71.25 71.25 Situs of income; allocation and apportionment. For purposes of determining the situs of income under this section:
71.25(1) (1)Beneficiaries. The situs of income derived by any taxpayer as the beneficiary of the estate of a decedent or of a trust estate shall be determined as if such income had been received without the intervention of a fiduciary.
71.25(2) (2)Grantor trusts. The situs of income received by a trustee, which income, under the internal revenue code, is taxable to the grantor of the trust or to any person other than the trust, shall be determined as if such income had been actually received directly by such grantor or such other person, without the intervention of the trust.
71.25(4) (4)Corporations engaged in business wholly within this state. For corporations engaged in business wholly within this state, all income is subject to, or included in the measure of, the Wisconsin income or franchise tax.
71.25(5) (5)Corporations engaged in business both within and without the state.
71.25(5)(a)(a) Apportionable income. Except as provided in sub. (6), corporations engaged in business both within and without this state are subject to apportionment. Apportionable income includes all income or loss of corporations, other than nonapportionable income as specified in par. (b), including, but not limited to, income, gain or loss from the following sources:
71.25(5)(a)1. 1. Sale of inventory.
71.25(5)(a)2. 2. Farms, mines and quarries.
71.25(5)(a)3. 3. Sale of scrap and by-products.
71.25(5)(a)4. 4. Commissions.
71.25(5)(a)5. 5. Sale of real property or tangible personal property used in the production of business income.
71.25(5)(a)6. 6. Royalties from intangible assets.
71.25(5)(a)7. 7. Redemption of securities.
71.25(5)(a)8. 8. Interest on trade accounts and trade notes receivable.
71.25(5)(a)9. 9. Interest and dividends if the operations of the payer are unitary with those of the payee, or if those operations are not unitary but the investment activity from which that income is derived is an integral part of a unitary business and the payer and payee are neither affiliates nor related as parent company and subsidiary. In this subdivision, "investment activity" includes decision making relating to the purchase and sale of stocks and other securities, investing surplus funds and the management and record keeping associated with corporate investments, not including activities of a broker or other agent in maintaining an investment portfolio.
71.25(5)(a)10. 10. Sale of intangible assets if the operations of the company in which the investment was made were unitary with those of the investing company, or if those operations were not unitary but the investment activity from which that gain or loss was derived is an integral part of a unitary business and the companies were neither affiliates nor related as parent company and subsidiary. In this subdivision, "investment activity" has the meaning given under subd. 9.
71.25(5)(a)11. 11. Management fees.
71.25(5)(a)12. 12. Franchise fees.
71.25(5)(a)13. 13. Treble damages.
71.25(5)(a)14. 14. A partner's share of income or loss from a partnership or a member's share of income or loss from a limited liability company.
71.25(5)(a)16. 16. Foreign exchange gain or loss.
71.25(5)(a)17. 17. Sale of receivables.
71.25(5)(a)18. 18. Rentals of, or royalties from, real property or tangible personal property if that real property or tangible personal property is used in the business.
71.25(5)(a)19. 19. Sale or exchange of petroleum at the wellhead.
71.25(5)(a)20. 20. Personal services performed by employes of the corporation.
71.25(5)(a)21. 21. Patents, copyrights, trademarks, trade names, plans, specifications, blueprints, processes, techniques, formulas, designs, layouts, patterns, drawings, manuals and technical know-how.
71.25(5)(a)22. 22. Redemption of the corporation's bonds.
71.25(5)(a)23. 23. Interest on state and federal tax refunds on business income or business property.
71.25(5)(a)24. 24. Pari-mutuel wager winnings or purses under ch. 562.
71.25(5)(b) (b) Nonapportionable income.
71.25(5)(b)1.1. Income, gain or loss from the sale of nonbusiness real property or nonbusiness tangible personal property, rental of nonbusiness real property or nonbusiness tangible personal property and royalties from nonbusiness real property or nonbusiness tangible personal property are nonapportionable and shall be allocated to the situs of the property.
71.25(5)(b)2. 2. All income, gain or loss from intangible property that is earned by a personal holding company, as defined in section 542 of the internal revenue code, as amended to December 31, 1974, shall be allocated to the residence of the taxpayer.
71.25(6) (6)Allocation and separate accounting and apportionment formula. Corporations engaged in business within and without the state shall be taxed only on such income as is derived from business transacted and property located within the state. The amount of such income attributable to Wisconsin may be determined by an allocation and separate accounting thereof, when the business of such corporation within the state is not an integral part of a unitary business, but the department of revenue may permit an allocation and separate accounting in any case in which it is satisfied that the use of such method will properly reflect the income taxable by this state. In all cases in which allocation and separate accounting is not permissible, the determination shall be made in the following manner: for all businesses except financial organizations, public utilities, railroads, sleeping car companies, car line companies and corporations or associations that are subject to a tax on unrelated business income under s. 71.26 (1) (a) there shall first be deducted from the total net income of the taxpayer the part thereof (less related expenses, if any) that follows the situs of the property or the residence of the recipient. The remaining net income shall be apportioned to Wisconsin by use of an apportionment fraction composed of a sales factor under sub. (9) representing 50% of the fraction, a property factor under sub. (7) representing 25% of the fraction and a payroll factor under sub. (8) representing 25% of the fraction.
71.25(7) (7)Property factor. For purposes of sub. (5):
71.25(7)(a) (a) The property factor is a fraction, the numerator of which is the average value of the taxpayer's real and tangible personal property owned or rented and used in this state during the tax period and the denominator of which is the average value of all the taxpayer's real and tangible personal property owned or rented and used during the tax period. Cash on hand or in the bank, shares of stock, notes, bonds, accounts receivable, or other evidence of indebtedness, special privileges, franchises, goodwill, or property the income of which is not taxable or is separately allocated, shall not be considered tangible property nor included in the apportionment.
71.25(7)(b) (b) Property used in the production of nonapportionable income or losses shall be excluded from the numerator and denominator of the property factor. Property used in the production of both apportionable and nonapportionable income or losses shall be partially excluded from the numerator and denominator of the property factor so as to exclude, as near as possible, the portion of such property producing the nonapportionable income or loss.
71.25(7)(c) (c) Property owned by the taxpayer is valued at its original cost. Property rented by the taxpayer is valued at 8 times the net annual rental. Net annual rental is the annual rental paid by the taxpayer less any annual rental received by the taxpayer from sub-rentals.
71.25(7)(d) (d) The average value of property shall be determined by averaging the values at the beginning and ending of the tax period but the secretary of revenue may require the averaging of monthly values during the tax period if reasonably required to reflect properly the average value of the taxpayer's property.
71.25(8) (8)Payroll factor. For purposes of sub. (5):
71.25(8)(a) (a) The payroll factor is a fraction, the numerator of which is the total amount paid in this state during the tax period by the taxpayer for compensation, and the denominator of which is the total compensation paid everywhere during the tax period.
71.25(8)(b) (b) Compensation is paid in this state if:
71.25(8)(b)1. 1. The individual's service is performed entirely within this state;
71.25(8)(b)2. 2. The individual's service is performed within and without this state, but the service performed without this state is incidental to the individual's service within this state;
71.25(8)(b)3. 3. A portion of the service is performed within this state and the base of operations of the individual is in this state;
71.25(8)(b)4. 4. A portion of the service is performed within this state and, if there is no base of operations, the place from which the individual's service is directed or controlled is in this state;
71.25(8)(b)5. 5. A portion of the service is performed within this state and neither the base of operations of the individual nor the place from which the service is directed or controlled is in any state in which some part of the service is performed, but the individual's residence is in this state; or
71.25(8)(b)6. 6. The individual is neither a resident of nor performs services in this state but is directed or controlled from an office in this state and returns to this state periodically for business purposes and the state in which the individual resides does not have jurisdiction to impose income or franchise taxes on the employer.
71.25(8)(c) (c) Compensation related to the operation, maintenance, protection or supervision of property used in the production of both apportionable and nonapportionable income or losses shall be partially excluded from the numerator and denominator of the payroll factor so as to exclude, as near as possible, the portion of pay related to the operation, maintenance, protection and supervision of property used in the production of nonapportionable income.
71.25(8)(d) (d) In this subsection, compensation includes deductible management or service fees paid to a related corporation as consideration for the performance of personal services, and the situs of those fees is in this state if the services fulfill one of the requirements under par. (b). The recipient of the fees may not include the compensation paid to its employes with respect to personal services in either the numerator or denominator of its payroll factor. Except for management or service fees, payments made to a related corporation, an independent contractor or any person not properly classifiable as an employe are excluded. In this paragraph, "related corporation" means a corporation which is part of a controlled group as defined in section 267 (f) (1) of the internal revenue code.
71.25(8)(e) (e) If the company has no employes and pays no management or service fees or the department determines that employes are not a substantial income-producing factor and that the management or service fees paid are insubstantial, the department may order or permit the elimination of the payroll factor.
71.25(9) (9)Sales factor. For purposes of sub. (5):
71.25(9)(a) (a) The sales factor is a fraction, the numerator of which is the total sales of the taxpayer in this state during the tax period, and the denominator of which is the total sales of the taxpayer everywhere during the tax period. For sales of tangible personal property, the numerator of the sales factor is the sales of the taxpayer during the tax period under par. (b) 1. and 2. plus 50% of the sales of the taxpayer during the tax period under pars. (b) 2m. and 3. and (c).
71.25(9)(b) (b) Sales of tangible personal property are in this state if any of the following occur:
71.25(9)(b)1. 1. The property is delivered or shipped to a purchaser, other than the federal government, within this state regardless of the f.o.b. point or other conditions of the sale.
71.25(9)(b)2. 2. The property is shipped from an office, store, warehouse, factory or other place of storage in this state and delivered to the federal government within this state regardless of the f.o.b. point or other conditions of sale.
71.25(9)(b)2m. 2m. The property is shipped from an office, store, warehouse, factory or other place of storage in this state and delivered to the federal government outside this state and the taxpayer is not within the jurisdiction, for income or franchise tax purposes, of the destination state.
71.25(9)(b)3. 3. The property is shipped from an office, store, warehouse, factory or other place of storage in this state to a purchaser other than the federal government and the taxpayer is not within the jurisdiction, for income or franchise tax purposes, of the destination state.
71.25(9)(c) (c) Sales of tangible personal property by an office in this state to a purchaser in another state and not shipped or delivered from this state are in this state if the taxpayer is not within the jurisdiction for income tax purposes of either the state from which the property is delivered or shipped or of the destination state.
71.25(9)(d) (d) Sales, other than sales of tangible personal property, are in this state if the income-producing activity is performed in this state. If the income-producing activity is performed both in and outside this state the sales shall be divided between those states having jurisdiction to tax such business in proportion to the direct costs of performance incurred in each such state in rendering this service. Services performed in states which do not have jurisdiction to tax the business shall be deemed to have been performed in the state to which compensation is allocated by sub. (8).
71.25(9)(e) (e) Sales defined. In this subsection, "sales" includes, but is not limited to, the following items related to the production of business income:
71.25(9)(e)1. 1. Gross receipts from the sale of inventory.
71.25(9)(e)2. 2. Gross receipts from the operation of farms, mines and quarries.
71.25(9)(e)3. 3. Gross receipts from the sale of scrap or by-products.
71.25(9)(e)4. 4. Gross commissions.
71.25(9)(e)5. 5. Gross receipts from personal and other services.
71.25(9)(e)6. 6. Gross rents from real property or tangible personal property.
71.25(9)(e)7. 7. Interest on trade accounts and trade notes receivable.
71.25(9)(e)8. 8. A partner's share of the partnership's gross receipts or a member's share of the limited liability company's gross receipts.
71.25(9)(e)9. 9. Gross management fees.
71.25(9)(e)10. 10. Gross royalties from income-producing activities.
71.25(9)(e)11. 11. Gross franchise fees from income-producing activities.
71.25(9)(f) (f) Items that are not sales. The following items are among those that are not included in "sales" in this subsection:
71.25(9)(f)1. 1. Gross receipts and gain or loss from the sale of tangible business assets, except those under par. (e) 1., 2. and 3.
71.25(9)(f)2. 2. Gross receipts and gain or loss from the sale of nonbusiness real or tangible personal property.
71.25(9)(f)3. 3. Gross rents and rental income or loss from real property or tangible personal property if that real property or tangible personal property is not used in the production of business income.
71.25(9)(f)4. 4. Royalties from nonbusiness real property or nonbusiness tangible personal property.
71.25(9)(f)5. 5. Proceeds and gain or loss from the redemption of securities.
71.25(9)(f)6. 6. Interest, except interest under par. (e) 7., and dividends.
71.25(9)(f)7. 7. Gross receipts and gain or loss from the sale of intangible assets, except those under par. (e) 1.
71.25(9)(f)8. 8. Dividends deductible by corporations in determining net income.
71.25(9)(f)9. 9. Gross receipts and gain or loss from the sale of securities.
71.25(9)(f)10. 10. Proceeds and gain or loss from the sale of receivables.
71.25(9)(f)11. 11. Refunds, rebates and recoveries of amounts previously expended or deducted.
71.25(9)(f)12. 12. Other items not includable in apportionable income.
71.25(9)(f)13. 13. Foreign exchange gain or loss.
71.25(9)(f)14. 14. Royalties and income from passive investments in the property under sub. (5) (a) 21.
71.25(9)(f)16. 16. Pari-mutuel wager winnings or purses under ch. 562.
71.25(10) (10)Railroads, financial organizations and public utilities.
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This is an archival version of the Wis. Stats. database for 1995. See Are the Statutes on this Website Official?