Tax 11.68(3)(a)(a) Generally, real property construction contractors are persons who perform real property construction activities and include persons engaged in activities such as building, electrical work, plumbing, heating, painting, steel work, ventilating, paper hanging, sheet metal work, bridge or road construction, well drilling, excavating, wrecking, house moving, landscaping, roofing, carpentry, masonry and cement work, plastering, and tile and terrazzo work.
Tax 11.68(3)(b)
(b) A retailer may also be a real property contractor, such as a department store which sells and installs tangible personal property and items or goods under s.
77.52 (1) (b) or
(d), Stats., which becomes a part of real property after installation.
Tax 11.68 Note
Example: A hot water heater or water softener sold and installed in a purchaser's residence by a retailer becomes real property after installation. The retailer is considered to be a real property contractor.
Tax 11.68(4)(a)(a) Under s.
77.51 (2), Stats., contractors who perform real property construction activities are the consumers of building materials which they use in altering, repairing, or improving real property. Therefore, suppliers' sales of building materials to contractors who incorporate the materials into real property in performing construction activities are subject to the tax. This includes raw materials purchased outside Wisconsin that are used by a contractor in manufacturing tangible personal property or items under s.
77.52 (1) (b), Stats., outside Wisconsin, or that are fabricated or altered outside Wisconsin by a contractor so as to become different or distinct items of tangible personal property or items under s.
77.52 (1) (b), Stats., from the constituent raw materials, and are subsequently stored, used, or consumed in Wisconsin by that contractor.
Tax 11.68 Note
Note: Prior to August 12, 1993, raw materials purchased outside Wisconsin that were used by a contractor in manufacturing tangible personal property outside Wisconsin or that were fabricated or altered outside Wisconsin by a contractor so as to become different or distinct items of tangible personal property from the constituent raw materials, and were subsequently stored, used, or consumed in Wisconsin by that contractor were not subject to tax pursuant to the Circuit Court of Dane County decision in Morton Buildings, Inc. vs. Wisconsin Department of Revenue (2/10/92).
Tax 11.68(4)(b)1.1. Tangible personal property and property, items, and goods under s.
77.52 (1) (b),
(c), and
(d), Stats., which a construction contractor will resell as personal property may be purchased without tax for resale. This includes personal property furnished as part of a real property construction activity when the personal property retains its character as personal property after installation. This also includes personal property furnished as part of a real property construction activity when provided as part of a taxable landscaping service.
Tax 11.68 Note
Note: Refer to subs. (5) and (7) for the classification of property.
Tax 11.68(4)(b)2.
2. Taxable services which a construction contractor will resell may be purchased without tax for resale.
Tax 11.68(4)(c)
(c) Machinery and equipment, including road building equipment, tunnel shields, construction machines, and cement mixers, tools, including power saws and hand tools, and supplies, including machine lubricating and fuel oils, form lumber, and industrial gases, purchased by a construction contractor for the contractor's use are generally either consumed in the process of construction or are removed when the project is completed. The contractor is the consumer of the personal property and shall pay the tax on its purchases of the property. However, an exemption is provided in s.
77.54 (5) (d), Stats., for mobile cement mixers used for mixing and processing and the motor vehicle or trailer on which a mobile mixing unit is mounted, including accessories, attachments, parts, supplies, and materials for the vehicles, trailers, and units.
Tax 11.68(4)(d)
(d) Under s.
77.54 (26), Stats., contractors may purchase without sales or use tax tangible personal property and items and property under s.
77.52 (1) (b) and
(c), Stats., which become a component part of an industrial waste treatment facility that would be exempt under s.
70.11 (21), Stats., if the property were taxable under
ch. 70, Stats., or a municipal waste treatment facility, even though they are the consumers of the property and items.
Tax 11.68 Note
Note: Refer to s.
Tax 11.11 regarding industrial and municipal waste treatment facilities.
Tax 11.68(4)(e)
(e) Under s.
77.54 (26m), Stats., contractors may purchase without sales or use tax waste reduction and recycling machinery and equipment, including parts, which are exclusively and directly used for waste reduction and recycling activities which reduce the amount of solid waste generated, reuse, recycle, or compost solid waste, or recover energy from solid waste, even though they are the consumers of the property.
Tax 11.68 Note
Examples: 1) Equipment used in a foundry to clean sand so that the sand can be reused qualifies for exemption.
Tax 11.68 Note
2) Equipment used to remove impurities from lubricating oil used in manufacturing machines so that the oil can continue to be used by the manufacturer qualifies for exemption.
Tax 11.68 Note
3) Equipment used to produce fuel cubes qualifies for exemption. This equipment shreds waste paper and cardboard, removes foreign objects, blends the materials with a binding agent, adds moisture if necessary and then compresses the materials into fuel cubes which are burned by homeowners or others to replace wood.
Tax 11.68 Note
4) A roto-mill machine that mines old pavement and grinds up the mined materials to be reused in construction activities qualifies for exemption.
Tax 11.68 Note
5) Large steel waste collection containers, including dumpsters, which may be picked up and dumped into waste collection trucks or hauled away on flatbed trucks, or which may mechanically compact the waste in the container do not qualify for exemption.
Tax 11.68(4)(f)
(f) Under s.
77.54 (41), Stats., contractors, subcontractors, or builders may purchase without sales or use tax building materials, supplies, and equipment acquired solely for or used solely in the construction, renovation, or development of property that would be exempt under s.
70.11 (36), Stats. Section
70.11 (36), Stats., exempts property consisting of or contained in a sports and entertainment home stadium, including but not limited to parking lots, garages, restaurants, parks, concession facilities, transportation facilities, and functionally related or auxiliary facilities and structures; including those facilities and structures while they are being built; constructed by, leased to, or primarily used by a professional athletic team that is a member of a league that includes teams that have home stadiums in other states, and the land on which that stadium and those structures and facilities are located.
Tax 11.68(4)(g)
(g) Under s.
77.54 (5) (am), Stats., contractors and subcontractors may purchase without sales and use tax modular homes, as defined in s.
101.71 (6), Stats., and manufactured homes as defined in s.
101.91 (2), Stats., that are used in real property construction activities outside Wisconsin.
Tax 11.68(5)
(5) Classification of property after installation. Tax 11.68(5)(a)(a) Contractors shall determine whether a particular contract or transaction results in an improvement to real property or in the sale and installation of personal property. In determining whether personal property becomes a part of real property, the following criteria shall be considered:
Tax 11.68(5)(a)2.
2. Application or adaptation to the use or purpose to which the real property is devoted.
Tax 11.68(5)(a)3.
3. An intention on the part of the person making the annexation to make a permanent accession to the real property.
Tax 11.68 Note
Note: See Dept. of Revenue vs. A. O. Smith Harvestore Products, Inc.(1976),
72 Wis. 2d 60, regarding determining whether personal property becomes a part of real property.
Tax 11.68(5)(b)
(b) Certain types of property that have a variety of functions may be personal property in some instances and additions to real property in others, including boilers, furnaces, stand-by generators, pumps, substations, and transformers. When this property is installed primarily to provide service to a building or structure and is essential to the use of the building or structure, it is a real property improvement. However, when similar property is installed in a manufacturing plant to perform a processing function, it may, as machinery, retain its status as personal property.
Tax 11.68(6)
(6) Personal property which becomes a part of realty. A construction contractor is the consumer of tangible personal property and items and goods under s.
77.52 (1) (b) and
(d), Stats., such as building materials, which is incorporated into or becomes a part of real property, and sales of this personal property to a contractor are subject to the tax. Personal property which becomes a part of real property includes the following:
Tax 11.68(6)(b)
(b) Built-in household items such as kitchen cabinets, dishwashers, fans, garbage disposals, central vacuum systems, and incinerators.
Tax 11.68(6)(bm)
(bm) Casework, tables, counters, cabinets, lockers, sinks, athletic and gymnasium equipment attached to the structure in apartment buildings, convalescent homes, or other residential buildings.
Tax 11.68(6)(d)
(d) Personal property that is used to construct buildings, and structural and other improvements to buildings, including awnings, canopies, carpeting, foundations for machinery, floors, including computer room floors, partitions and movable walls attached in any way to realty, general wiring and lighting facilities, roofs, stairways, stair lifts, sprinkler systems, storm doors and windows, door controls, air curtains, loading platforms, central air conditioning units, building elevators, sanitation and plumbing systems, and heating, cooling, and ventilation systems.
Tax 11.68(6)(f)
(f) Personal property that is used to construct improvements to land. "Improvements to land," as used in this section, include retaining walls, roads, walks, bridges, fencing, railway switch tracks, ponds, dams, ditches, wells, underground irrigation systems except systems sold to and for use by farmers, drainage, storm, and sanitary sewers, and water supply lines for drinking water, sanitary purposes, and fire protection.
Tax 11.68(6)(g)
(g) Residential water heaters, water softeners, intercoms, incinerators, and garage door opening equipment, except portable equipment.
Tax 11.68(6)(m)
(m) Walk-in cold storage units becoming a component part of a building.
Tax 11.68(7)
(7) Property provided under a construction contract which remains personal property. Tax 11.68(7)(a)(a) Contractors shall obtain a seller's permit and report for taxation the sales price received from the sale and installation of tangible personal property and items and goods under s.
77.52 (1) (b) and
(d), Stats., furnished under a construction contract, which retains its character as personal property after installation, such as:
Tax 11.68(7)(a)1.
1. Furniture, radio and television sets and antennas, washers and dryers, portable lamps, home freezers, portable appliances, and window air conditioning units.
Tax 11.68(7)(a)2.
2. Communication equipment, including intercoms, pneumatic tube systems, satellite dishes, roof mounted antennas, CATV wiring, and music and sound equipment in business, industrial, or commercial buildings, schools, and hospitals, but not in apartment buildings, convalescent homes, or other residential buildings.
Tax 11.68(7)(a)3.
3. Casework, tables, counters, cabinets, lockers, sinks, athletic and gymnasium equipment, and related easily movable property attached to the structure in schools, laboratories, and hospitals, except if attached to the structure in the bathrooms of such facilities.
Tax 11.68(7)(a)4.
4. Machinery, including safety attachments, equipment, tools, appliances, process piping and wiring used exclusively by manufacturers, industrial processors, and others performing a processing function with the items.
Tax 11.68(7)(a)5.
5. Office, bank, and savings and loan association furniture and equipment, including office machines, safe deposit boxes, drive-up and walk-up windows, night depository equipment, remote TV auto teller systems, camera security equipment except when used to monitor for unauthorized entry to a building or room in a building, and vault doors.
Tax 11.68(7)(a)6.
6. Personal property used to carry on a trade or business, including fixtures and equipment installed in stores, taverns, night clubs, restaurants, ice arenas, bowling centers, hotels and motels, barber and beauty shops, figure salons, theaters, and gasoline service stations. Underground storage tanks at gasoline service stations are real property.
Tax 11.68(7)(a)7.
7. Shades, curtains, drapes, venetian blinds, and associated hardware.
Tax 11.68(7)(a)8.
8. Radio, television, and cable television station equipment, but not broadcasting towers installed on their owner's land.
Tax 11.68(7)(a)9.
9. Except as provided in ss.
77.51 (12m) (b) 7. and
(15b) (b) 7. and
77.54 (31), Stats., mobile homes, as defined in s.
101.91 (10), Stats., and manufactured homes, as defined in s.
101.91 (11) and
(12), Stats., located in a mobile home park on land owned by a person other than the mobile home or manufactured home owner. Exemptions are provided by s.
77.51 (12m) (b) 7. and
(15b) (b) 7., Stats., for 35% of the total amount for which a new manufactured home, as defined in s.
101.91 (11), Stats., is sold. No credit may be allowed for trade-ins and the exemption does not apply to a lease or rental. The exemption provided in s.
77.54 (31), Stats., applies to the sale of, but not the lease or rental of, used mobile homes as defined in s.
101.91 (10), Stats., and used manufactured homes as defined in s.
101.91 (12), Stats.
Tax 11.68(7)(a)10.
10. Advertising signs, except their underground concrete foundations. A foundation is underground even though a portion of the foundation extends above the grade.
Tax 11.68(7)(a)12.
12. Utility transmission and distribution lines installed above ground on land owned by others as provided in
s. Tax 11.86 (1), and oil and gas pipeline pumping station equipment.
Tax 11.68(7)(a)13.
13. Commercial and industrial incinerators which do not become an integral part of the building.
Tax 11.68(7)(a)14.
14. Seating in auditoriums and theaters, and theater stage lights and projection equipment.
Tax 11.68(7)(a)15.
15. Stop and go lights, railroad signs and signals, and street identification signs.
Tax 11.68(7)(b)
(b) If a few items of tangible personal property, items, property, or goods under s.
77.52 (1) (b),
(c), or
(d), Stats., or taxable services are minor in relation to the total amount of a contract and are sold as part of a contract which includes construction of a building or other real property improvement and no separate charge is made in any document provided to the customer for the taxable property, items, goods, and services, the cost of all such property, items, goods, and services to the construction contractor shall be used as the measure subject to sales tax. The tangible personal property, property, items, and goods under s.
77.52 (1) (b),
(c), and
(d), Stats., and taxable services are "minor in relation to the total amount of a contract" if, based on a reasonable allocation, the sales price of the taxable property, items, goods, and services included in the contract is 10 percent or less of the total contract amount. If a separate charge is made in any document provided to the customer, including a contract, contract addendum, appendix, or payment request, for any of the taxable property, items, goods, or services, the separate charge is subject to tax.
Tax 11.68 Note
Examples: 1) A refrigerator and drapes are included in the contract to construct a new house. No separate charge is made for the refrigerator and drapes, but, based on a reasonable allocation, the sales price of the refrigerator and drapes is less than 10 percent of the total contract amount. Therefore, the cost of the refrigerator and drapes to the construction contractor is the construction contractor's measure subject to sales tax.
Tax 11.68 Note
2) Landscaping services are included in a contract to build a building. No separate charge is made for the landscaping services, but, based on a reasonable allocation, the sales price of the landscape services is more than 10 percent of the total contract amount. Since the sales price of the landscaping services, based on a reasonable allocation, is more than 10 percent of the contract amount, the construction contractor is required to make an allocation between the taxable landscaping services and the other nontaxable charges included in the contract and charge Wisconsin sales tax on the sales price of those landscaping services.
Tax 11.68(8)
(8) Property, items, and goods purchased by a person who performs both real property construction activities and sells tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., at retail, when destination of property, item, or good purchased is unknown at time of purchase. Section
77.51 (2), Stats., provides in part that a contractor engaged primarily in real property construction activities may use resale certificates only with respect to purchases of tangible personal property or items or goods under s.
77.52 (1) (b) or
(d), Stats., which the contractor has sound reason to believe the contractor will sell to customers for whom the contractor will not perform real property construction activities involving the use of such tangible personal property or items or goods under s.
77.52 (1) (b) or
(d), Stats. However, some construction contractors who also sell construction supplies at retail do not know when they purchase these supplies whether they will be consumed in construction contracts or resold to others. In these instances, a construction contractor may do one of the following at the time of making purchases:
Tax 11.68(8)(a)
(a) Give an exemption certificate claiming resale to suppliers and purchase the property, item, or good without tax. If the contractor later resells the property, item, or good, the contractor shall report the sales and collect and remit the tax on the sales price to customers. If the property, item, or good is used in fulfillment of a construction contract, the contractor shall pay a use tax on its purchase price.
Tax 11.68(8)(b)
(b) Pay sales tax to suppliers on all property, items, and goods purchased. If the property, item, or good is later consumed in fulfilling a real property construction contract, the tax obligation is taken care of. If the property, item, or good is resold at retail, the contractor shall collect and remit sales tax on these retail sales, but may take as a credit against the sales tax any tax paid to suppliers on the purchase of such property, item, or good.
Tax 11.68(9)
(9) Property, items, and goods purchased to fulfill a contract with an exempt entity. Tax 11.68(9)(a)(a) The sales tax exemption provided to governmental units and other exempt entities, such as churches and nonprofit hospitals, does not apply to building materials purchased by a contractor for use under a construction contract to alter, repair, or improve real property for the exempt entity. The sales price received from sales of these building materials to a contractor is subject to the tax if the building materials become part of real property after construction or installation.
Tax 11.68 Note
Examples: 1) A contractor shall pay the tax to its supplier of tangible personal property and items, property, and goods under s.
77.52 (1) (b),
(c), and
(d), Stats., purchased to construct a bridge, road, or governmental building, since the property, item, or good becomes a part of realty after installation.
Tax 11.68 Note
2) A contractor shall pay tax on its purchases of equipment for use at a municipal well or pumping station that becomes a part of realty after installation.
Tax 11.68(9)(b)
(b) A contractor may purchase without tax for resale tangible personal property and items, property, and goods under s.
77.52 (1) (b),
(c), and
(d), Stats., which retain their character as personal property after installation as described in
sub. (7), and taxable services, even though the resale of the property, item, good, or taxable service by the contractor is exempt when sold to a governmental unit or other exempt entity having a Wisconsin certificate of exempt status. This property includes furniture; processing machinery or equipment used in a municipal sewerage or water treatment plant; classroom laboratory sinks, tables, and other equipment; and seating for an auditorium. Taxable services include landscaping services. This exemption does not apply to property, items, goods, or taxable services which become a part of real property as described in
sub. (6) and
par. (a).
Tax 11.68(10)
(10) Use of property, items, and goods purchased outside Wisconsin. Tax 11.68(10)(a)(a) If a construction contractor, when the contractor acts as a consumer, purchases property, items, or goods outside Wisconsin for use in Wisconsin, the contractor shall pay the Wisconsin use tax, but may claim a credit against this use tax for any sales or use tax legally due and paid in the state where the purchase was made.
Tax 11.68(10)(b)
(b) If a construction contractor purchases property, items, or goods outside Wisconsin which will be stored in Wisconsin and subsequently used in real property construction activities outside Wisconsin, the contractor shall pay the Wisconsin use tax on those purchases, but may claim a credit against this use tax for any sales or use tax legally due and paid in the state where the purchase was made or where the property, item, or good was used prior to being stored in Wisconsin.
Tax 11.68(10)(c)
(c) If Wisconsin has jurisdiction over the out-of-state supplier, the supplier shall collect the use tax and remit it to the department. If the supplier fails to collect the tax, the contractor shall report and pay the tax to Wisconsin.
Tax 11.68 Note
Note: The use tax as provided for in sub. (10) does not apply prior to August 12, 1993, to raw materials purchased outside Wisconsin that are, prior to being stored, used or consumed in Wisconsin, manufactured into tangible personal property by that contractor outside Wisconsin, or that are fabricated or altered outside Wisconsin by that contractor so as to become different or distinct items of tangible personal property from the constituent materials pursuant to the Circuit Court of Dane County decision in Morton Buildings, Inc. vs. Wisconsin Department of Revenue (2/10/92).
Tax 11.68(11)(a)(a) A contractor who performs real property construction activities may not add tax to any charge for labor or material, since the sales price received from these activities is not taxable. The tax which a contractor pays on its purchases of materials consumed in real property construction increases its cost of the materials and becomes a cost of doing business.
Tax 11.68(11)(b)
(b) A contractor's charges for the repair, service, alteration, fitting, cleaning, painting, coating, towing, inspection, and maintenance of all tangible personal property and items, property, and goods under s.
77.52 (1) (b),
(c), and
(d), Stats., are taxable. Solely for the purpose of imposing the tax on these services, numerous items that in other circumstances and for other purposes are deemed part of real property are deemed to retain their character as tangible personal property. Accordingly, any construction contractor who is engaged in the repair, service, alteration, fitting, cleaning, painting, coating, towing, inspection, and maintenance of any items listed in
par. (c) or other items of tangible personal property or items, property, or goods under s.
77.52 (1) (b),
(c), or
(d), Stats., shall register as a retailer and pay the tax on the sales price received from the performance of these services except that the tax does not apply to the original installation or complete replacement of an item listed in
par. (c), if that installation or replacement is a real property construction activity under s.
77.51 (2), Stats.
Tax 11.68(11)(c)
(c) Section
77.52 (2) (ag), Stats., provides in part that the following items shall be considered to have retained their character as tangible personal property, regardless of the extent to which the item is fastened to, connected with or built into real property:
