Wisconsin – Budget Bill Creates and Amends Several Exemptions

SALT Report 2674 – On June 30, 2013, Wisconsin’s Governor signed into law the State’s 2013-2015 budget Bill.  The Bill includes new sales and use tax exemptions for contractors and printers and amends the exemption available for manufacturing, biotechnology, and qualified research.

Exemption for Contractors

A sales and use tax exemption has been created for taxable products and services sold by a contractor as part of a lump sum contract if the total sales price of all taxable products is less than 10% of the total amount of the lump-sum contract.

The Bill provides that the contractor is considered the consumer of all taxable products and must pay the sales and use tax on these products.  However, if the lump sum contract is entered into with an entity that is exempt from tax, the contractor is still considered the consumer of the taxable product, but, the contractor may purchase the following items for resale:  tangible personal property, items and property, and taxable services.  These items must be resold by the contractor as part of the lump sum contract with the tax-exempt entity and cannot be consumed by the contractor in real property construction.

A lump sum contract is defined as a “contract to perform real property construction and to provide tangible personal property, other taxable items, or taxable services and for which the contractor quotes the charge for labor, services of subcontractors, tangible personal property, and other taxable items and services as one price.”

Exemption for Printers

Effective July 1, 2013, the printing or imprinting services for advertising or promotional direct mail is exempt from sales and use tax.  The exemption is available to those primarily engaged in commercial printing, not including screen printing or book printing, without publishing, except for gray goods; printing or printing and binding of books or pamphlets without publishing the books or pamphlets; and prepress or post-press services in support of printing activities.

The exemption for printers applies to sales and use of:

  • Computers and servers that are used to store copies of the product that are sent to a printing press, and
  • Tangible personal property purchased from out-of-state sellers that are temporarily stored, remain idle, and are not used in Wisconsin for more than 180 days and that will be delivered and used outside Wisconsin

Exemption for Manufacturing, Biotechnology, and Qualified Research

The exemption available to manufacturing and biotechnology businesses for machinery, equipment, and other property used in qualified research has been amended to reflect that the exemption now applies to those engaged in manufacturing or biotechnology in the State and to certain combined group members conducting qualified research.

The exemption applies to purchases of machinery and equipment, including attachments, parts, and accessories, and items sold to qualified businesses and that are consumed or destroyed or lose their identities while being used exclusively and directly in qualified research.

The Bill states that qualified research in the State must meet the definition provided in §41(d)(1) of the Internal Revenue Code.  However, the State’s definition also includes qualified research that is funded by a member of a combined group for another member of a combined group. The combined group member who is conducting the qualified research must be doing so on behalf of a combined group member that is engaged in manufacturing or biotechnology.

Lastly, all qualified manufacturers must conduct their manufacturing in a building that is assessed as manufacturing property.

For Further Information

Wisconsin Department of Revenue – Act 20, Assembly Bill 40, Laws 2013