1. DOR Update Municipal Treasurers Association of Wisconsin Fall Conference Wisconsin Department of Revenue September 22, 2016

2. Session Overview  What's new?  Taxable Sales by Governmental Units  Nontaxable Sales by Governmental Units  Admissions  Occasional Sales Exemption  Documentation 2

3. What's new? Effective January 1, 2017 -  Sheboygan County Tax  City of Rhinelander Premier Resort Area Tax (Publication 403) 3

4. Building Materials Exemption  A contractor's purchase of building materials is exempt if: 1.Using the materials in a real property construction activity for a Wisconsin local governmental unit and 2.The materials become a component of a facility located in Wisconsin owned by the local governmental unit. 4

5. Building Materials Exemption  "Facility" means any building, shelter, parking lot, parking garage, athletic field, athletic park, storm sewer, water supply system, or sewerage and waste water treatment facility, but does not include a highway, street, or road.  Applies to contracts entered into on or after January 1, 2016  January 2016 WI Tax Bulletin #192, page 19 5

6. Construction Projects Sales of real property improvements are not taxable  Contractor is consumer of building materials and owes use tax on purchase of such materials, unless an exemption applies  Governmental unit's exemption does not "flow through" to the contractor  Governmental unit, however, may purchase materials directly from vendor (who is not also installer) 6

7. Occasional Sales Exemption  New standards  If a governmental unit's otherwise taxable sales qualify as occasional sales, no seller's permit is required. 7

8. Taxable Sales

9. Sales and Use Tax Law  Sales tax is imposed on a seller's "sales price" of taxable sales, leases, licenses, and rentals in Wisconsin  Sales price includes separately stated costs associated with the sale of taxable products:  Labor  Charges necessary to complete sale  Service costs 9

10. Sales and Use Tax Law  "Sales price" does not include:  Separately state charges for interest, financing, or insurance  Cash discounts  Trade-ins 10

11. Sales and Use Tax Law  State tax - 5%  County tax - 0.5%  Baseball stadium district tax - 0.5%  Local food and beverage tax – 0.5%  Premier resort area tax – 0.5% or 1.25% 11

12. Sales and Use Tax Law  Wisconsin governmental units are exempt from Wisconsin sales and use tax on all purchases.  Other states' governmental units are not exempt. 12

13. Taxable Sales  Sale, license, lease or rental of tangible personal property  Coins and stamps sold above face value  Certain leased property  Certain digital goods  Certain services 13

14. Taxable Sales by Governmental Units  Tangible personal property  Clothing  Equipment  Landscaping materials 14

15. Taxable Sales by Governmental Units  Tangible personal property  Motor vehicles and similar property  Printed materials  Utilities  Miscellaneous 15

16. Taxable Sales by Governmental Units Requirement to collect tax (if seller's permit required):  Sales of motor vehicles, boats, snowmobiles, recreational vehicle, trailers, semitrailers, ATVs, UTVs, and aircraft  If sold by a "retailer" – purchaser pays tax to retailer  If seller is not a "retailer" – purchaser pays tax when registering or titling  Provide invoice showing tax to the purchaser 16

17. Taxable Sales by Governmental Units  Certain digital goods are taxable  Examples  If tangible form is not taxable, the digital form is not taxable  Publication 240, Digital Goods 17

18. Taxable Sales by Governmental Units  Taxable Services  Cable TV and Telecommunications  Including electronic monitoring services  Landscaping  Publication 210  Laundry 18

19. Taxable Sales by Governmental Units  Taxable Services  Lodging facilities available to public for a continuous period less than one month  Publication 219  Parking and docking  Towing and "lock-out" services 19

20. Taxable Sales by Governmental Units  Taxable sales include:  Candy  Soft drinks  Dietary supplements  Prepared food  Alcoholic beverages 20

21. Taxable Sales by Governmental Units  Candy  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. 21

22. Taxable Sales by Governmental Units  Soft drinks  A beverage that contains less than 0.5% alcohol and that contains natural and artificial sweeteners.  "Soft drink" does not include a beverage that contains milk or milk products; soy, rice or similar milk substitutes; or more than 50% vegetable or fruit juice by volume 22

23. Taxable Sales by Governmental Units  Dietary supplements Must meet all of the following: 1.Contain vitamin, mineral, herb, or other botanical, amino acid, dietary substance to supplement the diet 2.Intended for ingestion in tablet, capsule, powder, soft-gel, gel-cap or liquid form or if not in such forms, not represented as conventional food and is not represented as the sole item of a meal or diet. 3.Labeled as a dietary supplement (21 CFR 101.36) 23

24. Supplemental Facts vs Nutritional Facts 24

25. Taxable Sales by Governmental Units  "Prepared foods" includes:  Food and food ingredients sold in a heated state  Food and food ingredients heated by the retailer – with exceptions  Two or more food ingredients mixed or combined by the retailer for sale as a single item – with exceptions  Food and food ingredients sold with eating utensils such as napkins, plates, forks, straws, etc. that are provided by the retailer – with certain requirements 25

26. Taxable Sales by Governmental Units  Prepared Food  Food and food ingredients heated by the retailer Example: Concession stand sales. Pops popcorn then sells the unheated popcorn to customers. The popcorn that was heated by the retailer is prepared food. 26

27. Taxable Sales by Governmental Units  Prepared Food  Two or more food ingredients mixed or combined by the retailer for sale as a single item – with exceptions Example: A concession stand prepares and sells a cold sandwich to its customer. The sandwich is prepared by spreading mayonnaise on two slices of bread and putting meat, cheese, and lettuce between the two slices of bread. The sandwich that was prepared by the retailer is prepared food. 27

28. Taxable Sales by Governmental Units  Prepared Food  Food and food ingredients sold with eating utensils such as napkins, plates, forks, straws, etc. that are provided by the retailer – with certain requirements Example: A concession stand sells soft-serve ice cream. The concession stand worker hands the customer the cup of ice cream. The ice cream is prepared food. 28

29. Taxable Sales by Governmental Units  Alcoholic Beverages  A beverage suitable for human consumption that contains 0.5% or more alcohol by volume.  Donations and fundraising  When a charge to a customer for taxable food, food ingredients, and beverages bears little or no relation to the actual value of the taxable food, food ingredients, and beverages provided, the actual value of the food is subject to tax 29

30. Nontaxable Sales

31. Nontaxable Sales by Governmental Units  Fees and licenses  Out-of-state sales  Storage  Rental of building space, for purposes other than recreational, amusement, entertainment or athletic.  Utilities  Tree and shrub trimming performed in utility right-of- way to prevent interference or make inaccessible to children 31

32. Nontaxable Sales by Governmental Units Examples: 32  Ambulance service charges  Fees for garbage or trash removal  Library fines  Licenses and permits  Notary public fees  Police escort services  Snow removal and snowplowing

33. Admissions

34. Taxable Admissions  Admission to amusement, athletic, entertainment or recreational events or places  Season tickets for amusement, athletic, entertainment, or recreational events  Entry fees for individuals or teams for participation in sports league – with exception  Camping permits or identification card permitting access to amusement, athletic, entertainment or recreational facilities 34

35. Taxable Admissions  Fees or admission charges to permit access to multipurpose facilities, such as:  Parks  Pavilions  Athletic fields  Gymnasiums  Auditoriums 35

36. Multipurpose Facility Rentals  Exceptions to taxable multipurpose facility rentals:  The organization paying for the facility use is exempt from tax (e.g., church)  The person renting the facility will sell an admission to the event (i.e., resale)  The person uses the facility for a non-recreational type of event. 36

37. Nontaxable Admissions  Admissions to sports activities, such as leagues entry fees, if more than 50% of the participants are 19 year old or younger  Fees for instruction (e.g., swimming lessons)  Admissions to museums of history, art or science, including zoos  Admissions to county fairs  Admissions to facilities used primarily for fitness or health 37

38. Occasional Sale Exemption

39. Three standards must be met: 1.Organization is not engaged in a "trade or business" 2.Entertainment is not involved at admission event 3.Organization does not have or is not required to hold a sellers permit - Except for conducting bingo events 39

40. Occasional Sale Exemption 1.An organization is engaged in a "trade or business" if:  Sales of taxable products and services (not including ticket sales of tickets to events to events), or its events, occur on more than 20 days during the calendar year AND  It's sales of taxable products and services exceed $25,000 for the calendar year 40

41. Occasional Sale Exemption 2.No entertainment at admission event  "Entertainment" means entertainment provided at an admission event by all persons or groups who are paid more than $500 per event by all persons performing, for reimbursement of expense, or prize money  "Admissions" are involved if access to event is restricted to those who pay a required fee, pay a required donation, or must make 41

42. Occasional Sale Exemption Examples of entertainment:  Four bands are paid $200 each to perform during a 3- day event. An admission is charged to access event.  Two organizations co-sponsor an admission event. Each organization pays the band $300. An admission is charged to access the event.  Nonprofit organization hosts an admission event. Sponsor pays singer $800 to perform. As a result, receipts from each of the events above are taxable. 42

43. Occasional Sale Exemption 2.No entertainment at admission event Exception: A nonprofit that would otherwise qualify for the exempt occasional sales, except for the involvement of entertainment may:  Obtain a seller's permit for the day or days of the event involving entertainment,  Pay the sales tax on the sales of tpp and taxable services on these days, and  Request inactivation of the seller's permit after the event by contacting DOR 43

44. Occasional Sale Exemption 3.The organization does not have and is not required to hold a seller's permit  A nonprofit is not required to hold a seller's permit if its meets standards 1 & 2 44

45. Occasional Sale Exemption  New standards for 2017 –  20-day standard increase to 75 days per calendar year  $25,000 receipts standard will increase to $50,000 per calendar year  $500 entertainment standard increases to $10,000 45

46. Documentation

47.  Purchases by Governmental Units  Must provide one of the following:  A purchase order or similar document identifying the governmental unit as the purchaser.  A fully completed exemption certificate  Its Certificate of Exempt Status (CES) number. The vendor records on the invoice that it keeps. 47

48. Documentation  Employee Purchases of Meals and Lodging  To be exempt the following must occur: 1.Governmental unit provides seller documentation (see prior slide) and indicates employee is traveling on governmental unit business and funds are being provided to the employee to pay any expenses. 2.The seller issues the billing or invoice for the meal or lodging in the name of the governmental unit. 48

49. Documentation  Records to Keep  A seller is liable for sales tax on its sales of taxable products or services unless it shows such sales are exempt 49

50. Documentation  Records to Keep Four common reasons that taxable sales or services are exempt: 1.The purchaser is purchasing an item for resale. 2.The purchaser is making an exempt use of the item. 3.The purchaser is exempt. 4.The purchaser provides a direct pay permit. 50

51. Documentation  A governmental unit must keep as part of its records the completed exemption certificates, purchase orders or invoices to prove the sales are exempt. 51

52. Resources  Fact Sheet 2107, Rentals of Multipurpose Facilities  Publication 206, Nonprofit Organizations  Publication 209, Counties and Municipalities  Publication 210, Landscaping  Publication 220, Grocers  Publication 240, Digital Goods  Wisconsin Tax Bulletin 52

53. Speaker information: Becky Haines Wisconsin Department of Revenue Rebecca.Haines@wisconsin.gov (608) 261-5282 53