Tax 11.68 Note4) Same facts as Example 3, except the prime contractor hires a subcontractor to provide the landscaping services and to install a retaining wall. The prime contractor’s sale is not taxable. The prime contractor may provide its subcontractor with a fully completed exemption certificate claiming the exemption under s. 77.54 (60), Stats. The subcontractor is performing real property construction activities when installing the retaining wall and providing products when performing landscaping services. The landscaping subcontractor should not charge the prime contractor tax on its sale. The landscaping subcontractor is the consumer of the products consumed in the landscaping service and retaining wall installation as part of its construction contract with the prime contractor and shall pay sales or use tax on its purchases of taxable products, including landscaping materials. Tax 11.68 Note5) Same facts as Example 4, except the prime contractor does not provide the subcontractor with an exemption certificate claiming the exemption under s. 77.54 (60), Stats. The subcontractor’s sales price of the real property construction activities of the construction contract is 80 percent of the subcontractor’s total contract price so the construction contract exemption does not apply to the subcontractor’s contract with the prime contractor. The landscaping subcontractor is the consumer of and shall pay sales or use tax on its purchases of taxable products used in the retaining wall installation. The subcontractor is a retailer and shall charge sales tax to the prime contractor on the taxable landscaping services that make up 20 percent of the construction contract. Tax 11.68 Note6) A subcontractor enters into a construction contract with a prime contractor to install a parking lot and provide landscaping. The prime contractor’s contract with its customer does not meet the construction contract exemption criteria. The subcontractor is performing real property construction activities when installing the parking lot and providing products when performing landscaping services. The subcontractor’s sales price of the real property construction activities of the construction contract with the prime contractor is more than 90 percent of the subcontractor’s total contract price so the construction contract exemption applies to the subcontractor’s contract with the prime contractor. The subcontractor does not charge the prime contractor sales tax. The subcontractor shall pay sales or use tax on its purchases of taxable products, including landscaping materials.
Tax 11.68(7)(b)6.6. If the construction contract is entered into with an entity that is exempt from taxation under s. 77.54 (9a), Stats., the following apply: Tax 11.68(7)(b)6.a.a. The prime contractor is the consumer of all products used by the prime contractor in real property construction activities, but the prime contractor may purchase without tax, for resale, products that are sold by the prime contractor to the entity as part of the construction contract and that are not consumed by the prime contractor in real property construction activities. Tax 11.68(7)(b)6.b.b. A subcontractor of the prime contractor is the consumer of all products used by the subcontractor in real property construction activities, but the subcontractor may purchase without tax, for resale, products that are sold by the subcontractor to the prime contractor or another subcontractor, as part of the subcontractor’s construction contract under subd. 3., for resale to the entity and that are not consumed by the subcontractor in real property construction activities. Tax 11.68(8)(8) Property, items, and goods purchased by a person who performs both real property construction activities and sells tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., at retail, when destination of property, item, or good purchased is unknown at time of purchase. Section 77.51 (2), Stats., provides in part that a contractor engaged primarily in real property construction activities may use resale certificates only with respect to purchases of tangible personal property or items or goods under s. 77.52 (1) (b) or (d), Stats., which the contractor has sound reason to believe the contractor will sell to customers for whom the contractor will not perform real property construction activities involving the use of such tangible personal property or items or goods under s. 77.52 (1) (b) or (d), Stats. However, some construction contractors who also sell construction supplies at retail do not know when they purchase these supplies whether they will be consumed in construction contracts or resold to others. In these instances, a construction contractor may do one of the following at the time of making purchases: Tax 11.68(8)(a)(a) Give an exemption certificate claiming resale to suppliers and purchase the property, item, or good without tax. If the contractor later resells the property, item, or good, the contractor shall report the sales and collect and remit the tax on the sales price to customers. If the property, item, or good is used in fulfillment of a construction contract, the contractor shall pay a use tax on its purchase price. Tax 11.68(8)(b)(b) Pay sales tax to suppliers on all property, items, and goods purchased. If the property, item, or good is later consumed in fulfilling a real property construction contract, the tax obligation is taken care of. If the property, item, or good is resold at retail, the contractor shall collect and remit sales tax on these retail sales, but may take as a credit against the sales tax any tax paid to suppliers on the purchase of such property, item, or good. Tax 11.68(9)(9) Property, items, and goods purchased to fulfill a contract with an exempt entity. Tax 11.68(9)(a)(a) Except as provided in s. 77.54 (9m), Stats., the sales tax exemption provided to governmental units and other exempt entities, such as churches and nonprofit hospitals, does not apply to building materials purchased by a contractor for use under a construction contract to alter, repair, or improve real property for the exempt entity. The sales price received from sales of these building materials to a contractor is subject to the tax if the building materials become part of real property after construction or installation. Tax 11.68 NoteExample: A contractor shall pay the tax to its supplier of tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., purchased to construct a bridge or road, since the property, item, or good becomes a part of realty after installation. Tax 11.68(9)(b)(b) A contractor may purchase without tax for resale tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., which retain their character as personal property after installation as described in sub. (7), and taxable services, even though the resale of the property, item, good, or taxable service by the contractor is exempt when sold to a governmental unit or other exempt entity having a Wisconsin certificate of exempt status. This property includes furniture; processing machinery or equipment used in a municipal sewerage or water treatment plant; classroom laboratory sinks, tables, and other equipment; and seating for an auditorium. Taxable services include landscaping services. This exemption does not apply to property, items, goods, or taxable services which become a part of real property as described in sub. (6) and par. (a). Tax 11.68(10)(10) Use of property, items, and goods purchased outside Wisconsin. Tax 11.68(10)(a)(a) If a construction contractor, when the contractor acts as a consumer, purchases property, items, or goods outside Wisconsin for use in Wisconsin, the contractor shall pay the Wisconsin use tax, but may claim a credit against this use tax for any sales or use tax legally due and paid in the state where the purchase was made. Tax 11.68(10)(b)(b) If a construction contractor purchases property, items, or goods outside Wisconsin which will be stored in Wisconsin and subsequently used in real property construction activities outside Wisconsin, the contractor shall pay the Wisconsin use tax on those purchases, but may claim a credit against this use tax for any sales or use tax legally due and paid in the state where the purchase was made or where the property, item, or good was used prior to being stored in Wisconsin. Tax 11.68(10)(c)(c) If Wisconsin has jurisdiction over the out-of-state supplier, the supplier shall collect the use tax and remit it to the department. If the supplier fails to collect the tax, the contractor shall report and pay the tax to Wisconsin. Tax 11.68 NoteNote: The use tax as provided for in sub. (10) does not apply prior to August 12, 1993, to raw materials purchased outside Wisconsin that are, prior to being stored, used or consumed in Wisconsin, manufactured into tangible personal property by that contractor outside Wisconsin, or that are fabricated or altered outside Wisconsin by that contractor so as to become different or distinct items of tangible personal property from the constituent materials pursuant to the Circuit Court of Dane County decision in Morton Buildings, Inc. vs. Wisconsin Department of Revenue (2/10/92).
Tax 11.68(11)(a)(a) A contractor who performs real property construction activities may not add tax to any charge for labor or material, since the sales price received from these activities is not taxable. The tax which a contractor pays on its purchases of materials consumed in real property construction increases its cost of the materials and becomes a cost of doing business. Tax 11.68(11)(b)(b) A contractor’s charges for the repair, service, alteration, fitting, cleaning, painting, coating, towing, inspection, and maintenance of all tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., are taxable. Solely for the purpose of imposing the tax on these services, numerous items that in other circumstances and for other purposes are deemed part of real property are deemed to retain their character as tangible personal property. Accordingly, any construction contractor who is engaged in the repair, service, alteration, fitting, cleaning, painting, coating, towing, inspection, and maintenance of any items listed in par. (c) or other items of tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., shall register as a retailer and pay the tax on the sales price received from the performance of these services except that the tax does not apply to the original installation or complete replacement of an item listed in par. (c), if that installation or replacement is a real property construction activity under s. 77.51 (2), Stats. Tax 11.68(11)(c)(c) Section 77.52 (2) (ag), Stats., provides in part that the following items shall be considered to have retained their character as tangible personal property for purposes of repair, service, alteration, fitting, cleaning, painting, coating, towing, inspection, and maintenance, regardless of the extent to which the item is fastened to, connected with or built into real property: Tax 11.68(11)(c)38.38. Recreational, sporting, gymnasium, and athletic goods and equipment including the following: Tax 11.68(11)(c)39.39. Equipment in offices, business facilities, schools, and hospitals but not in residential facilities including personal residences, apartments, long-term care facilities, as defined under s. 16.009 (1) (em), Stats., state institutions, as defined under s. 101.123 (1) (i), Stats., Type 1 juvenile correctional facilities, as defined in s. 938.02 (19), Stats., or similar facilities including the following: Tax 11.68(11)(d)(d) Charges for tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., such as a repair part, incorporated into property listed in par. (c) being repaired are taxable. Because the item repaired is deemed personal property, any tangible personal property or item, property, or good under s. 77.52 (1) (b), (c), or (d), Stats., incorporated into it may be purchased by the contractor without tax for resale. Tax 11.68 NoteExample: If a contractor is engaged to repair a refrigerator, whether free-standing personal property or built-in so as to be a part of real property, in a home, the repair service and any charge for parts are taxable.
Tax 11.68(12)(12) Repair services contrasted with replacement services. Section 77.52 (2) (a) 10., Stats., provides that the sales price received for the repair, service, alteration, fitting, cleaning, painting, coating, towing, inspection, and maintenance of all items of tangible personal property or items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., is taxable, except that the tax does not apply to the original installation or complete replacement of an item listed in s. 77.52 (2) (ag), Stats., if that installation or replacement is a real property construction activity under s. 77.51 (2), Stats. When a contractor performs an original installation or complete replacement of an item listed in s. 77.52 (2) (ag), Stats., and that activity is a real property construction activity, the contractor’s charges for the installation of the item is not subject to tax imposed under s. 77.52 (2) (a) 10., Stats., and the contractor must pay tax on its purchase of the materials used in making the real property improvement, as described in sub. (4) (a), unless an exemption applies.
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