Wisconsin Legislature: Tax 11.905(4)(d)2.

(k) “Source document” means a record containing the detail of a transaction entered in a data processing accounting system.

(L) “Statistical sampling” means a sampling method in which the department randomly selects a sample of electronic transactions and uses probability theory to evaluate the sample results.

(m) “Total population” means all of a person’s electronic transactions produced by a computerized data processing accounting system.

(3) Procedures.

(a) The department may, by field audit, determine the tax required to be paid to the state or the refund due to any person on the basis of sampling, whether or not any of the following is true:

1. The person being audited has complete records of transactions.

2. The method is statistical sampling.

3. The person being audited consents.

(b) Any person with less than $10,000,000 annual sales during any year at issue in a field audit may require the department to use statistical sampling in that field audit, if all of the criteria in sub. (4) are met.

(c) Upon the department’s determination of the sample population, a sample is generated of sample units and source documents for those sample units are made available to the department’s auditor.

(d) The department may use more than one sample population to draw sample units for purposes of determining an error rate and tax due or refund. The department may use a separate sample population and sampling method to select sample units in any of the following circumstances:

1. Significant changes in the person’s computerized data processing accounting software.

2. Changes to laws that affect the tax treatment or recordkeeping of a person’s sales or purchases.

Example: A new exemption for certain supplies used by the person occurs in the third year of a four-year audit period. The sample units randomly selected for review occur in the first and second year of the audit period, when the exemption did not apply. If the department finds that no tax was paid on the supplies, a projection of the error for the audit period may result in an over-assessment of tax on the supplies.

3. Changes to the person’s internal procedures for reporting sales and use tax.

4. Changes to the person’s business operations or organizational structure.

Example: The person began selling a new line of products in the audit period.

5. Other relevant circumstances in which the use of more than one sample population or a separate sampling method to select sample units would be reasonably necessary to maintain statistical quality.

(4) Criteria for statistical sampling. All of the following criteria must be met before statistical sampling may be used on a sample population:

(a) All accounting transactions must be maintained in an electronic format and must be capable of secure electronic transfer to the department, in a form useable by the department.

(b) The data processing accounting system must be capable of producing and transferring to the department an electronic spreadsheet of all accounts for each period under audit, including account number, account description, and year-end and pre-closing balances.

1. Customer name.

2. Electronic transaction number that identifies and leads to the source document.

3. Electronic transaction date.

4. Electronic transaction amount.

5. Information necessary to determine where sourced under s. 77.522, Stats.

(d) All electronic purchase transactions must include all of the following:

1. Vendor name.

2. Electronic transaction number that identifies and leads to the source document.

3. Electronic transaction date.

4. Electronic transaction amount.

5. Account number from accounting system or other information that identifies where the purchased item was stored, used or consumed.

(e) Documentation used to prepare each sales and use tax return filed with the department to report sales and use tax paid must be available for review by the department, including transaction detail, reports, and work papers.

(f) All sample unit source documents must be available for review by the department.

(g) There must be at least 10,000 sample units in the sample population.

(5) Maximum sample size.

(a) Except as provided in par. (b), the maximum number of sample units selected for review for each sample population from which a statistical sample is drawn may not exceed 10 percent of the sample population or 15,000 transactions, whichever is less.

(b) Paragraph (a) does not apply if the relative precision of the sample is greater than 20 percent. In determining an acceptable sample size, the department must consult with the person.

Example: If the relative precision of a sample is 20 percent and the net error is $100,000, there is 90% confidence that the true error of the sample population is between $80,000 and $120,000.

Note: Section Tax 11.905 interprets s. 77.59 (2) and (2g), Stats.

History: CR 18-080: cr. Register April 2019 No. 760, eff. 5-1-19; correction in (2) (f), (h) made under s. 35.17, Stats., Register April 2019 No. 760.

Tax 11.91 Successor’s liability.

(1) Description of successor.

(a) A purchaser or assignee of the business or stock of goods, including furniture, fixtures, equipment, and inventory, of any retailer liable for sales or use tax shall be personally liable for the payment of the sales or use tax if the purchaser or assignee fails to withhold a sufficient amount of the purchase price to cover the taxes due.

(b) If a corporation is created and acquires the assets of a sole proprietor in consideration for the corporation’s capital stock, the corporation is liable for any sales or use tax liability of the sole proprietorship.

(c) A surviving joint tenant shall not have successor’s liability for delinquent sales or use tax where the business or inventory passes by law to the remaining joint tenant.

(d) A financial institution or mortgagee who forecloses on a loan to a retailer owing delinquent sales or use tax shall not incur successor’s liability.

(e) If a retail business or stocks of goods shall pass from A to B to C, and B’s successor’s liability shall be unpaid, such liability shall not pass to C. The new successor, C, shall be liable only for B’s unpaid sales and use tax.

(f) Successor’s liability is not incurred in a sale by a trustee in bankruptcy, in a transfer by gift or inheritance, in a sheriff’s sale, or in a sale by a personal representative or special administrator.

(g) If a creditor, including a financial institution, actually operates a business which has been voluntarily surrendered by a delinquent debtor in full or partial liquidation of a debt, the creditor is a successor. The creditor is not a successor if it acquires possession of a business voluntarily surrendered, if it never operates the business and if its sole purpose is to sell the business in its entirety, as a whole or piecemeal, at whatever price it can obtain to recover its investment.

(2) Extent of liability.

(a) If there is no purchase price, there shall be no successor’s liability.

(b) A successor shall be liable to the extent of the purchase price. The purchase price shall include:

1. Consideration paid for tangible property and items, property, and goods, under s. 77.52 (1) (b), (c), and (d), Stats., and for intangibles such as leases, licenses, and good will.

2. Debts assumed by the purchaser, or canceled by a creditor.

(c) A successor shall be liable only for the amount of the tax liability, not for penalties and interest. Although based on the predecessor’s tax, the successor’s liability shall not bear interest.

(d) A successor’s liability shall be limited to amounts owed by the predecessor which were incurred at the location purchased. If the seller operated at more than one location while incurring a total liability for all locations, its liability incurred at the location sold shall be determined and shall represent the amount for which the successor may be held liable.

(e) Successor’s liability is determined by law and shall not be altered by agreements or contracts between a buyer and seller.

(3) Procedures for purchaser.

(a) A purchaser shall withhold a sufficient amount from the purchase price to cover any possible sales or use tax liability.

(b) The purchaser shall submit a written request to the department for a clearance certificate. An oral request for a clearance certificate shall not be accepted. The letter requesting the certificate shall include the real name, business name, and seller’s permit number, if known, of the prior operator. All sales tax returns for all periods during which the predecessor operated shall be filed with the department before it may issue the certificate.

(c) Under s. 77.52 (18) (bm), Stats., the department has 60 days from the date it receives the request for a clearance certificate or from the date the former owner makes its records available, whichever is later, but no later than 90 days after it receives the request, to ascertain the amount of sales tax liability, if any. The department shall within these periods, issue either:

1. A clearance certificate; or

2. A notice of sales tax liability to purchaser and successor in business, which shall state the amount of tax due before a clearance certificate can be issued and which shall be served and handled as a deficiency determination under s. 77.59, Stats.

(d) The department’s failure to mail the notice of liability within the 90 day period shall release the purchaser from any further obligation.

(4) Department’s collection procedures.

(a) The department shall first direct collection against the predecessor.

(b) Action against the successor shall not be commenced prior to an action against a predecessor unless it appears that a delay would jeopardize collection of the amount due.

Note: Section Tax 11.91 interprets s. 77.52 (18), Stats.

Note: The interpretations in s. Tax 11.91 are effective under the general sales and use tax law on and after September 1, 1969, except that the separate impositions of tax on coins and stamps sold above face value under s. 77.52 (1) (b), Stats., certain leased property affixed to real property under s. 77.52 (1) (c), Stats., and digital goods under s. 77.52 (1) (d), Stats., became effective October 1, 2009, pursuant to 2009 Wis. Act 2.

History: Cr. Register, October, 1976, No. 250, eff. 11-1-76; am. (1) (d) and (2) (b) 2., cr. (1) (f) and (g), Register, December, 1978, No. 276, eff. 1-1-79; am. (1) (a), (b) and (g), (2) (a) and (3) (b) and (c) (intro.), Register, June, 1991, No. 426, eff. 7-1-91; correction in (3) (c) (intro.) made under s. 13.93 (2m) (b) 7., Stats., Register July 2002 No. 559; EmR0924: emerg. am. (1) (a), (2) (b) 1. and (3) (b), eff. 10-1-09; CR 09-090: am. (1) (a), (2) (b) 1. and (3) (b) Register May 2010 No. 653, eff. 6-1-10.

Tax 11.92 Records and record keeping.

(1) General. All persons selling, licensing, leasing, or renting tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., or taxable services and every person storing, using, or otherwise consuming in Wisconsin tangible personal property, items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., or taxable services shall keep adequate and complete records so that they may prepare complete and accurate tax returns. These records shall include the normal books of account ordinarily maintained by a prudent business person, together with all supporting information such as beginning and ending inventories, records of purchases and sales, cancelled checks, bills, receipts, invoices which shall contain a posting reference, cash register tapes, credit memoranda which shall carry a reference to the document evidencing the original transaction or other documents of original entry which are the basis for the entries in the books of account, and schedules used in connection with the preparation of tax returns. These records shall show:

(a) The sales price from sales of tangible personal property, items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., and taxable services, or licenses, rentals, or leases of tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., including any services that are a part of the sale, license, lease, or rental sourced to Wisconsin under s. 77.522, Stats., even if the seller, licensor, or lessor regards the receipts as taxable or nontaxable. Taxable receipts shall be reported on the accrual basis, except when the department is satisfied that an undue hardship would exist and authorizes reporting on some other basis.

(b) The basis for all deductions claimed in filing returns, including exemption certificates obtained from customers. Exempt sales to governmental units and public schools need not be supported by exemption certificates, if the supplier retains a copy of the exempt entity’s purchase order and the supplier’s invoice or billing document. Sales to organizations holding a certificate of exempt status, CES, including religious or charitable organizations and certain title holding companies described under section 501 (c) (2), can be documented as exempt by recording the CES number on the seller’s copy of the bill of sale. Except as provided in this paragraph and ss. 77.52 (13) and 77.53 (10), Stats., exempt sales shall be supported by an exemption certificate retained by the seller and paper certificates shall also be signed by the purchaser. Documents necessary to support claimed exemptions from tax liability, such as bills of lading and purchase orders, shall be maintained in a manner in which they readily can be related to the transaction for which exemption is sought.

(bg) Sales to state veterans organizations, as defined in s. 45.41 (1) (b), Stats., are exempt, except for property and services used primarily in preparing, storing, serving, selling, or delivering food and beverages, including products and services for cleaning machinery and equipment used for the food and beverages that are sold by the veterans organization. The state veterans organization shall provide a Wisconsin sales and use tax exemption certificate, Form S-211 or S-211E, to claim an exemption on their purchases.

(c) Total purchase price of all tangible personal property, items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., and taxable services purchased for sale, license, lease, rental, storage, use, or other consumption in Wisconsin.

(d) Every person subject to the county or stadium sales and use tax shall keep a record of sales that the person makes that are sourced under s. 77.522, Stats., to each:

1. County that has in effect an ordinance imposing a county tax under s. 77.70, Stats.

2. Stadium district that has in effect a resolution imposing the tax under s. 77.706, Stats.

(e) Every person shall keep a record of the purchase price of property, items, and goods on which the person is subject to county and stadium use or excise tax in each enacting county or stadium district’s jurisdiction.

(2) Microfilm records. Microfilm, including microfiche, reproductions of general books of account, such as cash books, journals, voucher registers and ledgers, and supporting records of detail shall be acceptable if the following conditions are met:

(a) Appropriate facilities are provided for preservation of the films for periods required.

(b) Microfilm rolls are indexed, cross referenced, labeled to show beginning and ending numbers or beginning and ending alphabetical listing of documents included, and are systematically filed.

(c) Transcriptions are provided for any information contained on microfilm which may be required for purposes of verification of tax liability.

(d) Proper facilities are provided for the ready inspection and location of the particular records, including adequate projectors for viewing and copying the records.

(3) Records prepared by automated data processing (adp) systems. An automatic data processing, ADP, tax accounting system shall have the capability of producing visible and legible records which will provide the following necessary information for verification of the taxpayer’s tax liability: