Wisconsin Sales and Use Tax

Wisconsin Sales and Use Tax
Wisconsin Department of Revenue WI RV Dealers Alliance December 8, 2016

Introduction Holly Hoffman Janet Abrams (715) 824-2258
Janet Abrams (608)

Topics Sales and Use Tax Overview Sales by RV Dealers
Purchases by RV Dealers Record Keeping

Sales and Use Tax Overview

Overview Sales Tax: Use Tax:
5% tax imposed on the sales price of taxable sales, leases, licenses, and rentals in Wisconsin Use Tax: 5% tax imposed on the purchase price of taxable sales, leases, licenses, and rentals that are stored, used, or consumed in Wisconsin upon which a Wisconsin sales or use tax has not previously been paid

Overview Definition of Sales Price and Purchase Price
Total consideration with no deduction for: Delivery, Handling, and Preparation "Service Fees" Extended Warranties and Service Contracts Federal Gas Guzzler Tax Manufacturer's Rebates and Coupons Credit Card Points or Dollars Exchanges or Barter Capitalized Cost Reductions Lease Cancellation Charges

Overview Definition of Sales Price and Purchase Price:
Does not include: Trade-In Allowances Dealer Refunds or Credits Dealer Rebates and Manufacturer's Incentives Registration, Titling, and Filing Fees Bad Debts Interest, Financing, and Carrying Charges Insurance Rental Vehicle Fee

Overview What is use tax?
Wisconsin use tax is a tax imposed on the purchase price of taxable products or taxable services that are stored, used, or consumed within Wisconsin, and upon which a Wisconsin sales or use tax has not previously been paid.

Overview Why is use tax necessary?
Wisconsin retailers could be at a competitive disadvantage if WI persons could purchase taxable products or services from sources outside WI without paying sales tax.

Overview Rates State Tax – 5% County Tax – 0.5%
Baseball Stadium District Tax – 0.1% Football Stadium District Tax – 0.5% (ended 9/30/15) Local Food and Beverage Tax – 0.5% Premier Resort Area Tax – 0.5% or 1.25%

Overview Football Stadium Tax Premier Resort Tax Sheboygan County Tax
Ended 9/30/2015 Premier Resort Tax City of Rhinelander effective 1/1/2017 Sheboygan County Tax 0.5% effective 1/1/2017 Kewaunee County Tax 0.5% effective 4/1/2017

Overview What sales are subject to sales tax?
Tangible personal property Certain coins or stamps Certain leased tangible personal property affixed to real property Certain digital goods (Publication 240) Specified services

Overview Rental Vehicle Fee
A 5% fee is imposed on the sales price from the lease or rental of certain vehicles If your primary business is the rental or lease of vehicles without drivers for 30 days or less Vehicles covered by this fee include: Motor homes Recreational vehicles Camping trailers A rental is in Wisconsin if the lessee takes possession of the motor vehicle from the lessor in Wisconsin How do I register for the rental vehicle fee and/or limousine fee? Use the online application or Form BTR-101, Application for Business Tax Registration. Limousine companies registering for the limousine fee that are not required to register for a seller's permit or a Wisconsin employer identification number should complete Form RV-101, Registration for Rental Vehicle and Limousine Fee Accounts. How do I report my rental vehicle or limousine rental fee? Use My Tax Account, the department's online filing system to report the rental vehicle fee or the limousine rental fee on the Wisconsin Rental Vehicle Fee Return. To use My Tax Account, you will need a logon ID and password. See: Getting Started. A return must be filed for each period, even if there are no fees due for that period. You may download instructions. Are there any exemptions from the rental vehicle fee if my business is primarily engaged in the short-term rental of Type 1 automobiles? Yes. The rental vehicle fee does not apply to the rental of Type 1 automobiles without drivers if the vehicle is being used as a replacement during the service or repair of another vehicle. To claim this exemption, the lessee must present a properly completed Certificate of Exemption for Rental Vehicles (Form RV-207) to the lessor for retention as part of the lessor's records. Other exemptions from the rental vehicle fee include: Rentals not in Wisconsin, Rerentals, Rentals to the U.S. government, Rentals to nonprofit organizations that hold a certificate of exempt status (CES) number, and Rentals to public or private elementary or secondary schools. PRIMARILY ENGAGED IN SHORT TERM RENTALS IS BASED ON LOCATION!!! An “establishment primarily engaged in the short-term rental of vehicles without drivers” is a business location whose primary business is the rental of vehicles for periods of 30 days or less. A location’s primary business may be determined by comparing the gross receipts from each activity at a location for the previous taxable year (e.g., sales, service, rentals, etc.) to the total gross receipts at that location for the previous taxable year. The activity with the greatest percentage of gross receipts is the primary business.

Sales by RV Dealers

Taxable Sales Examples of Taxable Sales by RV Dealers:
RV Sales, Leases, and Rentals RV Repairs and Maintenance Services Sale of Parts, Accessories, and Attachments Towing and Hauling RVs Winterizing/Dewinterizing Services to RVs Storage and Parking of Motorized RVs

Taxable Sales All retailers that hold, or are required to hold, a sellers permit must collect and remit all applicable state and local sales tax on sales of: Motor vehicles Boats Snowmobiles Recreational vehicles as defined in sec (48r), Wis. Stats. Trailers Semitrailers ATV's Aircraft The requirement to collect and remit tax on these sales applies, even if the retailer is not a "dealer" or "registered dealer" of the item sold.

Taxable Sales Retailer Should Provide Buyer Receipt:
Signed Certificate of Title Receipt showing the tax the retailer collected Buyer Must Provide Upon Registration: Receipt when registering or titling item to prove that tax had been paid to retailer

Taxable Sales Recreational vehicles as defined in sec (48r), Wis. Stats.: A vehicle that is designed to be towed upon a highway by a motor vehicle, that is equipped and used, or intended to be used, primarily for temporary or recreational human habitation, that has walls of rigid construction, and that does not exceed 45 feet in length

Taxable Sales of RVs Where the Sale Takes Place Nonresident Purchaser
State, county and stadium sales tax is based on the location where the vehicle is customarily kept Nonresident Purchaser State sales tax based on location where nonresident takes possession (Exemption may apply) County and stadium tax based on location where customarily kept; if kept out of state, the retailer is not required to collect county/stadium taxes Customarily Kept: licenses, leases, and rentals of motor vehicles, trailers, semitrailers, and aircraft that are not transportation equipment are sourced to the primary location of such property as indicated by an address for the property that is provided by the lessee or licensee and that is available in the business records of the lessor or licensor that are maintained in the ordinary course of the lessor's or licensor's business, provided the use of such address does not constitute bad faith

Exemption Nonresident Purchaser
If nonresident purchaser will make no use of the RV in WI other than to remove it from WI, sale is exempt from tax If registered in WI, tax applies Customarily Kept: licenses, leases, and rentals of motor vehicles, trailers, semitrailers, and aircraft that are not transportation equipment are sourced to the primary location of such property as indicated by an address for the property that is provided by the lessee or licensee and that is available in the business records of the lessor or licensor that are maintained in the ordinary course of the lessor's or licensor's business, provided the use of such address does not constitute bad faith

Taxable Sales Camping Trailer is defined as: A vehicle with a collapsible or folding structure designed for human habitation and towed upon a highway by a motor vehicle Pop-up camper Tent camper Truck camper Slide-in truck camper

Taxable Sales of Camping Trailers
Where the Sale Takes Place State, county and stadium sales tax is based on where possession takes place Same treatment for resident or nonresident (no exemption for nonresidents)

Taxable Sales Leases or Rentals of Motor Vehicles, Trailers, Semitrailers, and Aircraft – Where the Sale Takes Place State, county and stadium sales tax is based on the primary location of such vehicles Motor vehicles equipment, etc. used on highways in Wisconsin and out-of-state are subject to Wisconsin sales tax if the lease payments are sourced to a location in Wisconsin Customarily Kept: Except as provided in par. (b), licenses, leases, and rentals of motor vehicles, trailers, semitrailers, and aircraft that are not transportation equipment are sourced to the primary location of such property as indicated by an address for the property that is provided by the lessee or licensee and that is available in the business records of the lessor or licensor that are maintained in the ordinary course of the lessor's or licensor's business, provided the use of such address does not constitute bad faith

Taxable Sales Change in Where the Sale Takes Place
Effective March 3, 2016, the location where a one-payment lease of a motor vehicle, trailer, semitrailer, or aircraft takes place is where the customer receives the vehicle. Generally the lessor or dealer's location. Prior to March 3, 2016, the location where a one-payment lease of a motor vehicle, trailer, semitrailer, or aircraft takes place was, in some cases, different for Wisconsin state tax and Wisconsin county and/or stadium tax purposes. While the state sales tax was based on the location where the lease took place, the county and stadium taxes were based on the location where the motor vehicle, trailer, semitrailer, or aircraft was customarily kept. See the article titled "One-Payment Leases of Automobiles, Effective March 3, 2016 – Where Does the Sale Take Place?" for additional information.

Taxable Sales Service, Maintenance, Towing, etc. to RV's:
Services to tangible personal property are taxable Sale sourced to location where service was received (where customer receives the service property) For example, towing is sourced to where the vehicle is towed to

Taxable Sales Winterizing (Dewinterizing) Services for RVs are Taxable Including: Draining water from a water heater Opening water faucets to allow water to drain Blowing air through water lines & drain pipes to clear water Installing temporary storm windows or plastic sheeting on the windows RV's are TPP; therefore, these services are taxable services to TPP

Taxable Sales Storage and Parking
Parking of self-propelled vehicles is taxable including: RVs, Boats, Aircraft, Motor Vehicles Storage of boats is taxable Storage of RVs, aircraft, and motor vehicles is not taxable if the vehicle is not available for immediate use (e.g., motor vehicle stored on blocks) Providing storage/parking for campers that are not self-propelled is not taxable NOTE: Admissions to campgrounds and RVs setup on campsites are taxable (see Publication 239: Campgrounds)

Taxable Sales Other taxable sales Sales of used equipment
Office furniture Vehicles Sales or rentals to employees We mentioned earlier other taxable purchases that a contractor might not be looking at closely for use tax. The same goes for other taxable sales. Businesses are working hard to ensure that they are properly charging tax on sales that directly relate to their main business purpose. However, they don't think about unusual, occasional or out of the ordinary sales. If you hold or are required to hold a sellers permit you are required to collect sales tax on all taxable sales. Do you rent equipment, repair TPP, sell your old equipment (computers, office furniture, tools, etc)? These may not be part of your daily business operation but are taxable sales. You should be creating invoices and charging sales tax. This includes vehicles – it used to be that only dealers were required to collect tax on vehicle sales. Why is this important when the DMV will collect sales tax when the purchaser goes to register it??? Because it seems that all vehicles cost exactly $500 when registered at the DMV! When the seller is under audit, they are liable for tax on all taxable sales unless proven otherwise. So the seller can contact the customer to verify if they paid tax properly and DOR may be able to obtain information from DMV on amount of sales tax remitted. The seller will be liable for any unpaid tax – so if the sale was $10,000 but the purchaser only reported the sale price as $500… the seller is responsible for the sales tax on the difference ($9,500). So – collect the tax to avoid audit issues and liability for unpaid tax. Provide your customer with a sales invoice that clearly shows amount of tax paid so they can prove that to the DMV for the registration process.

Purchases by RV Dealers

Purchases Taxable purchases: Machinery and equipment for business use
Small tools Shop supplies Office furniture, equipment, and supplies Out of state purchases/credit card purchases When Holly talked about contractors, she really focused on materials consumed in construction. However, contractors need to keep in mind other taxable purchases they are making: Machinery and equipment Equipment rented for a job Small tools Office furniture, equipment, and supplies Make sure WI tax is properly charged on these purchases or remit use tax!

Licensed Carrier DOT may require persons hauling goods of others for hire to obtain a License Carrier number (LC number). Although a person may have an LC number, the exemption for motor trucks used in common or contract carriage is only allowed if the motor truck / semitrailer is used EXCLUSIVELY to haul goods of others for hire. How many of you have clients that have large trucks with LC #'s that the DOT has issued? Yes, the DOT has certain criteria that requires regulation and LC #'s. However, DOT and DOR LC exemption criteria are not the same! In order to qualify for the sales tax exemption for a contract carrier – the vehicle/trailer must be used EXCLUSIVELY to haul the GOODS OF OTHERS for HIRE. You cannot haul your own goods. Your trucking company cannot be a disregarded entity – must be a separately filing entity in order to qualify as hauling goods of others for hire. We also see in audits that some repair/service shops will incorrectly apply the LC exemption without any consent from the vehicle owner if they see an LC# on the vehicle. So if you have vehicles with LC#'s, be sure to review your repair invoices to ensure tax is being charged properly.

Purchases Resale Exemption: Items purchased must qualify for resale
Exclusively held, displayed, or demonstrated for sale purposes Physically transferred to customer If used for business purposes or personally: Use tax is due on original purchase price or lease value Use tax may be due on dealer plate

Record Keeping Audit topics are going to provide some guidance on common issues seen in audits.

Exemption Certificates
Must get within 90 days of sale No good faith requirement within 90 days (if fully completed) Relieves seller of requirement to collect unless: Seller fraudulently fails to collect the tax Solicits purchaser to claim unlawful exemption Sale to an exempt entity, at seller’s location and certificate indicates claimed exemption is not available All taxable sales are considered taxable until proven otherwise. This means that if a seller makes an exempt sale, they need to show documentation to support that exempt sale. To relieve the seller of liability, an exemption certificate must be received within 90 days of the sale. However, a seller should charge tax unless they have an exemption certificate in hand to avoid issues with obtaining a certificate from their customer within 90 days. If a seller receives a fully completed exemption certificate within 90 days of the sale, there will be no good faith requirement. The seller will be relieved of the requirement to collect sales tax unless: -Seller fraudulently fails to collect tax -The seller solicits the purchaser to claim an unlawful exemption -Or in the case where it is a sale to an exempt entity, at seller’s location and certificate indicates claimed exemption is not available. An example of this is how we are WI state employees and DOR has a CES # that when we present it to WI hotels while staying on business, exempts our rooms from sales tax. However, a WI hotel cannot accept a MN state exempt status # for a MN DOR employee speaking at an event here.

A fully completed exemption certificate contains the following information: Purchaser’s name and address; Type of business; Reason(s) for exemption; ID number required by the state where the sale is sourced; and If paper is used, signature of the purchaser. So we said there is no good faith requirement if the seller gets a "fully completed" exemption certificate within 90 days of the sale. What does "fully completed" mean? A fully completed exemption certificate contains the following information: Purchaser’s name and address; Type of business; Reason(s) for exemption (we see many certificates during audits with no box checked for what exemption the customer is claiming) ID number required by the state where the sale is sourced (this is required when claiming resale, certified exempt status, and for native American indian tribes) If paper is used, signature of the purchaser. Date is not listed; however, it is implied in order to qualify for the 90 day requirement.

Allowable Exemption Certificates include: Wisconsin Sales and Use Tax Exemption Certificate (Form S-211) Streamlined Sales and Use Tax Agreement Certificate of Exemption (S-211-SST/SSTGB Form F0003 and F0008) A substitute exemption certificate if it contains all the essential information and is approved by the Department (sec. Tax 11.14(2)(b), Wis. Adm. Code) These are the primary exemption certificates allowed and used. -S-211 is the WI form and most commonly used. -We are a member of streamlined so that is another acceptable form. -A substitute form can be used – you can make up your own form, maybe the information is included in your credit application to have it all in one form. However, the form must contain all of the required fields we discussed as making the exemption form "fully completed" and you must submit your proposed form to DOR and get it approved prior to using it.

When the seller does not receive an exemption certificate within 90 days of the sale, the seller must apply good faith in obtaining the exemption certificate from its customer. So what happens if you don't receive an exemption certificate within 90 days or if you don't keep an exemption certificate on file? Well, usually missing exemption certificates are discovered during an audit. At that point, the seller will be given at least 120 days to obtain missing exemption certificates. For any certificates not dated or received after 90 days of the sale, the seller must apply the good faith requirement.

A seller accepts an exemption certificate in good faith if the certificate: is fully completed, contains no statement or entry which the seller knows, or has reason to believe, is false or misleading, and discloses a valid reason for exemption from Wisconsin sales and use tax under Wisconsin law A seller accepts an exemption certificate in good faith if the certificate: is fully completed (we just discussed what fully completed means) contains no statement or entry which the seller knows, or has reason to believe, is false or misleading, and discloses a valid reason for exemption from Wisconsin sales and use tax under Wisconsin law So now the seller must become the exemption certificate police. An auditor will scrutinize certificates received after 90 days of the sale. Is the customer claiming the exemption in the business of what exemption they are claiming? An excavator claiming the farming exemption or an auto dealer claiming resale for a boat purchase. If it does not appear to be a valid exemption claimed, the seller will be held liable for the sales tax. This is why it is important to get the exemption certificates within 90 days of the sale and keep them on file.

Records Keep good records What you sold Who you sold it to
Recordkeeping Keep good records What you sold Who you sold it to Where sale took place Exemption certificates Anything unique about the transaction We are often asked how to prepare for an audit. The best way to be prepared for an audit is to keep good records. What you sold – adequate description of items/services provided Who you sold it to – name and contact information (especially important if you need to contact customers for exemption certificates) Where sale took place – Our sourcing rules base tax due primarily on where possession is transferred/delivery address/job location…so delivery information or job location is very important to document Exemption certificates – In a location where they are organized and easily accessed. Anything unique about the transaction – Statute of limitations are generally 4 years but if a nonfiler or fraud is involved can go back as far as 6 years. With employee turnover and just the lapse of time it erodes ability to remember or determine what happened 4-6 years ago. So keep notes on unusual situations that can be referred to during an audit.

Online Resources Electronic Mailing Lists Training Opportunities
Go to revenue.wi.gov and search " updates" to subscribe ▪Tax Professionals ▪Sales and Use Tax Training Opportunities Go to revenue.wi.gov and search "Training" My Tax Account webinars Publications on our website: revenue.wi.gov ▪ Wisconsin Tax Bulletins ▪ Publication 201: WI Sales and Use Tax Information ▪ Publication 202: Motor Vehicle Sales, Leases, and Repairs ▪ Publication 207: Contractors ▪ Publication 216: Filing Claims for Refund ▪ Publication 240: Digital Goods All of the information in today's presentation is available on our website and in our publications. How many of you are signed up for the electronic mailing lists? You will receive notices for important law changes or updates from DOR, seminars that may apply to you, and other important information. Only a few s per month, not overwhelming. So often taxpayers under audit claim that they didn't know about an important law change because DOR didn't personally notify them. The electronic mailing list is how you will be notified. Training opportunities – on our website, in the lower right hand corner, you can click on "Training" Lists upcoming seminars and webinars Information for the Speakers Bureau – you can request a speaker in an online request form here These are some of the publications we mentioned in this presentation. I highly recommend looking at Common Questions and Articles on our website also.

Articles: Sales of Watercraft, Such as Boats and Jet Skis
Boats and Trailers: Determining Which County and Stadium Taxes Apply One-Payment Leases of Automobiles Effective March 3, Where Does The Sale Take Place? Snowmobiles, ATVs, UTVs, and Similar Property Sold to Nonresidents

Technical Assistance for Sales and Use Tax
Write: P.O. Box 8949 Mail Stop Madison, WI Telephone: (608) You have our contact information – it was provided at the start of the presentation and is also in your handout. You can feel free to contact us if you have questions after you leave here today. We will also stick around for questions after the presentation today. You can also or call our Madison sales and use tax customer service for assistance. If you have a technical question or would like a written ruling, you can provide all the facts and details and submit it in writing either via mail or to our Office of Technical Assistance. Written rulings (depending on the complexity of the issue) can take 4-6 weeks. Some are not so difficult and you would receive a response within two weeks.

Wisconsin Sales and Use Tax

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