Veto by Governor [B-30]: Veto provisions to modify the recycling surcharge as follows: (a) reduce the surcharge rate to 3.0% for corporations and 0.2% for nonfarm sole proprietor-ships, partnerships, S corporations and LLCs taxed as partnerships; (b) set the maximum payment at $9,800; and (c) exclude nonfarm businesses with less than $4,000,000 in gross receipts from paying the surcharge. As vetoed, the recycling surcharge is estimated to generate $6 million in 1999-00 and $16.9 million in 2000-01.
[Act 9 Sections: 1817bb, 1817bcm thru 1817bn, 9143(3d) and 9343(23em)]
[Act 9 Vetoed Sections: 1817be, 1817bf, 1817bh and 1817bi]
27. EDUCATION TAX CREDIT
Assembly: Provide, for tax years beginning on or after July 1, 2001, a tax credit under the individual and corporate income and franchise taxes equal to 50% of the amount paid or incurred for an individual to participate in an education program of a qualified postsecondary institution, if the individual is enrolled in a degree-granting program. The claimant could not claim tax credits based on tuition amounts also used to claim the state and federal higher education credits and deductions. The credit could be carried forward up to fifteen years to offset future tax liabilities.
Corporations and insurance companies could claim the education tax credit to offset tax liabilities. Partnerships, limited liability companies and tax-option corporations could not claim the tax credit, but eligibility for and the amount of credit that could be claimed would be based on amounts paid for tuition by the entity. A partnership, LLC or tax-option corporation would be required to compute the amount of tax credit each of its partners, members or shareholders could claim and to provide that information to them. Partners, LLC members and shareholders of tax-option corporations would claim the credit in proportion to their ownership interest.
"Degree-granting program" would be defined as an educational program for which an associate, a bachelor's or a graduate degree is awarded upon successful completion. "Qualified postsecondary institution" would mean a University of Wisconsin system institution, a technical college system institution or a regionally accredited four-year nonprofit college or university having its regional headquarters and principal place of business in Wisconsin.
Because the tax credit would first apply for tax years beginning on or after July 1, 2001, there would be no fiscal effect in the 1999-01 biennium. However, when implemented the education tax credit would reduce state individual and corporate income and franchise tax revenues by an estimated $9 million annually.
Conference Committee/Legislature: Delete provision.
28. CORPORATE INCOME AND FRANCHISE TAX -- DEDUCTION FOR SALARIES PAID TO CORPORATE OFFICERS AND EMPLOYES
Senate: Limit the deduction, under the state corporate income and franchise tax, for wages, salaries and bonuses paid to an employe or officer of a corporation to an amount equal to twenty-five times the wages, salaries, commissions and bonuses paid to the corporation's lowest paid full-time employe. This provision would first apply to tax years beginning on or after January 1 of the year following the bill's general effective date and would increase corporate income and franchise tax revenues by an estimated $6.5 million in 1999-00 and $13.0 million in 2000-01.
Conference Committee/Legislature: Delete provision.
29. INDIVIDUAL AND CORPORATE INCOME AND FRANCHISE TAXES -- FOREIGN STUDY TAX CREDIT
Senate: Provide, for tax years beginning on or after January 1, 2000, a tax credit of $1,000 under the individual and corporate income and franchise taxes for eligible expenses incurred by a business to sponsor an eligible student to attend a post-secondary educational institution in a foreign country. Eligible expenses would include transportation costs, room and board, books, tuition and other expenses related to attending school in a foreign country. A business would be required to pay a minimum of $3,000 of such expenses to claim the tax credit. An eligible student would be defined as a full-time undergraduate student enrolled in a Wisconsin public post-secondary institution who would be eligible for a grant under the Wisconsin Higher Education Grant (WHEG) program.
The credit could be claimed by corporations, sole proprietors, partners, tax-option corporation shareholders and limited liability company members. A partnership, tax-option corporation or LLC would be required to compute the amount of credit that each of its partners, shareholders or members may claim and provide that information to them. Partners, members of limited liability companies and shareholders of tax-option corporations could claim the credit in proportion to their ownership interest. Unused credit amounts could be carried forward up to 15 years to offset future tax liabilities. This provision would have a minimal fiscal effect.
Conference Committee/Legislature: Delete provision.
[Bill Sections: 1723 and 9343(18)]
General Sales and Use Tax
1. VOLUNTARY AGREEMENTS WITH DIRECT MARKETERS TO COLLECT WISCONSIN SALES TAX
GPR-REV $8,300,000
Joint Finance/Legislature: Authorize DOR to enter into voluntary agreements with out-of-state direct marketers for collection of Wisconsin sales and use tax from Wisconsin customers at a rate to include the general state sales tax rate plus the optional general county sales tax rate.
Specify that direct marketers who voluntarily agree to collect Wisconsin sales and use tax may retain 5% of the first $1 million of such tax in a calendar year and 6% of any additional amounts collected in the remainder of the same year. Specify that these provisions would not apply to an out-of-state retailer that has nexus with the state of Wisconsin for sales and use tax purposes.
Authorize DOR to promulgate administrative rules as needed to promote this option with Direct Marketing Association members and to negotiate payment schedules and audit follow-up as necessary.
Provide that all taxes collected through such voluntary agreements be deposited in the general fund. Specify that 1/11 of the funds generated in a fiscal year be appropriated to the Department of Health and Family Services (DHFS) in the subsequent fiscal year to be distributed to counties on a per capita basis in the form of block grants to fund services for children and families. Require DOR to certify at the close of each fiscal year the amount to be appropriated to DHFS for the block grants. Specify that these provisions would take effect on the first day of the second month beginning after publication of the bill.
Under current law, if an out-of-state seller has adequate nexus (business connection) with the state, the state can require the seller to collect the Wisconsin sales and use tax on sales to its Wisconsin customers. Any out-of-state seller that is not required to collect Wisconsin sales and use tax may voluntarily obtain a business tax registration certificate from DOR and thereby be authorized and required to collect the 5% tax. Current law provides a retailers' discount of the greater of $10 or 0.5% of sales and use tax payable per reporting period to cover administrative costs associated with collecting and remitting the tax. These provisions would increase the retailer's discount for an out-of-state direct marketer without nexus with the state who voluntarily collects the Wisconsin sales and use tax.
It is estimated that these provisions would generate increased general fund revenues of $2.8 million in 1999-00 and $5.5 million in 2000-01. The share to be distributed by DHFS to counties in the form of block grants is projected at $250,000 in 2000-01 (the actual amount would be determined from collections during 1999-00) and $500,000 in 2001-02 and thereafter. The amounts for the block grants are reflected in the agency budget summary for "Health and Family Services -- Children and Family Services."
[Act 9 Sections: 390d, 1104g and 1815g]
2. FULL-YEAR SALES TAX EXEMPTION FOR ELECTRICITY USED IN FARMING
GPR-REV - $2,900,000
Assembly/Legislature: Extend the current law sales tax exemption for electricity sold from November through April for use in farming to electricity sold for use in farming at any time of the year. Provide that the extension of this exemption would first apply to electricity sold for use in farming on May 1, 2000. It is estimated that these provisions would reduce general fund revenues by $700,000 in 1999-00 and $2.2 million in 2000-01.
[Act 9 Sections: 1812p and 9343(23g)]
3. SALES TAX ON MATERIALS FOR RAILROAD TRACKS AND RIGHTS-OF-WAY
Senate/Legislature: Provide a sales and use tax exemption for the gross receipts from the sale of and the storage, use or other consumption of materials, supplies and fuel used in the maintenance of railroad tracks and rights-of-way. Specify that this provision would be effective on January 1, 2001. This provision would reduce general fund revenues by an estimated $470,000 in 2000-01 and $940,000 annually thereafter.
4. TIME-SHARE PROPERTIES [LFB Paper 123]
Veto by Governor [F-31]: Delete provision.
[Act 9 Vetoed Sections: 1812t and 9443(8c)]
Governor: Modify the treatment of conveyances of time-share properties with respect to the real estate transfer fee and the sales tax as described below.
Real Estate Transfer Fee
Exempt from the real estate transfer fee and the requirement to file a real estate transfer return transfers of time-share property as defined in section 707.02(32) of the statutes, which relates to time-share ownership.
Section 707.02(32) defines "time-share property" as one or more time-share units subject to the same time-share instrument, together with any real estate or rights to real estate appurtenant to those units. In addition, to qualify as "time-share property" under this definition, an owner's interest in the property must provide the right to use or occupy a unit during at least four separate periods over at least four years.
Current statutes on the real estate transfer fee do not specifically refer to sales of time-share property. However, the Department of Revenue has interpreted the law as subjecting only "fixed-time" time-share sales, in which the use of the rooms or lodging is fixed at the time of sale as to the starting day or lodging unit, to the real estate transfer fee. The bill would exempt these types of time-share transactions from the real estate transfer fee, if they meet the definition under s. 707.02(32).
Sales Tax
Under current law, the furnishing of rooms or lodging through the sale of time-share property as defined in s. 707.02(32) is subject to the sales tax if the use of the rooms or lodging is for continuous periods of less than one month and if the use of the rooms or lodging is not fixed at the time of the sale as to the starting date or lodging unit. The Governor's recommendation would subject all sales of time-share property for continuous periods of less than one month to the sales tax. This provision would also specify that charges associated with taxable time-share property would be taxable at the time the charges are incurred, even if those charges were not taxable at the time of the initial sale of the time-share property.
Additional Provisions
The bill would amend additional statutes to make them consistent with the exemption of time-share property from the real estate transfer fee. Currently, transfers of time-share property as defined in s. 707.02 (32) in this state are subject to certain reporting requirements related to disclosure by owners of residential real estate. In addition, such time-share property is subject to a requirement that the small claims procedure be the exclusive procedure used in circuit court in actions relating to the return of earnest money tendered pursuant to a contract for purchase of property. However, in both cases the statutes specify that transfers that are exempt from the real estate transfer fee are also exempt from such requirements.
The bill would specify that these requirements would no longer apply to transfers of time-share property as defined under s. 707.02 (32). However, transfers of time-share property that do not meet the definition under s. 707.02 (32) would continue to be subject to the requirements on disclosure and on the specified use of the small claims procedure.
These provisions would take effect on the first day of the second month beginning after publication of the bill. The fiscal effect is estimated to be a net increase in general fund revenues of $1,200,000 in 1999-00 and $1,440,000 in 2000-01.
Joint Finance: Delete provision.
Assembly/Legislature: Exempt sales of flex-time time-share property, including maintenance charges, from the sales tax and impose the real estate transfer fee on all sales of time-share property, effective on the first day of the second month beginning after publication of the bill. Under current law, sales of flex-time time-shares are subject to the sales tax and sales of fixed-time time-shares are subject to the real estate transfer fee. These provisions would specify that all sales of time-shares are subject to the real estate transfer fee and not the sales tax. The fiscal effect is estimated to be a net reduction of general fund tax collections of $70,000 in 1999-00 and $90,000 in 2000-01.
[Act 9 Sections: 1810fm, 1812Lm, 1812Ln, 1812Lp, 3049sm and 9443(4g)]
5. SALES TAX ON INTERNET ACCESS CHARGES
Assembly: Provide a sales and use tax exemption for Internet access services effective July 1, 2001. Under current law, the Department of Revenue has interpreted the general statutes relating to taxation of telecommunications services to include Internet access charges. Due to the effective date of the provision, there would be no effect on general fund revenues during the 1999-01 biennium. However, it is estimated that this provision would result in reduced general fund revenues of $6.4 million annually, beginning in 2001-02. This estimate is in 1999-00 dollars and does not account for anticipated growth in Internet access services subsequent to 2000-01.
Conference Committee/Legislature: Delete provision.
6. VENDING MACHINE SALES
Assembly/Senate/Legislature: Provide that, effective July 1, 2001, food and beverages that are exempt from the state sales tax when sold in a store for off-premises consumption would also be exempt when sold through a vending machine. Under current law, the Department of Revenue assumes that sales of such items through vending machines are sold for on-premises consumption and are, therefore, subject to the sales tax. Due to the effective date of the provision, there would be no effect on general fund revenues during the 1999-01 biennium. However, it is estimated that this provision would result in reduced general fund revenues of $3.7 million annually, beginning in 2001-02. This estimate is in 1999-00 dollars.
[Act 9 Sections: 1812np and 9443(7g)]
7. SALES TAX: AUCTION SALES
Assembly: Provide that the current sales tax exemption for occasional sales would apply to an auction which is the sale of personal farm property or household goods and not held more than five times at the same location during a year. Specify that these provisions would take effect on the January 1 after publication of the bill.
Under current law, the sales tax exemption for auction sales of farm property or household goods applies to auctions that are not held at regular intervals (which the Department of Revenue interprets as three or fewer times per year). This provision would specify that the exemption would apply as long as the total number of auctions at the same location was five or fewer.
Conference Committee/Legislature: Include the Assembly position with the following modifications: (a) provide that the current sales tax exemption for occasional sales would apply to auctions which are the sale of personal farm property or household goods and not held more than five times by the same auctioneer at the same location during a year; and (b) specify that in the case of an indoor location, "location" means a building, except that in the case of a shopping center or shopping mall, "location" means a store.
[Act 9 Sections: 1812Lmg and 9443(7v)]
8. SALES AND USE TAX ON FOOD AND RELATED ITEMS PROVIDED TO RESTAURANT EMPLOYES AT WORK
Assembly/Legislature: Provide a sales tax exemption for certain food and related items provided by restaurants to their employes during work hours. Specify that the following items, which are specifically excluded from the current law sales tax exemption for food and beverages, would be exempt from the sales tax when provided by restaurants to their employes at work:
· Soda water, beverages, bases, concentrates and powders intended to be reconstituted by consumers to produce soft drinks;
· Fruit drinks and ades not defined as fruit juices (such as lemonade and orangeade);
· Sales of the following items for off-premise consumption: (a) meals and sandwiches (heated or not); (b) heated food or heated beverages; (c) soda fountain items such as sundaes, milk shakes, malts, ice cream cones and sodas; and (d) candy, chewing gum, lozenges, popcorn and confections.
·
In addition, specify that paper and similar disposable products provided by a restaurant to its employes to use in the consumption of food, food products and beverages while at work would be exempt from the sales tax.
Specify that the provisions would be effective on the first day of the second month beginning after publication of the bill. Because the current provision is difficult to enforce, it is estimated that the exemption would have a minimal fiscal impact on sales tax collections.
[Act 9 Sections: 1812Lr and 9443(7fg)]
