SALT Report 2803 – The Wisconsin Department of Revenue’s August edition of Tax Bulletin discusses the application of sales and use tax to home warranty contracts and newspaper advertising supplements.
Home Warranty Contracts
Under section 77.52(2)(a)10 Wisconsin Statutes, tax is imposed on the repair, service, alteration, fitting, cleaning, painting, coating, towing, inspection, and maintenance of all items of tangible personal property unless at the time of service, the sale of the property to the customer would have been exempt from tax.
In addition, tax applies to the sale of contracts, including service contracts, and maintenance agreements that provide for the future performance of, or payment for, the repair, service, alteration, fitting, cleaning, painting, coating, towing, inspection, or maintenance of tangible personal property. However, if the property were exempt at the time of sale, the sale of a maintenance or warranty contract would also be exempt.
If the contract includes a single charge for the provision of both taxable and nontaxable services, the entire charge would be subject to tax unless it is determined by the Department that another method, such as allocation or primary purpose of the transaction, will more accurately reflect the taxability of the service.
Newspaper Advertising Supplements
Generally, sales of catalogs and their mailing envelopes are exempt if they are designed to advertise and promote the sale of merchandise or to advertise the services of an individual business as provided in, section 77.54(25m) Wisconsin Statutes.
In addition, advertising supplements that are distributed as a component part of a newspaper’s publication are exempt from sales and use tax as a newspaper if:
- The advertising supplement is printed by the newspaper, or
- The advertising supplement is printed by a newspaper or commercial printer and sold to a newspaper for inclusion in that newspaper
In order to meet the requirements of the second example, an advertising supplement must be sold directly to the newspaper. If the newspaper simply bills and pays the printer or another newspaper on behalf of its customer for the advertising supplements, the advertising supplements are not considered to “sold to the newspaper.”
Also, the exemption for advertising and promotional direct mail that was effective July 1, 2013, and the exemption for printed advertising materials for use solely outside Wisconsin do not apply to advertising supplements that are sold for inclusion in a newspaper.
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