Blog Post by: Mark W. Siler
Wisconsin is continuing to modify its sales and use tax regime to conform to the Streamlined Sales and Use Tax Project. Recent legislation included the changes set forth below.
The definitions and sourcing rules have been created for two types of direct mail, “advertising and promotional direct mail” and “other direct mail.” “Advertising and promotional direct mail” is defined as direct mail for the primary purpose of attracting public attention to a product, person, business or organization or for the primary purpose of attempting to sell, popularize or secure financial support for a product, person, business or organization. “Other direct mail” is therefore defined as any direct mail that does not fall under the above definition.
The sourcing of advertising and promotional direct mail is determined as follows: if the purchaser of advertising and promotional direct mail does not provide the seller with a direct pay permit, an exemption certificate claiming direct mail or other information indicating the appropriate taxing jurisdiction where the mail is delivered to the ultimate recipients, the sale of the advertising and promotional direct mail is sourced to the location from which it is shipped. If the purchaser does provide an exemption certificate claiming direct mail or a direct pay permit to the seller, the purchaser must source the sales to the jurisdictions to which the mail is delivered. The seller, absent bad faith, is relieved of all obligations to collect, pay or remit the tax on any transaction to which the direct pay permit or exemption certificate applies. If the purchaser provides the delivery addresses indicating the jurisdictions to which the mail is to be delivered, the seller must source the sale for those jurisdictions and collect/remit tax accordingly.
The sourcing of other direct mail is determined as follows: if the purchaser does not provide a direct pay permit or an exemption certificate claiming direct mail to the seller, the sale is sourced to the purchaser’s address as indicated by the seller’s business records. If the purchaser does provide an exemption certificate claiming direct mail or a direct pay permit to the seller, the purchaser must source the sale to the jurisdictions to which the mail is to be delivered to its ultimate recipients. The seller, again, will be relieved of all obligations to collect, pay and remit tax on any transaction to which a direct pay permit or an exemption certificate claiming direct mail applies absent bad faith.
The legislation also sets forth the standards for exemption certificates. An exemption certificate is considered to be received by a seller in good faith if the certificate claims an exemption for which all of the following apply:
- It was an exemption authorized by law on the date of the transaction in the jurisdiction where the transaction is sourced;
- It could be applicable to the property, item, good or service being purchased; and
- It is reasonable for the purchaser’s type of business.
If a seller obtains the information above on an exemption certificate, the seller is relieved of any liability for the tax on the transaction unless it is discovered during audit that the seller knew or had reason to know that the information relating to the exemption was materially false or the seller intended to purposefully evade the tax.
Local Exposition District Tax
Alcoholic beverages are now included in the local exposition district tax on candy, prepaid food and soft drinks. Also, with respect to the local exposition district tax, the definition of the word “premises” will be broadly construed and will include seating, aisles and parking areas of any arena, rink or stadium or the lobby, aisles, and auditorium of a theater. Also, the “premises” as applied to a caterer are those places where the meals or beverages are served. These provisions apply retroactively to sales occurring on and after October 1, 2009.
Prepaid Calling Services
The legislation also clarified that prepaid calling services are taxable communication services.
The bad debt deduction has been amended to clarify that the deduction applies only to bad debt for which the seller has paid the tax.