Every day businesses and individuals pay sales tax on purchases of products or services without giving it too much thought. The Wisconsin state sales tax rate is set at 5 percent. However, most counties also charge a 0.5 percent county sales tax and several counties charge an additional 0.1 percent stadium tax, effectively making the total tax 5.6 percent. Sales tax is then calculated by multiplying the purchase price of a product or service by the applicable tax rate.
There are many rules and exceptions to be aware of when dealing with sales tax and some industries also have their own set of rules. For instance:
Landscaping – If you are a landscaper, you charge your customers sales tax for your services. However, there are specific rules for different services you offer. You would charge sales tax for services such as planting, weeding and mowing lawns, but if you also plow snow, you would not charge customers sales tax for this service.
The many rules and grey areas can be overwhelming and costly if a mistake is made.
Sales and use tax can be very confusing for businesses and individuals alike. There’s a very good chance that you or your business have purchased a product on-line from another state and therefore weren’t charged Wisconsin sales tax. Unfortunately, many people are not aware that they typically would need to pay Wisconsin sales tax on those items. This is known as use tax. Businesses would remit use tax on their sales and use tax return. Individuals would report the tax due on purchases on their Wisconsin individual income tax return.
As the state is looking to generate additional revenue, sales and use tax Audits by the Wisconsin Department of Revenue are on the rise. A sales tax audit can be time consuming and costly and in some instances the interest and penalties charged by the state can be more than the original taxes due.
As more companies are conducting business in states outside of Wisconsin, you will want to familiarize yourself with the term Nexus. Nexus is a sufficient physical presence used by states to determine whether an out-of-state business selling products or providing services in that state, is liable for collecting the tax on sales in the state. Nexus can be created if your company has employees or property (inventory, offices or warehouses) in another state. Every state varies on what qualifies as a physical presence. If nexus is established, a company may be required to register, collect and remit sales tax and potentially file income tax returns in those states.
If you or somebody you know has questions concerning sales & use taxes or nexus, please call Winter, Kloman, Moter & Repp, S.C. a call. We are happy to help.