LRBs0267/1
KRP&JK:emw/kjf/amn
2015 - 2016 LEGISLATURE
ASSEMBLY SUBSTITUTE AMENDMENT 1,
TO ASSEMBLY BILL 623
January 26, 2016 - Offered by Representative Macco.
AB623-ASA1,1,13 1An Act to repeal 20.566 (1) (hn), 71.10 (1m) (b) 1. and 2., 71.30 (2m) (b) 1. and
22., 71.80 (1m) (b) 1. and 2. and 73.03 (28d); to renumber 71.80 (9m) (a) and (b)
3and 77.61 (19) (a) and (b); to renumber and amend 71.10 (1m) (b) (intro.),
471.30 (2m) (b) (intro.), 71.80 (1m) (b) (intro.), 71.80 (9m) (intro.) (except 71.80
5(9m) (title)), 77.54 (60) (a) and 77.61 (19) (intro.); to amend 77.51 (2), 77.52 (2)
6(a) 10., 77.52 (2m) (b), 77.54 (60) (b) and 77.54 (60) (c); and to create 77.51 (12t),
777.54 (60) (bm), 77.54 (60) (c) 2. and 77.54 (60) (d) 2. and 3. of the statutes;
8relating to: a sales and use tax exemption for products sold in connection with
9real property construction activities; factors that determine whether a
10transaction has economic substance for income and franchise tax purposes; the
11imposition of penalties on a taxpayer for failing to produce records and
12documents; and participation by the Department of Revenue in the Multistate
13Tax Commission Audit Program.

The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB623-ASA1,1 1Section 1. 20.566 (1) (hn) of the statutes is repealed.
AB623-ASA1,2 2Section 2. 71.10 (1m) (b) (intro.) of the statutes is renumbered 71.10 (1m) (b)
3and amended to read:
AB623-ASA1,2,84 71.10 (1m) (b) A transaction has economic substance only if the taxpayer shows
5all of the following:
the transaction is treated as having economic substance as
6determined under section 7701 (o) of the Internal Revenue Code, except that the tax
7effect shall be determined using federal, state, local, or foreign taxes, rather than
8only the federal income tax effect.
AB623-ASA1,3 9Section 3. 71.10 (1m) (b) 1. and 2. of the statutes are repealed.
AB623-ASA1,4 10Section 4. 71.30 (2m) (b) (intro.) of the statutes is renumbered 71.30 (2m) (b)
11and amended to read:
AB623-ASA1,2,1612 71.30 (2m) (b) A transaction has economic substance only if the taxpayer shows
13both of the following:
the transaction is treated as having economic substance as
14determined under section 7701 (o) of the Internal Revenue Code, except that the tax
15effect shall be determined using federal, state, local, or foreign taxes, rather than
16only the federal income tax effect.
AB623-ASA1,5 17Section 5. 71.30 (2m) (b) 1. and 2. of the statutes are repealed.
AB623-ASA1,6 18Section 6. 71.80 (1m) (b) (intro.) of the statutes is renumbered 71.80 (1m) (b)
19and amended to read:
AB623-ASA1,3,220 71.80 (1m) (b) A transaction has economic substance only if the taxpayer shows
21both of the following:
the transaction is treated as having economic substance as
22determined under section 7701 (o) of the Internal Revenue Code, except that the tax

1effect shall be determined using federal, state, local, or foreign taxes, rather than
2only the federal income tax effect.
AB623-ASA1,7 3Section 7. 71.80 (1m) (b) 1. and 2. of the statutes are repealed.
AB623-ASA1,8 4Section 8. 71.80 (9m) (intro.) (except 71.80 (9m) (title)) of the statutes is
5renumbered 71.80 (9m) (a) (intro.) and amended to read:
AB623-ASA1,3,146 71.80 (9m) (a) (intro.) A person who fails to produce records or documents, as
7provided under ss. s. 71.74 (2) and 73.03 (9), that support amounts or other
8information required to be shown on any return required under this chapter and fails
9to comply in good faith with a summons issued pursuant to s. 73.03 (9) seeking those
10records and documents
may be subject to any of the following penalties, as
11determined by the department, except that the department may not impose a
12penalty under this subsection if the person shows that under all facts and
13circumstances the person's response, or failure to respond, to the department's
14request was reasonable or justified by factors beyond the person's control:
AB623-ASA1,9 15Section 9. 71.80 (9m) (a) and (b) of the statutes are renumbered 71.80 (9m) (a)
161. and 2.
AB623-ASA1,10 17Section 10. 73.03 (28d) of the statutes is repealed.
AB623-ASA1,11 18Section 11. 77.51 (2) of the statutes is amended to read:
AB623-ASA1,4,1119 77.51 (2) "Contractors" and "subcontractors" are the consumers of tangible
20personal property or items or goods under s. 77.52 (1) (b) or (d) used by them in real
21property construction activities and the sales and use tax applies to the sale of
22tangible personal property or items or goods under s. 77.52 (1) (b) or (d) to them. A
23contractor engaged primarily in real property construction activities may use resale
24certificates only with respect to purchases of tangible personal property or items or
25goods under s. 77.52 (1) (b) or (d) which the contractor has sound reason to believe

1the contractor will sell to customers for whom the contractor will not perform real
2property construction activities involving the use of such tangible personal property
3or items or goods under s. 77.52 (1) (b) or (d). In this subsection, "real property
4construction activities" means activities that occur at a site where tangible personal
5property or items or goods under s. 77.52 (1) (b) or (d) that are applied or adapted to
6the use or purpose to which real property is devoted are affixed to that real property,
7if the intent of the person who affixes that property is to make a permanent accession
8to the real property. In this subsection, "real property construction activities" does
9not include affixing property subject to tax under s. 77.52 (1) (c) to real property or
10affixing to real property tangible personal property that remains tangible personal
11property after it is affixed.
AB623-ASA1,12 12Section 12. 77.51 (12t) of the statutes is created to read:
AB623-ASA1,4,2013 77.51 (12t) "Real property construction activities" means activities that occur
14at a site where tangible personal property or items or goods under s. 77.52 (1) (b) or
15(d) that are applied or adapted to the use or purpose to which real property is devoted
16are affixed to that real property, if the intent of the person who affixes that property
17is to make a permanent accession to the real property. "Real property construction
18activities" does not include affixing property subject to tax under s. 77.52 (1) (c) to
19real property or affixing to real property tangible personal property that remains
20tangible personal property after it is affixed.
AB623-ASA1,13 21Section 13. 77.52 (2) (a) 10. of the statutes is amended to read:
AB623-ASA1,5,2022 77.52 (2) (a) 10. Except for the repair, service, alteration, fitting, cleaning,
23painting, coating, towing, inspection, and maintenance of any aircraft or aircraft
24parts; except for services provided by veterinarians; and except for installing or
25applying tangible personal property, or items or goods under sub. (1) (b) or (d), that,

1subject to par. (ag), when installed or applied, will constitute an addition or capital
2improvement of real property; the repair, service, alteration, fitting, cleaning,
3painting, coating, towing, inspection, and maintenance of all items of tangible
4personal property or items, property, or goods under sub. (1) (b), (c), or (d), unless, at
5the time of that repair, service, alteration, fitting, cleaning, painting, coating,
6towing, inspection, or maintenance, a sale in this state of the type of property, item,
7or good repaired, serviced, altered, fitted, cleaned, painted, coated, towed, inspected,
8or maintained would have been exempt to the customer from sales taxation under
9this subchapter, other than the exempt sale of a motor vehicle or truck body to a
10nonresident under s. 77.54 (5) (a) and other than nontaxable sales under s. 77.522
11or unless the repair, service, alteration, fitting, cleaning, painting, coating, towing,
12inspection, or maintenance is provided under a contract that is subject to tax under
13subd. 13m. The tax imposed under this subsection applies to the repair, service,
14alteration, fitting, cleaning, painting, coating, towing, inspection, or maintenance of
15items listed in par. (ag), regardless of whether the installation or application of
16tangible personal property or items, property, or goods under sub. (1) (b), (c), or (d)
17related to the items is an addition to or a capital improvement of real property, except
18that the tax imposed under this subsection does not apply to the original installation
19or the complete replacement of an item listed in par. (ag), if that installation or
20replacement is a real property construction activity under s. 77.51 (2).
AB623-ASA1,14 21Section 14. 77.52 (2m) (b) of the statutes is amended to read:
AB623-ASA1,6,322 77.52 (2m) (b) With respect to the services subject to tax under sub. (2) (a) 7.,
2310., 11., and 20. and except as provided in s. 77.54 (60) (b) and (bm) 2., all tangible
24personal
property or items, property, or goods under s. 77.52 (1) (b), (c), or (d)
25physically transferred, or transferred electronically, to the customer in conjunction

1with the selling, performing, or furnishing of the service is a sale of tangible personal
2property or items, property, or goods under s. 77.52 (1) (b), (c), or (d) separate from
3the selling, performing, or furnishing of the service.
AB623-ASA1,15 4Section 15. 77.54 (60) (a) of the statutes is renumbered 77.54 (60) (d) and
5amended to read:
AB623-ASA1,6,66 77.54 (60) (d) In this subsection,"lump sum:
AB623-ASA1,6,15 71. "Construction contract" means a contract to perform real property
8construction activities and to provide tangible personal property, items or property
9under s. 77.52 (1) (b) or (c), or taxable services and for which the contractor quotes
10the charge for labor, services of subcontractors, tangible personal property, items and
11property under s. 77.52 (1) (b) and (c), and taxable services as one price, including
12a contract for which the contractor itemizes the charges for labor, services of
13subcontractors, tangible personal property, items and property under s. 77.52 (1) (b)
14and (c), and taxable services as part of a schedule of values or similar document

15products.
AB623-ASA1,16 16Section 16. 77.54 (60) (b) of the statutes is amended to read:
AB623-ASA1,6,2417 77.54 (60) (b) The sales price from the sale of and the storage, use, or other
18consumption of tangible personal property, items and property under s. 77.52 (1) (b)
19and (c), and taxable services
products that are sold by a prime contractor as part of
20a lump sum construction contract, if the total sales price of all such taxable products
21is less than 10 percent of the total amount of the lump sum construction contract.
22Except as provided in par. (c), the prime contractor is the consumer of such taxable
23the products and shall pay the tax imposed under this subchapter on the taxable
24products.
AB623-ASA1,17 25Section 17. 77.54 (60) (bm) of the statutes is created to read:
AB623-ASA1,7,4
177.54 (60) (bm) 1. The sales price from the sale of and the storage, use, or other
2consumption of products that are sold by a subcontractor to a prime contractor or
3another subcontractor as part of a construction contract, if any of the following
4applies:
AB623-ASA1,7,65 a. The sales price is exempted under par. (b) for the products resold by the prime
6contractor.
AB623-ASA1,7,87 b. The sales price is less than 10 percent of the total amount of the construction
8contract.
AB623-ASA1,7,119 2. Except as provided in par. (c), the subcontractor is the consumer of the
10products exempted under this paragraph and shall pay the tax imposed under this
11subchapter on the products.
AB623-ASA1,18 12Section 18. 77.54 (60) (c) of the statutes is amended to read:
AB623-ASA1,7,1513 77.54 (60) (c) If the lump sum construction contract under par. (b) is entered
14into with
between a prime contractor and an entity that is exempt from taxation
15under sub. (9a), the all of the following apply:
AB623-ASA1,7,22 161. The prime contractor is the consumer of all taxable products used by the
17prime contractor in real property construction activities, but the prime contractor
18may purchase without tax, for resale, tangible personal property, items and property
19under s. 77.52 (1) (b) and (c), and taxable services
products that are sold by the prime
20contractor to the entity as part of the lump sum construction contract with the entity
21and that are not consumed by the prime contractor in real property construction
22activities.
AB623-ASA1,19 23Section 19. 77.54 (60) (c) 2. of the statutes is created to read:
AB623-ASA1,8,424 77.54 (60) (c) 2. A subcontractor of the prime contractor is the consumer of all
25products used by the subcontractor in real property construction activities, but the

1subcontractor may purchase without tax, for resale, products that are sold by the
2subcontractor to the prime contractor or another subcontractor, as part of the
3subcontractor's construction contract under par. (bm), for resale to the entity and
4that are not consumed by the subcontractor in real property construction activities.
AB623-ASA1,20 5Section 20. 77.54 (60) (d) 2. and 3. of the statutes are created to read:
AB623-ASA1,8,86 77.54 (60) (d) 2. "Prime contractor" means a contractor who enters into a
7construction contract with an owner or lessee of real property, except for leased
8property under s. 77.52 (1) (c).
AB623-ASA1,8,109 3. "Subcontractor" means a contractor who enters into a construction contract
10with a prime contractor or another subcontractor.
AB623-ASA1,21 11Section 21. 77.61 (19) (intro.) of the statutes is renumbered 77.61 (19) (a)
12(intro.) and amended to read:
AB623-ASA1,8,2113 77.61 (19) (a) (intro.) A person who fails to produce records or documents, as
14provided under s. 73.03 (9) or 77.59 (2), that support amounts or other information
15required to be shown on a return required under s. 77.58 and fails to comply in good
16faith with a summons issued pursuant to s. 73.03 (9) seeking those records and
17documents
may be subject to any of the following penalties, as determined by the
18department, except that the department may not impose a penalty under this
19subsection if the person shows that under all facts and circumstances the person's
20response, or failure to respond, to the department's request was reasonable or
21justified by factors beyond the person's control:
AB623-ASA1,22 22Section 22. 77.61 (19) (a) and (b) of the statutes are renumbered 77.61 (19) (a)
231. and 2.
AB623-ASA1,23 24Section 23. Nonstatutory provisions.
AB623-ASA1,9,3
1(1) The repeal of sections 20.566 (1) (hn) and 73.03 (28d) of the statutes does
2not affect the validity of any assessment based entirely or in part on information or
3documents obtained from the multistate tax commission prior to the repeal.
AB623-ASA1,24 4Section 24. Initial applicability.
AB623-ASA1,9,105 (1) The treatment of sections 71.10 (1m) (b) (intro.), 1., and 2., 71.30 (2m) (b)
6(intro.), 1., and 2., and 71.80 (1m) (b) (intro.), 1., and 2. of the statutes first applies
7to taxable years beginning on January 1 of the year in which this subsection takes
8effect, except that if this subsection takes effect after July 31, this act first applies
9to taxable years beginning on January 1 of the year following the year in which this
10subsection takes effect.
AB623-ASA1,9,1211 (2) The treatment of section 73.03 (28d) of the statutes first applies to a contract
12that is entered into or extended, modified, or renewed on July 1, 2017.
AB623-ASA1,9,1513 (3) The treatment of sections 71.80 (9m) (intro.), (a), and (b) and 77.61 (19)
14(intro.), (a), and (b) of the statutes first applies to an audit commenced, or a summons
15issued, on the effective date of this subsection.
AB623-ASA1,9,1816 (4) The treatment of sections 77.52 (2m) (b) and 77.54 (60) (a), (b), (bm), (c) and
172., and (d) 2. and 3. of the statutes first applies to a contract that is entered into or
18extended, modified, or renewed on the effective date of this subsection.
AB623-ASA1,25 19Section 25. Effective dates. This act takes effect on the day after publication,
20except as follows:
AB623-ASA1,9,2221 (1) The treatment of section 20.566 (1) (hn) of the statutes takes effect on July
221, 2017.
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