71.04(4m) (4m)Apportionment formula computation.
71.04(4m)(a)1.1. For taxable years beginning before January 1, 2008, if both the numerator and the denominator of the sales factor under sub. (7) related to a taxpayer's remaining net income are zero, the sales factor under sub. (7) is eliminated from the apportionment formula to determine the taxpayer's remaining net income under sub. (4).
71.04(4m)(a)2. 2. For taxable years beginning after December 31, 2007, if both the numerator and the denominator of the sales factor under sub. (7) related to a taxpayer's remaining net income are zero, none of the taxpayer's remaining net income is apportioned to this state.
71.04(4m)(b)1.1. For taxable years beginning before January 1, 2008, if the numerator of the sales factor under sub. (7) related to a taxpayer's remaining net income is a negative number and the denominator of the sales factor under sub. (7) related to a taxpayer's remaining net income is a positive number, a negative number, or zero, the sales factor under sub. (7) is zero.
71.04(4m)(b)2. 2. For taxable years beginning after December 31, 2007, if the numerator of the sales factor under sub. (7) related to a taxpayer's remaining net income is a negative number and the denominator of the sales factor under sub. (7) related to a taxpayer's remaining net income is a positive number, a negative number, or zero, none of the taxpayer's remaining net income is apportioned to this state.
71.04(4m)(c)1.1. For taxable years beginning before January 1, 2008, if the numerator of the sales factor under sub. (7) related to a taxpayer's remaining net income is a positive number and the denominator of the sales factor under sub. (7) related to a taxpayer's remaining net income is zero or a negative number, the sales factor under sub. (7) is one.
71.04(4m)(c)2. 2. For taxable years beginning after December 31, 2007, if the numerator of the sales factor under sub. (7) related to a taxpayer's remaining net income is a positive number and the denominator of the sales factor under sub. (7) related to a taxpayer's remaining net income is zero or a negative number, all of the taxpayer's remaining net income is apportioned to this state.
71.04(5) (5)Property factor. For purposes of sub. (4) and for taxable years beginning before January 1, 2008:
71.04(5)(a) (a) The property factor is a fraction, the numerator of which is the average value of the taxpayer's real and tangible personal property owned or rented and used in this state during the tax period and the denominator of which is the average value of all the taxpayer's real and tangible personal property owned or rented and used during the tax period. Cash on hand or in the bank, shares of stock, notes, bonds, accounts receivable, or other evidence of indebtedness, special privileges, franchises, goodwill, or property the income of which is not taxable or is separately allocated, shall not be considered tangible property nor included in the apportionment.
71.04(5)(b) (b) Property used in the production of nonapportionable income or losses shall be excluded from the numerator and denominator of the property factor. Property used in the production of both apportionable and nonapportionable income or losses shall be partially excluded from the numerator and denominator of the property factor so as to exclude, as near as possible, the portion of such property producing the nonapportionable income or loss.
71.04(5)(c) (c) Property owned by the taxpayer is valued at its original cost. Property rented by the taxpayer is valued at 8 times the net annual rental. Net annual rental is the annual rental paid by the taxpayer less any annual rental received by the taxpayer from sub-rentals.
71.04(5)(d) (d) The average value of property shall be determined by averaging the values at the beginning and ending of the tax period but the secretary of revenue may require the averaging of monthly values during the tax period if reasonably required to reflect properly the average value of the taxpayer's property.
71.04(6) (6)Payroll factor. For purposes of sub. (4) and for taxable years beginning before January 1, 2008:
71.04(6)(a) (a) The payroll factor is a fraction, the numerator of which is the total amount paid in this state during the tax period by the taxpayer for compensation, and the denominator of which is the total compensation paid everywhere during the tax period.
71.04(6)(b) (b) Compensation is paid in this state if:
71.04(6)(b)1. 1. The individual's service is performed entirely within this state;
71.04(6)(b)2. 2. The individual's service is performed within and without this state, but the service performed without this state is incidental to the individual's service within this state;
71.04(6)(b)3. 3. A portion of the service is performed within this state and the base of operations of the individual is in this state;
71.04(6)(b)4. 4. A portion of the service is performed within this state and, if there is no base of operations, the place from which the individual's service is directed or controlled is in this state;
71.04(6)(b)5. 5. A portion of the service is performed within this state and neither the base of operations of the individual nor the place from which the service is directed or controlled is in any state in which some part of the service is performed, but the individual's residence is in this state; or
71.04(6)(b)6. 6. The individual is neither a resident of nor performs services in this state but is directed or controlled from an office in this state and returns to this state periodically for business purposes and the state in which the individual resides does not have jurisdiction to impose income or franchise taxes on the employer.
71.04(6)(c) (c) Compensation related to the operation, maintenance, protection or supervision of property used in the production of both apportionable and nonapportionable income or losses shall be partially excluded from the numerator and denominator of the payroll factor so as to exclude, as near as possible, the portion of pay related to the operation, maintenance, protection and supervision of property used in the production of nonapportionable income.
71.04(6)(d) (d) Payments made to an independent contractor or any person not properly classified as an employee are excluded from the payroll factor.
71.04(6)(e) (e) If the taxpayer has no employees or the department determines that employees are not a substantial income-producing factor, the department may order or permit the elimination of the payroll factor.
71.04(7) (7)Sales factor. For purposes of sub. (4):
71.04(7)(a) (a) The sales factor is a fraction, the numerator of which is the total sales of the taxpayer in this state during the tax period, and the denominator of which is the total sales of the taxpayer everywhere during the tax period. For sales of tangible personal property, the numerator of the sales factor is the sales of the taxpayer during the tax period under par. (b) 1. and 2. plus 50% of the sales of the taxpayer during the tax period under pars. (b) 2m. and 3. and (c).
71.04(7)(b) (b) Sales of tangible personal property are in this state if any of the following occur:
71.04(7)(b)1. 1. The property is delivered or shipped to a purchaser, other than the federal government, within this state regardless of the f.o.b. point or other conditions of the sale.
71.04(7)(b)2. 2. The property is shipped from an office, store, warehouse, factory or other place of storage in this state and delivered to the federal government within this state regardless of the f.o.b. point or other conditions of sale.
71.04(7)(b)2m. 2m. The property is shipped from an office, store, warehouse, factory or other place of storage in this state and delivered to the federal government outside this state and the taxpayer is not within the jurisdiction, for income or franchise tax purposes, of the destination state.
71.04(7)(b)3. 3. The property is shipped from an office, store, warehouse, factory or other place of storage in this state to a purchaser other than the federal government and the taxpayer is not within the jurisdiction, for income or franchise tax purposes, of the destination state.
71.04(7)(c) (c) Sales of tangible personal property by an office in this state to a purchaser in another state and not shipped or delivered from this state are in this state if the taxpayer is not within the jurisdiction for income tax purposes of either the state from which the property is delivered or shipped or of the destination state.
71.04(7)(d) (d) Except as provided in pars. (df) and (dh), sales, other than sales of tangible personal property, are in this state if the income-producing activity is performed in this state. If the income-producing activity is performed both in and outside this state the sales shall be divided between those states having jurisdiction to tax such business in proportion to the direct costs of performance incurred in each such state in rendering this service.
71.04(7)(df)1.1. Gross receipts from the use of computer software are in this state if the purchaser or licensee uses the computer software at a location in this state.
71.04(7)(df)2. 2. Computer software is used at a location in this state if the purchaser or licensee uses the computer software in the regular course of business operations in this state, for personal use in this state, or if the purchaser or licensee is an individual whose domicile is in this state. If the purchaser or licensee uses the computer software in more than one state, the gross receipts shall be divided among those states having jurisdiction to impose an income tax on the taxpayer in proportion to the use of the computer software in those states. To determine computer software use in this state, the department may consider the number of users in each state where the computer software is used, the number of site licenses or workstations in this state, and any other factors that reflect the use of computer software in this state.
71.04(7)(df)3. 3. If the taxpayer is not subject to income tax in the state in which the gross receipts are considered received under this paragraph, but the taxpayer's commercial domicile is in this state, 50 percent of those gross receipts shall be included in the numerator of the sales factor.
71.04(7)(dh)1.1. Gross receipts from services are in this state if the purchaser of the service received the benefit of the service in this state.
71.04(7)(dh)2. 2. The benefit of a service is received in this state if any of the following applies:
71.04(7)(dh)2.a. a. The service relates to real property that is located in this state.
71.04(7)(dh)2.b. b. The service relates to tangible personal property that is located in this state at the time that the service is received or tangible personal property that is delivered directly or indirectly to customers in this state.
71.04(7)(dh)2.c. c. The service is provided to an individual who is physically present in this state at the time that the service is received.
71.04(7)(dh)2.d. d. The service is provided to a person engaged in a trade or business in this state and relates to that person's business in this state.
71.04(7)(dh)3. 3. If the purchaser of a service receives the benefit of a service in more than one state, the gross receipts from the performance of the service are included in the numerator of the sales factor according to the portion of the service received in this state.
71.04(7)(dh)4. 4. If the taxpayer is not subject to income tax in the state in which the benefit of the service is received, the benefit of the service is received in this state to the extent that the taxpayer's employees or representatives performed services from a location in this state. Fifty percent of the taxpayer's receipts that are considered received in this state under this paragraph shall be included in the numerator of the sales factor.
71.04(7)(e) (e) In this subsection, "sales" includes, but is not limited to, the following items related to the production of business income:
71.04(7)(e)1. 1. Gross receipts from the sale of inventory.
71.04(7)(e)2. 2. Gross receipts from the operation of farms, mines and quarries.
71.04(7)(e)3. 3. Gross receipts from the sale of scrap or by-products.
71.04(7)(e)4. 4. Gross commissions.
71.04(7)(e)5. 5. Gross receipts from personal and other services.
71.04(7)(e)6. 6. Gross rents from real property or tangible personal property.
71.04(7)(e)7. 7. Interest on trade accounts and trade notes receivable.
71.04(7)(e)8. 8. A partner's or member's share of the partnership's or limited liability company's gross receipts.
71.04(7)(e)9. 9. Gross management fees.
71.04(7)(e)10. 10. Gross royalties from income-producing activities.
71.04(7)(e)11. 11. Gross franchise fees from income-producing activities.
71.04(7)(f) (f) The following items are among those that are not included in "sales" in this subsection:
71.04(7)(f)1. 1. Gross receipts and gain or loss from the sale of tangible business assets, except those under par. (e) 1., 2. and 3.
71.04(7)(f)2. 2. Gross receipts and gain or loss from the sale of nonbusiness real or tangible personal property.
71.04(7)(f)3. 3. Gross rents and rental income or loss from real property or tangible personal property if that real property or tangible personal property is not used in the production of business income.
71.04(7)(f)4. 4. Royalties from nonbusiness real property or nonbusiness tangible personal property.
71.04(7)(f)5. 5. Proceeds and gain or loss from the redemption of securities.
71.04(7)(f)6. 6. Interest, except interest under par. (e) 7., and dividends.
71.04(7)(f)7. 7. Gross receipts and gain or loss from the sale of intangible assets, except those under par. (e) 1.
71.04(7)(f)8. 8. Dividends deductible by corporations in determining net income.
71.04(7)(f)9. 9. Gross receipts and gain or loss from the sale of securities.
71.04(7)(f)10. 10. Proceeds and gain or loss from the sale of receivables.
71.04(7)(f)11. 11. Refunds, rebates and recoveries of amounts previously expended or deducted.
71.04(7)(f)12. 12. Other items not includable in apportionable income.
71.04(7)(f)13. 13. Foreign exchange gain or loss.
71.04(7)(f)14. 14. Royalties and income from passive investments in the property under
71.04(7)(f)16. 16. Pari-mutuel wager winnings or purses under ch. 562.
71.04(8) (8)Railroads, financial organizations and public utilities.
71.04(8)(a)(a) "Financial organization", as used in this section, means any bank, trust company, savings bank, industrial bank, land bank, safe deposit company, private banker, savings and loan association, credit union, cooperative bank, small loan company, sales finance company, investment company, brokerage house, underwriter or any type of insurance company.
71.04(8)(b)1.1. For taxable years beginning before January 1, 2006, "public utility", as used in this section, means any business entity described under subd. 2. and any business entity which owns or operates any plant, equipment, property, franchise, or license for the transmission of communications or the production, transmission, sale, delivery, or furnishing of electricity, water or steam, the rates of charges for goods or services of which have been established or approved by a federal, state or local government or governmental agency.
71.04(8)(b)2. 2. In this section, for taxable years beginning after December 31, 2005, "public utility" means any business entity providing service to the public and engaged in the transportation of goods and persons for hire, as defined in, regardless of whether or not the entity's rates or charges for services have been established or approved by a federal, state or local government or governmental agency.
71.04(8)(c) (c) The net business income of railroads, sleeping car companies, car line companies, pipeline companies, financial organizations, telecommunications companies, air carriers, and public utilities requiring apportionment shall be apportioned pursuant to rules of the department of revenue, but the income taxed is limited to the income derived from business transacted and property located within the state.
71.04 Cross-reference Cross Reference: See also s. Tax 2.46, 2.47, 2.475, 2.49, 2.495, 2.50, and 2.502, Wis. adm. code.
71.04(9) (9)Nonresident income from multistate tax-option corporation. Nonresident individuals and nonresident estates and trusts deriving income from a tax-option corporation which is engaged in business within and without this state shall be taxed only on the income of the corporation derived from business transacted and property located in this state and losses and other items of the corporation deductible by such shareholders shall be limited to their proportionate share of the Wisconsin loss or other item, except that all income that is realized from the sale of or purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in this state shall be allocated to this state. For purposes of this subsection, all intangible income of tax-option corporations passed through to shareholders is business income that follows the situs of the business, except that all income that is realized from the sale of or purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in this state shall be allocated to this state.
71.04(10) (10)Department may waive factor. Where, in the case of any nonresident individual or nonresident estate or trust engaged in business in and outside of this state and required to apportion its income as provided in this section, it shall be shown to the satisfaction of the department of revenue that the use of any one of the 3 factors provided under sub. (4) gives an unreasonable or inequitable final average ratio because of the fact that such nonresident individual or nonresident estate or trust does not employ, to any appreciable extent in its trade or business in producing the income taxed, the factors made use of in obtaining such ratio, this factor may, with the approval of the department of revenue, be omitted in obtaining the final average ratio which is to be applied to the remaining net income. This subsection does not apply to taxable years beginning after December 31, 2007.
71.04(11) (11)Department may apportion by rule. If the income of any such nonresident individual or nonresident estate or trust properly assignable to the state of Wisconsin cannot be ascertained with reasonable certainty by the methods under this section, then the same shall be apportioned and allocated under such rules as the department of revenue may prescribe.
71.04 Cross-reference Cross Reference: See also s. Tax 2.39, Wis. adm. code.
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