It is not uncommon for a purchaser to buy an item without tax (e.g., purchasing an item without tax for resale by presenting the vendor with a fully completed exemption certificate) and then later use that item in a taxable manner. When a taxable use is made of such an item, use tax is owed based on the original purchase price of the item. (Section 77.57, Wis. Stats. (2011-12))

Example: Computer Store buys and sells computers. A laptop computer was purchased without tax for resale in 2013 for $550. In 2014, Computer Store took the laptop out of inventory and gave it away as a promotional item (i.e., taxable use). The fair market value of the laptop at the time that the first taxable use occurred was $300. Company's use tax liability is based on its purchase price of $550.

July 7, 2014