Madison, WI 53707
Written comments on the proposed rules received by Ms. Slauson at the above address no later than September 16, 1996, will be given the same consideration as testimony presented at the hearing.
Analysis by the Department of Public Instruction
1996 Wis. Act 431 eliminates the two-tier system for resolving disputes concerning a child with exceptional educational needs who is enrolled in the school district and the parents of the child. The Act eliminates the initial hearing conducted by a hearing officer appointed by a school board. Instead, the Act provides that the school board or the parent of the child may initiate the process by filing a written request for a hearing with the department. The department must appoint a hearing officer who is not employed by or under contract with a school board (or otherwise employed by the department) to conduct the hearing. The school board must pay the cost of the hearing. Either party may appeal the decision of the hearing officer to circuit court or federal district court.
The proposed rules have been modified to conform to statutory language amended as a result of the Act.
Fiscal Estimate
Local Fiscal Effect: Elimination of the second tier appeal prior to appeal to circuit court will result in savings to school districts which have first-tier decisions appealed. Although only a few second tier appeals are made each year (usually less than 6), the costs to the school districts involved can be significant. Making the initial appeal directly to the department is also expected to save time in resolving the appeal, which would result in savings to school districts in staff time and attorney fees. The provision requiring the school board to pay the costs of the hearing officer does not result in increased cost to school boards since they are already required to pay first-tier hearing officer costs under current law.
State Fiscal Effect: There may be some additional work to the department to receive requests for hearings and appointing a hearing officer. Any additional work will be accomplished with existing resources, however, due to staff reductions, any additional work may result in delay or reduction of other department activities.
Initial Regulatory Flexibility Analysis
The proposed rules are not anticipated to have a fiscal effect on small businesses as defined under s. 227.114(1)(a), Stats.
Notice of Proposed Rule
Revenue
Notice is hereby given that pursuant to s. 227.11(2)(a), Stats., and interpreting ss.77.51(14), 77.52(14), 77.53(11), 77.54(20) and 77.56(3), Stats., and according to the procedure set forth in s. 227.16(2)(e), Stats., the Department of Revenue will adopt the following rules as proposed in this notice without public hearing unless, within 30 days after publication of this notice on August 15, 1996, it is petitioned for a public hearing by 25 natural persons who will be affected by the rule, a municipality which will be affected by the rule, or an association which is representative of a farm, labor, business or professional group which will be affected by the rule:
Contact Person
Please contact Mark Wipperfurth at (608) 266-8253, if you have any questions regarding this proposed rule order.
Analysis by the Department of Revenue
Statutory authority: s. 227.11(2)(a)
Statutes interpreted: ss. 77.51(14), 77.52(14), 77.53(11),
77.54(20) and 77.56(3)
SECTION 1. Tax 11.28(title), relating to gifts and other advertising specialties given away, is amended to more generally reflect the content of the rule.
Tax 11.28(1)(a), relating to definitions of “sale” and related terms, is amended to conform punctuation to Legislative Council Rules Clearinghouse standards.
Tax 11.28(2)(title), relating to gifts and sales incentive plans, is amended to more clearly reflect the text of the subsection.
SECTIONS 2, 3 AND 4. Tax 11.28(2)(intro.), relating to gifts, is renumbered Tax 11.28(2)(a) and a title is created, to conform to Legislative Council Rules Clearinghouse standards. Similarly, Tax 11.28(2)(a) through (e) are renumbered Tax 11.28(b) through (f).
Tax 11.28(2)(b), as renumbered, relating to the purchase of grand opening gifts, is amended to reflect:
a. The department's current position with respect to determining whether a retailer has accepted an exemption certificate in “good faith.”
b. Section 77.56(3), Stats., which provides an exemption from use tax for property purchased without tax for resale which is donated to an entity exempt from sales or use tax under s. 77.54(9a), Stats.
c. Correct punctuation, per Legislative Council Rules Clearinghouse standards.
Tax 11.28(2)(e), as renumbered, relating to purchases of awards, is amended to create a title and to change punctuation, to conform to Legislative Council Rules Clearinghouse standards.
SECTION 5. Tax 11.28(3)(b), relating to cents-off coupons, is amended to conform punctuation to Legislative Council Rules Clearinghouse standards.
SECTION 6. Tax 11.28(3)(c), relating to items redeemed from a retailer, is repealed and recreated to reflect the department's current position that a resale exemption applies to property given away with a required purchase of another item, regardless of whether the item purchased is subject to, or exempt from, Wisconsin sales tax. There is no provision in the sales and use tax law that supports the position that a resale exemption is not allowed based on whether the related property purchased is taxable or exempt.
SECTION 7. Tax 11.28(4)(c), relating to items given away, is amended to clarify the department's position that food products given away are not subject to tax, assuming exemption applies under s. 77.54(20), Stats.
Tax 11.28(5), relating to trading stamps, is amended to conform language to Legislative Council Rules Clearinghouse standards.
SECTION 8. Tax 11.46(3)(c), relating to sales by summer camps, is repealed and recreated to clarify that groceries sold at camps, which are not subject to tax, are only those that are exempt from tax under s. 77.54(20), Stats.
SECTION 9. Tax 11.46(5)(intro.), relating to combined charges, is amended to conform grammar, punctuation and style to Legislative Council Rules Clearinghouse standards.
SECTION 10. Tax 11.51(1), relating to sales by grocers, is amended to reflect the proper reading of s. 77.54(20), Stats., which in no way requires that, for food, food products, and beverages to be exempt from tax, they must be used in the “home preparation of meals.” The statute provides that food, food products, and beverages sold for direct consumption on the premises of the seller are subject to tax.
Tax 11.51(2)(a) and (b), relating to sales by grocers, are amended to reflect the Wisconsin Tax Appeals Commission decision in Artesian Water Company v. Wisconsin Department of Revenue (April 8, 1994), which held that bottled water was exempt from Wisconsin sales or use tax. Section 77.54(20)(b), Stats., specifically excludes from exemption soft drinks and soda water beverages (which would include carbonated or flavored bottled water).
Both subunits are also amended to conform punctuation and style to Legislative Council Rules Clearinghouse standards.
SECTIONS 11, 12 AND 13. Tax 11.87(1)(a) through (g), relating to sales of meals, are renumbered Tax 11.87(1)(b) through (h) and Tax 11.87(1)(a) is created to reflect the amendment to s. 77.54(20)(c)4, Stats., by 1993 Wisconsin Act 332, which exempted from sales or use tax meals sold on premises by community-based residential facilities. Tax 11.87(1)(b) as renumbered is amended to clarify that whether food is exempt from tax is determined under s. 77.54(20), Stats.
SECTION 14. Tax 11.87(3)(a), relating to sales of meals, is amended to reflect the amendment to s. 77.54(20)(c)4, Stats., by 1993 Wisconsin Act 332, which exempted from sales or use tax meals sold on premises by community-based residential facilities.
Tax 11.87(3)(d) is amended to reflect the proper reading of s. 77.54(20), Stats., which in no way requires that, for food, food products, and beverages to be exempt from tax, they must be used in the “home preparation of meals.” The statute only requires that food, food products, and beverages sold for direct consumption on the premises of the seller are subject to tax.
Tax 11.87(3)(e) is amended to correct terminology.
Text of Rule
SECTION 1. Tax 11.28(title), (1)(a) and (2)(title) are amended to read:
Tax 11.28(title) GIFTS AND OTHER ADVERTISING SPECIALTIES. (ss. 77.51(4)(a) and (14)(k) and 77.56(3), Stats.)
(1)(a) Section 77.51(14)(k), Stats., provides that “sale”
,“ ”sale, lease or rental“,” “retail sale”,“ ”sale at retail“ or equivalent terms includes the sale of tangible personal property to a purchaser even though the property may be used or consumed by another person to whom the purchaser transfers the property without valuable consideration, such as gifts and other advertising specialties distributed gratis apart from the sale of other tangible personal property or services.
(2)(title) GIFTS AND SALES INCENTIVE PLANS.
SECTION 2. Tax 11.28(2)(intro.) is renumbered Tax 11.28(2)(a).
SECTION 3. Tax 11.28(2)(a)(title) is created to read:
Tax 11.28(2)(a)(title) General.
SECTION 4. Tax 11.28(2)(a), (b), (c), (d) and (e) are renumbered Tax 11.28(2)(b), (c), (d), (e) and (f) and Tax 11.28(2)(b) and (e) as renumbered are amended to read:
Tax 11.28(2)(b) Grand opening gifts. A person who sells tangible personal property to a retailer who uses the property as gifts at a “grand opening” or similar event, such as an open house, celebrity appearance or “farm days,” cannot accept a resale certificate in good faith if the seller is aware, or should be aware with the exercise of reasonable diligence, of how the property will be used. The seller shall be deemed to be aware of how the property is to be used if the retailer does not normally purchase this type of item or if the retailer does not normally purchase from the seller in this volume. In cases where a seller furnishes free property to a retailer for use as gifts at a “grand opening” or similar event, the person seller furnishing the property to the retailer without charge is subject to the sales or use tax pursuant to s. Tax 11.14(2)(c) on its cost of the property donated, unless the property is exempt from use tax under s. 77.56(3), Stats., because it is donated to an entity exempt from sales or use tax under s. 77.54(9a), Stats.
(e)(title) Awards. Persons transferring tangible personal property to salespersons or distributors or both in redemption of awards, such as “points”, given under a sales incentive plan shall pay the tax on their purchases of the property.
SECTION 5. Tax 11.28(3)(b) is amended to read:
Tax 11.28(3)(b)(title) Cents-off coupons redeemable by manufacturers. A common arrangement between manufacturers and retailers involves the use of “cents-off”
coupons. The coupons are distributed as part of a retailer's advertisements and are used by consumers toward the purchase of tangible personal property. The retailer then is reimbursed by the manufacturer. In this situaiton, a retailer's taxable gross receipts include the amount which the retailer is reimbursed and the amount paid by the customer presenting the coupon, less any coupon handling fees paid by the manufacturer.
SECTION 6. Tax 11.28(3)(c) is repealed and recreated to read:
Tax 11.28(3)(c) Coupons issued and redeemable by retailers. 1. When a retailer distributes coupons which its customer may use to obtain free tangible personal property, the following shall apply:
a. When purchasing tangible personal property which will be given away to customers who must purchase other property to obtain the free property, a retailer may use a resale certificate to purchase the free property withoutpayment of the sales tax, since the transaction is deemed a sale of both the free property and the other property. The sale of the free property and other property by the retailer is subject to Wisconsin sales or use tax, unless an exemption applies.
b. A retailer may not use a resale certificate when purchasing taxable property which the retailer knows, or should know, is to be given away to customers without the customers being required to purchase other property to receive the free property. If the property that is given away was acquired without tax for resale, the retailer shall report the use tax based on the cost of the property.
Examples: 1) A retailer knows key chains it purchases will be given away to customers when those customers purchase gasoline, food items, or other tangible personal property. The retailer may purchase the key chains without Wisconsin sales tax by giving a resale certificate to its supplier.
2) A retailer purchases key chains that are subsequently given away to customers, regardless of whether the customer makes a purchase. If the retailer purchased the key chains without Wisconsin sales or use tax by giving its supplier a resale certificate, the retailer is liable for tax measured by the cost of the key chains given away.
2. The taxable gross receipts of retailers, who issue cents-off coupons which reduce the price of merchandise they sell, and who receive no reimbursement from a manufacturer, are the reduced amounts charged the customer.
SECTION 7. Tax 11.28(4)(c) and (5) are amended to read:
Tax 11.28(4)(c) Except for meals, retailers
Retailers are subject to the sales and use tax on their cost of taxable property transferred when coupons are redeemed without consideration from a sales agency, the consumer or any other person unless an exemption applies. No use tax arises when a meal prepared from exempt food is given away, and the retailer shall not pass on any tax to the consumer of a free meal.
Note to Revisor: Insert the following example after sub. (4)(c):
Example: Motel A provides a free breakfast with the purchase of lodging. Motel A purchases fruit, milk, cereal, bakery goods (rolls, bagels, muffins, bread), ground coffee beans, frozen juice, napkins, plastic utensils, and paper plates and cups from a vendor. Motel A prepares the coffee and juice. The food and beverages are placed on a table in the lobby. Motel A's customers may take as much or as little as they want of the food and beverage items.
Motel A's purchases of fruit, milk, cereal, bakery goods (rolls, bagels, muffins, bread), ground coffee beans, and frozen juice are
not subject to Wisconsin sales or use tax because they are exempt food items not for direct consumption on the premises of the vendor under s. 77.54(20), Stats. Motel A's purchases of the napkins, plastic utensils, and paper plates and cups are subject to sales or use tax because no exemption applies.
(5) TRADING STAMPS. (a) Furnishing trading stamps and stamp books, with or without a charge, to a retailer is an advertising or sales promotional service. The person furnishing the stamps and books is the consumer of such the material and shall pay the Wisconsin sales or use tax on purchases of the material.
(b) A retailer's taxable gross receipts shall
may not be reduced by the retailer's payments for trading stamps and stamp books or for payments to customers in redemption of such the stamps.
SECTION 8. Tax 11.46(3)(c) is repealed and recreated to read:
Tax 11.46(3)(c) Food, food products and beverages as defined in s. 77.54(20)(a) and (b), Stats., excluding those food, food products and beverages listed in s. 77.54(20)(c), Stats., sold at a camp for consumption off the premises of the camp. “Off the premises of the camp” means a location outside the boundaries of the camp.
SECTION 9. Tax 11.46(5)(intro.) is amended to read:
Tax 11.46(5)(intro.) An allocation between taxable and exempt receipts shall be made when a single, combined, charge is made for all the privileges extended by a camp. Adequate records shall be kept and maintained to enable the proper allocation; otherwise, the total charge shall be taxable. For purposes of allocating, the following shall apply:
SECTION 10. Tax 11.51(1) and (2)(a) and (b) are amended to read:
Tax 11.51(1) GENERAL. All sales of tangible personal property are taxable except when a specific exemption applies. One of the exemptions is for “food, food products and beverages”
,“ which generally exempts all basic food items for human consumption necessary for the home preparation of meals off the premises of the grocer. This exemption, however, does not include many items normally available in grocery and food stores, such as soda water beverages, including bases or concentrates to produce soft drinks and fruit drinks, beer, intoxicating liquors, candy, paper products and detergents. The following lists in sub. (2)(a) and (b) shall serve as a guide to grocers to determine the kinds of items that are taxable and exempt.
Note to Revisor: Amend only the following portions of the alphabetical lists in sub. (2)(a) and(b):
(2)(a) . . .
Cameras and supplies.
Can openers.
Candied fruits.
Candy.
Candy apples.
Canning and freezer supplies.
Can openers.
. . .
Water, bottled, sparkling, spring and distilled
carbonated or flavored.
Water conditioners.
Wax paper.
