Wisconsin Legislature: Tax 11.68(4)(h)

Note: Refer to subs. (5) and (7) for the classification of property.

2. Labor or services furnished in installing tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., which retain their character as personal property after installation.

Note: Refer to subs. (5) and (7) for the classification of property.

3. Labor and material furnished in the repair, service, alteration, fitting, cleaning, painting, coating, towing, inspection, and maintenance of items of real property which retain their character as tangible personal property for repair purposes.

Note: Refer to sub. (11) for a description of real property which retains its character as tangible personal property for repair purposes.

4. Tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., sold.

(c) Contractors are consumers of tangible personal property and items and goods under s. 77.52 (1) (b) and (d), Stats., they use when engaged in real property construction activities, such as altering, repairing, or improving real property.

(3) Real property construction contractors.

(a) Generally, real property construction contractors are persons who perform real property construction activities and include persons engaged in activities such as building, electrical work, plumbing, heating, painting, steel work, ventilating, paper hanging, sheet metal work, bridge or road construction, well drilling, excavating, wrecking, house moving, landscaping, roofing, carpentry, masonry and cement work, plastering, and tile and terrazzo work.

(b) A retailer may also be a real property contractor, such as a department store which sells and installs tangible personal property and items or goods under s. 77.52 (1) (b) or (d), Stats., which becomes a part of real property after installation.

Example: A water heater or water softener sold and installed in a purchaser’s residence by a retailer becomes real property after installation. The retailer is considered to be a real property contractor.

(4) Purchases by contractors.

(a) Materials used in real property. Under s. 77.51 (2), Stats., contractors who perform real property construction activities are the consumers of building materials which they use in altering, repairing, or improving real property. Therefore, suppliers’ sales of building materials to contractors who incorporate the materials into real property in performing construction activities are subject to the tax. This includes raw materials purchased outside Wisconsin that are used by a contractor in manufacturing tangible personal property or items under s. 77.52 (1) (b), Stats., outside Wisconsin, or that are fabricated or altered outside Wisconsin by a contractor so as to become different or distinct items of tangible personal property or items under s. 77.52 (1) (b), Stats., from the constituent raw materials, and are subsequently stored, used, or consumed in Wisconsin by that contractor.

Note: Prior to August 12, 1993, raw materials purchased outside Wisconsin that were used by a contractor in manufacturing tangible personal property outside Wisconsin or that were fabricated or altered outside Wisconsin by a contractor so as to become different or distinct items of tangible personal property from the constituent raw materials, and were subsequently stored, used, or consumed in Wisconsin by that contractor were not subject to tax pursuant to the Circuit Court of Dane County decision in Morton Buildings, Inc. vs. Wisconsin Department of Revenue (2/10/92).

(b) Materials sold as personal property.

1. Tangible personal property and property, items, and goods under s. 77.52 (1) (b), (c), and (d), Stats., which a construction contractor will resell as personal property may be purchased without tax for resale. This includes personal property furnished as part of a real property construction activity when the personal property retains its character as personal property after installation. This also includes personal property furnished as part of a real property construction activity when provided as part of a taxable landscaping service.

Note: Refer to subs. (5) and (7) for the classification of property.

2. Taxable services which a construction contractor will resell may be purchased without tax for resale.

(c) Machinery and tools purchased by contractors. Machinery and equipment, including road building equipment, tunnel shields, construction machines, and cement mixers, tools, including power saws and hand tools, and supplies, including machine lubricating and fuel oils, form lumber, and industrial gases, purchased by a construction contractor for the contractor’s use are generally either consumed in the process of construction or are removed when the project is completed. The contractor is the consumer of the personal property and shall pay the tax on its purchases of the property. However, an exemption is provided in s. 77.54 (5) (d), Stats., for mobile cement mixers used for mixing and processing and the motor vehicle or trailer on which a mobile mixing unit is mounted, including accessories, attachments, parts, supplies, and materials for the vehicles, trailers, and units.

(d) Waste treatment facilities. Under s. 77.54 (26), Stats., contractors may purchase without sales or use tax tangible personal property and items and property under s. 77.52 (1) (b) and (c), Stats., which become a component part of an industrial waste treatment facility that would be exempt under s. 70.11 (21), Stats., if the property were taxable under ch. 70, Stats., or a municipal waste treatment facility, even though they are the consumers of the property and items.

Note: Refer to s. Tax 11.11 regarding industrial and municipal waste treatment facilities.

(e) Waste reduction and recycling. Under s. 77.54 (26m), Stats., contractors may purchase without sales or use tax waste reduction and recycling machinery and equipment, including parts, which are exclusively and directly used for waste reduction and recycling activities which reduce the amount of solid waste generated, reuse, recycle, or compost solid waste, or recover energy from solid waste, even though they are the consumers of the property.

Examples: 1) Equipment used in a foundry to clean sand so that the sand can be reused qualifies for exemption.

2) Equipment used to remove impurities from lubricating oil used in manufacturing machines so that the oil can continue to be used by the manufacturer qualifies for exemption.

3) Equipment used to produce fuel cubes qualifies for exemption. This equipment shreds waste paper and cardboard, removes foreign objects, blends the materials with a binding agent, adds moisture if necessary and then compresses the materials into fuel cubes which are burned by homeowners or others to replace wood.

4) A roto-mill machine that mines old pavement and grinds up the mined materials to be reused in construction activities qualifies for exemption.

5) Large steel waste collection containers, including dumpsters, which may be picked up and dumped into waste collection trucks or hauled away on flatbed trucks, or which may mechanically compact the waste in the container do not qualify for exemption.

(f) Sports and entertainment home stadiums. Under s. 77.54 (41), Stats., contractors, subcontractors, or builders may purchase without sales or use tax building materials, supplies, and equipment acquired solely for or used solely in the construction, renovation, or development of property that would be exempt under s. 70.11 (36), Stats. Section 70.11 (36), Stats., exempts property consisting of or contained in a sports and entertainment home stadium, including but not limited to parking lots, garages, restaurants, parks, concession facilities, transportation facilities, and functionally related or auxiliary facilities and structures; including those facilities and structures while they are being built; constructed by, leased to, or primarily used by a professional athletic team that is a member of a league that includes teams that have home stadiums in other states, and the land on which that stadium and those structures and facilities are located.

(g) Modular and manufactured homes used outside Wisconsin. Under s. 77.54 (5) (am), Stats., contractors and subcontractors may purchase without sales and use tax modular homes, as defined in s. 101.71 (6), Stats., and manufactured homes as defined in s. 101.91 (2), Stats., that are used in real property construction activities outside Wisconsin.

(h) Fertilizer blending, feed milling, and grain drying operations. Under s. 77.54 (6) (bn), Stats., contractors and subcontractors may purchase without sales and use tax the items described in s. 77.54 (6) (am) 4. and 5., Stats., and used by the contractor or subcontractor in real property construction activities which satisfy the conditions described in s. 77.54 (6) (am) 4. and 5. and (bn), Stats., regarding a fertilizer blending, feed milling, or grain drying operation.

(i) Building materials for facilities owned by local governmental units and certain nonprofit organizations.

1. Under s. 77.54 (9m), Stats., contractors may purchase without sales or use tax building materials that the contractor, in fulfillment of a real property construction activity, transfers to a qualifying exempt entity if the materials become part of a facility in Wisconsin that is owned by the entity.

2. The following provisions apply to the exemption under s. 77.54 (9m), Stats.:

a. “Qualifying exempt entity” means an entity described in s. 77.54 (9a) (b), (c), (d), (em), and (f), and (fc), and (9g), Stats., a technical college district, the Board of Regents of the University of Wisconsin System, an institution, as defined in s. 36.05 (9), Stats., a college campus, as defined in s. 36.05 (6m), Stats., or the University of Wisconsin-Extension.

b. “Facility” means any building, shelter, parking lot, parking garage, athletic field, athletic park, storm sewer, water supply system, or sewerage and waste water treatment facility. “Facility” does not include highways, streets, roads, sidewalks or paths, regardless of whether located within a facility.

Examples: 1) Materials that become a component part of the road, curb, gutters, or sidewalk are not part of a facility, such as black top, cement, and road base materials.

2) Materials that become a component part of a storm sewer facility and the materials necessary to stabilize those items are part of the storm sewer facility, such as piping, fittings, gravel and other fill necessary to bury the storm sewer piping to protect it from the road. Any road base material used to bring the road to elevation, and the road surface itself, is not part of a facility.

3) Pipes, pipe liner material, manhole structures, manhole covers, manhole liners, and manhole coatings become a component part of the storm sewer facility.

c. A Wisconsin organization described under s. 77.54 (9a) (f), Stats., shall hold a Wisconsin Certificate of Exempt Status number. A non-Wisconsin organization described under s. 77.54 (9a) (f), Stats., and a state veterans organization described in s. 77.54 (9g), Stats., are not required to hold a Wisconsin Certificate of Exempt Status number.

d. A contractor’s purchase of building materials transferred to a county, city, village or town, a state governmental unit, or a federal governmental unit outside Wisconsin are not exempt.

e. A contractor’s purchase of building materials transferred to a person other than a qualifying entity is exempt if the person does not use the facility for any purpose other than to transfer it to the qualifying entity.

Example: Building materials for the construction of a parking ramp that will be owned and operated by a developer prior to transfer to a municipality, does not qualify for the exemption.

f. A subcontractor’s purchase of building materials is exempt if the materials are transferred to a qualifying entity and, upon completion of the facility, the materials become a part of the facility in Wisconsin that is owned by the qualifying entity, pursuant to a contract between a general contractor and the qualifying entity, and the general contractor does not use the facility for any purpose other than to transfer it to the entity.

g. The exemption applies to contracts entered into on or after January 1, 2016. The exemption does not apply to purchases of building materials after January 1, 2016, for a contract that was entered into prior to January 1, 2016, even if the change order relating to those materials was executed after January 1, 2016.

Note: The effective date is different for contracts with certain exempt qualifying entities. Contracts with certain title holding companies became effective September 1, 2017. Contracts with technical colleges, the UW System, and state veterans organization became effective July 1, 2018.

(j) Electronics and information technology manufacturing zone facilities. Under s. 77.54 (65), Stats., owners, lessees, contractors, subcontractors, or builders may purchase without sales or use tax building materials, supplies, equipment, and landscaping services if both of the following apply:

1. The property or landscaping service is acquired solely for or used solely in, the construction or development of a facility located in an electronics and information technology manufacturing zone designated under s. 238.396 (1m), Stats.

2. The capital expenditures for the construction or development of the facility may be claimed as a credit under s. 71.07 (3wm) (bm) or 71.28 (3wm) (bm), Stats., as certified by the Wisconsin Economic Development Corporation.

(5) Classification of property after installation.

(a) Contractors shall determine whether a particular contract or transaction results in an improvement to real property or in the sale and installation of personal property. In determining whether personal property becomes a part of real property, the following criteria shall be considered:

1. Actual physical annexation to the real property.

2. Application or adaptation to the use or purpose to which the real property is devoted.

3. An intention on the part of the person making the annexation to make a permanent accession to the real property.

Note: See Dept. of Revenue vs. A. O. Smith Harvestore Products, Inc.(1976), 72 Wis. 2d 60, regarding determining whether personal property becomes a part of real property.

(b) Certain types of property that have a variety of functions may be personal property in some instances and additions to real property in others, including boilers, furnaces, stand-by generators, pumps, substations, and transformers. When this property is installed primarily to provide service to a building or structure and is essential to the use of the building or structure, it is a real property improvement. However, when similar property is installed in a manufacturing plant to perform a processing function, it may, as machinery, retain its status as personal property.

(6) Personal property which becomes a part of realty. A construction contractor is the consumer of tangible personal property and items and goods under s. 77.52 (1) (b) and (d), Stats., such as building materials, which is incorporated into or becomes a part of real property, and sales of this personal property to a contractor are subject to the tax. Personal property which becomes a part of real property includes the following:

(a) Boilers and furnaces for space heating.

(b) Built-in household items such as kitchen cabinets, dishwashers, fans, garbage disposals, central vacuum systems, and incinerators.

(bm) Casework, tables, counters, cabinets, lockers, sinks, athletic and gymnasium equipment attached to the structure in apartment buildings, convalescent homes, or other residential buildings.

(d) Personal property that is used to construct buildings, and structural and other improvements to buildings, including awnings, canopies, carpeting, foundations for machinery, floors, including computer room floors, partitions and movable walls attached in any way to realty, holding structures used in fertilizer blending, feed milling, or grain drying operations, underground wiring, general wiring and lighting facilities, roofs, stairways, stair lifts, sprinkler systems, storm doors and windows, door controls, air curtains, loading platforms, central air conditioning units, building elevators, sanitation and plumbing systems, and heating, cooling, and ventilation systems.

(e) Fixed or year-around wharves and docks.

(f) Personal property that is used to construct improvements to land. “Improvements to land,” as used in this section, include retaining walls, roads, walks, bridges, fencing, railway switch tracks, ponds, dams, ditches, wells, underground irrigation systems except systems sold to and for use by farmers, drainage, storm, and sanitary sewers, and water supply lines for drinking water, sanitary purposes, and fire protection.

(g) Residential water heaters, water softeners, intercoms, incinerators, and garage door opening equipment, except portable equipment.

(h) Personal property that is used to construct silos and the building portion of grain elevators.

(i) Swimming pools, wholly or partially underground.

(j) Storage tanks constructed on the site.

(k) Street and parking lot lighting.

(L) Truck platform scale foundations.

(m) Walk-in cold storage units becoming a component part of a building.

(7) Property which remains personal property and construction contract exemption.

(a) Property which remains personal property. Contractors shall obtain a seller’s permit and report for taxation the sales price received from the sale and installation of tangible personal property and items and goods under s. 77.52 (1) (b) and (d), Stats., which retains its character as personal property after installation, such as:

1. Furniture, radio and television sets and antennas, washers and dryers, portable lamps, home freezers, portable appliances, and window air conditioning units.

2. Communication equipment, including intercoms, pneumatic tube systems, roof mounted antennas, CATV wiring, and music and sound equipment in business, industrial, or commercial buildings, schools, and hospitals, but not in apartment buildings, convalescent homes, or other residential buildings.

3. Casework, tables, counters, cabinets, lockers, sinks, athletic and gymnasium equipment, and related easily movable property attached to the structure in schools, laboratories, and hospitals, except if attached to the structure in the bathrooms of such facilities.

4. Machinery, including safety attachments, equipment, tools, appliances, process piping and wiring, and grain handling equipment and grain elevator legs used exclusively by manufacturers, industrial processors, and others performing a processing function with the items.

5. Office, bank, and savings and loan association furniture and equipment, including office machines, safe deposit boxes, drive-up and walk-up windows, night depository equipment, remote TV auto teller systems, camera security equipment except when used to monitor for unauthorized entry to a building or room in a building, and vault doors.

6. Personal property used to carry on a trade or business, including fixtures and equipment installed in stores, taverns, night clubs, restaurants, ice arenas, bowling centers, hotels and motels, barber and beauty shops, figure salons, theaters, and gasoline service stations. Underground storage tanks at gasoline service stations are real property.

7. Shades, curtains, drapes, venetian blinds, and associated hardware.

7m. Satellite dish systems installed on residential and commercial buildings, but not satellite dish systems that are installed by permanently affixing the satellite dish to a concrete foundation in apartment buildings, convalescent homes, or other residential buildings.

8. Radio, television, and cable television station equipment, but not broadcasting towers installed on their owner’s land.

9. Except as provided in ss. 77.51 (12m) (b) 7. and (15b) (b) 7. and 77.54 (31), Stats., mobile homes, as defined in s. 101.91 (10), Stats., and manufactured homes, as defined in s. 101.91 (11) and (12), Stats., located in a mobile home park on land owned by a person other than the mobile home or manufactured home owner. Exemptions are provided by s. 77.51 (12m) (b) 7. and (15b) (b) 7., Stats., for 35% of the total amount for which a new manufactured home, as defined in s. 101.91 (11), Stats., is sold. No credit may be allowed for trade-ins and the exemption does not apply to a lease or rental. The exemption provided in s. 77.54 (31), Stats., applies to the sale of, but not the lease or rental of, used mobile homes as defined in s. 101.91 (10), Stats., and used manufactured homes as defined in s. 101.91 (12), Stats.

10. Advertising signs, except their underground concrete foundations. A foundation is underground even though a portion of the foundation extends above the grade.

11. Buildings and standing timber sold for removal.

12. Utility transmission and distribution lines installed above ground on land owned by others as provided in s. Tax 11.86 (1), and oil and gas pipeline pumping station equipment.

13. Commercial and industrial incinerators which do not become an integral part of the building.

14. Seating in auditoriums and theaters, and theater stage lights and projection equipment.

15. Stop and go lights, railroad signs and signals, and street identification signs.

(b) Construction Contract Exemption.