Chapter Tax 2

Tax 2.495(2)(em) (em) “Engaged in business in and outside this state” has the same meaning as in s. Tax 2.39 (2) (b).

Tax 2.495(2)(f) (f) “Investment adviser” has the meaning given in 15 USC 80b-2 (a) (11).

Tax 2.495(2)(g) (g) “Investment company” has the meaning given in 15 USC 80a-3.

Tax 2.495(2)(h) (h) “Person” means a natural person, estate, trust, partnership, limited liability company, corporation, or any other business entity.

Tax 2.495(2)(i) (i) “Regular place of business” means an office at which the taxpayer carries on its business in a regular and systematic manner and which is regularly maintained, occupied, or used by employees of the taxpayer.

Tax 2.495(2)(j) (j) “Sales agent” means any individual other than a broker-dealer who represents a broker-dealer or issuer in effecting or attempting to effect transactions in securities. A sales agent includes a partner, officer, or director of a broker-dealer or issuer, or a person occupying a similar status or performing similar functions.

Tax 2.495(2)(k) (k) “State” means a state of the United States, the District of Columbia, the commonwealth of Puerto Rico, or any territory or possession of the United States.

Tax 2.495(2)(L) (L) “Taxpayer” means a broker-dealer, investment adviser, investment company, or underwriter who is subject to apportionment under this section.

Tax 2.495(2)(m) (m) “Trading assets” include securities, commodities, and related financial instruments that a taxpayer acquires and holds for sale in its inventory account.

Tax 2.495(2)(n) (n) “Underwriter” includes all persons described under 15 USC 77b (a) (11).

Tax 2.495(3) (3) Apportionment formula computation. For taxable years beginning after December 31, 2005, a broker-dealer, investment adviser, investment company, or underwriter that is engaged in business in and outside this state shall determine its net income for state franchise or income tax purposes as provided in this section. The broker-dealer, investment adviser, investment company, or underwriter shall first deduct from its total net income its nonapportionable income, less related expenses. Nonapportionable income shall be allocated as provided in s. 71.25 (5) (b), Stats. The broker-dealer, investment adviser, investment company, or underwriter shall apportion its remaining net income to this state as follows:

Tax 2.495(3)(a) (a) For taxable years beginning after December 31, 2005, and before January 1, 2007, apportionable income shall be apportioned using an apportionment fraction composed of a receipts factor under sub. (4) representing 60% of the fraction, a payroll factor under sub. (5) representing 20% of the fraction, and a property factor under sub. (6) representing 20% of the fraction.

Tax 2.495(3)(b) (b) For taxable years beginning after December 31, 2006, and before January 1, 2008, apportionable income shall be apportioned using an apportionment fraction composed of a receipts factor under sub. (4) representing 80% of the fraction, a payroll factor under sub. (5) representing 10% of the fraction, and a property factor under sub. (6) representing 10% of the fraction.

Tax 2.495(3)(c) (c) In any case in which the taxpayer has no employees nor pays management or service fees to a related entity, or in which the department determines that employees are not a substantial income producing factor, the department may order or permit the elimination of the payroll factor. In any case in which the taxpayer has no property, or in which the department determines that property is not a substantial income producing factor, the department may order or permit the elimination of the property factor. This subsection does not apply to taxable years beginning after December 31, 2007.

Tax 2.495(3)(d) (d) For taxable years beginning after December 31, 2007, apportionable income shall be apportioned using an apportionment fraction composed of the receipts factor under sub. (4).

Tax 2.495 Note Note: Brokers-dealers, investment advisers, investment companies, and underwriters that are in combined groups use the receipts factor numerator and denominator to compute the modified sales factor, which then determines the company’s Wisconsin share of the combined group’s apportionable income. See s. 71.255 (5), Stats., and s. Tax 2.61 (7) for details.

Tax 2.495(4) (4) Receipts factor. The receipts factor is the ratio of the taxpayer’s receipts in this state to the taxpayer’s total receipts everywhere during the taxable year. Interest, dividends, gross receipts or net gains from sales of securities, and other income from investment assets held by a taxpayer in the taxpayer’s investment account may not be included in the receipts factor. The receipts factor shall include the items described in pars. (a) to (h).

Tax 2.495 Note Note: A broker-dealer, investment adviser, investment company, or underwriter that is a combined group member must adjust its receipts factor numerator and denominator as described in s. Tax 2.61 (7).

Tax 2.495(4)(a) (a) Gross brokerage commissions. The numerator of the receipts factor includes gross brokerage commissions earned if the billing address of the customer is in this state.

Tax 2.495(4)(b) (b) Gross margin interest. The numerator of the receipts factor includes total margin interest earned on behalf of brokerage accounts owned by customers if the billing address of the customer is in this state.

Tax 2.495(4)(c) (c) Gross account maintenance fees. The numerator of the receipts factor includes account maintenance fees received on behalf of brokerage accounts owned by customers if the billing address of the customer is in this state.

Tax 2.495(4)(d) (d) Gross receipts from trading assets.

Tax 2.495(4)(d)1. 1. Except as provided in subds. 1m., 2., and 3., the numerator of the receipts factor includes gross receipts, net of commissions, from sales of trading assets, if the day-to-day decisions regarding the trading assets occur at a location in this state. If the day-to-day decisions regarding the trading assets occur at locations both in and outside this state, the assets shall be considered to be located at the location where the trading policies and guidelines are established. It shall be rebuttably presumed that the location where the trading policies and guidelines are established is at the taxpayer’s commercial domicile.

Tax 2.495(4)(d)1m. 1m. Except as provided in subd. 2., at the election of the taxpayer, for taxable years beginning after December 31, 2014, the numerator of the receipts factor includes gross receipts, net of commissions, from sales of trading assets if the customer’s billing address is in this state. Once made, an election under this subdivision cannot be revoked without prior consent from the department. If a request to change an election has been approved by the department, the change becomes effective with the first taxable year ending on or after approval by the department.

Tax 2.495(4)(d)2. 2. If the inclusion of gross receipts results in substantial distortion of the receipts factor, the department may order or permit the substitution of net gain, net of commissions, from sales of trading assets.

Tax 2.495(4)(d)3. 3. Subdivision 2. does not apply to any taxpayer who, before January 1, 2023, elected to use the customer billing address method defined in subd. 1m. if the taxpayer has not revoked that election, and who, for any taxable year beginning after December 31, 2021, determines its receipts factor under this section by using the average of the receipts factors determined by using (a) gross receipts, net of commissions, and (b) net gain, net of commissions, from sales of trading assets for the taxable year, with all other components of the receipts factor remaining the same. Any such taxpayer may compute its receipts factor under this subsection using that averaging method. The department cannot require any taxpayer who elected before January 1, 2023, to use the customer billing address method, if the taxpayer has not revoked that election, to use any other method of determining its receipts factor under this section.

Tax 2.495(4)(e) (e) Investment company receipts. The numerator of the receipts factor includes gross payments received on investment contracts issued by the taxpayer and held by customers if the billing address of the customer is in this state. “Investment contract” includes any bonds, shares, coupons, certificates of membership, or other obligations or agreements issued by the taxpayer to return to the holders or owners money or anything of value at some future date.

Tax 2.495(4)(f) (f) Gross receipts from underwriting services. The numerator of the receipts factor includes gross receipts, including gross commissions, gross management fees, or gross underwriting fees, earned in performing underwriting activities on behalf of the issuer of the securities if either of the following applies:

Tax 2.495(4)(f)1. 1. The issuer of the securities is not engaged in a trade or business, and the issuer’s billing address is in this state.

Tax 2.495(4)(f)2. 2. The issuer of the securities is engaged in a trade or business, the issuer of the securities maintains a regular place of business in this state, and the securities relate to that person’s business in this state. If the securities relate to that person’s regular place of business in more than one state, the receipts from the performance of the service are included in the numerator of the receipts factor according to the portion of the service received in this state. If the regular place of business to which the securities relate cannot be determined, the service is received in this state if the issuer of the securities, in the regular course of the issuer’s business, ordered the service from an office in this state. If the ordering office cannot be determined, the service is received in this state if the issuer’s billing address is in this state.

Tax 2.495(4)(g) (g) Other gross receipts or net gains. The numerator of the receipts factor includes any other gross receipts or net gains as provided in s. Tax 2.49 (4).

Tax 2.495(4)(h) (h) Receipts not taxed. For taxable years beginning before January 1, 2009, fifty percent of the taxpayer’s receipts that are apportioned under this section to a state which does not have jurisdiction to impose an income tax or franchise tax measured by net income on the taxpayer shall be included in the numerator of the apportionment fraction if the taxpayer’s commercial domicile is in this state. With regard to receipts described in pars. (a) to (f), this paragraph does not apply to taxable years beginning on or after January 1, 2009.

Tax 2.495(5) (5) Payroll factor. The payroll factor is the ratio of the total compensation paid to employees located in this state to the total compensation paid to employees located everywhere, determined in accordance with the provisions of ss. 71.04 (6) and 71.25 (8), Stats., and s. Tax 2.39 (5). “Compensation paid to employees” includes deductible management or service fees paid to a related entity directly or indirectly for the performance of personal services, and the situs of the fees is in this state if the services are performed in this state. The recipient of the 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.

Tax 2.495(6) (6) Property factor. The property factor is determined in accordance with the provisions of ss. 71.04 (5) and 71.25 (7), Stats., and s. Tax 2.39 (4).

Tax 2.495 Note Note: The provisions of s. Tax 2.495 first apply for taxable years beginning on January 1, 2006.

Tax 2.495 History History: CR 04-031: cr. Register June 2006 No. 606, eff. 7-1-06; corrections in (1), (2) (d) and (3) (intro.) made under s. 13.92 (4) (b) 7., Stats., Register April 2010 No. 652; EmR0943: eff. 12-31-09 and CR 10-001: am. (1), (3) (intro.), (4) (intro.) and (h), cr. (2) (em) and (3) (d), r. (3) (c), renum. (3) (d) to be (3) (c) Register June 2010 No. 654, eff. 7-1-10; CR 14-077: am. (4) (d) 1., cr. (4) (d) 1m. Register May 2015 No. 713, eff. 6-1-15; 2023 Wis. Act 19: am. (4) (d) 1., cr. (4) (d) 3. Register July 2023 No. 811, eff. 7-7-23.

Tax 2.50 Tax 2.50 Apportionment of apportionable income of interstate public utilities.

Tax 2.50(1) (1) Scope. A public utility that is engaged in business both in and outside this state shall apportion its apportionable income as provided in this section, except if the public utility is in a combined group, its Wisconsin share of the combined group’s apportionable income is computed as provided in s. 71.255 (5), Stats., and further detailed in s. Tax 2.61 (7). Nonapportionable income shall be allocated as provided in s. 71.25 (5) (b), Stats.

Tax 2.50 Note Note: A public utility that is a corporation may be in a combined group for taxable years beginning on or after January 1, 2009. See s. Tax 2.61 (2) for a description of corporations required to use combined reporting.

Tax 2.50(2) (2) Definitions. In this section:

Tax 2.50(2)(a) (a) “Engaged in business in and outside this state” has the same meaning as in s. Tax 2.39 (2) (b).

Tax 2.50(2)(b) (b) “Payroll factor” means the payroll fraction computed under s. 71.04 (6) or 71.25 (8), Stats., and s. Tax 2.39.

Tax 2.50(2)(c) (c) “Property factor” means the property fraction computed under s. 71.04 (5) or 71.25 (7), Stats., and s. Tax 2.39.

Tax 2.50(2)(d) (d) “Public utility” means any business entity that owns or operates any plant, equipment, property, franchise, or license for the production, transmission, sale, delivery, or furnishing of electricity, water, or steam the rates of charges for goods or services of which have been established or approved by a federal, state, or local government or governmental agency.

Tax 2.50(2)(e) (e) “Sales factor” means the sales fraction computed under ss. 71.04 (4m) and (7) or 71.25 (6m) and (9), Stats., and s. Tax 2.39.

Tax 2.50(3) (3) Apportionment formula computation. For taxable years beginning after December 31, 2004, a public utility that is engaged in business in and outside this state shall determine its net income for state franchise or income tax purposes as provided in this section. The public utility shall first deduct from its total net income its nonapportionable income, less related expenses. Nonapportionable income shall be allocated as provided in s. 71.25 (5) (b), Stats. The public utility shall apportion its remaining net income to this state as follows:

Tax 2.50(3)(a) (a) For taxable years beginning before January 1, 2006, apportionable income shall be apportioned using an apportionment fraction obtained by taking the arithmetical average of the sales factor, property factor, and payroll factor.

Tax 2.50(3)(b) (b) For taxable years beginning after December 31, 2005, and before January 1, 2007, apportionable income shall be apportioned using an apportionment fraction composed of the sales factor representing 60% of the fraction, the property factor representing 20% of the fraction, and the payroll factor representing 20% of the fraction.

Tax 2.50(3)(c) (c) For taxable years beginning after December 31, 2006, and before January 1, 2008, apportionable income shall be apportioned using an apportionment fraction composed of the sales factor representing 80% of the fraction, the property factor representing 10% of the fraction, and the payroll factor representing 10% of the fraction.

Tax 2.50(3)(d) (d) For taxable years beginning after December 31, 2007, apportionable income shall be apportioned using an apportionment fraction composed of the sales factor.

Tax 2.50 Note Note: Public utilities that are in combined groups must adjust the numerator and denominator of the sales factor as described in s. Tax 2.61 (7).

Tax 2.50 Note Note: The provisions of s. Tax 2.50 first apply for taxable years beginning on January 1, 2005.

Tax 2.50 Note Note: Section Tax 2.50 interprets ss. 71.04 (8) (b) and (c) and 71.25 (10) (b) and (c), Stats.

Tax 2.50 History History: Cr. Register, August, 1973, No. 212, eff. 9-1-73; am. (1), Register, February, 1990, No. 410, eff. 3-1-90; emerg. r. and recr. eff. 12-5-05; CR 05-117: r. and recr. Register June 2006 No. 606, eff. 7-1-06; corrections in (1) and (3) (intro.) made under s. 13.92 (4) (b) 7., Stats., Register April 2010 No. 652; EmR0943: eff. 12-31-09 and CR 10-001: am. (1) and (3) (intro.), renum. (2) (a) to (d) to be (2) (b) to (e), cr. (2) (a) Register June 2010 No. 654, eff. 7-1-10.

Tax 2.502 Tax 2.502 Apportionment of apportionable income of interstate telecommunications companies.

Tax 2.502(1) (1) Scope. A telecommunications company that is engaged in business both in and outside this state shall apportion its apportionable income as provided in this section, except if the telecommunications company is in a combined group, its Wisconsin share of the combined group’s apportionable income is computed as provided in s. 71.255 (5), Stats., and further detailed in s. Tax 2.61 (7). Nonapportionable income shall be allocated as provided in s. 71.25 (5) (b), Stats.

Tax 2.502 Note Note: A telecommunications company that is a corporation may be in a combined group for taxable years beginning on or after January 1, 2009. See s. Tax 2.61 (2) for a description of corporations required to use combined reporting.

Tax 2.502(2) (2) Definitions. In this section:

Tax 2.502(2)(a) (a) “Cable television service” means cable service as defined in 47 USC 522(6) when provided over a cable system as defined in 47 USC 522(7).

Tax 2.502(2)(am) (am) “Engaged in business in and outside this state” has the same meaning as in s. Tax 2.39 (2) (b).

Tax 2.502(2)(b) (b) “Payroll factor” means the payroll fraction computed under s. 71.04 (6) or 71.25 (8), 2001 Stats., and s. Tax 2.39.

Tax 2.502(2)(c) (c) “Property factor” means the property fraction computed under s. 71.04 (5) or 71.25 (7), 2001 Stats., and s. Tax 2.39.

Tax 2.502(2)(d) (d) “Telecommunications company” means any person that owns, operates, manages, or controls any plant or equipment used to furnish telecommunications services and cable television services within this state directly or indirectly to the public and derives at least 70% of its gross income for the current taxable year from the provision of telecommunications services and cable television services, excluding internet service and the resale of telecommunications by telecommunications resellers as defined in s. 196.01 (9), Stats. For purposes of the 70% test, gross income does not include interest, dividends, rents, royalties, capital gains or ordinary gains from asset dispositions, other than in the normal course of business. “Telecommunications company” does not include internet service providers.

Tax 2.502(2)(e) (e) The following terms have the same definitions as provided in ss. 77.51 and 77.522 (4) (a), Stats.:

Tax 2.502(2)(e)1. 1. “Ancillary services” (s. 77.51 (1ba), Stats.).

Tax 2.502(2)(e)2. 2. “Call-by-call basis” (s. 77.522 (4) (a) 2., Stats.).

Tax 2.502(2)(e)3. 3. “Communications channel” (s. 77.522 (4) (a) 3., Stats.).

Tax 2.502(2)(e)4. 4. “Customer” (s. 77.522 (4) (a) 4., Stats.).

Tax 2.502(2)(e)5. 5. “Customer channel termination point” (s. 77.522 (4) (a) 5., Stats.).

Tax 2.502(2)(e)6. 6. “Home service provider” (s. 77.522 (4) (a) 7., Stats.).

Tax 2.502(2)(e)7. 7. “Interstate telecommunications services” (s. 77.51 (5n), Stats.).

Tax 2.502(2)(e)8. 8. “Intrastate telecommunications services” (s. 77.51 (5r), Stats.).

Tax 2.502(2)(e)9. 9. “Mobile telecommunications service” (s. 77.522 (4) (a) 8., Stats.).

Tax 2.502(2)(e)10. 10. “Place of primary use” (s. 77.522 (4) (a) 9., Stats.).

Tax 2.502(2)(e)11. 11. “Postpaid calling service” (s. 77.522 (4) (a) 10., Stats.).

Tax 2.502(2)(e)12. 12. “Prepaid calling service” (s. 77.51 (10d), Stats.).

Tax 2.502(2)(e)13. 13. “Prepaid wireless calling service” (s. 77.51 (10f), Stats.).

Tax 2.502(2)(e)14. 14. “Private communication service” (s. 77.51 (11c), Stats.).

Tax 2.502(2)(e)15. 15. “Service address” (s. 77.51 (17m), Stats.).

Tax 2.502(2)(e)16. 16. “Telecommunications services” (s. 77.51 (21n), Stats.).

Tax 2.502(3) (3) Apportionment formula computation. For taxable years beginning after December 31, 2004, a telecommunications company that is engaged in business in and outside this state shall determine its net income for state franchise or income tax purposes as provided in this section. The telecommunications company shall first deduct from its total net income its nonapportionable income, less related expenses. Nonapportionable income shall be allocated as provided in s. 71.25 (5) (b), Stats. The telecommunications company shall apportion its remaining net income to this state using an apportionment fraction obtained by taking the arithmetical average of the property factor, payroll factor, and sales factor. The sales factor is determined as prescribed in subs. (4) and (5), as applicable.

Tax 2.502(4) (4) Sales factor for taxable years beginning before January 1, 2009. For taxable years beginning before January 1, 2009, the sales factor is the sales factor as would be determined under s. 71.25 (9), 2001 Stats.

Tax 2.502(5) (5) Sales factor for taxable years beginning on or after January 1, 2009. For taxable years beginning on or after January 1, 2009, the sales factor is determined as provided in s. 71.25 (9), Stats., as effective for the current taxable year. For purposes of computing the numerator of a telecommunications company’s sales factor under this subsection, the following rules apply:

Tax 2.502(5)(a) (a) General. Except as provided otherwise in par. (b) to (f), gross receipts from the sale of a telecommunications service or mobile telecommunications service are in this state if the customer’s place of primary use of the service is in this state.

Tax 2.502(5)(b) (b) Telecommunications services on call-by-call basis. Gross receipts from the sale of telecommunications services sold on an individual call-by-call basis are in this state if either of the following applies:

Tax 2.502(5)(b)1. 1. The call both originates and terminates in this state.

Tax 2.502(5)(b)2. 2. The call either originates or terminates in this state and the service address is located in this state.

Tax 2.502(5)(c) (c) Postpaid calling services, prepaid calling services, and prepaid wireless calling services. Gross receipts from the sale of postpaid calling services, prepaid calling services, and prepaid wireless calling services are in this state if the origination point of the telecommunication signal, as first identified by the service provider’s telecommunication system or, if the system used to transport telecommunication signals is not the seller’s, as identified by information received by the seller from its service provider, is located in this state.

Tax 2.502(5)(d) (d) Private communication services. The following gross receipts from the sale of private communication services are in this state: