LRB-3411/1
KRP&JK:klm
2017 - 2018 LEGISLATURE
May 19, 2017 - Introduced by Representatives Stafsholt, Bernier, E. Brooks,
Horlacher, Jacque, Katsma, Kuglitsch, Kulp, Macco, Murphy, Novak,
Quinn, Ripp and Sanfelippo, cosponsored by Senators Roth, Cowles, Feyen,
Marklein and Olsen. Referred to Committee on Ways and Means.
AB340,1,5 1An Act to renumber and amend 77.54 (60) (a) and 77.54 (60) (c); to amend
277.51 (2), 77.52 (2) (a) 10., 77.52 (2m) (b) and 77.54 (60) (b); and to create 77.51
3(12t), 77.54 (60) (bm), 77.54 (60) (c) 2. and 77.54 (60) (d) 2. and 3. of the statutes;
4relating to: a sales and use tax exemption for products sold in connection with
5real property construction activities.
Analysis by the Legislative Reference Bureau
This bill expands the sales and use tax exemption for products sold in
connection with real property construction activities as part of a lump sum contract
to all construction contracts.
Under current law, there is a sales and use tax exemption for property, items,
and services (products) sold by a contractor as part of a lump sum contract for real
property construction activities if the total sales price attributable to the taxable
products is less than 10 percent of the total contract price. Under the bill, the
exemption is expanded to apply to all construction contracts involving real property
construction activities if the total sales price of the taxable products is less than 10
percent of the total contract price. If the exemption applies, the contractor is the
consumer of, and pays the sales tax on, the products.
The bill also provides that, if a prime contract qualifies for the exemption, the
exemption applies to all subcontracts entered into with respect to the real property
construction activities. If the exemption applies to a subcontract, the subcontractor
is the consumer of, and pays the sales tax on, the products.

Under current law, if a construction contract is between a contractor and a
tax-exempt entity, the contractor may purchase, without tax for resale to the
tax-exempt entity, any products that will be sold by the contractor to the tax-exempt
entity as part of a construction contract. The bill extends that sales and use tax
exemption to products purchased by a subcontractor for eventual resale to the
tax-exempt entity.
Because this bill relates to an exemption from state or local taxes, it may be
referred to the Joint Survey Committee on Tax Exemptions for a report to be printed
as an appendix to the bill.
For further information see the state and local fiscal estimate, which will be
printed as an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB340,1 1Section 1. 77.51 (2) of the statutes is amended to read:
AB340,3,32 77.51 (2) “Contractors" and “subcontractors" are the consumers of tangible
3personal property or items or goods under s. 77.52 (1) (b) or (d) used by them in real
4property construction activities, and the sales and use tax applies to the sale of
5tangible personal property or items or goods under s. 77.52 (1) (b) or (d) to them. A
6contractor engaged primarily in real property construction activities may use resale
7certificates only with respect to purchases of tangible personal property or items or
8goods under s. 77.52 (1) (b) or (d) which that the contractor has sound reason to
9believe the contractor will sell to customers for whom the contractor will not perform
10real property construction activities involving the use of such tangible personal
11property or items or goods under s. 77.52 (1) (b) or (d). In this subsection, “real
12property construction activities" means activities that occur at a site where tangible
13personal property or items or goods under s. 77.52 (1) (b) or (d) that are applied or
14adapted to the use or purpose to which real property is devoted are affixed to that real
15property, if the intent of the person who affixes that property is to make a permanent
16accession to the real property. In this subsection, “real property construction

1activities" does not include affixing property subject to tax under s. 77.52 (1) (c) to
2real property or affixing to real property tangible personal property that remains
3tangible personal property after it is affixed.
AB340,2 4Section 2. 77.51 (12t) of the statutes is created to read:
AB340,3,125 77.51 (12t) “Real property construction activities" means activities that occur
6at a site where tangible personal property or items or goods under s. 77.52 (1) (b) or
7(d) that are applied or adapted to the use or purpose to which real property is devoted
8are affixed to that real property, if the intent of the person who affixes that property
9is to make a permanent accession to the real property. “Real property construction
10activities" does not include affixing property subject to tax under s. 77.52 (1) (c) to
11real property or affixing to real property tangible personal property that remains
12tangible personal property after it is affixed.
AB340,3 13Section 3. 77.52 (2) (a) 10. of the statutes is amended to read:
AB340,4,1214 77.52 (2) (a) 10. Except for the repair, service, alteration, fitting, cleaning,
15painting, coating, towing, inspection, and maintenance of any aircraft or aircraft
16parts; except for services provided by veterinarians; and except for installing or
17applying tangible personal property, or items or goods under sub. (1) (b) or (d), that,
18subject to par. (ag), when installed or applied, will constitute an addition or capital
19improvement of real property; the repair, service, alteration, fitting, cleaning,
20painting, coating, towing, inspection, and maintenance of all items of tangible
21personal property or items, property, or goods under sub. (1) (b), (c), or (d), unless, at
22the time of that repair, service, alteration, fitting, cleaning, painting, coating,
23towing, inspection, or maintenance, a sale in this state of the type of property, item,
24or good repaired, serviced, altered, fitted, cleaned, painted, coated, towed, inspected,
25or maintained would have been exempt to the customer from sales taxation under

1this subchapter, other than the exempt sale of a motor vehicle or truck body to a
2nonresident under s. 77.54 (5) (a) and other than nontaxable sales under s. 77.522
3or unless the repair, service, alteration, fitting, cleaning, painting, coating, towing,
4inspection, or maintenance is provided under a contract that is subject to tax under
5subd. 13m. The tax imposed under this subsection applies to the repair, service,
6alteration, fitting, cleaning, painting, coating, towing, inspection, or maintenance of
7items listed in par. (ag), regardless of whether the installation or application of
8tangible personal property or items, property, or goods under sub. (1) (b), (c), or (d)
9related to the items is an addition to or a capital improvement of real property, except
10that the tax imposed under this subsection does not apply to the original installation
11or the complete replacement of an item listed in par. (ag), if that installation or
12replacement is a real property construction activity under s. 77.51 (2).
AB340,4 13Section 4. 77.52 (2m) (b) of the statutes is amended to read:
AB340,4,2014 77.52 (2m) (b) With respect to the services subject to tax under sub. (2) (a) 7.,
1510., 11., and 20. and except as provided in s. 77.54 (60) (b) and (bm) 2., all tangible
16personal
property or items, property, or goods under s. 77.52 (1) (b), (c), or (d)
17physically transferred, or transferred electronically, to the customer in conjunction
18with the selling, performing, or furnishing of the service is a sale of tangible personal
19property or items, property, or goods under s. 77.52 (1) (b), (c), or (d) separate from
20the selling, performing, or furnishing of the service.
AB340,5 21Section 5. 77.54 (60) (a) of the statutes is renumbered 77.54 (60) (d) (intro.)
22and amended to read:
AB340,4,2323 77.54 (60) (d) (intro.) In this subsection, “ lump sum:
AB340,5,7 241. “Construction contract" means a contract to perform real property
25construction activities and to provide tangible personal property, items or property

1under s. 77.52 (1) (b) or (c), or taxable services and for which the contractor quotes
2the charge for labor, services of subcontractors, tangible personal property, items and
3property under s. 77.52 (1) (b) and (c), and taxable services as one price, including
4a contract for which the contractor itemizes the charges for labor, services of
5subcontractors, tangible personal property, items and property under s. 77.52 (1) (b)
6and (c), and taxable services as part of a schedule of values or similar document

7products.
AB340,6 8Section 6. 77.54 (60) (b) of the statutes is amended to read:
AB340,5,169 77.54 (60) (b) The sales price from the sale of and the storage, use, or other
10consumption of tangible personal property, items and property under s. 77.52 (1) (b)
11and (c), and taxable services
products that are sold by a prime contractor as part of
12a lump sum construction contract, if the total sales price of all such taxable products
13is less than 10 percent of the total amount of the lump sum construction contract.
14Except as provided in par. (c), the prime contractor is the consumer of such taxable
15the products and shall pay the tax imposed under this subchapter on the taxable
16products.
AB340,7 17Section 7. 77.54 (60) (bm) of the statutes is created to read:
AB340,5,2118 77.54 (60) (bm) 1. The sales price from the sale of and the storage, use, or other
19consumption of products that are sold by a subcontractor to a prime contractor, or to
20another subcontractor for eventual sale to the prime contractor, as part of a
21construction contract, if any of the following applies:
AB340,5,2322 a. The total sales price of all products is less than 10 percent of the total amount
23of the construction contract.
AB340,5,2524 b. The products will be sold by the prime contractor as part of a construction
25contract, and that sale is exempt under par. (b).
AB340,6,3
12. Except as provided in par. (c), the subcontractor is the consumer of the
2products exempted under this paragraph and shall pay the tax imposed under this
3subchapter on the products.
AB340,8 4Section 8. 77.54 (60) (c) of the statutes is renumbered 77.54 (60) (c) (intro.) and
5amended to read:
AB340,6,86 77.54 (60) (c) (intro.) If the lump sum construction contract under par. (b) is
7entered into with between a prime contractor and an entity that is exempt from
8taxation under sub. (9a), the all of the following apply:
AB340,6,15 91. The prime contractor is the consumer of all taxable products used by the
10prime contractor in real property construction activities, but the prime contractor
11may purchase without tax, for resale, tangible personal property, items and property
12under s. 77.52 (1) (b) and (c), and taxable services
products that are sold by the prime
13contractor to the entity as part of the lump sum construction contract with the entity
14and that are not consumed by the prime contractor in real property construction
15activities.
AB340,9 16Section 9. 77.54 (60) (c) 2. of the statutes is created to read:
AB340,6,2217 77.54 (60) (c) 2. A subcontractor of the prime contractor is the consumer of all
18products used by the subcontractor in real property construction activities, but the
19subcontractor may purchase without tax, for resale, products that are sold by the
20subcontractor to the prime contractor or another subcontractor, as part of the
21subcontractor's construction contract under par. (bm), for resale to the entity and
22that are not consumed by the subcontractor in real property construction activities.
AB340,10 23Section 10. 77.54 (60) (d) 2. and 3. of the statutes are created to read:
AB340,7,224 77.54 (60) (d) 2. “Prime contractor" means a contractor who enters into a
25construction contract with an owner or lessee of real property, except for leased

1property under s. 77.52 (1) (c), to perform real property construction activities on the
2real property.
AB340,7,43 3. “Subcontractor" means a contractor who enters into a construction contract
4with a prime contractor or another subcontractor.
AB340,11 5Section 11. Initial applicability.
AB340,7,106 (1) The treatment of sections 77.52 (2m) (b) and 77.54 (60) (b) and (bm) of the
7statutes, the renumbering and amendment of section 77.54 (60) (a) and (c) of the
8statutes, and the creation of section 77.54 (60) (c) 2. and (d) 2. and 3. of the statutes
9first apply to a contract that is entered into or extended, modified, or renewed on
10January 1, 2019.
AB340,7,1111 (End)
Loading...
Loading...