Examples: 1) Distributor is in the business of providing taxable admission services through amusement devices. Distributor owns an arcade game console that is an amusement device. The arcade game console is placed in a tavern. The tavern owner gives the receipts from customers playing arcade games on the console to Distributor, less a commission. Distributor purchases a software upgrade that is an electronic game played on the console, but does not replace the arcade game console. Distributor's purchase of the software upgrade is exempt.
2) Arcade purchases a pinball machine it used in providing taxable admission services. The invoice to Arcade separately states the purchase price of the pinball machine from the video game component of the pinball machine. Arcade's purchase of the video game that is used in the pinball machine is exempt from tax because it is separately stated on the invoice. Arcade's purchase of the pinball machine is taxable.
3) Tavern purchases a dart board that is an amusement device. Customers insert $1 to use the dart board.. Although Tavern's primary business is selling food and drinks, its business also includes taxable admission services. Tavern's purchase of the dart board is taxable. Tavern's purchase of the dart board's game component is not taxable if separately stated on the invoice.
4) Distributor is in the business of providing taxable admission services through amusement devices. Distributor purchases a video gambling machine that will be placed in a tavern. A commission will be paid to the tavern based on receipts from the video gambling machine. Distributor's invoice for the video gambling machine separately states the purchase price of the video gambling machine from the electronic game that is a component of the video gambling machine. Distributor's purchase of the video gambling machine and the electronic game is taxable, even though the electronic game is separately stated. The video gambling machine is not an amusement device because it is a device, machine, or game that is illegal to operate in Wisconsin. The operation of video gambling machines is in violation of Wisconsin law, as provided in ss. 945.03 and 945.04, Stats. SECTION 27. Tax 11.52 (7) (Note 1) and (Note 2) are amended to read:
Tax 11.52 (7) Note: Section Tax 11.52 interprets ss. 77.51 (1fm), (3n), (3t), (13), and (17w), 77.52 (1), (1m), (2) (a) 2., 6., 7., 10., and 11., and (2m), and 77.54 (20n), and (63), and (65m), Stats. Note: The interpretations in s. Tax 11.52 are effective under the general sales and use tax law on and after September 1, 1969, except: (a) The definitions of “candy," “dietary supplement," “food and food ingredient," and “soft drink," the exemption for food and food ingredients, the change of the term “gross receipts" to “sales price," and the separate impositions of tax on coins and stamps sold above face value under s. 77.52 (1) (b), Stats., certain leased property affixed to real property under s. 77.52 (1) (c), Stats., and digital goods under s. 77.52 (1) (d), Stats., became effective October 1, 2009, pursuant to 2009 Wis. Act 2; (b) Receipts from all self-service laundry, dry cleaning, pressing, and dyeing machines, including those that are not coin-operated, are not taxable effective October 1, 2013, pursuant to 2013 Wis. Act 20; and (c) The exemption for music sold to a jukebox operator for use in jukeboxes in s. 77.54 (63), Stats., became effective June 1, 2016, pursuant to 2015 Wis. Act 251; and (d) The exemptions for a video or electronic game sold to an amusement device operator for use in the amusement device and prizes awarded or transferred through the use of the amusement device under s. 77.54 (65m) became effective December 1, 2017, pursuant to 2017 Wis. Act 59. SECTION 28. Tax 11.53 (3) and (7) (Note 1) and (Note 2) are amended to read:
Tax 11.53 (3) Exception. Persons, other than nonprofit organizations, who do not hold and are not otherwise required to hold a seller's permit who have total taxable sales of tangible personal property, items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., or taxable services of less than $1,000 $2,000 during the calendar year are not required to hold a seller's permit. Sales by such persons are exempt occasional sales. However, a person's purchases of tangible personal property, items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., and taxable services which when resold are exempt occasional sales under this section, are taxable purchases by that person. (7) Note: Section Tax 11.53 interprets ss. 73.03 (38) and (50), 77.51 (9), 77.52 (1), (7), (9), (11), (12), and (19), 77.54 (7), 77.58, and 77.61 (2), Stats. Note: The interpretations in s. Tax 11.53 are effective under the general sales and use tax law effective on and after September 1, 1969, except: (a) The security amounts given in sub. (4) became effective February 1, 1982; (b) The provisions of sub. (7) became effective May 17, 1988, pursuant to 1987 Wis. Act 399; and (c) The change of the term “gross receipts" to “sales price" and the separate impositions of tax on coins and stamps sold above face value under s. 77.52 (1) (b), Stats., certain leased property affixed to real property under s. 77.52 (1) (c), Stats., and digital goods under s. 77.52 (1) (d), Stats., became effective October 1, 2009, pursuant to 2009 Wis. Act 2; and (d) The threshold for exempt occasional sales was changed to less than $2,000 in annual sales, effective for sales beginning January 1, 2018, pursuant to 2017 Wis. Act 59. SECTION 29. Tax 11.55 (1) and (2) (a) are amended to read:
Tax 11.55 (1) Undisclosed principal. A person who has possession of tangible personal property or items, property, or goods under s. 77.52 (1), (b), (c), or (d), Stats., or the right to transfer taxable services owned by an unknown or undisclosed principal and has the power to transfer title to that property, item, or good, or the right to transfer the taxable service to a third person, and who exercises that power, is a retailer whose receipts are subject to the tax. (2) Disclosed principal. (a) The sales price received from the sale of tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., or taxable services made by a person with possession of the property, item, or good, or the right to transfer a taxable service who is acting for a known or disclosed principal, is taxable to the principal if the principal is engaged in the full or part-time business of selling tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., or taxable services. If the principal fails to pay the tax, the agent may be liable for it, except as provided in s. 77.51 (13b), Stats. SECTION 30. Tax 11.57 (2) (i) is amended to read:
Tax 11.57 (2) (i) Sales of fuel and electricity for use in farming, including agriculture, dairy farming, horticulture, floriculture, silviculture, beekeeping, and horticulture custom farming services.
SECTION 31. Tax 11.57 (2) (r) is created to read:
Tax 11.57 (2) (r) 1. Service provided by an electric cooperative to another electric cooperative, or by a telecommunications utility to another telecommunications utility, for disaster relief work performed during a disaster period.
2. In this paragraph:
c. "Electric cooperative" has the meaning given in s. 76.48 (1g) (c), Stats. e. "Telecommunications utility" has the meaning given in s. 196.01 (10), Stats. 3. The exemption in this paragraph does not apply to materials and supplies used in performing exempt disaster relief services.
SECTION 32. Tax 11.57 (6) (Note 1) and (Note 2) are amended to read:
Note: The interpretations in s. Tax 11.57 are effective under the general sales and use tax law on and after September 1, 1969, except: (a) The exemption for sales of coal, fuel oil, propane, steam and wood became effective July 1, 1979, pursuant to Chapter 1, Laws of 1979; (b) The six-month exemption for electricity and gas became effective November 1, 1979, pursuant to Chapter 1, Laws of 1979; (c) The exemption for fuel converted to electrical energy, gas or steam by utilities became effective October 1, 1981, pursuant to Chapter 20, Laws of 1981; (d) The exemption for peat and fuel cubes produced from solid waste became effective April 2, 1986, pursuant to 1985 Wis. Act 149; (e) The exemption for wood residue became effective September 1, 1987, pursuant to 1987 Wis. Act 27; (f) The exemption for component parts of an industrial waste treatment facility became effective July 1, 1989, pursuant to 1983 Wis. Act 426, later clarified effective May 17, 1988, pursuant to 1987 Wis. Act 399; (g) The sale of gas or other fuel used to heat farm buildings, including greenhouses, that are not exempt machinery under s. Tax 11.12became taxable July 1, 1991; (h) All fuel used in farming became exempt October 1, 1991, pursuant to 1991 Wis. Act 39; (i) The exemption for electricity sold for use in farming became effective May 1, 2000, pursuant to 1999 Wis. Act 9; (j) The exclusion from the definition of sale for certain sales of transmission facilities became effective October 29, 1999, pursuant to 1999 Wis. Act 9; (k) The exemption for fuel and electricity consumed in manufacturing became exempt January 1, 2006, pursuant to 2003 Wis. Act 99; (L) The exemption for certain low-income assistance fees became effective July 1, 2007, pursuant to 2005 Wis. Act 141; (m) The exemption for biomass sold for residential use became effective December 1, 2007, pursuant to 2007 Wis. Act 20; and (n) The change of the term “gross receipts" to “sales price" and the separate impositions of tax on coins and stamps sold above face value under s. 77.52 (1) (b), Stats., certain leased property affixed to real property under s. 77.52 (1) (c), Stats., and digital goods under s. 77.52 (1) (d), Stats., became effective October 1, 2009, pursuant to 2009 Wis. Act 2; (o) The exemption for services performed during a disaster period became effective January 1, 2017, pursuant to 2017 Wis. Act 290; and (p) The exemption for fuel and electricity used in "beekeeping" became effective December 1, 2017, pursuant to 2017 Wis. Act 59. SECTION 33. Tax 11.62 (2) (b) and (3) (d) (Note 1) and (Note 2) are amended to read:
Tax 11.62 (2) (b) A barber or beauty shop operator's sales are not subject to Wisconsin sales tax if the barber or beauty shop operator does not hold and is not required to hold a Wisconsin seller's permit. A barber or beauty shop operator is not required to hold a seller's permit and register as a retailer to collect Wisconsin sales tax if the barber or beauty shop operator's total taxable receipts from sales of tangible personal property, items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., and taxable services are less than $1,000 $2,000 during the calendar year. Note: The interpretations in s. Tax 11.62 are effective under the general sales and use tax law on and after September 1, 1969; except that (a) the separate impositions of tax on coins and stamps sold above face value under s. 77.52 (1) (b), Stats., certain leased property affixed to real property under s. 77.52 (1) (c), Stats., and digital goods under s. 77.52 (1) (d), Stats., became effective October 1, 2009, pursuant to 2009 Wis. Act 2 and (b) The threshold for exempt occasional sales was changed to less than $2,000 in annual sales, effective for sales beginning January 1, 2018, pursuant to 2017 Wis. Act 59. SECTION 34. Tax 11.65 (1) (c), (3), and (5) (Note 1) and (Note 2) are amended to read:
Tax 11.65 (1) (c) Admissions to customer participation events such as swimming, skiing, bowling, skating, bingo, golfing, curling, dancing, card playing, hayrides, hunting, fishing, and horseback or pony riding, including entry fees for leagues, tournaments, and contests, are taxable.
(3) Prize money. Bowling center proprietors shall pay tax on all their regular bowling fees, including bowling tournament entrance fees. However, in the case of The amounts of taxable tournament and league entrance fees, the proprietor may subtract from its taxable receipts the amount advertised and set aside for prize money are exempt from tax.
Note: The interpretations in s. Tax 11.65 are effective under the general sales and use tax law on and after September 1, 1969, except: (a) Bingo receipts became taxable December 30, 1973, pursuant to Chapter 156, Laws of 1973; (b) The exemption for admissions to museums operated under a lease with the State Historical Society became effective July 20, 1985, pursuant to 1985 Wis. Act 29; (c) The exemption for admissions to American Legion baseball became effective September 1, 1985, pursuant to 1985 Wis. Act 29; (d) Recreational facilities and rights sold in connection with the sale of time-share property became taxable May 17, 1988, pursuant to 1987 Wis. Act 399; (e) The exemption for state park campground fees became effective September 1, 1989, pursuant to 1989 Wis. Act 31; (f) The exemption for admissions to certain gun clubs became effective July 1, 2007, pursuant to 2005 Wis. Act 327; (g) The exemption for sales of admissions by nonprofit organizations to certain youth sports activities became effective July 1, 2009, pursuant to 2009 Wis. Act 28; and (h) The change of the term “gross receipts" to “sales price" and the separate impositions of tax on coins and stamps sold above face value under s. 77.52 (1) (b), Stats., certain leased property affixed to real property under s. 77.52 (1) (c), Stats., and digital goods under s. 77.52 (1) (d), Stats., became effective October 1, 2009, pursuant to 2009 Wis. Act 2; and (i) The exemption for tournament or league entrance fees advertised and set aside as prize money in s. 77.54 (65m) (a) 3., Stats., became effective December 1, 2017, pursuant to 2017 Wis. Act 59. SECTION 35. Tax 11.66 (2) (c) (Note) is created to read:
Tax 11.66 (2) (c) Note: Sales of internet access services are not subject to Wisconsin sales or use tax after June 30, 2020.
SECTION 36. Tax 11.66 (4) (b) and (6) (Note 1) and (Note 3) are amended to read:
Tax 11.66 (4) (b) Revenues collected under s. 256.35 (3), Stats., the surcharge established by the public service commission under s. 256.35 (3m) (f), Stats., for customers of wireless providers as defined in s. 256.35 (3m) (a) 6., Stats., and the police and fire protection fees under s. 196.025 (6), Stats. (6) Note: Section Tax 11.66 interprets ss. 77.51 (1ba), (1r), (3c), (3pe), (3pn), (3rn), (5d), (5f), (5n), (5r), (7k), (8m), (9s), (10d), (10f), (11c), (13rn), (17m), (21n), (24), (25), and (26), 77.52 (2) (a) 5. and 5m., 77.522 (4), and 77.525, and 77.54 (37), Stats. Note: The interpretations in s. Tax 11.66 are effective under the general sales and use tax law on or after September 1, 1969, except: (a) Chapter 39, Laws of 1975, effective July 31, 1975, expanded the telephone services subject to the tax to include “telephone services of whatever nature"; (b) Chapter 317, Laws of 1981, imposed the tax on interstate telegraph and telephone service, effective May 1, 1982; (c) “911" service became exempt on August 1, 1987, pursuant to 1987 Wis. Act 27; (d) Telecommunications services originating in Wisconsin and charged to a subscriber in Wisconsin became taxable October 1, 1989, pursuant to 1989 Wis. Act 31; (e) Telecommunications services originating in Wisconsin and charged to a service address in Wisconsin became taxable October 1, 1991, pursuant to 1991 Wis. Act 31; (f) The repeal of the exemption for equipment in central offices of telephone companies became effective September 1, 1995, pursuant to 1995 Wis. Act 27; (g) Telecommunications services paid for by the insertion of coins in a coin-operated telephone became taxable August, 1, 1996, pursuant to 1995 Wis. Act 351; (h) Certain telecommunications message services became taxable December 1, 1997, pursuant to 1997 Wis. Act 27; (i) Telecommunications services originating outside Wisconsin, terminating in Wisconsin and charged to a service address in Wisconsin, except certain services obtained by means of a toll-free number, became taxable December 1, 1997, pursuant to 1997 Wis. Act 27; (j) Credit for sales tax properly paid to another state on interstate telecommunications services became effective October 14, 1997, pursuant to 1997 Wis. Act 27; (k) Sales of rights to purchase telecommunications services became taxable August 1, 1998, pursuant to 1997 Wis. Act 237; (L) The exemption for interstate private line services no longer applies, effective December 1, 2002; (m) The definitions of air-to-ground radio telephone service, ancillary services, call-by-call basis, communications channel, conference bridging service, customer, customer channel termination point, detailed telecommunications billing services, directory assistance, eight hundred service, end user, fixed wireless service, home service provider, international telecommunications services, internet access services, interstate telecommunications services, intrastate telecommunications services, mobile telecommunications service, nine hundred service, paging service, place of primary use, postpaid calling service, prepaid calling service, prepaid wireless calling service, private communications service, radio service, radiotelegraph service, radiotelephone service, service address, telecommunications service, value-added nonvoice data service, vertical service, and voice mail service became effective October 1, 2009, pursuant to 2009 Wis. Act 2; (n) The specific imposition of tax on ancillary services and interstate, intrastate, and international telecommunications services became effective October 1, 2009, pursuant to 2009 Wis. Act 2; (o) The sourcing provisions related to telecommunications services became effective October 1, 2009, pursuant to 2009 Wis. Act 2; (p) The change of the term “gross receipts" to “sales price" and the separate impositions of tax on coins and stamps sold above face value under s. 77.52 (1) (b), Stats., certain leased property affixed to real property under s. 77.52 (1) (c), Stats., and digital goods under s. 77.52 (1) (d), Stats., became effective October 1, 2009, pursuant to 2009 Wis. Act 2; and (q) The definition of “primary place of use" was amended to replace the reference to federal law with specific language, and the definition of “prepaid wireless calling service" was amended, pursuant to 2013 Wis. Act 20; and (r) The imposition of tax on internet access services under s. 77.52 (2) (a) 5. a., Stats., is repealed effective July 1, 2020, pursuant to 2017 Wis. Act 59. SECTION 37. Tax 11.68 (4) (i) is repealed and recreated to read:
Tax 11.68 (4) (i) Building materials for facilities owned by local governmental units and certain nonprofit organizations. 1. Under s. 77.54 (9m), Stats., contractors may purchase without sales or use tax building materials that the contractor, in fulfillment of a real property construction activity, transfers to a qualifying exempt entity if the materials become part of a facility in Wisconsin that is owned by the entity. 2. The following provisions apply to the exemption under s. 77.54 (9m), Stats.: a. "Qualifying exempt entity" means an entity described in s. 77.54 (9a) (b), (c), (d), (em), and (f), and (fc), and (9g), Stats., a technical college district, the Board of Regents of the University of Wisconsin System, an institution, as defined in s. 36.05 (9), Stats., a college campus, as defined in s. 36.05 (6m), Stats., or the University of Wisconsin-Extension. b. "Facility" means any building, shelter, parking lot, parking garage, athletic field, athletic park, storm sewer, water supply system, or sewerage and waste water treatment facility. Facility does not include highways, streets, roads, sidewalks or paths, regardless of whether located within a facility.
Examples: 1) Materials that become a component part of the road, curb, gutters, or sidewalk are not part of a facility, such as black top, cement, and road base materials.
2) Materials that become a component part of a storm sewer facility and the materials necessary to stabilize those items are part of the storm sewer facility, such as piping, fittings, gravel and other fill necessary to bury the storm sewer piping to protect it from the road. Any road base material used to bring the road to elevation, and the road surface itself is not part of a facility.
3) Pipes, pipe liner material, manhole structures, manhole covers, manhole liners, and manhole coatings become a component part of the storm sewer facility.
c. A Wisconsin organization described under s. 77.54 (9a) (f), Stats., shall hold a Wisconsin Certificate of Exempt Status number. A non-Wisconsin organization described under s. 77.54 (9a) (f), Stats., and a state veterans organization described in s. 77.54 (9g), Stats., are not required to hold a Wisconsin Certificate of Exempt Status number. d. A contractor's purchase of building materials transferred to a county, city, village or town, a state governmental unit, or a federal governmental unit outside Wisconsin are not exempt.
e. A contractor's purchase of building materials transferred to a person other than a qualifying entity is exempt if the person does not use the facility for any purpose other than to transfer it to the qualifying entity.
Example: Building materials for the construction of a parking ramp that will be owned and operated by a developer prior to transfer to a municipality, does not qualify for the exemption.
f. A subcontractor's purchase of building materials is exempt if the materials are transferred to a qualifying entity and, upon completion of the facility, the materials become a part of the facility in Wisconsin that is owned by the qualifying entity, pursuant to a contract between a general contractor and the qualifying entity, and the general contractor does not use the facility for any purpose other than to transfer it to the entity.
g. The exemption applies to contracts entered into on or after January 1, 2016. The exemption does not apply to purchases of building materials after January 1, 2016, for a contract that was entered into prior to January 1, 2016, even if the change order relating to those materials was executed after January 1, 2016.
Note: The effective date is different for contracts with certain exempt qualifying entities. Contracts with certain title holding companies became effective September 1, 2017. Contracts with technical colleges, the UW System, and state veterans organization became effective July 1, 2018.
SECTION 38. Tax 11.68 (4) (j) is created to read:
Tax 11.68 (4) (j) Electronics and Information Technology Manufacturing Zone Facilities. Under s. 77.54 (65), Stats., owners, lessees, contractors, subcontractors, or builders may purchase without sales or use tax building materials, supplies, equipment, and landscaping services if both of the following apply: 1. The property or landscaping service is acquired solely for or used solely in, the construction or development of a facility located in an electronics and information technology manufacturing zone designated under s. 238.396 (1m), Stats. 2. The capital expenditures for the construction or development of the facility may be claimed as a credit under s. 71.07 (3wm) (bm) or 71.28 (3wm) (bm), Stats., as certified by the Wisconsin Economic Development Corporation. SECTION 39. Tax 11.68 (7) (b) 1. and 2. are amended to read:
Tax 11.68 (7) (b) 1. In this paragraph:, “lump sum contract" means a contract to perform real property construction activities and to provide tangible personal property, items or property under s. 77.52 (1) (b) or (c), Stats., or taxable services and for which the contractor quotes the charge for labor, services of subcontractors, tangible personal property, items and property under s. 77.52 (1) (b) and (c), Stats., and taxable services as one price, including a contract for which the contractor itemizes the charges for labor, services of subcontractors, tangible personal property, items and property under s. 77.52 (1) (b) and (c), Stats., and taxable services as part of a schedule of values or similar document. a. "Construction contract" has the meaning in s. 77.54 (60) (d) 1., Stats., and includes both fixed price contracts and time and materials contracts. 2. A contractor's sales price of a lump sum contract is exempt from tax if the total sales price of all taxable products and services sold by the contractor as a part of the lump sum contract is less than 10 percent of the total amount of the lump sum contract. The sales price of products sold by a prime contractor as a part of a construction contract is not taxable if 90 percent or more of the total amount of the construction contract relates to real property construction activities. The calculation is made without regard for exemptions that may be claimed by the customer (e.g., manufacturing, farming). Change orders and additional work billed are included in this calculation. Except as provided in subd. 3., the prime contractor is the consumer of such products and shall pay tax on its purchase of the taxable products.
SECTION 40. Tax 11.68 (7) (b) 2g., 2h., and 2r. are created to read:
Tax 11.68 (7) (b) 2g. The sales price of products sold by a subcontractor to a prime contractor, or to another subcontractor for eventual sale to the prime contractor, as part of a construction contract is not taxable if any of the following apply:
a. The total sales price related to real property construction activities is 90 percent or more of the total amount of the construction contract.
b. The subcontractor received a fully completed exemption certificate from the prime contractor, or the subcontractor, claiming that the products are sold by the prime contractor as part of a construction contract that is exempt under s. 77.54 (60), Stats. 2h. Except as provided in subd. 3, the subcontractor is the consumer of the products sold as part of a construction contract described in subds. 2g. or 2r. (c) and shall pay tax on its purchase of the taxable products, as provided in s. 77.54 (60) (bm), Stats. 2r. The prime contractor shall make a determination at the start of the construction contract whether it provides the subcontractor with an exemption certificate claiming resale or the construction contract exemption in s. 77.54 (60), Stats., but not both. The liability for tax depends, in part, on whether the prime contractor gives an exemption certificate for its purchases. a. If the prime contractor gives the subcontractor an exemption certificate claiming resale, and the contract qualifies for exemption under s. 77.54 (60), Stats., the prime contractor is liable for tax on its purchase price of the products and services purchased from the subcontractor. b. If the prime contractor gives the subcontractor an exemption certificate claiming the exemption under s. 77.54 (60), Stats., and the contract does not qualify for the exemption, the prime contractor is liable for sales or use tax on the sales price of the taxable products and services sold. The prime contractor may collect the tax from its customer. c. If the subcontractor receives an exemption certificate from the prime contractor claiming resale, and the prime contractor's contract qualifies for exemption under s. 77.54 (60), Stats., the subcontractor is not liable for tax on the purchase price of the materials sold as products and services to the prime contractor as a part of the construction contract. Rather, the prime contractor is liable for the tax on its purchase price of the taxable products and services purchased from the subcontractor. The subcontractor is liable for tax on its purchase of materials used in real property construction activities. d. If the subcontractor receives an exemption certificate from the prime contractor claiming the exemption under s. 77.54 (60), Stats., and the contract does not qualify for the exemption, the subcontractor may claim a refund of any tax paid on the purchase of materials sold as products and services to the prime contractor as a part of the construction contract. The claim for refund shall substantiate that the prime contractor's contract did not qualify for the construction contract exemption, that the tax on sales to the prime contractor were reported to the department by the subcontractor or the prime contractor, and that the prime contractor's purchases qualified for the resale exemption. The subcontractor may not claim a refund of tax on its purchase of materials used in real property construction activities. SECTION 41. Tax 11.68 (7) (b) 3. (intro) and (Example 1) and (Example 2) are amended to read:
Tax 11.68 (7) (b) 3. If the lump sum construction contract is entered into with an entity that is exempt from taxation under s. 77.54 (9a), Stats., the contractor is the consumer of all taxable products used by the contractor in real property construction activities, but the contractor may purchase without tax, for resale, tangible personal property, items and property under s. 77.52 (1) (b) and (c), Stats., and taxable services that are sold by the contractor as part of the lump sum contract with the entity and that are not consumed by the contractor in real property construction activities. subd. pars. a. and b. apply. Examples: 1) A refrigerator and drapes are included in the construction contract to construct build a new house. No separate charge is made for the refrigerator and drapes, but, based which are taxable products. Based on a reasonable allocation, the sales price of the refrigerator and drapes is less than 10 percent of the total contract amount real property construction activities is 90 percent or more of the total amount of the construction contract. Therefore, the cost of the refrigerator and drapes to the construction contractor is the construction contractor's measure subject to sales tax the prime contractor's sale to its customer of the refrigerator and drapes is not subject to tax and the prime contractor shall pay sales or use tax on its purchase of the refrigerator and drapes in addition to the products consumed in the real property construction activities.
2) Landscaping services are included in a construction contract to build a building. Based on a reasonable allocation, the sales price of the landscape services is more than 10 percent of the total contract amount of the real property construction activities is less than 90 percent of the total amount of the construction contract. Since the total sales price of related to the landscaping services, based on a reasonable allocation, real property construction activities is more than 10 less than 90 percent of the contract amount, the construction prime 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.
SECTION 42. Tax 11.68 (7) (b) 3. a. and b. and (Example) are created to read:
Tax 11.68 (7) (b) 3. a. The prime contractor is the consumer of all products used by the prime contractor in real property construction activities, but the prime contractor may purchase without tax, for resale, products that are sold by the prime contractor to the entity as part of the construction contract and that are not consumed by the prime contractor in real property construction activities.
b. A subcontractor of the prime contractor is the consumer of all products used by the subcontractor in real property construction activities, but the subcontractor may purchase without tax, for resale, products that are sold by the subcontractor to the prime contractor or another subcontractor, as part of the subcontractor's construction contract under subd. 2g., for resale to the entity and that are not consumed by the subcontractor in real property construction activities.
Example: A prime contractor has a construction contract to build a home and provide landscaping services. The prime contractor hires a subcontractor to provide the landscaping services. The total sales price of the construction contract that is related to the real property construction activities is 90 percent or more of the total amount of the prime contractor's construction contract. The prime contractor's sale is not taxable. The prime contractor may provide its subcontractor with a fully completed exemption certificate claiming the exemption under s. 77.54 (60), Stats. The landscaping subcontractor should not charge the prime contractor tax on its sale. The landscaping subcontractor is deemed the consumer of the products consumed in the landscaping service and shall pay sales or use tax on its purchases of the products. SECTION 43. Tax 11.68 (9) (a) and (Example 1) are amended to read:
Tax 11.68 (9) (a) Except as provided in s. 77.54 (9m), Stats., The 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. Examples Example: 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, or road, or governmental building, since the property, item, or good becomes a part of realty after installation.
