Tax 2.39(2)(d)
(d) “Nexus" means that a taxpayer's business activity in a state or foreign country is of such a degree that the state or foreign country has jurisdiction to impose an income tax or franchise tax measured by net income on the taxpayer. For a combined group, the activities of the combined group are taken as a whole in determining if the combined group has nexus in a state or foreign country, as provided in s.
71.255 (5) (a), Stats. Nexus may exist even if a state or foreign country does not impose a tax on the taxpayer. Conversely, voluntary filing and paying income or franchise taxes when not required to do so, or paying a fee for qualification, organization or for the privilege of doing business in that state or foreign country does not, in itself, create nexus.
Tax 2.39 Note
Note: Refer to s.
Tax 2.82 for a description of factors which are recognized in determining whether nexus exists.
Tax 2.39 Note
Examples: 1) State A imposes a corporation franchise tax measured by net income for the privilege of doing business in that state. Corporation X files a return and pays the $50 minimum tax, although it carries on no activities in State A. Corporation X does not have nexus in State A under these circumstances.
Tax 2.39 Note
2) State B requires all nonresident corporations which qualify or register to do business in State B to pay to the secretary of state an annual license fee or tax for the privilege of doing business in the state regardless of whether the privilege is in fact exercised. The amount paid is determined according to the total authorized capital stock of the corporation; the rates are progressively higher by bracketed amounts. The statute sets a minimum fee of $50 and a maximum fee of $500. State B also imposes a corporation income tax. Nonresident Corporation Y is qualified to do business in State B and pays the required fee to the secretary of state but does not carry on any activities in State B. Corporation Y does not have nexus in State B under these circumstances.
Tax 2.39 Note
3) State C requires all nonresident corporations qualified or registered to do business in State C to pay to the secretary of state an annual permit fee or tax for doing business in the state. The base of the fee or tax is the sum of (1) outstanding capital stock, and (2) surplus and undivided profits. The fee or tax base attributable to State C is determined by a three-factor apportionment formula. Nonresident Corporation Z, which operates a plant in State C, pays the required fee or tax to the secretary of state. Corporation Z by virtue of its operation of a plant in State C has nexus in State C.
Tax 2.39 Note
4) State D imposes a corporation franchise tax measured by net income for the privilege of doing business in that state. Corporation W files a return based upon its business activities in the state but the amount of computed liability is less than the minimum tax. Corporation W pays the minimum tax. Corporation W has nexus in State D under these circumstances.
Tax 2.39 Note
5) Corporation U is actively engaged in manufacturing farm equipment in State E. State E imposes a net income tax but exempts corporations engaged in manufacturing farm equipment. Corporation U has nexus in State E under these circumstances.
Tax 2.39 Note
6) Corporation V has a sales office and warehouse located in State F. State F does not impose a corporation franchise or income tax. Corporation V has nexus in State F.
Tax 2.39(2)(f)
(f) “State" means any state of the United States, the District of Columbia, the commonwealth of Puerto Rico, and any territory or possession of the United States. A foreign country is not a state.
Tax 2.39(3)(a)1.1. For taxable years beginning before January 1, 2006, persons engaged in business in and outside this state, except direct air carriers, financial organizations, telecommunications companies, pipeline companies, public utilities, and railroads, as defined in ss.
71.04 (8) (a) and
(b) 1. and
71.25 (10) (a) and
(b) 1., Stats., and corporations that are authorized to use an alternative method of apportionment under s.
71.25 (14), Stats., shall use an apportionment fraction as described in s.
71.04 (4) (a) or
71.25 (6) (a), Stats. Property, payroll, or sales related to the production of nonapportionable income may not be included in either the numerator or the denominator of any of the apportionment factors.
Tax 2.39(3)(a)2.
2. If one of the factors described in subd.
1. is omitted pursuant to s.
71.04 (10) or
71.25 (11), Stats., the percentages of the fraction represented by the remaining factors shall be adjusted as follows:
Tax 2.39(3)(a)2.a.
a. If either the property factor or payroll factor is omitted, the other factor shall represent 33.3333 percent of the fraction and the sales factor shall represent 66.6667 percent of the fraction.
Tax 2.39(3)(a)2.b.
b. If the sales factor is omitted, the property factor and the payroll factor shall each represent 50 percent of the fraction.
Tax 2.39(3)(b)1.1. For taxable years beginning after December 31, 2005, and before January 1, 2007, persons engaged in business in and outside this state, except direct air carriers, financial organizations, telecommunications companies, pipeline companies, public utilities, and railroads, as defined in ss.
71.04 (8) (a) and
(b) 2. and
71.25 (10) (a) and
(b) 2., Stats., and corporations that are authorized to use an alternative method of apportionment under s.
71.25 (14), Stats., shall use an apportionment fraction as described in s.
71.04 (4) (b) or
71.25 (6) (b), Stats. Property, payroll, or sales related to the production of nonapportionable income may not be included in either the numerator or the denominator of any of the apportionment factors.
Tax 2.39(3)(b)2.
2. If one of the factors described in subd.
1. is omitted pursuant to s.
71.04 (10) or
71.25 (11), Stats., the percentages of the fraction represented by the remaining factors shall be adjusted as follows:
Tax 2.39(3)(b)2.a.
a. If either the property factor or payroll factor is omitted, the other factor shall represent 25 percent of the fraction and the sales factor shall represent 75 percent of the fraction.
Tax 2.39(3)(b)2.b.
b. If the sales factor is omitted, the property factor and the payroll factor shall each represent 50 percent of the fraction.
Tax 2.39(3)(c)1.1. For taxable years beginning after December 31, 2006, and before January 1, 2008, persons engaged in business in and outside this state, except direct air carriers, financial organizations, telecommunications companies, pipeline companies, public utilities, and railroads, as defined in ss.
71.04 (8) (a) and
(b) 2. and
71.25 (10) (a) and
(b) 2., Stats., and corporations that are authorized to use an alternative method of apportionment under s.
71.25 (14), Stats., shall use an apportionment fraction as described in s.
71.04 (4) (c) or
71.25 (6) (c), Stats. Property, payroll, or sales related to the production of nonapportionable income may not be included in either the numerator or the denominator of any of the apportionment factors.
Tax 2.39(3)(c)2.
2. If one of the factors described in subd.
1. is omitted pursuant to s.
71.04 (10) or
71.25 (11), Stats., the percentages of the fraction represented by the remaining factors shall be adjusted as follows:
Tax 2.39(3)(c)2.a.
a. If either the property factor or payroll factor is omitted, the other factor shall represent 11.1111 percent of the fraction and the sales factor shall represent 88.8889 percent of the fraction.
Tax 2.39(3)(c)2.b.
b. If the sales factor is omitted, the property factor and the payroll factor shall each represent 50 percent of the fraction.
Tax 2.39(3)(d)
(d) For taxable years beginning after December 31, 2007, persons engaged in business in and outside this state, except direct air carriers, financial organizations, telecommunications companies, pipeline companies, public utilities, and railroads, as defined in ss.
71.04 (8) (a) and
(b) 2. and
71.25 (10) (a) and
(b) 2., Stats., and corporations that are authorized to use an alternative method of apportionment under s.
71.25 (14), Stats., shall use only the sales factor to compute the apportionment fraction, as provided in s.
71.04 (4) (d) or
71.25 (6) (d), Stats. Sales related to the production of nonapportionable income may not be included in either the numerator or the denominator of the sales factor. If either the numerator or the denominator of the sales factor is zero or a negative number, the sales factor shall be determined as described in ss.
71.04 (4m) (a) 2.,
(b) 2., or
(c) 2. or
71.25 (6m) (a) 2.,
(b) 2., or
(c) 2., Stats.
Tax 2.39 Note
Note: See ss.
Tax 2.46,
2.47,
2.475,
2.48,
2.49,
2.495,
2.50,
2.502, and
2.505 for special apportionment fractions of interstate direct air carriers, motor carriers, railroads, pipelines, financial institutions, broker-dealers, investment advisers, investment companies, underwriters, public utilities, telecommunications companies, and professional sports clubs.
Tax 2.39 Note
Note: Corporations that are in combined groups use a modified sales factor to compute their Wisconsin share of apportionable income of the entire combined group. See s.
71.255 (5), Stats., and s.
Tax 2.61 (7) for details.
Tax 2.39(3)(e)
(e) The apportionment method may be used only if the taxpayer or combined group is engaged in business both in Wisconsin and at least one other state or foreign country and its business in Wisconsin is an integral part of a unitary business. For a combined group that has made the controlled group election provided in s.
71.255 (2m), Stats., the entire combined group's business is deemed to be a single unitary business.
Tax 2.39 Note
Note: A qualifying combined group may petition for an alternative apportionment method. See s.
Tax 2.64 for details.
Tax 2.39(4)(a)
(a) Numerator; denominator. The numerator of the property factor shall include the average value of the real and tangible personal property owned or rented and used by the taxpayer in Wisconsin in the production of apportionable income during the tax period. The denominator shall include the average value of all of the real and tangible personal property located everywhere owned or rented and used by the taxpayer in the production of apportionable income during the tax period. Property in transit on the date or dates for determining its average value, as described in par.
(f), shall be considered to be at its destination, for purposes of computing the property factor. The value of mobile or movable property such as construction equipment, trucks, airplanes or other equipment which is located within and without Wisconsin during the tax period shall be determined for purposes of the numerator of the factor on the basis of the ratio of time used, serviced and stored within Wisconsin to total time used, serviced and stored during the tax period. However, an automobile assigned to a traveling employee shall be included in the numerator of the factor if the employee's compensation is assigned to Wisconsin under the payroll factor.
Tax 2.39(4)(b)
(b) Owned property. Property owned by the taxpayer is valued at its original cost for purposes of computing the property factor. As a general rule “original cost" is deemed to be the basis of the property for federal income tax purposes, prior to any adjustments, at the time of acquisition by the taxpayer and adjusted by subsequent capital additions or improvements to the property and partial disposition of the property, by reason of sale, exchange, abandonment or other means. If the original cost of property is unascertainable, the property shall be included in the factor at its fair market value as of the date of acquisition by the taxpayer. Any subsequent adjustments, other than depreciation or amortization, to net income which affect property, such as capitalizations of repairs and adjustments to inventory, shall also be included in the property factor. The original cost of depletable property such as mines, oil and gas wells and timber shall be reduced by any extraction to the extent that cost depletion has been allowed. Inventories shall be included in the factor in accordance with the valuation method used for Wisconsin income or franchise tax purposes. Property acquired by gift or inheritance shall be included in the factor at its basis for federal income tax purposes. Pollution abatement equipment or waste treatment facilities written off as an expense under s.
71.04 (2b) and
(2g), 1985-86 or prior years Stats., but still in use, shall be included at original cost.
Tax 2.39(4)(c)
(c) Rented property. Property rented by the taxpayer is valued at 8 times the net annual rental determined at arm's length for purposes of computing the property factor. Net annual rental is the annual rental paid by the taxpayer, or allocated by the department pursuant to s.
71.10 (1),
71.30 (2) or
71.80 (1) (b), Stats., less any annual rental received by the taxpayer from sub-rentals. In exceptional cases this definition of net annual rental may result in a negative value or clearly inaccurate valuation. In these exceptional instances, any other method which will properly reflect the net annual rental value may be required by the department or may be requested by the taxpayer; however, in no case may the net annual rental be less than an amount which bears the same ratio to the total annual rental paid by the taxpayer as the rental value of the part of the property used by the taxpayer in the production of apportionable income bears to the total rental value of the same rental property.
Tax 2.39(4)(cm)1.
1. Is the amount paid as rental for the property for a 12-month period. Where property is rented for less than a 12-month period, the net rent paid for the actual period of rental shall constitute the “annual rental" for the tax period. Where a taxpayer has rented property for a term of 12 or more months and the tax period for which the property factor is being computed covers a period of less than 12 months, such as may be due to a reorganization or change of accounting period, the net rent paid for the short tax period shall be annualized; however, if the rental term is for less than 12 months, the rent shall be adjusted accordingly.
Tax 2.39(4)(cm)2.
2. Is the actual sum of money or other consideration payable, directly or indirectly, by the taxpayer or for its benefit for the use of the property and includes:
Tax 2.39(4)(cm)2.a.
a. Any amount payable for the use of real or tangible personal property, or any part of the property, whether designated as a fixed sum of money or as a percentage of sales, profits, or otherwise.
Tax 2.39(4)(cm)2.b.
b. Any amount payable as additional rent or in lieu of rents, such as interest, taxes, insurance, repairs or any other items which are required to be paid by the terms of the lease or other arrangement, but does not include amounts paid as service charges, such as utilities or janitor services. If a payment includes rent and other charges unsegregated, such as rental charges for public warehouses, the amount of rent shall be determined by making a reasonable allocation between the rent and the other items.
Tax 2.39(4)(cm)3.
3. Does not include incidental day-to-day expenses such as hotel or motel accommodations, daily rental of automobiles or royalties based on extraction of natural resources, whether represented by delivery or purchase. For this purpose, a royalty includes an amount paid to a holder of an interest in real property which constitutes a sharing of current or future production of natural resources from the property, whether denominated as royalty, advanced royalty, rental, delay rental or otherwise.
Tax 2.39(4)(d)
(d) Leasehold improvements. Leasehold improvements shall, for the purposes of the property factor, be treated as property owned by the taxpayer regardless of whether the taxpayer is entitled to remove the improvements or the improvements revert to the lessor upon expiration of the lease. The original cost of leasehold improvements shall be included in the factor.
Tax 2.39(4)(e)
(e) Construction in progress. Property or equipment under construction during the tax period, except inventoriable goods in process, shall be excluded from the factor until the property is actually used by the taxpayer in the regular course of its trade or business. If the property is partially used by the taxpayer in the regular course of its trade or business while under construction, the value of the property to the extent used shall be included in the property factor.
Tax 2.39(4)(f)
(f) Averaging property values. As a general rule the “average value" of property shall be determined by averaging the value at the beginning and ending of the tax period, but the department may require or the taxpayer may utilize the averaging of monthly values during the tax period if reasonably required to properly reflect the average value of the taxpayer's property. Averaging by monthly values shall generally be applied if substantial fluctuations in the values of the property exist during the tax period, or where property is acquired after the beginning of the tax period or disposed of before the end of the tax period.
Tax 2.39(5)(a)
(a) Numerator; denominator. The numerator of the payroll factor shall include the total amount paid in Wisconsin during the tax period by the taxpayer for compensation in the production of apportionable income and the denominator shall include the total compensation paid everywhere during the tax period by the taxpayer in the production of apportionable income. Compensation is paid in Wisconsin and included in the numerator if, as provided in ss.
71.04 (6) (b) and
71.25 (8) (b), Stats., one of the following applies:
Tax 2.39(5)(a)1.
1. The individual's service is performed entirely within Wisconsin.
Tax 2.39 Note
Example: Corporation A has a manufacturing plant located in Wisconsin. The compensation of an Illinois resident who works at the Wisconsin manufacturing plant is included in the numerator of the payroll factor since the employee's service is performed entirely in Wisconsin.
Tax 2.39(5)(a)2.
2. The individual's service is performed within and without Wisconsin, but the service performed without Wisconsin is incidental to the individual's service within Wisconsin.
Tax 2.39 Note
Example: Corporation B has its headquarters and a manufacturing plant in Wisconsin. Corporation B also has a manufacturing plant located in Indiana. The manager of the Wisconsin manufacturing plant spends two weeks during the tax year at the manufacturing plant located in Indiana training the new plant manager. The compensation of the Wisconsin plant manager is included in the numerator of the payroll factor because the purposes performed in Indiana is incidental to the service performed in Wisconsin.
Tax 2.39(5)(a)3.
3. A portion of the service is performed in Wisconsin and the base of operations of the individual is in Wisconsin.
Tax 2.39 Note
Example: Corporation C has a sales office located in Wisconsin. A salesperson working out of the Wisconsin office solicits sales in Wisconsin, Minnesota and Iowa. Since a portion of the salesperson's service is performed in Wisconsin and the salesperson's base of operations is in Wisconsin, the compensation of the salesperson is included in the numerator of the payroll factor.
Tax 2.39(5)(a)4.
4. A portion of the service is performed in Wisconsin and, if there is no base of operations, the place from which the individual's service is directed or controlled is in Wisconsin.
Tax 2.39 Note
Example: Corporation D has its regional sales office in Wisconsin. An Iowa resident works out of her home as a salesperson for Corporation D and solicits sales in Iowa, Illinois and Wisconsin. The salesperson is directed from the regional sales office located in Wisconsin. The compensation of the Iowa salesperson is included in the numerator of the payroll factor since a portion of her service is performed in Wisconsin, she has no base of operations and she is directed from Wisconsin.
Tax 2.39(5)(a)5.
5. A portion of the service is performed within Wisconsin and neither the base of operations of the individual nor the place from which the service is directed or controlled is in any state in which some part of the service is performed, but the individual's residence is in Wisconsin.
Tax 2.39 Note
Example: Corporation E is headquartered in and has its sales office in Indiana and maintains inventory in Wisconsin. A Wisconsin resident salesperson solicits sales in Wisconsin and Minnesota. The compensation of the Wisconsin salesperson is included in the numerator of the payroll factor since a portion of the salesperson's service is performed in Wisconsin, the salesperson is a resident of Wisconsin and the salesperson is directed or controlled from Indiana but performs no services in Indiana.
Tax 2.39(5)(a)6.
6. The individual is neither a resident of nor performs services in Wisconsin but is directed or controlled from an office in Wisconsin and returns to Wisconsin periodically for business purposes and the state in which the individual resides does not have jurisdiction to impose income or franchise taxes on the employer.
Tax 2.39 Note
Example: Corporation F has its sales office in Wisconsin. A salesperson resides in Nebraska and solicits sales in Nebraska and Kansas. Corporation F does not have nexus in Nebraska or Kansas. The salesperson returns to the Wisconsin sales office for two weeks each year for meetings and training. The compensation of the Nebraska salesperson is included in the numerator of the payroll factor since he is directed from an office in Wisconsin, returns to Wisconsin periodically for business purposes and Corporation F does not have nexus in Nebraska.
Tax 2.39(5)(b)
(b) Services. An individual shall be considered to be performing a service in Wisconsin during the year if the individual performs services in Wisconsin for at least 5 days during the year. The compensation of any one employee may not be split between 2 or more states during the year; however, this does not apply if the employee is transferred or changes positions during the year.
Tax 2.39(5)(c)1.
1. Wages, salaries, commissions and any other form of remuneration paid to employees for personal services including amounts contributed to a qualified cash or deferred arrangement under section
401 (k) of the Internal Revenue Code on behalf of employees who have elected to participate in the plan. However, matching contributions to the trust by an employer under section
401 (k) of the Internal Revenue Code are not included since the employees do not have a right to receive the matching contributions directly in cash.
Tax 2.39(5)(c)2.
2. The value of board, rent, housing, lodging and other benefits or services furnished to employees by the taxpayer in return for personal services, provided that these amounts constitute income to the recipient under the federal Internal Revenue Code for the year for which the payroll factor is computed. In the case of employees not subject to the federal Internal Revenue Code, such as citizens of foreign countries employed in foreign countries, the determination of whether the benefits or services constitute income to the employees shall be made as though the employees are subject to the federal Internal Revenue Code.
Tax 2.39(5)(c)3.
3. Deductible management or service fees paid, or management or service fees allocated by the department under s.
71.10 (1),
71.30 (2) or
71.80 (1) (b), Stats., to a related corporation, as defined in section
267 (f) (1) of the Internal Revenue Code, as consideration for the performance of personal services. As provided in s.
71.25 (8) (d), Stats., the recipient of these fees may not include the compensation paid to its employees with respect to the personal services in either the numerator or denominator of its payroll factor and the situs of the fees is in Wisconsin if the services fulfill one of the requirements of par.
(a). Except for these management or service fees, payments made to an independent contractor or any other person not properly classifiable as an employee are excluded.
Tax 2.39 Note
Examples: 1) Corporation A, headquartered in Illinois, owns 100% of the stock of Corporation B which is headquartered in Wisconsin. Employees of Corporation A perform all the accounting functions for Corporation B. For these services Corporation A charged $30,000 of office payroll as management fees to Corporation B, which paid that amount to Corporation A. If the employees of Corporation A that performed the accounting services for Corporation B were based in Illinois and spent only part of their time in Wisconsin while performing these services, no portion of the $30,000 is includable in the numerator of the payroll factor of Corporation B because the services do not meet the requirements of par. (a). The entire $30,000 is includable in the denominator of the payroll factor of Corporation B. If Corporation A files a Wisconsin return on the apportionment basis, it may not include in its computation of the payroll factor the $30,000 paid to its employees for services they performed for Corporation B.
Tax 2.39 Note
2) Corporation C, headquartered in Wisconsin, owns 100% of the stock of Corporation D which is also headquartered in Wisconsin. Employees of Corporation C prepare all tax returns for Corporation D. For these services Corporation C charged $20,000 of tax department payroll as management fees to Corporation D, which paid that amount to Corporation C. All of the services were performed in Wisconsin. The $20,000 is included in both the numerator and denominator of the payroll factor of Corporation D. Corporation C may not include the $20,000 in either the numerator or denominator of its payroll factor.
Tax 2.39(5)(d)
(d) Excludable compensation. Compensation paid to produce nonapportionable income or losses or income exempt from taxation under ch.
71, Stats., may not be included in the numerator or denominator of the payroll factor.
Tax 2.39(6)(a)
(a) Numerator; denominator. The numerator of the sales factor shall include the taxpayer's gross receipts from sales that are in this state and the denominator shall include the taxpayer's gross receipts from sales everywhere during the taxable year. Gross receipts that are not derived in the production of apportionable income and items described in ss.
71.04 (7) (f) and
71.25 (9) (f), Stats., may not be included in the sales factor.
Tax 2.39 Note
Note: A corporation that is a combined group member must adjust its sales factor numerator and denominator as described in s.
Tax 2.61 (7).
Tax 2.39(6)(b)
(b) Sales of tangible personal property attributable to Wisconsin. Tax 2.39(6)(b)1.1. Gross receipts from the sales of tangible personal property, except sales to the federal government as described in subd.
4., are in Wisconsin if the property is delivered or shipped to a purchaser within Wisconsin regardless of the f.o.b. point or other conditions of the sales. Some situations in which property is considered to be delivered or shipped to a purchaser within Wisconsin are if:
Tax 2.39(6)(b)1.a.
a. The property is picked up outside Wisconsin by a purchaser having a Wisconsin business location and the purchaser returns to Wisconsin with the property.
Tax 2.39 Note
Example: Corporation B is a Minnesota brewer that sells beer to a Wisconsin purchaser to be picked up at the brewer's shipping dock in Minnesota. The purchaser is a beer distributor which used its own vehicle to pick up the beer and haul it back to Wisconsin. Corporation B is subject to the tax by the state of Wisconsin. These dock sales are assigned to Wisconsin in Corporation B's sales factor in its apportionment formula for Wisconsin tax purposes, since the purchaser's location is in Wisconsin and the product is shipped to Wisconsin. Therefore, Corporation B, for Wisconsin franchise tax purposes, will include the amount of this dock sale in both the numerator and the denominator of the sales factor.
Tax 2.39 Note
Note: In
Pabst Brewing Co. v. Wisconsin Department of Revenue (Ct. App. Dist. IV, 1986),
130 Wis. 2d 291, the taxpayer sold beer to an Illinois distributor who picked it up in its own truck at the taxpayer's Wisconsin shipping dock and hauled it to Illinois. The Court held that the sales were not Wisconsin sales, since the location of the purchaser, rather than the location of the pickup of the product, controlled the determination of where the sale was assigned for purposes of the sales factor. The Court noted that if the sales were assigned to Wisconsin, the method of delivery, a condition of the sale, would be the determinative, which is contrary to statute. These sales are referred to as “dock sales," which are those sales where a purchaser uses its owned or rented vehicles or a common carrier it has made arrangements with to take delivery of the product at the seller-taxpayer's shipping dock.
Tax 2.39(6)(b)1.b.
b. The taxpayer, at the designation of the purchaser, or the purchaser delivers to or has the property shipped to a recipient other than the purchaser within Wisconsin.
Tax 2.39 Note
Example: Corporation M is a Wisconsin manufacturer that sells plumbing ware to an Illinois wholesaler and retailer to be picked up at the manufacturer's shipping dock in Wisconsin. The purchaser has its corporate headquarters in Illinois. The purchaser uses its own vehicle to pick up plumbing ware and haul it to the job site of the purchaser's customer. The customer is a plumbing contractor that is working on a new motel being constructed in Madison, Wisconsin. These dock sales are assigned to Wisconsin in Corporation M's sales factor in its apportionment formula for Wisconsin tax purposes, since the purchaser's customer's location is in Wisconsin and the product is shipped to Wisconsin. The delivery to the plumbing contractor was at the designation of the purchaser and that is where the product was delivered. Therefore, Corporation M, for Wisconsin franchise tax purposes, is required to include the amount of this dock sale in both the numerator and the denominator of the sales factor.
Tax 2.39(6)(b)1.c.
c. The shipment by either the taxpayer or the purchaser terminates in Wisconsin, even though the property is subsequently transferred by the purchaser to another state.
Tax 2.39 Note
Example: Corporation B has a Wisconsin manufacturing plant which makes engines for an Indiana based manufacturer. Title to the engines passes to the purchaser after the engines are tested. Corporation B, at the direction of the purchaser, ships the tested engines to a public warehouse in Wisconsin. The warehouse stores the engines until directed to ship them by the purchaser. These sales are included in the numerator of the sales factor for Corporation B since the public warehouse is considered to be a business location of the Indiana purchaser and the warehouse is located in Wisconsin.
Tax 2.39(6)(b)1.d.
d. The recipient is in Wisconsin, even though the property is ordered from outside Wisconsin.
