1 mid-america council leadership training session april 2014 presented by wisconsin department of...
TRANSCRIPT
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Mid-America CouncilLeadership Training Session
April 2014
Presented byWisconsin Department of Revenue
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Agenda
Streamlined Sales Tax Project Wisconsin Sales and Use Tax Sales and Use Tax Exemptions Law Changes and Updates Miscellaneous and Resources
Streamlined Sales Tax Project
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Streamlined Sales Tax Project
Streamlined Sales Tax Governing Board began in March 2000
23 full member states 1 associate member state
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Streamlined Sales Tax Project
Quill Corp. – U.S. Supreme Court Physical presence Existing system too complicated Congress has authority to require remote sellers to
collect tax
Simplify and modernize sales and use tax administration
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Streamlined Sales Tax Project
Wisconsin became full member on October 1, 2009 Legislation passed – 2009 Wisconsin Acts 2 and
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Streamlined Sales and Use Tax Agreement (SSUTA)
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Streamlined Sales Tax Project The key areas that are being made more
uniform include: Rate simplification Limiting the frequency of tax rate changes Simplifying registration systems Simplifying filing and paying of sales tax Uniform audit procedures Uniform definitions within tax bases Uniform rounding rules Uniform treatment of bad debts
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Streamlined Sales Tax Project Annual state recertification
Certificate of compliance Taxability matrix
States certify software providers Wisconsin rate and boundary database file Sales tax rate look-up
https://ww2.revenue.wi.gov/STRB/application
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Streamlined Sales Tax Project Streamlined Sales Tax Registration System
Must register in all Member States Sellers can indicate they do not have sales in a
particular state Can indicate states where a seller is already
registered All changes or updates to registration information
made in one place and sent to all states Different technology models
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Streamlined Sales Tax Project Federal legislation
Senate (S. 743) passes Marketplace Fairness Act of 2013 in May 2013
Judiciary Committee hearing on alternatives on the internet sales tax issue
Marketplace Fairness Act of 2013 Two different paths
Member States under the SSUTA Alternative path - minimum simplifications
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Streamlined Sales Tax Project Current Developments
Registration system More state disclosure
Best Practices Matrix – Vouchers Best Practices Matrix – Credits??
Prepared food toggle Marketplace Fairness Act Online taxability matrix
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Wisconsin Sales and Use Tax
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Seller's Permit
A retailer located outside Wisconsin who has “nexus” in Wisconsin and who makes taxable sales in Wisconsin is required to register.
A retailer without “nexus” may voluntarily register.
"Nexus" or "engaged in business" is defined in Tax 11.96 of the Wis. Adm. Code
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What is nexus? What creates nexus?
Nexus is a connection or a link to Wisconsin (i.e., a physical presence).
For sales and use tax purposes, common situations that create nexus for a business are:• Having any portion of your business physically located
in Wisconsin
• Leasing or renting tangible personal property located in Wisconsin
• Repairing or installing tangible personal property in Wisconsin
What creates nexus? (continued)
• Performing construction work in Wisconsin
• Performing taxable services in Wisconsin
• Delivering tangible personal property into Wisconsin in your own vehicle
• Having agents, salespeople, etc. in the state selling, taking orders, or making deliveries
• Participating in conventions and/or trade shows in Wisconsin
Note: Keep in mind that nexus requirements vary for different tax types.
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What creates nexus? (continued) Activities that by themselves do not create
nexus:• Advertising in newspapers and telephone books
• Sending catalogs into the state from outside the state
• Receiving mail or telephone orders and having the orders shipped into the state using mail or common carrier
• Attending educational seminars
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Where does the sale take place? Sourcing is the term used to indicate
where the sale takes place and which taxing jurisdictions (state and local) are entitled to impose a tax on the sale.
A sourcing hierarchy was developed and must be followed to determine the proper state and local jurisdiction to which a sale is sourced.
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Sourcing hierarchy
1. Seller’s Address –
Tax is charged based on the taxing jurisdiction of seller’s location, if that’s where possession transfers.
2. Delivery Address –
Tax is charged based on where the product is shipped to or the service is provided.
3. Billing Address –
Tax is charged based on the address that the seller has in their records for the customer.
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Sourcing hierarchy
4. Other Address –
Purchaser’s address obtained during the consummation of the sale (possibly on the payment instrument)
5. Location from which the item is shipped -
This is a catch-all provision … so seller always has a definite place to source a sale
Wisconsin Statutes 77.522
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Special Sourcing Rules
Leases, licenses, and rentals of TPP sec. 77.522(3)(a), Wis. Stats.
Leases, licenses, and rentals of motor vehicles, trailers, semitrailers, or aircraft that do not qualify as transportation equipment sec. 77.522(3)(b), Wis. Stats.
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Sales and Use Taxes
Rates
State tax – 5.0% County tax - 0.5% Baseball stadium district tax - 0.1% Football stadium district tax - 0.5% Local food and beverage tax - 0.5% Local expo basic room tax – 2.0% (7% additional room tax for
City of Milwaukee only) Premier resort area tax - 0.5% or 1.0% (Effective July 1, 2014,
Lake Delton and City of Wisconsin Dells increase to 1.25%)
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What is included in the sales price? “Sales price” includes the following charges:
• Retail price of the product or service
• Delivery charges
• Installation charges
• Taxes that are the obligation of the seller
• Tips or service charges added to the bill by the seller
• Services necessary to complete the sale (e.g. trip charges, fuel surcharge, reimbursed expenses, etc.)
• All items as required as a condition of the sale
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What is not included in the sales price?
“Sales price” does not include the following charges:• Credit allowed for TPP taken in trade (i.e. trade-in allowance)
• Interest
• Finance charges from the extension of credit
• Taxes legally imposed on the purchaser, if separately stated on the invoice
• Delivery charges for direct mail (if separately stated on the invoice to the purchaser)
• Discounts or coupons, unless reimbursed by a third party (e.g., manufacturer’s coupon)
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Sales and Use Taxes
Taxable Products: Tangible personal property (sec. 77.52(1)(a), Stats.) Certain coins or stamps (sec. 77.52(1)(b), Stats.) Certain leased tangible personal property affixed to real
property (sec. 77.52(1)(c), Stats.) Digital goods (sec. 77.52(1)(d), Stats.)
The four products, above, are referred to collectively as tangible personal property, and items, property, and goods.
Specified services
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Sales made over the Internet
Sellers who are registered or required to be registered to collect tax in Wisconsin and who make sales over the Internet, must charge sales tax on sales sourced to Wisconsin.
Wisconsin also imposes sales tax on internet access services.
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Sales and Use Taxes
Taxable Services (not all-inclusive): Repair or other service to tangible personal property Parking (for motor vehicles and aircraft) Admissions to amusement, athletic, recreational, and
entertainment events or facilities Landscaping Cable television
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Sales and Use Taxes
More Taxable Services (not all-inclusive): Boat docking and storage Providing rooms and lodging Photographic services, including videographic
services Laundry and dry cleaning services Telecommunications services Printing or imprinting services
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When is labor taxed?
Repair labor – taxable Fabrication labor – taxable Installation Labor – taxable Construction labor – not taxable if the labor is
used to make a real property improvement (exceptions apply)
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Nontaxable Service Providers Many service providers provide services that
are typically not subject to tax. Examples include:
banks accountants attorneys consulting firms health care providers
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Nontaxable Service Providers If they provide any taxable products or services, they
are required to register and collect the applicable taxes like any other business.
Examples include: Accountants who sell computer software and
install it on their client’s computer Banks that sell collector coin sets Hospitals that sell photocopies of medical records
Purchases of business assets and office supplies are taxable (unless an exemption applies).
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Tangible Personal Property Defined in sec. 77.51(20), Stats. "Tangible personal property" means personal
property that can be seen, weighed, measured, felt, or touched, or that is in any other manner perceptible to the senses, and includes electricity, gas, steam, water, and prewritten computer software, regardless of how it is delivered to the purchaser.
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Digital Goods
Items/products that may be transferred by: Uploading using the internet Streaming over the internet Emailing to the purchaser
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Digital Goods
If tangible form was exempt or not subject to tax, digital form is also not subject to tax
Sec. 77.54(50), Stats.
Example: Finished artwork consumed in manufacturing
brochures
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Online Training or Webinar
Live event Digital audiovisual work Tangible form is not taxable
Previously recorded Digital audiovisual work Tangible form subject to tax
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Digital Goods
Taxable digital goods include: Specified Digital Goods Digital Codes Additional Digital Goods
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Specified Digital Goods include
Digital audio works Recorded or live songs, reading of books,
ringtones Digital audiovisual works
Movies, motion pictures, music videos, live or recorded events
Digital books Novels, autobiographies, dictionaries, cookbooks,
textbooks
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Digital Codes
Codes used to access or obtain any specified digital good, or any additional digital goods that have been previously purchased & promotion cards/codes purchased by retailer or other business entity
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Additional Digital Goods Greeting Cards Finished Artwork Periodicals Video or Electronic Games Newspaper or other news or information
products
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Finished Artwork
Drawings Paintings Designs Photographs Lettering
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Digital Goods
Examples of generally taxable digital goods (i.e., they are one of the specific digital goods that are subject to tax)
PowerPoint presentation Brochure designs Copies of construction plans and specifications Designing, creating, and distributing e-newsletters
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Digital Goods Examples of nontaxable digital goods (i.e., they
are not one of the specific digital goods that are subject to tax)
Blank legal forms Viewing a live educational seminar via webinar Access to a web site that allows the user to search a
database that returns personal information about a person
Web hosting services
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Digital Goods
References: Publication 235: Advertising Companies Publication 240: Digital Goods Common Questions – Computer, Hardware, and
Software
What is use tax?
Self-assessed and paid directly to the state.
Applies when you purchase taxable items or
services for your own use without paying sales tax.
Is the complement to sales tax - it reduces unfair competition for all businesses.
Most audit assessments are for use tax!!
What is the basis for use tax?
Use tax is based on: your purchase price of taxable purchases, including any taxable miscellaneous charges.
This is true whether you buy items: for your own business use without paying sales
tax, take them out of inventory and use them in a
taxable manner or donate them to a charitable organization.
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Consumer Use Tax
A business that does not make retail sales subject to Wisconsin sales or use tax is required to register for a consumer’s use tax certificate if it regularly makes purchases that are subject to Wisconsin use tax. (Examples: materials consumed by contractors).
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Credit for Taxes Paid to Other States
Wisconsin allows a credit for the amount of sales tax owed in another state (tax must be legally due and owed), up to the amount of tax due in Wisconsin on that same purchase.
Example - A Janesville business buys and picks up office supplies in Rockford. The office supply store charges the appropriate 8.25% Illinois sales tax. The business brings the supplies back to Janesville for use. A credit is given for the 8.25% IL tax paid to offset the 5.5% WI tax. Thus no Wisconsin or Rock county use tax is due.
Note: Wisconsin business CANNOT get a refund on the additional 1.375% IL tax.
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Sales and Use Tax Exemptions
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Sales and Use Tax Exemptions
Product based exemption
The product itself is exempt (e.g., most food purchased from a grocery store, such as milk, eggs, fresh fruit).
No exemption certificate required
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Sales and Use Tax Exemptions
Use based exemption
The product is used in an exempt manner (e.g., farm machinery).
An exemption certificate is required
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Sales and Use Tax Exemptions
Entity based exemption
The buyer or seller is exempt from tax (e.g., sale by the federal government, or sale to a nonprofit organization holding a CES number). An exemption certificate or copy of their
Wisconsin CES number
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Government Agencies Wisconsin state and local governmental agencies do not have
to pay sales or use tax on their purchases of taxable goods and services.
Examples of exempt governmental units in Wisconsin: Federal governmental agencies Federally recognized American Indian Tribe or Band in Wisconsin Wisconsin governmental agencies Local governmental agencies from Wisconsin
Note: State and local government agencies from other states are taxable in Wisconsin.
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Non-profit Organizations Non-profit organizations that can obtain exempt
status for sales and use tax are: Charitable organizations (e.g. hospitals, nursing
homes, ambulance services and outpatient surgical centers organized under 501(c)(3) )
Religious organizations (e.g. churches, synagogues, mosques, etc.)
Educational organizations (e.g. scouts and youth groups)
Note: Many people assume that if an organization has obtained federal nonprofit status that they automatically qualify for a sales tax exemption. This is not the case – it is not an automatic exemption.
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Sales and Use Tax Exemptions
Sec. 77.54(5)(a), Stats. Motor vehicles purchased by non-residents Only use is to remove from this state Includes: aircraft, truck bodies
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Sales and Use Tax Exemptions
Sec. 77.53(17), Stats. Excluded from use tax Personal property brought into WI by a non-
resident while temporarily in WI Does not include property used in a trade or
business Examples: Camping supplies, snowmobiles,
strollers, cameras, cell phones
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Sales and Use Tax Exemptions
Sec. 77.53(18), Stats. Excluded from use tax if changing domicile Household goods when moving to WI Must be purchased 90 days or more prior to bringing
property into WI Includes (personal use): aircraft, motor vehicles,
boats, snowmobiles, mobile and manufactured homes, RVs, trailers, semitrailers, and ATVs
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Exemption Certificates All sales of taxable products are considered
taxable, until the contrary is established. Authorized exemption certificates
Form S-211 Form S-211-SST Certificate of Exempt Status Direct Pay Permit issued by Wisconsin Uniform Sales and Use Tax Certificate (Multi-
jurisdictional Tax Certificate)
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Exemption Certificates
Seller is relieved of liability for the tax if the seller obtains and retains: Fully completed exemption certificate Prior to or within 90 days after the date of the sale Indicating that the purchaser will use the property
or service in a manner that is exempt from Wisconsin sales and use tax.
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Exemption Certificates
In the case of an audit: Allow 120 days once requested by WI DOR to
substantiate a claimed exemption Seller must accept exemption certificate in good
faith
Is the business still operating?
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Law Changes and Updates
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2013 & 2014 Sales and Use Tax Law Changes
Advertising and promotion direct mail exemption (eff. 7/1/13)
Services that result in advertising and promotional direct mail (eff. 7/1/13)
Laundry, dry cleaning, pressing, and dyeing services through self-service machines exemption (eff. 10/1/13)
Lump sum contracts (eff. 10/1/13) Other recent law changes – articles to be published
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2013 & 2014 Sales and Use Tax Law Changes
Exemption certificate received after sales tax paid Effective July 2, 2013 Retailer receiving fully completed exemption
certificate from purchaser after reporting sale as taxable may claim deduction on sales tax return for items covered by exemption certificate
Previously had to file amended return
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2013 & 2014 Sales and Use Tax Law Changes
Exemption certificate deduction - cont’d Requirements:
Retailer paid tax to DOR Exemption certificate received by retailer
in same taxable year as sale covered by exemption certificate, and
Retailer returned tax to buyer
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2013 & 2014 Sales and Use Tax Law Changes
Exemption certificate deduction - cont’d The deduction is claimed on return filed for period
in which retailer receives exemption certificate. May result in negative “taxable sales” on sales tax
return
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2013 & 2014 Sales and Use Tax Law Changes
Sales/Use Filing Frequency Changes Tax years beginning on or after January 1, 2014
Monthly – tax due in calendar quarter is more than $1,200 (previously $600)
Quarterly – tax due annually more than $600 but less than $1,200 quarterly
Annual – tax due $600 or less annually (rule change pending)
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2013 & 2014 Sales and Use Tax Law Changes
Sales/Use Filing Frequency Changes Letters notifying affected taxpayers went out in
November Taxpayers can elect to keep more frequent filing
frequency through My Tax Account after receiving letter
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2013 & 2014 Sales and Use Tax Law Updates
Take and bake pizza (March Sales and Use Tax Report)
Motor vehicles sales by Wisconsin retailers that hold a Wisconsin seller's permit
No exemption for nonresidents for non-motorized campers
Revenue from federal law to reduce Wisconsin individual income tax
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Miscellaneous and Resources
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Refund Interest Reduction
All DOR-paid refund interest amounts shifted from 9% to 3% on July 2, 2013, regardless of tax type, filing date or taxable period
12% interest rate on assessments (18% if delinquent) is unchanged
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My Tax Account (MTA)
MTA is an online filing and payment system that allows you to:
File and amend returns Make payments Receive payment and return confirmations Monitor your business tax accounts at any
time
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My Tax Account Webinars
Watch for announcements on: Regular monthly MTA webinars for new
businesses Webinars for persons with third-party access
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Delinquent Tax Issues
File Returns Even if Tax Can’t Be Paid My Tax Account can be used to file past due
returns
Sales and Use Tax ResourcesKeep on top of changes!
Go to DOR web site at www.revenue.wi.gov
Sales and Use Tax Reports (quarterly) Wisconsin Tax Bulletins Publications
Publication 201 for general sales and use tax info
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DOR ResourcesElectronic Mailing Lists
List Servs Sales & Use Tax Tax Professionals Wisconsin Economic Outlook Withholding Tax
Subscribe at: http://www.revenue.wi.gov/html/lists.html
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DOR ResourcesPractitioner Assistance
Email: [email protected]
Phone:
608-261-5199
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