Disregarded Entities (Sales and Use Tax)

​The Wisconsin Legislature passed 2009 Wis. Act 28 (effective July 1, 2009), which makes the sales and use tax treatment of disregarded entities consistent with the tax treatment for income and franchise tax purposes.

The Act provides that a single-owner entity that is disregarded as a separate entity for Wisconsin income and franchise tax purposes under Chapter 71 of the Wisconsin Statutes ("disregarded entity") is disregarded as a separate entity for purposes of Wisconsin sales and use taxes. The Act also removes the owner of a single-owner entity that is disregarded as a separate entity under Chapter 71 of the Wisconsin Statutes from the definition of "person" for purposes of Chapter 77.

Prior to July 1, 2009, a single-owner entity disregarded as a separate entity for purposes of Chapter 71, is treated as an entity separate from its owner for purposes of Chapter 77, except for reporting purposes.

The Act also provides a single-owner entity disregarded as a separate entity for purposes of Chapter 71, the option to (1) include the information from the disregarded entity on the owner's return, or (2) file a separate electronic sales and use tax return for the disregarded entity. If an owner that owns more than one disregarded entity elects to file a separate return for one if its disregarded entities, the owner is required to file separate returns for all of its disregarded entities. Such returns shall be signed by the person required to file the return or by a duly authorized agent but need not be verified by oath (effective September 1, 2009).

For sales and use tax returns filed prior to September 1, 2009, the owner of a disregarded entity must include the information from the disregarded entity on the owner's sales and use tax return.

Transitional Provisions: The law includes the following transitional provisions to ensure that, solely due to this law change, the owner of a single-owner entity that is disregarded as a separate entity under Ch. 71, will not incur a use tax liability on purchases made prior to the effective date of the law change or on real property contracts entered into prior to the effective date of the law change:

  • A single-owner entity that is disregarded as a separate entity under Ch. 71 on July 1, 2009 shall be treated under this subchapter as an entity separate from its owner for purposes of the sale, lease, or rental of and the storage, use, or other consumption of tangible personal property purchased by the single-owner entity or its owner prior to July 1, 2009.
  • A single-owner entity that is disregarded as a separate entity under Ch. 71 on July 1, 2009 shall be treated under this subchapter as an entity separate from its owner for purchases of building materials, if the materials are affixed and made a structural part of real estate, and the amount payable to the contractor is fixed without regard to the costs incurred in performing a written contract that was irrevocably entered into prior to July 1, 2009 or that resulted from the acceptance of a formal written bid accompanied by a bond or other performance guaranty that was irrevocably submitted before July 1, 2009.

IMPORTANT NOTE: Owners of disregarded entities that hold or are required to hold a seller's permit should contact one of the Department of Revenue's customer service representatives at (608) 266-2776 or at DORSalesandUse@wisconsin.gov if any of the following apply:

  1. The owner and one or more disregarded entity have the same business location. (Seller's permits issued to a disregarded entity that has the same business location as its owner must be inactivated.)
  2. The owner elects to file a separate electronic sales and use tax return for the disregarded entity.
  3. The owner and/or one or more of its disregarded entities are currently improperly registered (e.g., have different 15-digit account identification numbers).

If you contact the department, be sure to include the following information:

   √   Tax account number. Include the business name and address if you have more than one location.
   √   Federal employer identification number (FEIN).
   √   Effective date of change.
   √   Explanation of change.

July 1, 2009