Property that is purchased without tax for resale and later used in a taxable manner is subject to Wisconsin use tax. The business is the consumer of such property that it uses, rather than sells. The use tax is based on the purchase price of the property.

Example 1: Grocery Store purchases floor wax without tax, for resale, that it will hold in inventory for sale. Grocery Store takes a bottle of floor wax out of inventory to wax Grocery Store's floor. Grocery Store is the consumer of the floor wax that it uses in a taxable manner and must pay use tax on its purchase price of the floor wax.

Exception: A donor business does not owe use tax if the property is purchased without tax for resale and later donated to a tax exempt organization listed in sec. 77.54(9a), Wis. Stats. If the exempt organization is not a governmental unit, the donor business should obtain the exempt organization's certificate of exempt status number to document this exemption.

Example 2: Retailer sells athletic wear. Retailer takes a football jersey out of stock and donates it to Exempt Organization, who will use the jersey as a prize in its raffle. Retailer does not incur a use tax liability, since the jersey is donated to a qualifying tax exempt organization.

This exemption only applies to donations to qualifying organizations (i.e., organizations listed in sec. 77.54(9a), Wis. Stats.). A fundraiser may be held to benefit an individual. Property that is taken out of inventory and donated to a fundraiser for an individual does not qualify for exemption from use tax, since the funds raised benefit an individual and not a qualifying organization. The donor is liable for use tax on its purchase price of taxable products donated in this manner.

Example 3: Individual has incurred medical expenses that are not covered by insurance. Individual's friends and neighbors organize a silent auction, with the proceeds being used to defray Individual's medical expenses. Retailer takes a football jersey out of inventory and donates it to the auction. Retailer is the consumer of the jersey that it uses in a taxable manner and must pay use tax on its purchase of the jersey. The exemption for property purchased without tax for resale and donated does not apply, since the property is being donated to a nonqualifying person or organization.

November 4, 2015