Wisconsin – Exemption for Qualified Research

SALT Report 1506 – The Wisconsin Department of Revenue recently updated their publication regarding the sales and use tax exemption for purchases used in qualified research facilities.  The exemption is available to anyone primarily engaged in manufacturing or biotechnology research in Wisconsin.

Taxpayers claiming the exemption must establish that the research being performed meets all four of the following criteria:

  • Expenditures meet the guidelines set forth in IRC sec. 174
  • Research is for the purpose of discovering information which is technological in nature
  • Is intended to be useful in the development of a new or improved business component of the taxpayer; and
  • The activities of which constitutes a process of experimentation relating to a new or improved function, performance, reliability, or quality
To claim the exemption complete Form S-211, Wisconsin Sales and Use Tax Exemption Certificate.  The certificate must be provided to the seller at the time of purchase and can be used to purchase the following items:
  • Tangible personal property, including fuel and electricity, and certain other property consumed or destroyed or losing their identities while being used exclusively and directly in qualified research, and
  • Machinery and specific processing equipment, including attachments, parts, and accessories, used exclusively and directly in qualified research
A business claiming the exemption is required to maintain records that can substantiate that at least 95% of the property or item’s total use is directly used in qualified research. The documents must include the following detail:
  • Project scope (including uncertainty being addressed and alternative methods for resolving uncertainty)
  • Research and testing activities performed
  • Results of the research (including evaluation of tests performed and summary of uncertainty resolved)
  • The activity or activities in which the property or item is used
  • The manner in which the property or item is used in each activity
  • The activity or activities in which the property or item is used constitute qualified research