Chapter 71

71.25(9)(dh)2.b. b. The service relates to tangible personal property that is delivered directly or indirectly to customers in this state.

71.25(9)(dh)2.c. c. The service is purchased by an individual who is physically present in this state at the time that the service is received.

71.25(9)(dh)2.d. d. The service is provided to a person engaged in a trade or business in this state and relates to that person’s business in this state.

71.25(9)(dh)3. 3. Except as provided in subd. 4. if the purchaser of a service receives the benefit of a service in more than one state, the gross receipts from the performance of the service are included in the numerator of the sales factor according to the portion of the service received in this state.

71.25(9)(dh)4. 4. For taxable years beginning after December 31, 2018, a broadcaster’s gross receipts from advertising are in this state only if the advertiser’s commercial domicile is in this state. With regard to a broadcaster who is a member of a combined group, as defined in s. 71.255 (1) (a), this subdivision does not apply to the gross receipts of the members who are not broadcasters.

71.25(9)(dj) (dj)

71.25(9)(dj)1. 1. Except as provided in subd. 2m. and par. (df), gross royalties and other gross receipts received for the use or license of intangible property, including patents, copyrights, trademarks, trade names, service names, franchises, licenses, plans, specifications, blueprints, processes, techniques, formulas, designs, layouts, patterns, drawings, manuals, technical know-how, contracts, and customer lists, are sales in this state if any of the following applies:

71.25(9)(dj)1.a. a. The purchaser or licensee uses the intangible property in the operation of a trade or business at a location in this state. Except as provided in subd. 2m., if the purchaser or licensee uses the intangible property in the operation of a trade or business in more than one state, the gross royalties and other gross receipts from the use of the intangible property shall be divided between those states having jurisdiction to impose an income tax on the taxpayer in proportion to the use of the intangible property in those states.

71.25(9)(dj)1.b. b. The purchaser or licensee is billed for the purchase or license of the use of the intangible property at a location in this state.

71.25(9)(dj)1.c. c. The purchaser or licensee of the use of the intangible property has its commercial domicile in this state.

71.25(9)(dj)2m. 2m. For taxable years beginning after December 31, 2018, a broadcaster’s gross royalties and other gross receipts received for the use or license of intangible property are sales in this state only if the commercial domicile of the purchaser or licensee is in this state and the purchaser or licensee has a direct connection or relationship with the broadcaster pursuant to a contract under which the royalties or receipts are derived. With regard to a broadcaster who is a member of a combined group, as defined in s. 71.255 (1) (a), this subdivision does not apply to the gross royalties and receipts of the members who are not broadcasters.

71.25(9)(dk) (dk) Sales of intangible property, excluding securities, are sales in this state if any of the following applies:

71.25(9)(dk)1. 1. The purchaser uses the intangible property in the regular course of business operations in this state or for personal use in this state. If the purchaser uses the intangible property in more than one state, the sales shall be divided between those states having jurisdiction to impose an income tax on the taxpayer in proportion to the use of the intangible property in those states.

71.25(9)(dk)2. 2. The purchaser is billed for the purchase of the intangible property at a location in this state.

71.25(9)(dk)3. 3. The purchaser of the intangible property has its commercial domicile in this state.

71.25(9)(e) (e) In this subsection, “sales” includes, but is not limited to, the following items related to the production of business income:

71.25(9)(e)1. 1. Gross receipts from the sale of inventory.

71.25(9)(e)2. 2. Gross receipts from the operation of farms, mines and quarries.

71.25(9)(e)3. 3. Gross receipts from the sale of scrap or by-products.

71.25(9)(e)4. 4. Gross commissions.

71.25(9)(e)5. 5. Gross receipts from personal and other services.

71.25(9)(e)6. 6. Gross rents from real property or tangible personal property.

71.25(9)(e)7. 7. Interest on trade accounts and trade notes receivable.

71.25(9)(e)8. 8. A partner’s share of the partnership’s gross receipts or a member’s share of the limited liability company’s gross receipts.

71.25(9)(e)9. 9. Gross management fees.

71.25(9)(e)10. 10. Gross royalties from income-producing activities.

71.25(9)(e)11. 11. Gross franchise fees from income-producing activities.

71.25(9)(f) (f) The following items are among those that are not included in “sales” in this subsection:

71.25(9)(f)1. 1. Gross receipts and gain or loss from the sale of tangible business assets, except those under par. (e) 1., 2. and 3.

71.25(9)(f)2. 2. Gross receipts and gain or loss from the sale of nonbusiness real or tangible personal property.

71.25(9)(f)3. 3. Gross rents and rental income or loss from real property or tangible personal property if that real property or tangible personal property is not used in the production of business income.

71.25(9)(f)4. 4. Royalties from nonbusiness real property or nonbusiness tangible personal property.

71.25(9)(f)5. 5. Proceeds and gain or loss from the redemption of securities.

71.25(9)(f)6. 6. Interest, except interest under par. (e) 7., and dividends.

71.25(9)(f)7. 7. Gross receipts and gain or loss from the sale of intangible assets, except those under par. (e) 1.

71.25(9)(f)8. 8. Dividends deductible by corporations in determining net income.

71.25(9)(f)9. 9. Gross receipts and gain or loss from the sale of securities.

71.25(9)(f)10. 10. Proceeds and gain or loss from the sale of receivables.

71.25(9)(f)11. 11. Refunds, rebates and recoveries of amounts previously expended or deducted.

71.25(9)(f)12. 12. Other items not includable in apportionable income.

71.25(9)(f)13. 13. Foreign exchange gain or loss.

71.25(9)(f)14. 14. Royalties and income from passive investments in the property under sub. (5) (a) 21.

71.25(9)(f)16. 16. Pari-mutuel wager winnings or purses under ch. 562.

71.25(9)(f)17. 17. Gross receipts from sales of property or services as part of performing disaster relief work, as defined in s. 323.12 (5) (a) 3.

71.25(9)(g) (g)

71.25(9)(g)1. 1. For taxable years beginning after December 31, 2018, the amount of a broadcaster’s gross receipts from advertising and the use or license of intangible property, as determined under pars. (dh) 4. and (dj) 2m., shall be adjusted as follows:

71.25(9)(g)1.a. a. Determine the amount of the numerator of the sales factor for a broadcaster as provided in this subsection.

71.25(9)(g)1.b. b. Multiply .01 by the total amount of the domestic gross receipts of the broadcaster from advertising and royalties and other gross receipts for the use or license of intangible property.

71.25(9)(g)1.c. c. Determine the numerator of the sales for a broadcaster by substituting the amount determined under subd. 1. b. for the total amount determined under subd. 1. a.

71.25(9)(g)1.d. d. Except as provided in subd. 1. e., if the amount of the numerator determined under subd. 1. c. is more than the amount determined under subd. 1. a., substitute the amount of total gross receipts determined under subd. 1. b. for the total amount of the gross receipts determined under subd. 1. a. For purposes of this subd. 1. d., the amount of the numerator for a broadcaster is the amount determined under subd. 1. c.

71.25(9)(g)1.e. e. If the amount of the numerator computed under subd. 1. c. is more than 140 percent of the amount determined under subd. 1. a., adjust the total amount of the gross receipts under subd. 1. a. so that the amount of the numerator for a broadcaster is 140 percent of the numerator otherwise determined under subd. 1. a.

71.25(9)(g)2. 2. The department may promulgate rules to administer this paragraph.

71.25(10) (10) Railroads, financial organizations and public utilities.

71.25(10)(a) (a)

71.25(10)(a)1. 1. In this section, “financial organization” means any bank, trust company, savings bank, industrial bank, land bank, safe deposit company, private banker, savings and loan association, credit union, cooperative bank, small loan company, sales finance company, investment company, brokerage house, underwriter or any type of insurance company.

71.25(10)(a)2. 2. As used in this section, “financial organization” includes any subsidiary of an entity described in subd. 1., if a significant purpose for the subsidiary is to hold investments or if the subsidiary primarily functions to hold investments.

71.25(10)(b) (b)

71.25(10)(b)1. 1. In this section, for taxable years beginning before January 1, 2006, “public utility” means any business entity described under subd. 2. and any business entity which owns or operates any plant, equipment, property, franchise, or license for the transmission of communications or 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.

71.25(10)(b)2. 2. In this section, for taxable years beginning after December 31, 2005, “public utility” means any business entity providing service to the public and engaged in the transportation of goods and persons for hire, as defined in s. 194.01 (4), regardless of whether or not the entity’s rates or charges for services have been established or approved by a federal, state or local government or governmental agency.

71.25(10)(c) (c) The net business income of railroads, car line companies, pipeline companies, financial organizations, telecommunications companies, air carriers, and public utilities requiring apportionment shall be apportioned pursuant to rules of the department of revenue, but the income taxed is limited to the income derived from business transacted and property located within the state.

71.25 Cross-reference Cross-reference: See also ss. Tax 2.46, 2.47, 2.475, 2.48, 2.49, 2.495, 2.50, and 2.502, Wis. adm. code.

71.25(11) (11) Department may waive factor. Where, in the case of any corporation engaged in business in and outside of this state and required to apportion its income as provided in sub. (6), it shall be shown to the satisfaction of the department of revenue that the use of any one of the 3 factors provided in sub. (6) gives an unreasonable or inequitable final average ratio because of the fact that such corporation does not employ, to any appreciable extent in its trade or business in producing the income taxed, the factors made use of in obtaining such ratio, this factor may, with the approval of the department of revenue, be omitted in obtaining the final average ratio which is to be applied to the remaining net income. This subsection does not apply to taxable years beginning after December 31, 2007.

71.25(12) (12) Department may apportion by rule. If the income of any such corporation properly assignable to the state of Wisconsin cannot be ascertained with reasonable certainty by the methods under this section, then the same shall be apportioned and allocated under such rules as the department of revenue may prescribe.

71.25 Cross-reference Cross-reference: See also s. Tax 2.45, Wis. adm. code.

71.25(13) (13) Unrelated business taxable income. The unrelated business taxable income of organizations that are subject to tax on that income under s. 71.26 (1) (a) shall be apportioned under the department of revenue’s rules.

71.25(14) (14) Alternative allocation.

71.25(14)(a) (a) Upon request by a corporation on or before January 1, 2000, the department of revenue may authorize a corporation or a subsidiary thereof to use or continue to use a different method of apportioning its income to this state for purposes of this subchapter, and may specify the method of apportionment that the corporation or subsidiary shall use. This paragraph is to be used exclusively in the event of a corporate restructuring that would result in an unfair representation of the degree of business activity in this state. In no instance may the alternative method proposed under the new corporate structure result in less franchise or income tax revenue to the state than the current corporate structure is liable for, given the same overall level of sales, payroll and property.

71.25(14)(b) (b) Before the department of revenue grants permission to any corporation to use an alternative method of allocation under par. (a), the department of revenue shall promulgate rules that specify in more detail the circumstances in which that authority may be granted and the kinds of alternative methods that the department may authorize.

71.25(14)(c) (c) At least 14 days before giving final approval to an alternative method of apportionment under par. (a), the department of revenue shall submit the proposed alternative method of apportionment to the cochairpersons of the joint committee for review of administrative rules, together with a description of the proposed alternative and the reasons for the proposed alternative. If, within 14 days after receipt of the proposed alternative method, the cochairpersons of the joint committee for review of administrative rules do not notify the department of revenue that the proposed alternative must be promulgated as an administrative rule in order to be used, the department of revenue may give final approval to the proposed method without promulgating an administrative rule. If the cochairpersons of the joint committee for review of administrative rules notify the department of revenue within 14 days after receipt of the proposed alternative that the proposed alternative must be promulgated as an administrative rule, the proposed alternative may not be used until it is promulgated as an administrative rule under ch. 227.

71.25(15) (15) Partnerships and limited liability companies.

71.25(15)(a) (a) A general or limited partner’s share of the numerator and denominator of a partnership’s apportionment factors under this section are included in the numerator and denominator of the general or limited partner’s apportionment factors under this section.

71.25(15)(b) (b) If a limited liability company is treated as a partnership, for federal tax purposes, a member’s share of the numerator and denominator of a limited liability company’s apportionment factors under this section are included in the numerator and denominator of the member’s apportionment factors under this section.

71.25(16) (16) Disaster relief work. For purposes of the apportionment of any income under this section, the disaster relief work, as defined in s. 323.12 (5) (a) 3., of an out-of-state business, as defined in s. 323.12 (5) (a) 6., shall not increase the amount of income apportioned to this state. For purposes of sub. (7), any property brought temporarily into this state by an out-of-state business in connection with performing disaster relief work is not considered property located in this state. For purposes of sub. (8), compensation paid to out-of-state employees, as defined in s. 323.12 (5) (a) 7., who are performing disaster relief work is not considered compensation paid in this state. For purposes of sub. (9), gross receipts from the sale of property or services as part of performing any disaster relief work are not considered gross receipts from sales received in this state.

71.25 History History: 1987 a. 312; 1987 a. 411 ss. 57, 62, 117 to 123; 1989 a. 31; 1991 a. 39, 269; 1993 a. 112; 1997 a. 299; 1999 a. 9; 2001 a. 16; 2003 a. 37; 2005 a. 25; 2009 a. 2, 28, 276; 2015 a. 84, 216; 2017 a. 59; 2021 a. 239.

71.25 Cross-reference Cross-reference: See also s. Tax 2.39, Wis. adm. code.

71.25 Annotation Under sub. (6), it is within the Department of Revenue’s discretion to decide whether to permit a multistate business to deviate from the apportionment method. Nelson Brothers Furniture Corp. v. DOR, 152 Wis. 2d 746, 449 N.W.2d 328 (Ct. App. 1989).

71.25 Annotation Discussing subjecting an entity’s income to apportionment when the entity’s operations constitute a “unitary business” under sub. (6). Chilstrom Erecting Corp. v. DOR, 174 Wis. 2d 517, 497 N.W.2d 785 (Ct. App. 1993).

71.25 Annotation A corporation’s investment income that served an “operational” function and was not unrelated to corporate functions within the state was subject to apportionment. Port Affiliates, Inc. v. DOR, 190 Wis. 2d 271, 526 N.W.2d 806 (Ct. App. 1994).

71.25 Annotation Sub. (9) (df) is limited to a “licensee” who uses software in Wisconsin. The provision makes no reference to use of the computer software in this state by a “sublicensee.” In this case, when the defendant taxpayer received royalties from licensing its software to businesses that were not located in this state and that manufactured or assembled computers that incorporated the defendant’s software but whose products were used in this state under a sublicense, the royalties were not considered in calculating the defendant’s franchise tax liability under this section. The software end-users were not licensees of the defendant. DOR v. Microsoft Corp., 2019 WI App 62, 389 Wis. 2d 350, 936 N.W.2d 160, 18-2024.

71.255 71.255 Combined reporting.

71.255(1) (1) Definitions. In this section:

71.255(1)(a) (a) “Combined group” means the group of all persons whose income and apportionment factors are required to be taken into account under sub. (2) to determine a member’s share of the net business income or loss apportionable to this state that is attributable to a unitary business.

71.255(1)(b) (b) “Combined report” means a report in the form and manner prescribed by the department that specifies a combined group’s income from the unitary business, apportionment factors attributable to the unitary business, and any other tax return information prescribed by the department.

71.255(1)(c) (c) “Commonly controlled group” means any of the following:

71.255(1)(c)1. 1. A parent corporation and any one or more corporations or chains of corporations that are connected to the parent corporation by direct or indirect ownership by the parent corporation, if the parent corporation owns stock representing more than 50 percent of the voting power of at least one of the connected corporations or if the parent corporation or any of the connected corporations owns stock that cumulatively represents more than 50 percent of the voting power of each of the connected corporations.

71.255(1)(c)2. 2. Any 2 or more corporations if a common owner, regardless of whether the owner is a corporate entity, directly or indirectly owns stock representing more than 50 percent of the voting power of the corporations or connected corporations.

71.255(1)(c)3. 3. Any 2 or more corporations if stock representing more than 50 percent of the voting power in each corporation are interests that cannot be separately transferred.

71.255(1)(c)4. 4. Any 2 or more corporations if stock representing more than 50 percent of the voting power in each corporation is directly owned by, or for the benefit of, family members. In this subdivision, “family member” means an individual related by blood, marriage, or adoption within the 3rd degree of kinship, as computed under s. 990.001 (16), or the spouse of such individual.

71.255(1)(d) (d) “Consolidated foreign operating corporation” means a corporation that, for the taxable year, satisfies all of the following conditions: