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 37. 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 38. Tax 11.68 (7) (title) is amended to read:
Tax 11.68 (7) Property provided under a construction contract which remains personal property and construction contract exemption.
SECTION 39. Tax 11.68 (7) (a) is amended to read:
Tax 11.68 (7) (a) Property which remains personal property. Contractors shall obtain a seller's permit and report for taxation the sales price received from the sale and installation of tangible personal property and items and goods under s. 77.52 (1) (b) and (d), Stats., furnished under a construction contract, which retains its character as personal property after installation, such as:
SECTION 40. Tax 11.68 (7) (b) is repealed and recreated to read:
(b) Construction Contract Exemption.
1. In this paragraph:
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. c. "Products" as defined in s. 77.51 (11d), Stats., includes property, goods, and services. 2. The sales price of products sold by a prime contractor as a part of a construction contract is not taxable if more than 90 percent 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. 6., the prime contractor is the consumer of the products and shall pay tax on its purchase of the taxable products.
3. 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 the subcontractor's construction contract is not taxable if either of the following apply:
a. The total sales price related to the subcontractor's real property construction activities is more than 90 percent of the total amount of the construction contract.
b. The subcontractor received a fully completed exemption certificate from the prime contractor, or another subcontractor, claiming that the products are sold by the prime contractor or the other subcontractor as part of a construction contract that is exempt under s. 77.54 (60), Stats. 4. a. A subcontractor is liable for tax on its purchases of materials it uses in real property construction activities.
b. Except as provided in subd. 6, a subcontractor is liable for tax on its purchase of taxable products sold as part of a construction contract in which subd. 3. a. or 3. b. applies.
5. 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 prime contractor is liable for tax on its purchases of materials it uses in real property construction activities. The liability for tax on products not used in real property construction activities depends, in part, on whether the prime contractor gives an exemption certificate for its purchases, as follows: a. If the prime contractor does not give the subcontractor an exemption certificate or gives 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 taxable products purchased from the subcontractor. b. If the prime contractor does not give the subcontractor an exemption certificate or gives 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 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 its purchase price of the materials sold as products 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. 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 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. e. If the subcontractor does not receive an exemption certificate from the prime contractor, the subcontractor is not liable for tax on its purchase price of materials sold as products to the prime contractor. The subcontractor's sale of taxable products and services to the prime contractor is taxable.
Examples: 1) A refrigerator and drapes are included in the construction contract to build a new house. No separate charge is made for the refrigerator and drapes, which are taxable products. Based on a reasonable allocation, the sales price of the real property construction activities is more than 90 percent of the total amount of the construction contract. Therefore, the prime contractor's sale to its customer of the refrigerator and drapes is not subject to tax. 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 for the construction of the building is 80 percent of the total amount of the construction contract. Since the total sales price to construct the building is not more than 90 percent of the total amount of the construction contract, the prime contractor is required to make an allocation between the taxable landscaping services and the other nontaxable charges included in the contract. The prime contractor is required to charge Wisconsin sales tax on the sales price of the landscaping services.
3) Landscaping services are included in a construction contract to build a building. Based on a reasonable allocation, the sales price for the construction of the building is 95 percent of the total amount of the construction contract. Since the total sales price to construct the building is more than 90 percent of the total amount of the construction contract, the prime contractor's sale is not taxable. The prime contractor is the consumer of the products and shall pay sales or use tax on its purchases of taxable products, including landscaping materials.
4) Same facts as Example 3, except the prime contractor hires a subcontractor to provide the landscaping services and to install a retaining wall. 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 subcontractor is performing real property construction activities when installing the retaining wall and providing products when performing landscaping services. The landscaping subcontractor should not charge the prime contractor tax on its sale. The landscaping subcontractor is the consumer of the products consumed in the landscaping service and retaining wall installation as part of its construction contract with the prime contractor and shall pay sales or use tax on its purchases of taxable products, including landscaping materials. 5) Same facts as Example 4, except the prime contractor does not provide the subcontractor with an exemption certificate claiming the exemption under s. 77.54 (60), Stats. The subcontractor's sales price of the real property construction activities of the construction contract is 80 percent of the subcontractor's total contract price so the construction contract exemption does not apply to the subcontractor's contract with the prime contractor. The landscaping subcontractor is the consumer of and shall pay sales or use tax on its purchases of taxable products used in the retaining wall installation. The subcontractor is a retailer and shall charge sales tax to the prime contractor on the taxable landscaping services that make up 20 percent of the construction contract. 6) A subcontractor enters into a construction contract with a prime contractor to install a parking lot and provide landscaping. The prime contractor's contract with its customer does not meet the construction contract exemption criteria. The subcontractor is performing real property construction activities when installing the parking lot and providing products when performing landscaping services. The subcontractor's sales price of the real property construction activities of the construction contract with the prime contractor is more than 90 percent of the subcontractor's total contract price so the construction contract exemption applies to the subcontractor's contract with the prime contractor. The subcontractor does not charge the prime contractor sales tax. The subcontractor shall pay sales or use tax on its purchases of taxable products, including landscaping materials.
6. If the construction contract is entered into with an entity that is exempt from taxation under s. 77.54 (9a), Stats., the following apply: 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. 3., for resale to the entity and that are not consumed by the subcontractor in real property construction activities.
SECTION 41. 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. SECTION 42. Tax 11.68 (9) (a) (Example 2) is repealed.
SECTION 43. Tax 11.68 (13) (Note 1) and (Note 2) are amended to read:
Tax 11.68 (13) Note: Section Tax 11.68 interprets ss. 77.51 (2), (12m) (b) 7., (12t), (14) (intro.), (15a) (b) 1. and 4., (15b) (b) 7., 77.52 (2) (a) 10., 11., and 20. and (2m), 77.53 (1), 77.54 (5) (d), (6) (am) 1., 4., and 5., (9m), (26), (26m), (31), (41), (60), and (62m), and (65), 77.71 (3), and 77.77 (3), Stats. Note: The interpretations in s. Tax 11.68 are effective under the general sales and use tax law on and after September 1, 1969, except: (a) Vault doors were not considered personal property until August 1, 1975; (b) Service station equipment such as underground tanks, gasoline pumps and hoists installed in or securely attached to their owner's land was real property, but the property was personal property if the personal property and land were owned by different persons prior to August 1, 1975; (c) Advertising signs were real property if erected on and securely attached to the owner's land prior to August 1, 1975; (d) Landscaping services became taxable effective May 1, 1982, pursuant to Chapter 317, Laws of 1981; (e) The exemption for waste reduction and recycling machinery and equipment became effective July 1, 1984, pursuant to 1983 Wis. Act 426; (f) The exemption for mobile units used for mixing and processing became effective July 20, 1985, pursuant to 1985 Wis. Act 29; (g) The credit for local sales taxes paid to other states became effective April 1, 1986, pursuant to 1987 Wis. Act 27; (h) The exemption for safety attachments for manufacturing machines became effective June 1, 1986, pursuant to 1985 Wis. Act 149; (i) The exemption of 35% of the selling price of new mobile homes and 100% of the selling price of used mobile homes became effective January 1, 1987, pursuant to 1985 Wis. Act 29; (j) The exemption for property used in constructing professional sports and home entertainment stadiums became effective October 1, 1991, pursuant to 1991 Wis. Act 37; (k) The 35% reduction in gross receipts for new mobile homes transported in 2 unattached sections became effective October 1, 1991, pursuant to 1991 Wis. Act 39; (L) Tangible personal property purchased outside Wisconsin, stored in Wisconsin and subsequently used outside Wisconsin became taxable October 1, 1991, pursuant to 1991 Wis. Act 39; (m) Raw materials purchased outside Wisconsin, manufactured, fabricated or otherwise altered by the contractor outside Wisconsin and used in real property construction by the contractor in Wisconsin became subject to use tax effective August 12, 1993, pursuant to 1993 Wis. Act 16; (n) In Tom Kuehne Landscape Contractor, Inc. vs. Wisconsin Department of Revenue, Wisconsin Court of Appeals, District IV, No. 86-1813, October 29, 1987 (CCH 202-919), highway signs, sign bridges, delineator posts and guardrails were found to remain tangible personal property after installation; (o) The stadium tax on building materials became effective January 1, 1996, pursuant to 1995 Wis. Act 56; (p) The change to the definition of "real property construction activities" to include only those activities that take place at a site where tangible personal property is affixed to real property became effective for sales of property pursuant to contracts entered into on or after December 1, 1997, pursuant to 1997 Wis. Act 27; (q) The clarification of the tax treatment of the original installation or complete replacement of certain deemed items became effective on October 1, 2001, pursuant to 2001 Wis. Act 16; (r) The changes in the use of the terms mobile homes and manufactured homes became effective January 1, 2008, pursuant to 2007 Wis. Act 11; (s) 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; (t) The exemption for modular homes and manufactured homes used in real property construction activities outside Wisconsin became effective September 1, 2011 pursuant to 2011 Wis. Act 32; and (u) The exemption for lump sum contracts first applied to contracts entered into on or after October 1, 2013, pursuant to 2013 Wis. Act 20; (v) The exemption for building materials acquired solely for holding structures used in a fertilizer blending, feed milling, or grain drying operation became effective April 19, 2014, pursuant to 2013 Wis. Act 324; (w) The exemption for building materials, supplies, and equipment used in the construction or development of sports and entertainment arena facilities became effective August 14, 2015, pursuant to 2015 Wis. Act 20; and (x) The exemption for building materials that become a part of a facility owned by a local government or exempt nonprofit organization first applies to contracts entered into January 1, 2016, pursuant to 2015 Wis. Act 126; (y) The exemption for products used in constructing or developing a facility in the electronics and information technology manufacturing zone became effective September 20, 2017, pursuant to 2017 Wis. Act 58; (z) The exemption for building materials that become a part of a facility owned by certain title holding companies described in s. 501 (c) (2) of the Internal Revenue Code became effective for contracts entered into on or after September 1, 2017, pursuant to 2017 Wis. Act 231, and to technical colleges and the UW System, and state veterans organization for contracts entered into on or after July 1, 2018, pursuant to 2017 Wis. Acts 59 and 190, respectively; and (za) The exemption for lump sum contracts was amended to apply to time and materials construction contracts and to subcontractors for construction contracts entered into or extended, modified, or renewed on or after December 1, 2017. SECTION 44. Tax 11.83 (4) (c) is amended to read:
Tax 11.83 (4) (c) A motor vehicle, trailer, semi-trailer, all-terrain vehicle, off-highway motorcycle, or recreational vehicle as defined in s. 340.01 (48r), Stats., purchased outside Wisconsin by a nonresident of Wisconsin 90 days or more before bringing the unit into Wisconsin, in connection with a change of residence to Wisconsin by the individual, is not subject to the Wisconsin use tax. SECTION 45. Tax 11.86 (5) (d) is created to read:
Tax 11.86 (5) (d) 1. The sales price received for a 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 46. Tax 11.86 (6) (Note 1) and (Note 2) are amended to read:
Note: The interpretations in s. Tax 11.86 are effective on and after September 1, 1969, except: (a) Underground utility facilities were determined not to be tangible personal property, effective September 1, 1970; (b) Landscaping services described in sub. (6) became taxable effective May 1, 1982, pursuant to Chapter 317, Laws of 1981; (c) The Wisconsin Tax Appeals Commission decision in Capital City Tree Experts, Inc., dated June 19, 1987, later modified by stipulation and order of the Circuit Court of Dane County dated September 21, 1987, held that the service of trimming trees on a utility right-of-way to prevent interference and to make inaccessible to children is not a taxable landscaping service; and (d) 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 (e) The exemption for services performed during a disaster period became effective January 1, 2017, pursuant to 2017 Wis. Act 290. SECTION 47. Tax 11.87 (3) (h) is created to read:
Tax 11.87 (3) (h) Prepared food manufactured by the retailer. Sales of prepared food that is manufactured at one location and sold by the same retailer at a different location, are exempt if all of the following apply:
1. The prepared food is not candy, a soft drink, or a dietary supplement.
2. The prepared food is manufactured by the retailer at a building assessed as manufacturing property under s. 70.995, Stats., or that would be assessed as manufacturing property under s. 70.995, Stats., if the building was located in Wisconsin. 3. The retailer does not make any retail sales of prepared food at the building described in subd 2.
4. Either of the following apply:
a. The prepared food is sold by the retailer in a frozen state without eating utensils (i.e., plates, bowls, knives, forks, spoons, glasses, cups, napkins, straws).
b. The prepared food consists of more than 50% yogurt.
SECTION 48. Tax 11.87 (4) (Note 2) is amended to read:
Tax 11.87 (4) Note: The interpretations in s. Tax 11.87 are effective under the general sales and use tax law on and after September 1, 1969, except: (a) Sales of meals by retirement homes became exempt April 25, 1978, pursuant to Chapter 250, Laws of 1977; (b) Sales of meals by certain health care facilities off their premises became taxable October 1, 1991, pursuant to 1991 Wis. Act 39; (c) Sales of meals by community-based residential facilities on their premises became exempt June 1, 1994, pursuant to 1993 Wis. Act. 332; (d) The exemption for certain meals, food, food products and beverages furnished by institutions of higher education was revised to apply only if the items are furnished to an undergraduate student, a graduate student or a student enrolled in a professional school if the student is enrolled for credit at that institution and if the items are consumed by that student, or the items are furnished to a national football league team, effective for contracts or agreements entered into on or after October 14, 1997, pursuant to 1997 Wis. Act 27, and further revised to include certain meals, food, food products or beverages paid for to an institution of higher education through the use of an account of the institution, if the items are furnished by the institution, effective December 31, 1997, pursuant to 1997 Wis. Act 41; (e) Sales of certain food combinations became exempt effective August 1, 1997, pursuant to 1997 Wis. Act 237; (f) The exemption for food and food ingredients was revised to exempt all food and food ingredients except candy, dietary supplements, prepared food and soft drinks effective October 1, 2009, pursuant to 2009 Wis. Act 2; and (g) 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 (h) The exemption for prepared food manufactured and sold by the same retailer under s. 77.54 (20n) (d), Stats., became effective September 23, 2017, pursuant to 2017 Wis. Act 59. SECTION 49. Tax 11.92 (1) (b) is amended to read:
Tax 11.92 (1) (b) The basis for all deductions claimed in filing returns, including exemption certificates obtained from customers. Exempt sales to governmental units and public schools need not be supported by exemption certificates, if the supplier retains a copy of the exempt entity's purchase order and the supplier's invoice or billing document. Sales to organizations holding a certificate of exempt status, CES, including religious or charitable organizations and certain title holding companies described under section 501 (c) (2), can be shown to be documented as exempt by recording the CES number on the seller's copy of the bill of sale. Except as provided in this paragraph and ss. 77.52 (13) and 77.53 (10), Stats., exempt sales shall be supported by an exemption certificate retained by the seller and paper certificates shall also be signed by the purchaser. Documents necessary to support claimed exemptions from tax liability, such as bills of lading and purchase orders, shall be maintained in a manner in which they readily can be related to the transaction for which exemption is sought. SECTION 50. Tax 11.92 (1) (bg) is created to read:
Tax 11.92 (1) (bg) Sales to state veterans organizations, as defined in s. 45.41 (1) (b), Stats., are exempt, except for property and services used primarily in preparing, storing, serving, selling, or delivering food and beverages, including products and services for cleaning machinery and equipment used for the food and beverages that are sold by the veterans organization. The state veterans organization shall provide a Wisconsin sales and use tax exemption certificate, Form S-211 or S-211E, to claim an exemption on their purchases. SECTION 51. Tax 11.92 (7) (b) (Note 1) is amended to read:
SECTION 52. Tax 11.985 (3) (b) and (Note1) are amended to read:
Tax 11.985 (3) (b) If the transaction includes food and food ingredients as defined in s. 77.51 (3t), Stats., drugs as defined in s. 77.51 (3pj), Stats., durable medical equipment as defined in s. 77.51 (3pm), Stats., mobility-enhancing equipment as defined in s. 77.51 (7m), Stats., prosthetic devices as defined in s. 77.51 (11m), Stats., or medical supplies, the sales price received from sales of taxable products sold in what would be a bundled transaction, except that the sales price of the taxable products in the transaction are 50 percent or less of the seller's total sales price of all of the products in the transaction or the seller's total purchase price of the taxable products in the transaction are 50 percent or less of the seller's total purchase price of all of the products in the transaction. This paragraph does not apply if one or more of the products in the transaction is a service. Note: Section Tax 11.985 interprets ss. 77.51 (1f), (3pf), and (9p) and, 77.52 (1), (2), (20), (21), (22), and (23), and 77.54 (51) and (52), Stats. SECTION 53. Effective date. This rule shall take effect on the first day of the month following publication in the Wisconsin Administrative Register as provided in s. 227.22 (2) (intro.), Stats. DEPARTMENT OF REVENUE
