Articles

Sales Tax Audit Protection Plan
Holly Hoffman
March 2021
Why pay $5,000+ to suffer through a sales tax audit?
Contractor Sales Tax Group Plan: The Ideal Learning Environment for You
Holly Hoffman
December 2020

Do you currently attend annual contractor sales and use tax law training? Do you walk away feeling overwhelmed and unsure how to apply what you learned to your specific tax issues?

The Sales & Income Tax Advisory Network, LLC has rolled out a new approach to helping contractors understand the complexities of Wisconsin sales and use tax compliance and it is built around proven adult learning strategies.

Malcolm Knowles, a pioneer in adult education, popularized the concept of five teaching strategies for adults, which states that students learn best when:

  1. Adults understand why something is important to know or do.
  2. Adults have the freedom to learn in their own way.
  3. Learning is experiential.
  4. The time is right for them to learn.
  5. The education process is positive and encouraging.

The Contractor Sales Tax Group Plan is a monthly training and support program designed specifically for contractors and the many compliance pitfalls they face with their services and with their purchases. Let us look at the Contractor Sales Tax Group Plan to see why it fits perfectly with the five adult learning concepts.

The Contractor Sales Tax Group Plan includes:

  • Initial on-site consultation
  • Monthly small group training
  • Monthly one-on-one virtual meeting
  • Quarterly on-site consultation
  • Email support
  • Audit defense guarantee

 

Specific & Targeted Training

It is not a secret that Wisconsin contractors struggle with sales and use tax compliance. The solution requires an understanding of your specific business practices and targeted training to guide you on how to correct any issues. The initial on-site consultation provides Holly Hoffman an opportunity to get to know your business and understand what your areas of concern are. She will also be able to identify areas of risk that you did not recognize. This addresses #1 and #4 of the learning concepts. You will understand why learning sales and use tax compliance is important to your business, not in a general sense, but specific to areas of concern and risk within your business.

Small Group Learning

Learning in a small group format is helpful for the instructor to tailor the lesson to the needs of the individual audience members. It allows for more interaction and discussion. Small groups allow for sharing of concerns and solutions amongst the businesses in the group. It is helpful for a multitude of reasons including identifying new concerns, finding creative solutions, and knowing that you are not alone in your compliance struggles. Group learning helps you learn in your own way as you can hear from other members how they approach the issue or how they understand the tax law. This small group format addresses learning concepts #2 and #5.

One-On-One Guidance

The one-on-one monthly meeting and email support helps apply the training to issues as they occur in your business. This is the best learning concept for adults and the most effective for contractor sales and use tax compliance. This is experiential learning (concept #3) because you are learning the tax law and applying it within your own business to specific transactions as they occur.

The Contractor Sales Tax Group Plan applies to the business, meaning that any employee of the business can attend training or be involved in the consultations. Sales and use tax affects many areas of a business as tax decisions are made when items are purchased or sold; therefore, you may have multiple employees who may benefit from training topics.

Experienced Support

You are supported throughout the learning process by peers and by Holly Hoffman to create a positive and encouraging education process (concept #5). Holly has firsthand experience at the Wisconsin Department of Revenue (DOR) where she was an auditor, head of the DOR Speaker’s Bureau, created and revised sales tax publications, and provided sales tax rulings to contractors on complex issues. Holly has been working closely with contractors all over Wisconsin on sales and use tax issues for over 10 years.

Audit Defense Guarantee

Holly is so confident in the Contractor Sales Tax Group Plan that she guarantees your audit defense at no additional charge should you receive an audit notice while you are an active Group Plan member. You will benefit from the best training and audit defense with the comfort of knowing you are not in this alone. To qualify for audit defense, you must be a member in good standing at the time of receiving the audit notice and must remain a member for the duration of the audit. Audit defense does not include audit appeals.

Sign up by December 31st

Contractor Sales Tax Group Plan monthly rates vary from $300 to $750 per month, based on number of employees in your business, and no annual contract is required. If you sign up by December 31, 2020, you will receive January through March membership for one low price of $750! Make your New Year’s resolution to get your sales and use tax issues resolved and reduce your stress. Email or call Holly today to register for January!

Holly Hoffman, Owner

Sales & Income Tax Advisory Network, LLC

contractorsalestax.com

hhoffman@salesandincometax.com

715.498.4164

Are You Required to Register for Sales Tax?
Holly Hoffman
September 2020

Knowing when your business is required to be registered for sales and use tax (i.e., Seller’s Permit, Use Tax Permit, or Consumer’s Use Tax Permit) is crucial to ensuring your business is in compliance and to avoid unnecessary interest and penalties. For Wisconsin businesses, three things to know about sales and use tax registration requirements are:

  1. Types of permits
  2. Taxable sales and services
  3. Physical presence and economic nexus

Types of Permits

Before we get into whether or not your business is required to be registered, you must first understand the types of permits. There are three basic types of permits:

  1. Seller’s Permit (Retailer, Wholesaler)
  2. Use Tax Permit (Out-of-State Seller, Vendor’s Use Tax, Seller’s Use Tax)
  3. Consumer’s Use Tax Permit (Non-retailer but owes use tax)

A seller’s permit is required to be held by a business that has taxable sales. It is the most common type of permit. A business that is registered, or is required to be registered, for a Seller’s Permit is required to collect and remit all applicable local sales and use taxes on its sales and purchases. In Wisconsin, the requirement applies to ALL taxable sales by the business whether those sales are in the regular course of business or not.

For example, a vacuum retailer is required to be registered to collect sales on all vacuums, supplies, and parts. Because the vacuum retailer holds a Seller’s Permit, it is also required to collect sales tax on its sales to employees and on its sales of used vehicles or office equipment owned by the business.

A Use Tax Permit (otherwise known as Vendor’s Use Tax or Seller’s Use Tax Permit) is required to be held by an out-of-state seller who makes taxable sales into another state. It is called a Use Tax Permit because the seller is required to collect the use tax on behalf of its customer and remit it to the state.

The third type of permit is called the Consumer’s Use Tax Permit. A seller may not have taxable sales, but has a regular use tax liability. In other words, the seller provides nontaxable sales or services but stores, uses, and/or consumes taxable items upon which a Wisconsin sales tax has not been previously paid. Instead of registering for a Seller’s Permit, which creates a requirement for the business to collect tax on all taxable sales including infrequent or sporadic sales of equipment or vehicles that are not sold in the regular course of business, the business can register for a Consumer’s Use Tax Permit. Then the business can submit regular sales and use tax returns to report only its use tax liability. It is not uncommon for a wholesaler, manufacturer, or certain contractors to hold a Consumer’s Use Tax Permit.

Taxable Sales and Services

The next step in determining whether you are required to register for a sales tax permit is to determine whether you have taxable sales and/or services. Businesses located in Wisconsin, that provide sales of taxable products and services are required to hold a Wisconsin Seller’s Permit. However, wholesalers, manufacturers and other businesses not making direct retail sales of tangible property or taxable services are not required to obtain a Seller’s Permit.

Wisconsin taxable sales and services include (unless an exemption applies):

  • Tangible personal property is personal property that can be seen, weighted, measured, felt, or touched, or that is in any other manner perceptible to the senses. Tangible personal property is generally not permanently affixed to realty. It also includes electricity, gas, steam and water.
  • Coins and stamps that are sold, licensed, leased, rented or traded as collector’s items, above their face value.
  • Leased tangible personal property affixed to real property, if the lessor has the right to remove the leased property upon breach or termination of the lease agreement.
  • Certain digital goods (e.g., music downloads, ebooks, movies, etc.)
  • Certain tangible personal property installed in a commercial facility if it primarily (more than 50%) serves a business function/process.
  • Certain services are specified as taxable including:
    • Admission and access privileges to amusement, athletic, entertainment, or recreational places or events
    • Access or use of amusement devices
    • Boat docking and storage
    • Cable television services
    • Contracts for future performance of services
    • Landscaping and lawn maintenance services
    • Laundry and dry cleaning services
    • Parking services for motor vehicles and aircraft
    • Photography and videography services
    • Producing, fabricating, and printing
    • Repair and service of tangible personal property
    • Rooms or lodging for less than one month
    • Telecommunications message services
    • Telecommunications services, including prepaid calling services, and ancillary services
    • Towing and hauling of motor vehicles by a tow truck

Some common characteristics of all types of sales tax to keep in mind are:

  • Everything, even used stuff, is considered taxable unless exempted by law.
  • Everyone is considered taxable unless exempted by law.
  • All receipts related to the sale are taxable unless excluded by law.
  • Only transactions defined by law as occurring within the state are subject to the tax of that state.
  • Services are taxable by exception in all states except states who adopted a gross receipts tax (Delaware, Nevada, Ohio, Texas, and Washington).

Physical Presence or Economic Nexus

It is common for Wisconsin businesses to make sales in other states. To determine whether you are required to collect sales or use tax in other states, you need to identify if you have a physical presence or an economic nexus in each state you make sales in.

The first step is to identify if you have a physical presence in states other than Wisconsin. Physical presence automatically creates nexus and, combined with taxable sales in that state, means that your business is required to be registered and remitting sales and/or use tax. The following are activities or situations that may create a physical presence in another state (list not all-inclusive):

  • Owning property or inventory in that state
  • Employees or agents of your business located in that state
  • Providing services (including by a subcontractor) in that state
  • An affiliate or division of your business has nexus or a physical presence in that state
  • Making sales or taking orders at, or after, a tradeshow as a result of an employee or agent operating a booth in that state
  • An employee, agent, or other representative located in that state taking orders or making sales on behalf of your business
  • Employees, agents, or other representatives providing training or consulting in that state
  • Making deliveries into that state using your company vehicles

If you determine you do not have a physical presence in that other state, you must then look at your sales into that state (i.e., economic nexus). While the standards vary state to state, most states have a small seller exception. Sellers with $100,000 or less in total sales (includes taxable and nontaxable) or less than 200 transactions (invoices) in the previous year may not be required to register for a Use Tax or a Seller’s Use Tax Permit. Kansas is the only state currently that has adopted Wayfair legislation with no small seller exception, so any amount of sales into Kansas requires a business to register and remit sales tax.

Conclusion

This article provides an overview of the types of sales tax permits, taxable sales, and nexus. It is important for a business to understand when they are required to register for a sales tax permit so that they are collecting and remitting tax properly. It is more important than ever to understand your sales tax obligations in other states that you do business in.

For more information about economic nexus as a result of the Wayfair court decision, see the Wisconsin Department of Revenue’s web site regarding “Remote Sellers – Wayfair Decision.” Also check out the Streamlined Sales Tax website for “Remote Seller Guidance by State – Chart.”

Helpful hyperlinks listed above:

https://www.revenue.wi.gov/Pages/Businesses/remote-sellers.aspx

https://www.streamlinedsalestax.org/for-businesses/remote-seller-faqs/remote-seller-state-guidance

 

When Is a Repair Taxable?
Holly Hoffman
March 2020

The repair, service, alteration, fitting, cleaning, painting, coating, towing, inspection, and maintenance of tangible personal property is a taxable service. The sales price (including charges for materials, labor, and any services necessary to complete the sale) of such services are subject to tax.

Exception: Unless, at the time of that repair, service, alteration, fitting, cleaning, painting, coating, towing, inspection, or maintenance, the owner of the property may purchase the property being serviced exempt (sec. 77.52(2)(a)10., Wis. Stats.).

Exceptions

Tangible personal property installed in a commercial facility (any facility that is not residential is a commercial facility) which primarily (more than 50%) serves a business or process function, rather than a building function, retains its character as tangible personal property regardless of the extent that it is affixed to real property.

Although services to real property are not subject to tax, there are certain types of property that are treated as tangible personal property for purposes of repair or other service to that property. Repair and other services to these items are taxable, regardless of the extent that they are attached to or fastened to real property. A complete list of these "deemed items" can be found in Part 3.A of Wisconsin Department of Revenue Publication 207, Sales and Use Tax Information for Contractors.

General Sales & Use Tax Treatment for Contractor Charges
Holly Hoffman
April 2020

Sales of Taxable Products and Services:

  • The contractor charges sales tax on its sales price from the retail sale of taxable products and services unless an exemption applies.
    • The term "sales price" also includes other charges made by a contractor which the contractor separately states on their invoices to its customer, such as:
      • Contractor's cost of property
      • Cost of materials used, labor or service cost, transportation to the contractor
      • Taxes imposed on the contractor (with certain exceptions)
      • Services necessary to complete the sale (e.g., general overhead, consulting, installation, trip charge, fuel surcharge)
      • Delivery charges
    • The contractor may purchase without tax, for resale, the tangible personal property that is physically transferred to its customer.

Contractor Providing Real Property Construction Activities:

  • The contractor's sale of or service to real property is not taxable.
    • The contractor is the consumer of materials used in making a real property improvement and must pay sales or use tax on its purchase of these materials.

For information on distinguishing between real property and personal property activities, see Part 2 and Appendix A in Wisconsin Department of Revenue Publication 207, Sales and Use Tax Information for Contractors.

Should I Pay Tax on Used Equipment Purchased Off of Craig's List, Neighbor, or a Rummage Sale?
Holly Hoffman
June 2020

You may be held liable for Wisconsin sales or use tax on your purchases of tangible personal property (e.g., lawn mower, power saw), unless an exemption applies.

Occasional Sales Exemption

There is an exemption which exempts the seller from the sales tax on their sale of tangible personal property or taxable services if the sales are "occasional sales" (sec. 77.51(9), Wis. Stats.). If the seller is making an exempt occasional sale, the buyer is also exempt from use tax on that purchase. If the seller does not hold, or is not required to hold a Seller's Permit, their sales are occasional sales. A person who makes less than $2,000 in taxable sales per calendar year or who makes rare and sporadic taxable sales may qualify for the occasional sales exemption. The exemption also applies to business assets (other than inventory held for sale) sold by a business after that business has ceased conducting all business activities at that location (sec. 77.51(9)(am), Wis. Stats.).

Purchases from Craig's List may be from individuals making exempt occasional sales or it can be from individuals/businesses that are registered, or are required to be registered, for a seller's permit.  Use caution in these purchases and, like all purchases, be sure to obtain documentation from the transaction regarding who the seller is, their contact information, and details of the purchase.

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