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Do You Owe Wisconsin Sales or Use Tax on Online Purchases?

BY Kevin Wood, CPA
04/06/2015 - 10:50am
With the increased popularity of online shopping, it is common for companies doing business online that are located outside of Wisconsin, to not charge Wisconsin sales tax on customer purchases. What does this mean for you? Do you think you got lucky that the company forgot to charge you sales tax and ignore it? Or do you find it odd that you were not charged and wonder what you should do next? 
 

If you are not charged Wisconsin sales tax on purchases you’ve made online, you are still required to pay the sales tax to the state of Wisconsin on that purchase.  This is called use tax. Use tax is similar to sales tax and is imposed on purchases of any property, items, goods, or taxable services, purchased from a retailer, if:
The property, item, good or service is stored, used, or consumed in Wisconsin by the purchaser in a taxable manner; and,
No Wisconsin Sales Tax was paid by the purchaser to the retailer of the property, item, good or service.  
 
So now that you realize that you may owe use tax, where do you pay the tax and how much is it? Use tax is calculated at the same rate as sales tax, based on the zip code where you resided when you made the online purchase.  You can look up the sales and tax rate by zip code at http://www.zip2tax.com/Website/pagesTaxRates/z2t_lookup.asp
 
Individuals can pay use tax in one of two ways: 
 
1. Include the unpaid sales tax as a line item on your Wisconsin individual income tax return (Form 1, line 34  - Sales and use tax on Internet, mail order, or other out-of-state purchases).
 
2. Pay use tax quarterly by filing Wisconsin Form UT-5. 
 
Businesses can pay the use tax either on their sales and use tax return (Form ST-12) or on a quarterly Wisconsin Form UT-5, Consumer Use Tax Return. 
 
Wisconsin allows a credit, for sales tax properly paid in another state, against use tax due.  If you properly paid sales tax in another state, the sales tax may be used to offset the Wisconsin used tax due.
 
If you decided to ignore the fact that you were not charged sales tax, you may be subject to interest and penalties. Starting with the Wisconsin 2011 Individual Income tax returns, individuals have to disclose the amount of unpaid sales or use tax or certify that no sales or use tax was due for a current tax year. Claiming that you did not see the line item is not a valid defense for not paying the use tax. 
 
The Wisconsin Department of Revenue has a spreadsheet to help keep track of purchases made during the year for which no sales tax was charged, but are subject to use tax and can be accessed at www.revenue.wi.gov/forms/sales/su-102.xls This is a great organizational tool that you may find helpful. Again, you will only need to use this to keep track of items you purchased online for which you were not charged sales tax. 
 
For more information on use tax visit, Use Tax Commonly Asked Questions - Wisconsin Department of Revenue or give us a call, we’d be happy to assist you.