Tax 11.20 Note
(2) Company B is engaged in manufacturing in Wisconsin at a building assessed under s.
70.995, Stats. Company B purchases a machine that it will use directly in conducting qualified research at its manufacturing plant in Wisconsin. More than 5% of Company B's total use of this machine will be for conducting research and development projects that do not meet the definition of qualified research. Company B's purchase of the machine is taxable because it is not used exclusively in qualified research.
Tax 11.20 Note
(3) Company C is engaged in manufacturing in Wisconsin at a building assessed under s.
70.995, Stats. Company C develops a new product in an activity that is qualified research. Company C purchases a variety of raw materials. Some of these materials are used exclusively and directly and destroyed in qualified research. Once the qualified research is completed, Company C consumes the remaining raw materials in activities that are not qualified research. Company C's purchases of the raw materials that it uses exclusively and directly and destroys in qualified research are exempt under par. (a) 2. Company C's purchases of the raw materials that it uses in activities that are not qualified research do not qualify for exemption under par. (a).
Tax 11.20 Note
(4) Manufacturer P is engaged in manufacturing in Wisconsin at a building assessed under s.
70.995, Stats. Manufacturer P contracts with Company D to produce a prototype that is tangible personal property. Manufacturer P's primary objective in this transaction is to obtain the prototype, rather than a research and development service. Company D may purchase the materials used to construct the prototype without tax for resale. Manufacturer P will use the prototype exclusively and directly in one of its research and development activities that constitutes qualified research and may claim the exemption under par. (a) on its purchase of the prototype.
Tax 11.20 Note
(5) Manufacturer F is engaged in manufacturing in Wisconsin at a building assessed under s.
70.995, Stats. Manufacturer F contracts with Company E to perform research services. Manufacturer F and Company E are not members of the same combined group. Company E will provide a prototype that is tangible personal property to Manufacturer F along with these services. Manufacturer F's primary objective in this transaction is to obtain the research and development services. Company E's primary activity in Wisconsin is the provision of professional engineering services that do not involve biotechnology, and Company E is not a manufacturer. Company E may not claim the exemptions under par. (a), since Company E is neither engaged in manufacturing in Wisconsin at a building assessed under s.
70.995, Stats., nor engaged primarily in biotechnology in Wisconsin. In addition, Company E cannot purchase the materials without tax for resale that it uses to construct the prototype, because Company E uses the prototype in performing its research services. The prototype is transferred to Manufacturer F incidental to the research services.
Tax 11.20(2)(e)1.1. A business claiming an exemption under par.
(a) shall maintain records to substantiate that at least 95% of the property or item's total use is direct use in qualified research, including records to establish all of the following:
Tax 11.20(2)(e)1.c.
c. The activity or activities in which the property or item is used constitute qualified research.
Tax 11.20(2)(e)2.
2. If contemporaneous with the research activity or activities performed, documents that may, as required under subd.
1. c., establish an activity or activities that constitute qualified research include the following:
Tax 11.20(2)(e)2.a.
a. Materials explaining the research activities conducted, including brochures, pamphlets, press releases, and other similar documents.
Tax 11.20(2)(e)2.b.
b. Submissions to management, the board of directors, review committees, or other similar groups regarding the research projects, activities, and the expenditures.
Tax 11.20(2)(e)2.c.
c. Documents prepared by, or on behalf of, internal audit, including quarterly and annual reports that refer in any manner to the research activities.
Tax 11.20(2)(e)2.d.
d. Minutes, notes, or other similar recordings from budget, board of director, managerial or other similar meetings concerning the research activities.
Tax 11.20(2)(e)2.e.
e. Project authorizations, budgets, or work orders that initiate a research project.
Tax 11.20(2)(e)2.f.
f. Position and department descriptions of employees identified as providing qualified research.
Tax 11.20(2)(e)2.j.
j. Prototype and process testing reports, field and lab verification data/summary data.
Tax 11.20(2)(e)2.k.
k. Papers, treaties, or other published documents regarding the taxpayer's research.
Tax 11.20(2)(e)2.L.
L. Complete copies of contracts, including all modifications, letter agreements, memoranda of understanding, or similar documents for research performed by, or on behalf of, a third party.
Tax 11.20 Note
Example: This example illustrates records that are generally acceptable as adequate to document the exemptions under par. (a).
Tax 11.20 Note
Company A is engaged in manufacturing in Wisconsin at a building assessed under s.
70.995, Stats. Company A attempts to make a new and improved widget. Upon approval of a project, Company A documents the scope and goals of the project, the uncertainties that exist in accomplishing these goals, and the processes by which Company A hopes to eliminate the uncertainties. In addition, contemporaneously with conducting the research project, Company A documents: (1) the location or locations at which the research is conducted, (2) the machinery and equipment used in the project and the manner used, (3) the various materials and supplies used in attempting to produce the improved widget, the purpose and manner in which such items were used, (4) the processes applied, (5) the results achieved throughout the research process, and (6) the point at which Company A either abandons the research project or achieves the goal of eliminating the uncertainties involved with the development of the new widget. Company A purchased various machinery and equipment, and supplies and materials used in conjunction with development of the new widget without tax claiming the purchases are exempt under par. (a). In general, contemporaneous records kept in the manner and detail described will be accepted and used by the department in making its determinations regarding whether the taxpayer is entitled to claim the exemptions under par. (a).
Tax 11.20(2)(e)3.
3. A business claiming an exemption under par.
(a) shall provide records described in subd.
2. or any other information as required by the department to verify that activities are qualified research or that machinery, equipment, or other property or items are used exclusively and directly in qualified research.
Tax 11.20(3)
(3)
Exemptions for raising animals used in qualified research or manufacturing. Tax 11.20(3)(a)
(a) Sales of the following property and items to a person who is engaged in the business of raising animals are exempt if all of the animals raised by the seller of the animals are sold primarily to biotechnology businesses, public or private institutions of higher education, and governmental units for exclusive and direct use by those entities in qualified research or manufacturing:
Tax 11.20(3)(a)1.
1. Machines and specific processing equipment, including accessories, attachments, and parts for the machines or equipment, that are used exclusively and directly in raising such animals.
Tax 11.20(3)(a)2.
2. Seeds for planting, plants, feed, fertilizer, soil conditioners, animal bedding, sprays, pesticides and fungicides, breeding and other livestock, bees, beehives and bee combs, poultry, farm work stock, baling twine and baling wire, containers for fruits, vegetables, grain, hay, silage and animal wastes, plastic bags, plastic sleeves and plastic sheeting used to store or cover hay or silage, drugs, semen for artificial insemination, fuel, and electricity, that are used exclusively and directly in raising such animals.
Tax 11.20 Note
Examples: (1) Company A raises various animals that it sells for use in qualified research. Company A sells more than 50% of the animals it raises to biotechnology businesses for exclusive and direct use in qualified research. All of the feed Company A purchases for exclusive and direct use in raising its animals is exempt.
Tax 11.20 Note
(2) Company T raises various animals that it sells for use in qualified research. Company T uses cages to raise some of these animals. Company T's purchases of cages are exempt only if more than 50% of all the animals raised by Company T are sold to biotechnology businesses, public or private institutions of higher education, and governmental units for exclusive and direct use by those organizations in qualified research or manufacturing.
Tax 11.20(3)(b)
(b) For purposes of determining whether an activity is qualified research under par.
(a), the regulations under Treas. Reg. section 1.41-4 apply, except that qualified research that is funded by a member of a combined group for another member of a combined group shall remain qualified research for purposes of this subsection.
Tax 11.20(3)(c)1.1. Except as provided in subd.
2. and sub.
(4) (am), a person claiming an exemption under par.
(a) shall obtain a “Purchaser's Statement to Seller for Animals Used in Qualified Research or Manufacturing," Form S-209, from each of its customers described in par.
(a) (intro.) and keep the completed forms as a part of its records to document the number of animals that were raised by the seller and sold to biotechnology businesses, public or private institutions of higher education, and governmental units for exclusive and direct use in qualified research or manufacturing. When completing Form S-209, the purchaser of the animals is attesting to the number of animals purchased and the number of animals used exclusively and directly in qualified research or manufacturing.
Tax 11.20(3)(c)2.
2. A person is not required to obtain Form S-209 from its customers that are public or private institutions of higher learning and governmental units. For purposes of the exemption in par.
(a), animals sold to such customers are deemed to be sold to such customers for exclusive and direct use in qualified research.
Tax 11.20 Note
Note: Form S-209 is available on the department's web site at
www.revenue.wi.gov.
Tax 11.20(4)
(4)
Certification of biotechnology businesses by the department. Tax 11.20(4)(a)(a) Except as provided in par.
(am), in order to be considered a biotechnology business for purposes of the exemptions under sub.
(3), a business shall first obtain certification from the department as prescribed in this subsection.
Tax 11.20(4)(am)
(am) In lieu of Form S-209, a seller may accept a fully completed exemption certificate, Form S-211 or S-211E from a purchaser that is a biotechnology business indicating the percentage of the animals purchased from the seller that are for exclusive and direct use in qualified research or manufacturing. The seller of the animals may regard such animals claimed as exempt for exclusive and direct use in qualified research or manufacturing, subject to a request by the department that the seller obtain certifications described in par.
(a) from the purchasers to verify the exemption. If the department determines that all of the animals raised by the seller are not sold primarily to biotechnology businesses, the department may invalidate the exemption and make an adjustment to reflect the correct tax.
Tax 11.20 Note
Example: Company A raises and sells animals exclusively to purchasers that are biotechnology businesses. Based on the Forms S-209 and the fully completed exemption certificates received by Company A, 60% of all the animals it sells are sold to biotechnology businesses for exclusive and direct use in qualified research or manufacturing. Company A is audited by the department. The department requests that certain purchasers of animals be certified by the department as biotechnology businesses for years relating to the audit. Some of these purchasers are not certified as biotechnology businesses by the department. As a result, only 45% of Company A's sales of animals are considered to be sold to biotechnology businesses for exclusive and direct use in qualified research or manufacturing. Since Company A does not sell more than 50% of the animals to biotechnology businesses, Company A does not qualify for the exemption under sub. (3) (a).
Tax 11.20(4)(b)
(b) A business seeking certification or renewal of a certification under this subsection shall apply with the department in the manner prescribed by the department. The department may require any business submitting an application under this paragraph to provide additional information, as determined by the department, prior to the department granting or denying the applicant's request for certification or renewal of a certification.
Tax 11.20 Note
Note: Information concerning the certification process is available on the department's web site at
www.revenue.wi.gov.
Tax 11.20 Note
Example: Additional information that may be requested by the department in processing an application includes documentation of the nature of the business' income and expenses.
Tax 11.20(4)(c)
(c) A business shall be certified by the department as a biotechnology business for the period described in par.
(d) if, during that period, the business' activities are primarily biotechnology.
Tax 11.20(4)(d)
(d) The certification period under par.
(c) shall correspond to the business' tax year as determined for federal income tax purposes, including short years, subject to the following conditions:
Tax 11.20(4)(d)1.
1. If a business is certified by the department with respect to a previous tax year, the certification is valid only for the previous tax year.
Tax 11.20(4)(d)2.
2. If a business is certified for a current tax year, the certification is valid until the expected end of the tax year unless, during such tax year the business' tax year terminates earlier than expected. When a tax year terminates earlier than expected, the certification is valid until the actual end of the tax year as determined for federal income tax purposes.
Tax 11.20(4)(e)
(e) Notwithstanding any other provision in this subsection, the department may:
Tax 11.20(4)(e)1.
1. Revoke any certification granted under this subsection, but only upon information that either the business' application for certification contained a misstatement as to the business' gross income or expenses and deductions or the business no longer qualifies as a biotechnology business.
Tax 11.20(4)(e)2.
2. Require any business seeking certification to be certified only with respect to its previous tax years.
Tax 11.20 Note
Note: The interpretations in s.
Tax 11.20 are effective beginning January 1, 2012, pursuant to
2009 Wis. Act 28, except for the following amendments effective July 2, 2013, pursuant to
2013 Wis. Act 20: (a) “Qualified research" was amended to include research funded by one member of a combined group for another member of a combined group; (b) The exemption for property used in qualified research by persons engaged primarily in manufacturing in Wisconsin was amended to apply to property used in qualified research by a person engaged in manufacturing in Wisconsin at a building assessed under s.
70.995, Stats.; (c) The exemption for property used in qualified research was amended to include use by one member of a combined group who is conducting qualified research for another combined group member who is either engaged in manufacturing in Wisconsin at a building assessed under s.
70.995, Stats., or is primarily engaged in biotechnology; and (d) The change of the term “medicines" to “drugs."
Tax 11.20 History
History: CR 12-015: cr.
Register July 2012 No. 679, eff. 8-1-12;
CR 14-006: cr. (1) (cg), (cr), am. (1) (h), r. and recr. (2) (a), am. (2) (b), (Example 2), (Example 3), (c), (d) (Example 1) to (Example 5), (e) 2. L. (Example), (3) (a) 2., (b)
Register August 2014 No. 704, eff. 9-1-14; correction in (2) (d) (Examples) (1) made under s.
13.92 (4) (b) 7., Stats.,
Register August 2014 No. 704;
CR 19-113: renum. (3) (c) to (3) (c) 1. and am., cr. (3) (c) 2., am. (4) (a), cr. (4) (am), (Example)
Register April 2020 No. 772, eff. 5-1-20;
CR 20-027: am. (3) (a) 2.
Register July 2021 No. 787, eff. 8-1-21.
Tax 11.26
Tax 11.26
Other taxes, fees, and charges in taxable sales price and purchase price. Tax 11.26(1)(a)(a) Tangible personal property and items, property, and goods under s.
77.52 (1) (b),
(c), and
(d), Stats., sold at retail are subjected to many direct and indirect taxes, fees, and charges prior to reaching a retailer. The taxes, fees, and charges are commonly included in the price the retailer pays for the property and are not separately identifiable as taxes, fees, and charges. Occasionally, however, a tax, fee, or charge is either separately passed on to a retailer or is imposed at the retail level of activity, but is different from and in addition to the sales tax. The tax, fee, or charge may be imposed by Wisconsin, the federal government, or a municipality.
Tax 11.26(1)(b)
(b) In determining the sales price or purchase price used to compute Wisconsin sales or use taxes, the treatment of a tax, fee, or charge for sales tax purposes is identical to the treatment that applies for use tax purposes. The same taxes, fees, and charges that are included or excluded from the sales price are also included or excluded from the purchase price.
Tax 11.26(2)
(2)
Taxes, fees, and charges included as part of sales price and purchase price. The following taxes, fees, and charges are included in the sales price and the purchase price, regardless of whether they are separately stated on the invoice, bill of sale, or other similar document given by the seller to the purchaser, except as provided in sub.
(3):
Tax 11.26(2)(c)
(c) Any federal stamp tax and manufacturer's or importer's excise tax not imposed directly on the purchaser. Federal excise taxes include excise taxes on alcohol, tobacco, motor and aviation fuel except motor fuel taxes refunded, tires, firearms and ammunition, sporting goods, and air or ship transportation.
Tax 11.26(2)(d)
(d) A federal, county, or municipal fuel tax included in the price of alternate fuels and general aviation fuel subject to sales tax.
Tax 11.26 Note
Example: Fuel taxes are included in the price of fuel used in aircraft, boats, and for other nonhighway use. The taxes are included in the sales price.
Tax 11.26(2)(f)
(f) The Canadian or any other country's export gallonage tax on fuels.
Tax 11.26(2)(h)
(h) The federal gas guzzler tax imposed under s. 4064 of the Internal Revenue Code.
Tax 11.26(2)(j)
(j) The federal medical device excise tax imposed under s. 4191 of the Internal Revenue Code.
Tax 11.26(3)
(3)
Taxes, fees, and charges excluded from sales price or purchase price. Section
77.51 (12m) (b) 3. and
(15b) (b) 3., Stats., exclude from the sales price and purchase price any taxes legally imposed directly on the purchaser that are separately stated on the invoice, bill of sale, or similar document that the seller gives to the purchaser. Section
77.51 (12m) (b) 3m. and
(15b) (b) 3m., Stats., exclude from the sales price and purchase price taxes imposed on the seller that are separately stated on the invoice, bill of sale, or similar document that the seller gives to the purchaser if the law imposing or authorizing the tax provides that the seller may, but is not required to, pass on to and collect the tax from the user or consumer. Therefore, the following taxes, fees, and charges are excluded from the sales price or the purchase price if they are separately stated on the invoice, bill of sale, or similar document given to the purchaser:
Tax 11.26(3)(a)
(a) The federal communications tax imposed upon telegraph service and telephone service.
Tax 11.26(3)(ac)
(ac) The room taxes imposed under s.
66.0615, Stats., which municipalities or local exposition districts impose on persons furnishing lodging to transients.
Tax 11.26(3)(aL)
(aL) The local exposition district food and beverage and rental car taxes imposed under ss.
77.98 and
77.99, Stats.
Tax 11.26(3)(ax)
(ax) The federal luxury tax imposed under ss. 4001 to 4007 of the Internal Revenue Code.
Tax 11.26(3)(c)
(c) Federal and Wisconsin motor vehicle excise taxes refunded.
