WHICH GOODS AND SERVICES ARE TAXABLE?
Determining whether or not the products or services your company sells are taxable in Wisconsin is the first step in sales tax compliance.
Traditional Goods or Services
Goods that are subject to sales tax in Wisconsin include physical property, like furniture, home appliances, and motor vehicles.
Prescription medicine, groceries, and gasoline are all tax-exempt.
Some services in Wisconsin are subject to sales tax. For a detailed list of taxable services view this page from the Wisconsin Department of Revenue.
Digital Goods or Services
A digital good or service is anything electronically delivered, such as an album downloaded from iTunes or a film purchased from Amazon.
Wisconsin State requires businesses to collect sales tax on the sale of digital goods or services.
HOW TO REGISTER FOR WISCONSIN SALES TAX
If you determined that you need to charge sales tax on some or all of the goods and services your business sells, your next step is to register for a seller's permit. This allows your business to collect sales tax on behalf of your local and state governments.
In order to register, you will need the following information:
- Reason for your application
- Basic business information
- Your business type (sole proprietorship, corporation, etc.)
- The type of business you run (dry cleaner, limousine, food and beverage, etc.)
- The start date you’ll begin collecting sales tax
- Other business owners
Save Money with a Resale Certificate
With a resale certificate, also known as a reseller's permit, your business does not have to pay sales tax when purchasing goods for resale.
COLLECTING SALES TAX
After getting your seller's permit and launching your business, you will need to determine how much sales tax you need to charge different customers. To avoid fines and the risk of costly audits, it's important for business owners to collect the correct rate of sales tax.
When calculating sales tax, you'll need to consider the following kinds of sales:
- Store Sales
- Shipping In-State
- Out-of-State Sales
For traditional business owners selling goods or services on site, calculating sales tax is easy: all sales are taxed at the rate based on the location of the store.
Here's an example of what this scenario looks like:
Mary owns and manages a bookstore in Appleton, Wisconsin. Since books are taxable in the state of Wisconsin, Mary charges her customers a flat-rate sales tax of 5.00% on all sales. This includes Wisconsin’s sales tax rate of 5.00%
The state of Wisconsin follows what is known as a destination-based sales tax policy. This means that long-distance sales within Wisconsin are taxed according to the address of the buyer. This policy applies to state, county, and city sales taxes.
Consider the following example:
Steve runs his own business selling electronics on eBay out of his home in Appleton, Wisconsin. A customer living in La Crosse finds Steve’s eBay page and purchases a $350 pair of headphones. When calculating the sales tax for this purchase, Steve applies the 5.0% tax rate for Wisconsin State. Thus the total cost of sales tax is $17.50.
Wisconsin businesses only need to pay sales tax on out-of-state sales if they have nexus in other states. Nexus means that the business has a physical presence in another state.
Common types of nexus include:
- A physical location, such as an office, store, or warehouse
- An employee who works remotely or who is a traveling sales representative
- A marketing affiliate
- Drop-shipping from a third party seller.
- A temporary physical location, including festival and fair booths.
FILE YOUR SALES TAX RETURN
Now that you’ve registered for your Wisconsin seller's permit and know how to charge the right amount of sales tax to all of your customers, you are all set to file your sales tax return. Just be sure to keep up with all filing deadlines to avoid penalties and fines.
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How to File
Wisconsin requires businesses to file sales tax returns and submit sales tax payments online.
How Often Should You File?
- Annual filing: If your business collects less than $900.00 in sales tax per month then your business should file returns on an annual basis.
- Quarterly filing: If your business collects between $900.01 and $7200.00 in sales tax per month then your business should file returns on a quarterly basis.
- Monthly filing: If your business collects more than $7200.00 in sales tax per month then your business should file returns on a monthly basis.
Note: Wisconsin requires you to file a sales tax return even if you have no sales tax to report.
Returns must be filed by the last day of the month following the end of the reporting period, with one exception. Early monthly sales tax filers are required to file by the 20th of the month following the end of the reporting period. A return must be filed for each period, even if no tax is due for that period. Below is a list of this year’s filing deadlines:
Annual filing: January 31, 2020
- Q1 (Jan. - Mar.): Due April 30
- Q2 (April - June): Due July 31
- Q3 (July - Sept.): Due October 31
- Q4 (Oct. - Dec.): Due January 31
Monthly filing: The last day of the following month, or the next business day, e.g. April 30 for the month of March, or May 31 for the month of April.
Penalties for Late Filing
Wisconsin charges a $20.00 fine for late filing, plus 5.00% interest per month on the total amount owed up to an additional 25.00%.