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. What are property, items, and goods under sec. 77.52(1)(b), (c), and (d)?
  7. 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?

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

    A contractor is a consumer when constructing, installing, repairing, or servicing real property such as buildings. As a consumer, the contractor must pay sales or use tax on materials and supplies used in such activities. A contractor may not charge sales tax on materials or supplies used in such work. However, a contractor's selling price may reflect all costs incurred.

    A contractor is a retailer when selling, installing, repairing or servicing tangible personal property, property, items, or goods under sec. 77.52(1)(b), (c), or (d) (see question #6, below), or performing landscaping services. When selling, installing, repairing, or servicing tangible personal property, property, items, or goods under sec. 77.52(1)(b), (c), or (d), or performing landscaping services, a contractor is liable for sales tax on all receipts from labor, material, and other charges for such sales or activities (unless an exemption applies to the customer). A contractor acting as a retailer that makes taxable sales is required to obtain a seller's permit. A contractor acting as a retailer may purchase the following property, items, and goods without tax, for resale: property, items, and goods sold or transferred to the customer in the installation, repair, or service of tangible personal property, property items or goods under sec. 77.52(1)(b), (c), or (d), and property, items, or goods that are transferred to the customer as part of performing landscaping services.

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

    Contractors should obtain Publication 207. Publication 207 contains additional information to help a contractor 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:

    Candy

    Dietary supplements

    Prepared food

    Soft drinks

    Note: Sales of alcoholic beverages are taxable, but alcoholic beverages are not considered "food" for purposes of Wisconsin sales tax laws.

    Section Tax 11.51(1), Wis. Adm. Code (November 2010 Register), provides the definition of "food and food ingredients" that is used for Wisconsin sales and use tax purposes.

    Section Tax 11.51(2), Wis. Adm. Code (November 2010 Register), provides lists that include examples of taxable and exempt "food and food ingredients."

    Section Tax 11.51(3), Wis. Adm. Code (November 2010 Register), provides the definitions of "candy," "dietary supplements," "prepared food," and "soft drinks" that are applicable for Wisconsin sales and use tax purposes.

    Section Tax 11.87, Wis. Adm. Code, (November 2010 Register), provides examples illustrating the application of Wisconsin sales tax laws as it relates to sales of food and food ingredients in various situations.

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

    Wisconsin state, county, and stadium district sales and use taxes are imposed on the sale of tangible personal property, property, items, or goods under sec. 77.52(1)(b), (c), or (d) (see question #6, below), and taxable services in Wisconsin, including sales over the Internet, unless an exemption applies. The general provisions of the Wisconsin sales tax that apply to every other business, also apply to a business conducted over the Internet. The Internet Tax Freedom Act, originally enacted in October 1998, does not prohibit Wisconsin from taxing sales over the Internet. There is no exemption merely for making sales over the Internet, except where the sale is sourced to (occurs at) a location, as provided in sec. 77.522, Wis. Stats., as created by 2009 Wis. Act 2 and amended by 2009 Wis. Act 28, which is outside Wisconsin.

    If you make sales to persons in other states, who take possession of your product(s) in those other states (for example, you mail the product to an address outside Wisconsin), those sales are not taxable for Wisconsin because they are made in interstate commerce.

    For more information see Wisconsin Sales and Use Tax Information (Pub 201).

  5. Are transportation charges subject to sales tax?

    When a retailer sells tangible personal property, property, items, or goods under sec. 77.52(1)(b), (c), or (d) (see question #6, below), or taxable services that are subject to tax and the retailer charges the purchaser for the delivery, the retailer's total charge, including the transportation charge, is taxable. It is immaterial whether delivery is made by the seller's vehicle, a common or contract carrier, or the United States Postal Service. Additional information relating to the taxability of transportation charges is contained in sec. Tax 11.94 Wis. Adm. Code, (November 2010 Register).

    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 to the purchaser. The "purchase price" shall include transportation charges paid by the Wisconsin purchaser to the seller for the shipment of the goods to the purchaser. The "purchase price" does not include transportation charges paid by the Wisconsin purchaser to a carrier which is independent of the seller.

  6. What are the property, items, and goods under sec. 77.52(1)(b), (c), and (d)?

    Property under sec. 77.52(1)(b), Wis. Stats., are coins and stamps of the United States that are sold, licensed, leased, rented, or traded as collectors' items above their face value.

    An item under sec. 77.52(1)(c), Wis. Stats., is leased property that is affixed to real property, if the lessor has the right to remove the leased property upon breach or termination of the lease agreement, unless the lessor of the leased property is also the lessor of the real property to which the leased property is affixed.

    A good under sec. 77.52(1)(d), Wis. Stats., is a specified digital good or an additional digital good sold at retail for the right to use the specified digital good or additional digital good on a permanent or less than permanent basis and regardless of whether the purchaser is required to make continued payments for such right.

    Additional information on "specified digital goods" and "additional digital goods" is available in Publication 240: Digital Goods - How Do Wisconsin Sales and Use Taxes Apply to Sales and Purchases of Digital Goods?

  7. 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
Madison, WI 53708-8949
Phone: (608) 261-6261
Fax: (608) 267-1030
E-Mail Additional Questions

Last updated June 16, 2011