Ruling Number: W1911005
December 10, 2018
Facts as Provided by You
Company is a corporation with its operations located out-of-state. Company is the manufacturer and retailer of bars, brownies, and cookies in various sizes and flavors. All these products are fully cooked food items which are individually wrapped, labeled and sold for human consumption. The food items are not sold heated and utensils are not included.
Company accepts orders for its products from Wisconsin residents through Company's own web page on the Internet, orders placed with , and from telephone at their out-of-state manufacturing facility. The products are then packaged in non-returnable containers and shipped to customers through a common carrier such as, . All goods are manufactured out-of-state and all merchandise shipped to customers originates from out-of-state.
Currently, Company does not have any offices, employees, inventory or property located in the State of Wisconsin. However, Company is aware of the new economic nexus standards that were enacted, which affect out of state retailers who sell to customers located in Wisconsin.
Ruling Requested by You
Question 1: Are sales of prepackaged bars, brownies, and cookies that are sold unheated, without utensils, exempt from Wisconsin sales and use tax?
Answer 1: Yes. Prepackaged bars, brownies, and cookies that are sold unheated and without eating utensils, are sales of food and food ingredients that are exempt from Wisconsin sales and use tax under sec. 77.54(20n)(a), Wis. Stats.
Analysis: Wisconsin law provides an exemption for food and food ingredients, as defined in sec. 77.51(3t), Wis. Stats., unless the food product is candy, a soft drink, a dietary supplement, or prepared food. The bars, brownies, and cookies are not a soft drink or a dietary supplement.
"Candy" is defined in sec. 77.51(1fm), Wis. Stats., as "a preparation of sugar, honey, or other natural or artificial sweetener combined with chocolate, fruit, nuts, or other ingredients or flavorings in the form of bars, drops, or pieces. 'Candy' does not include a preparation that contains flour or that requires refrigeration."
Based on the ingredients listings for brownies, sprites and morsels, cookies, and bars from Company's website, all items that Company sells contain flour and therefore, do not meet the definition of candy.
Prepared food, as provided in sec. 77.51(10m)(a)2., Wis. Stats., includes food and food ingredients heated by the retailer, unless an exception in sec. 77.51(10m)(b), Wis. Stats., applies. Bakery items made by the retailer, as provided in sec. 77.51(10m)(b)3., Wis. Stats., are an exception and are excluded from being prepared food. Bakery items include breads, rolls, pastries, buns, biscuits, bagels, croissants, donuts, danish, cakes, tortes, pies, tarts, muffins, bars, cookies, and tortillas. Therefore, Company's sales of bars, brownies, and cookies (i.e., bakery items) that are sold unheated without eating utensils, are not prepared food and exempt from Wisconsin sales and use tax.
Note If there are products sold or that will be sold by Company for which product ingredients are not listed on Company's website above, or such products are not bakery items, those products are not included in this ruling. Company must make a determination whether such items are subject to Wisconsin sales or use tax.
Question 2: Is Company required to register for Wisconsin sales and use tax?
Answer 2: No. Since Company's only sales into Wisconsin are sales of exempt food and food ingredients (i.e., prepackaged bars, brownies, and cookies as described in the answer to Question 1), Company is not required to register for Wisconsin sales or use tax.
Question 3: How does the United States Supreme Court's decision in South Dakota v. Wayfair, Inc., affect Company's sales into Wisconsin?
Answer 3: Because all Company's sales into Wisconsin are sales of exempt sales of food and food ingredients (i.e., prepackaged bars, brownies, and cookies as described in the answer to Question 1), the decision has no effect on Company's current sales.
Analysis: The United States Supreme Court's decision in South Dakota v. Wayfair, Inc., provides that an out-of-state retailer with no physical presence in Wisconsin is required to collect and remit Wisconsin sales or use tax on sales of taxable products and services beginning on or after October 1, 2018, unless the retailer qualifies for Wisconsin's small seller exception. However, since Company does not make sales of taxable products or services into Wisconsin, based on the facts provided, Company is not required to register, collect, or remit Wisconsin sales or use tax.
April 30, 2019