ORDER OF THE DEPARTMENT OF REVENUE CREATING RULE
The Wisconsin Department of Revenue proposes an order to: create Tax 11.905 relating to sales and use tax provisions.
The scope statement for this rule, SS 129-17, was approved by the Governor on December 15, 2017, published in Register No. 744B on December 26, 2017, and approved by the Secretary of Revenue on January 8, 2018.
Analysis by the Department of Revenue
Explanation of agency authority: Section 77.59 (2g), Stats., provides “[t]he department shall promulgate rules to establish criteria applicable to field audits conducted under this subchapter for which an auditor uses a statistical sampling method…” Section 227.11 (2) (a), Stats., provides “[e]ach agency may promulgate rules interpreting the provisions of any statute enforced or administered by the agency, if the agency considers it necessary to effectuate the purpose of the statute...”
Estimate of amount of time that state employees will spend developing the rule and of other resources necessary to develop the rule: The department estimates it will take approximately 100 hours to develop the rule.
Related statute or rule: Section 77.59 (2), Stats., provides "The [field audit] determination may be made on the basis of sampling, whether or not the person being audited has complete records of transactions and whether or not the person being audited consents." Plain language analysis: This rule establishes criteria applicable to field audits for which an auditor uses a statistical sampling method. The rule also provides that any person with less than $10,000,000 in annual sales during any year may choose to have the audit conducted using statistical sampling. Finally, the rule specifies the number of transactions necessary to qualify for statistical sampling and the maximum sample size.
Summary of, and comparison with, existing or proposed federal regulation: There is no existing or proposed federal regulation that is intended to address the activities to be regulated by the rule.
Comparison with rules in adjacent states: The department is not aware of a similar rule in an adjacent state.
Summary of factual data and analytical methodologies: 2017 Wisconsin Act 59 created s. 77.59 (2g), Stats., which provides in part, that the Department of Revenue shall promulgate rules to establish criteria for field audit statistical sampling. The department has created this proposed rule order to reflect this statutory change. Audit experience and practices, as provided in Department of Revenue Publication 516, Statistical Sampling, were used in the preparation of this proposed rule order. Analysis and supporting documents used to determine effect on small business: This rule order reflects the creation of s. 77.59 (2g), Wis. Stats., which authorizes the Department to provide specific criteria for persons under audit with less than $10,000,000 in annual sales during any year in a field audit may choose to have the audit conducted using statistical sampling. The proposed rule order reflects experience and practices for those persons as provided in Department of Revenue Publication 516, Statistical Sampling. Anticipated costs incurred by private sector: This proposed rule does not have a fiscal effect on the private sector.
Effect on small business: This proposed rule provides specific criteria for businesses under audit with less than $10,000,000 in annual sales in that the business may request that its audit be conducted using the statistical sampling method.
Agency contact person: Please contact Jen Chadwick at (608) 266-8253 or jennifer.chadwick@wisconsin.gov, if you have any questions regarding this proposed rule. Where to submit comments and submission deadline: Comments may be submitted to the contact person shown below no later than August 17, 2018. Information as to the place, date, and time of the public hearing will be published in the Wisconsin Administrative Register.
Jen Chadwick
Department of Revenue
Mail Stop 6-40
2135 Rimrock Road
P.O. Box 8933
Madison, WI 53708-8933
SECTION 1. Tax 11.905 is created to read:
Tax 11.905 Statistical Sample Criteria. (1) Purpose. The purpose of this section is to establish criteria applicable to field audits using statistical sampling conducted by the department. Sales transactions and purchase transactions must independently meet the criteria in sub. (4). This section does not apply to non-statistical sampling conducted by the department in field audits.
(2) Definitions. In this section:
(a) "Annual sales" means net sales reportable for federal income tax purposes for the person's taxable year.
(b) "Electronic records" means machine readable records that include electronic transactions and electronic source documents.
(c) "Electronic transaction" means a record produced by a computerized data processing accounting system that is used for recording an accounting transaction.
(d) "Maximum sample size" means the maximum number of sample units selected using statistical sampling for each sample population identified.
(e) “Net error” means the total error from the sample population determined by projecting the error from each subgroup or stratum of the sample population and summing those results.
