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)]
9. USE TAX ON BOATS BERTHED IN STATE BOUNDARY WATERS
Senate: Modify the current use tax exemption for a boat purchased in a state contiguous to this state by a person domiciled in that state if the boat is berthed in this state's boundary waters adjacent to the state of the domicile of the purchaser if the transaction was an exempt occasional sale under the laws of the state in which the purchase was made. Expand the provision to apply to a boat purchased anywhere (rather than in a contiguous state), as long as the other conditions still apply. Specify that these provisions would take effect on the first day of the second month beginning after publication. It is estimated that this provision would have a minimal fiscal effect.
Conference Committee/Legislature: Delete provision.
Excise Taxes
1. CIGARETTE TAX REFUNDS: CURRENT LAW REESTIMATE [LFB Paper 120]
Governor: Reduce funding for cigarette tax refunds by $1,800,000 in 1999-00 and $1,300,000 in 2000-01 to reflect lower estimates of the amount required to reimburse Native American tribes under present law. Currently, the tribes receive a refund of 100% of the cigarette tax on cigarettes sold to Native Americans and 70% of the tax on sales made to non-Native Americans on reservations or trust lands. The reduced funding reflects estimates of lower cigarette tax collections, primarily as a result of anticipated reductions in cigarette consumption following price increases associated with the settlement of the tobacco lawsuit.
Joint Finance/Legislature: Reestimate funding for cigarette tax refunds under current law at $9,520,000 in 1999-00 and $9,320,000 in 2000-01. The reestimates are based on assumed 1% annual reductions in cigarette consumption, with additional reductions related to increases in cigarette prices and federal taxes as described above. Compared to the Governor's recommendation, the revised estimates decrease funding for the refunds by $880,000 in 1999-00 and $1,580,000 in 2000-01.
2. CIGARETTE TAX REFUNDS [LFB Paper 121]
Governor: Reduce, from 70% to 50%, the percentage of cigarette tax collections from sales of cigarettes on reservations or trust lands that would be refunded to Indian tribes. In addition, clarify that "Indian tribe" means an American Indian tribe or band.
Under current law, the Department of Revenue refunds 70% of cigarette tax collections in respect to sales on reservations or trust lands of an Indian tribe under specified conditions. State law further authorizes DOR to enter into agreements with Indian tribes to provide for the refunding of cigarette taxes paid on cigarettes sold on reservations to enrolled members of the tribe residing on the tribal reservation.
Federal law prohibits states from imposing a cigarette tax on sales by Native Americans to Native Americans on reservations. Ten of the 11 Indian tribes in the state have signed agreements with the state in which the tribes agree to sell only stamped (taxed) cigarettes and the state agrees to provide refunds to the tribes of 100% of taxes paid on cigarette sales to tribal members living on the reservation. For these tribes, DOR refunds 100% of tax collections on cigarettes sold to tribal members, and 70% of taxes on cigarettes that are sold to non-tribal members.
The remaining tribe, which does not have an agreement with the state, sells unstamped (untaxed) cigarettes to tribal members and stamped cigarettes to non-tribal members. For this tribe, the 70% refund applies only to tax collections from the sale of stamped cigarettes to non-tribal members.
The provision to reduce the refund rate from 70% to 50% would first apply to taxes imposed on the first day of the second month beginning after publication of the bill. The fiscal effect is estimated to be a reduction in refunds to Indian tribes of $2,500,000 in 1999-00 and $3,000,000 in 2000-01.
Joint Finance: Delete the Governor's recommendation to reduce the refund rate for taxes collected on tribal sales of cigarettes to non-tribal members from 70% to 50%. However, retain the provision that would clarify that an "Indian tribe" means an American Indian tribe or band. In addition, specify that "trust lands" means any lands in this state held in trust by the United States government for the benefit of a tribe or a member of a tribe.
For the cigarette tax refund on sales to non-tribal members, specify a maximum refund rate of 70% and require DOR to negotiate the exact rate in individual agreements with the tribes (at or below the 70% maximum). The statutes would continue to specify that such agreements would provide for the refunding of 100% of cigarette taxes imposed on sales to tribal members.
Under these provisions, estimated cigarette tax refunds for 1999-01 would be the same as the modified estimates under current law (which would be $2,500,000 greater in 1999-00 and $3,000,000 greater in 2000-01 than the estimates included in the bill). Savings would occur if agreements are negotiated with a refund rate of less than 70%.
Assembly: Retain the Joint Finance Committee provisions. However, establish the maximum rate at 50%, rather than 70%. Estimate reductions in cigarette tax refunds of $1,836,000 in 1999-00 and $2,397,000 in 2000-01. The estimated fiscal effect assumes that the tribes that are currently selling only stamped cigarettes would continue to do so and that refunds would be made at the 50% rate. If new agreements were negotiated at rates below the maximum, the refund expense to the state could be lower. However, if the tribes did not continue selling taxed cigarettes to non-tribal members, the state could see reductions in both tax collections and refunds from cigarette sales on reservations.
Senate/Legislature: Delete the provisions of the Joint Finance Committee that would specify the 70% refund rate for cigarette taxes collected from sales of cigarettes to non-tribal members as a maximum rate, with the exact rate to be negotiated in individual agreements with the tribes. Instead, maintain the 70% refund rate for cigarette taxes collected from sales of cigarettes to non-tribal members, as under current law.
Under these provisions, there would be no change in refunds from the estimates for the Joint Finance Committee, which assumed that refunds would be the same as under current law.
[Act 9 Sections: 2171, 2171m and 9343(6)]
3. TOBACCO PRODUCTS TAX [LFB Paper 122]
Governor: Convert the tobacco products tax from an occupational tax to an excise tax. Require DOR to refund 50% of tobacco products tax collections on sales by Indian tribes to non-tribal members under certain conditions as described below.
Current Law. Under current law, the Wisconsin tax on tobacco products is an occupational tax imposed on distributors of tobacco products. For domestic tobacco products sold by distributors, the distributors are required to pay a tax at the rate of 20% of the manufacturer's established list price (for imported products, federal tax is added to the list price before applying the 20% tax rate). However, the statutes provide exceptions to the tobacco products tax for the following:
a. tobacco products sold to or by post exchanges of the U.S. armed forces;
b. tobacco products sold to or by state-operated veterans hospitals in this state;
c. tobacco products sold to an interstate carrier of passengers for hire to be resold to bona fide passengers of such carriers;
d. tobacco products sold for shipment outside this state in interstate commerce; and
e. tobacco products that, under the Constitution and laws of the United States, may not be taxed by this state.
The U.S. Constitution and federal law have been interpreted in a manner that would exempt sales of tobacco products by distributors to Indian tribes from the tobacco products tax. According to DOR, in-state distributors of tobacco products typically claim exemptions from the tobacco products tax for their sales to Indian tribes. As a result, there may be retail sales on reservations of tobacco products to non-tribal members on which no tobacco products tax has been paid.
Change from an Occupational to an Excise Tax. The bill would change the tobacco products tax from an occupational tax to an excise tax. The tax would continue to be imposed at the distributor level. However, the bill would specify that the tax be passed on to the ultimate consumer of the tobacco products.
The bill would also eliminate the current exemption for sales that may not be taxed under the U.S. Constitution or federal law [item (e) above]. The bill would further specify that all tobacco products received in this state for sale or distribution in this state would be subject to the tax, unless they were specifically exempted. Under these provisions, it appears that sales of tobacco products by distributors to Indian tribes would not be exempt from the tax.
The bill would provide that a distributor of tobacco products who failed to file required reports and to collect and remit the tax on all tobacco products not specifically exempted would be subject to the following: (a) a fine of not less than $1,000 nor more than $5,000; (b) imprisonment for not less than 90 days nor more than one year; or (c) both types of penalties.
50% Refund to Tribes. The bill would require DOR to refund 50% of tobacco products tax collections in respect to sales on reservations or trust lands of an Indian tribe to the tribal council having jurisdiction over the reservation or trust land if all of the following conditions were met: (a) the tribal council had filed a claim for the refund with DOR; (b) the tribal council had approved the retailer; (c) the land on which the sale occurred had been designated a reservation or trust land on or before January 1, 1983; (d) the tobacco products had not been delivered by the retailer to the buyer by means of a common carrier, a contract carrier or the U.S. postal service; and (e) the retailer had not sold tobacco products to another retailer or to a subjobber. The bill would also expand the sum sufficient appropriation for cigarette tax refunds to include refunds related to the tobacco products tax.
Agreements with Tribes. The bill would authorize DOR to enter into agreements with Indian tribes to refund the tobacco products tax imposed on tobacco products sold on reservations or trust lands to enrolled members of the tribe residing on the tribal reservation.