told me that I am required to pay sales tax on the car manufacturer's rebate. Is that correct?
  2. How are contractors taxed on materials, labor and supplies?
  3. What food is taxable and what is exempt?
  4. As a retailer, am I required to collect sales tax on sales made over the Internet and shipped to Wisconsin addresses?
  5. Are transportation charges subject to sales tax?
  6. Is a seller that drop ships product to a Wisconsin location liable for Wisconsin sales tax on that sale?

  1. I have visited a car dealer recently and he told me that I am required to pay sales tax on the car manufacturer's rebate. Is that correct?

    Yes. Wisconsin sales tax is computed on the retailer's sales price of a new motor vehicle prior to reduction for the amount of a manufacturer's rebate.

  2. How are contractors taxed on materials, labor and supplies?

    The tax treatment of the work performed by contractors depends upon whether the contractor is acting as a retailer or acting as a consumer.

    When the contractor is acting as a consumer, no seller's permit is required. The contractor is a consumer when constructing, installing, repairing or servicing real property (e.g., installing windows, painting a house, installing a furnace). As a consumer, the contractor pays tax on materials purchased and used in performing the real property activity. The contractor's charge to the customer is not subject to tax.

    When the contractor is acting as a retailer, a seller's permit is required. A contractor is a retailer when selling, installing, repairing or servicing tangible personal property (e.g., repairing a furnace) or providing a taxable service (e.g., landscaping).

    A contractor must pay sales or use tax on all tools and equipment used in any construction, installation, repair, or service activity.

    Publication 207, Sales and Use Tax Information for Contractors, contains additional information to help distinguish between real and personal property activities.

  3. What food is taxable and what is exempt?

    In general, the sale of food for human consumption is exempt, with the following exceptions as defined in Section Tax 11.51(3), Wis. Adm. Code:

    • Candy
    • Dietary supplements
    • Prepared food
    • Soft drinks

    Note: Sales of alcoholic beverages are taxable. Alcoholic beverages are not considered "food" for purposes of Wisconsin sales tax laws. For further information see:

    Sec. Tax 11.51(1), Wis. Adm. Code - Definition of "food and food ingredients."

    Sec. Tax 11.51(2), Wis. Adm. Code - Examples of taxable and exempt "food and food ingredients."

    Sec. Tax 11.87, Wis. Adm. Code - Examples relating to sales of food and food ingredients.

  4. As a retailer, am I required to collect sales tax on sales made over the Internet and shipped to Wisconsin addresses?

    Wisconsin retailers must collect sales tax on sales made over the Internet and shipped to Wisconsin addresses. Out-of-state retailers must collect sales tax on sales made over the Internet and shipped to Wisconsin addresses if they are 1) registered to collect Wisconsin sales or use tax, or 2) engaged in business in Wisconsin (e.g., have nexus in Wisconsin).

    The Internet Tax Freedom Act, originally enacted in October 1998, does not prohibit Wisconsin from taxing sales over the Internet. There is no exemption for merely making sales over the Internet, except where the sale occurs (i.e., is sourced to a location) outside of Wisconsin.

    For more information see Publication 201, Wisconsin Sales and Use Tax Information.

  5. Are transportation charges subject to sales tax?

    When a retailer sells taxable goods, or services which are subject to tax, and the retailer charges the purchaser for delivery, the retailer's total charge, including the delivery charge, is taxable. This is the case whether delivery is made by the seller's vehicle, a common or contract carrier, or the United States Postal Service.

    Exception: The sales price of direct mail does not include separately stated delivery charges. For further information, see Publication 235, Advertising Companies.

    A Wisconsin purchaser who purchases taxable goods without tax for use in Wisconsin is subject to use tax based on the "purchase price" of the goods. "Purchase price" includes transportation or delivery charges paid by the Wisconsin purchaser to the seller for the shipment of taxable goods to the purchaser. "Purchase price" does not include transportation or delivery charges paid by the Wisconsin purchaser to a carrier which is independent of the seller.

  6. Is a seller that drop ships product to a Wisconsin location liable for Wisconsin sales tax on that sale?

    A manufacturer or other seller may accept an exemption certificate claiming resale from an out-of-state purchaser even when the manufacturer or other seller is directed to ship the product to a consumer in Wisconsin and the out-of-state purchaser does not have a Wisconsin seller's permit or Wisconsin use tax registration certificate.

FOR MORE INFORMATION PLEASE CONTACT:

WISCONSIN DEPARTMENT OF REVENUE
Customer Service Bureau
PO Box 8949, MS 5-77
Madison, WI 53708-8949
Phone: (608) 266-2776
Fax: (608) 267-1030
Email additional questions to DORSalesandUse@revenue.wi.gov

January 22, 2014