Tax 11.90(4)(a)(a) The penalties in this section may be waived if the person whose records were requested can show that, under all the facts and circumstances, its response to the written request for records or its failure to respond to the written request for records was reasonable or justified by factors beyond the person’s control. In determining whether the penalties will be waived, the department may consider any of the following factors: Tax 11.90(4)(a)1.1. Death of the taxpayer, tax preparer, accountant or other responsible party. Tax 11.90(4)(a)2.2. Onset of debilitating illness or injury of the taxpayer, tax preparer, accountant or other responsible party. Tax 11.90(4)(a)4.4. Records that were destroyed due to events beyond control of the taxpayer or other responsible party and not due to neglect. Tax 11.90(4)(a)5.5. Any other facts and circumstances that the department believes pertinent. Tax 11.90(4)(b)(b) Providing requested records after the time period required for providing the records has expired, as provided in sub. (3), shall result in a reduction of the penalties provided in sub. (1) (a) and (b) if the department determines that these records support a reduction in the disallowance or inclusion previously made by the department. Tax 11.90 NoteExamples: 1) Since Corporation C does not provide the records requested by the date specified in a summons request for records to support deductions for exempt sales, the department issues a proposed audit report to Corporation C disallowing all the deductions for exempt sales previously claimed, which represents the penalty provided in s. 77.61 (19) (a) 1., Stats. Additional tax of $100,000 and the penalty as provided in s. 77.61 (19) (a) 2., Stats., of $25,000 results in the proposed audit report from disallowing the deductions for exempt sales. Corporation C provides the records requested 26 days after the department issues the proposed audit report but before the notice of assessment is issued and explains, without any further detail, that they were too busy with other aspects of their business to respond to the three written requests for records by the dates specified. In this situation, the failure to provide the records requested is not reasonable or justified by factors beyond the person’s control. In addition, the records provided do not support a reduction of the exempt sales deductions disallowed in the proposed audit report. Therefore, the deductions for exempt sales adjustment is not modified so the proposed additional tax of $100,000 and the original proposed penalty as provided in s. 77.61 (19) (a) 2., Stats., of $25,000 remain. Tax 11.90 Note2) Since Mr. Smith does not provide the records requested regarding his business, which primarily receives payments in cash, to support the reported gross receipts by the date specified in a summons request for records, the department issues a notice of assessment to Mr. Smith including an estimated amount into taxable sales for unreported receipts, which represents the penalty provided in s. 77.61 (19) (a) 1., Stats. Additional tax of $60,000, a negligence penalty of $15,000 and the penalty as provided in s. 77.61 (19) (a) 2., Stats., of $15,000 results in the assessment from including these estimated receipts. Mr. Smith appeals the assessment, provides the records that were requested during the audit, and explains that he forgot to provide the records that were previously requested. In this situation, the failure to provide the records requested is not reasonable or justified by factors beyond the person’s control. However, the records provided show that unreported receipts were only 20% of the amount previously included by the department as estimated unreported receipts. Therefore, the unreported receipts adjustment is modified to reduce the additional tax from $60,000 to $12,000, the negligence penalty is reduced from $15,000 to $3,000 and the original penalty as provided in s. 77.61 (19) (a) 2., Stats., is reduced from $15,000 to $3,000. Tax 11.90 Note3) Assume the same facts as example 2, except that Mr. Smith explains that he did not previously provide the requested records because his accountant had possession of them and was in the hospital when the records were requested during the audit. In this situation the failure to provide the records requested is reasonable or justified by factors beyond the person’s control. Therefore, the unreported receipts adjustment is modified to reduce the additional tax from $60,000 to $12,000, the negligence penalty is reduced from $15,000 to $3,000 and the original penalty as provided in s. 77.61 (19) (a) 2., Stats., of $15,000 is waived. Tax 11.90 HistoryHistory: EmR0929: emerg. cr. eff. 10-19-09; CR 09-087: cr. Register June 2010 No. 654, eff. 7-1-10; correction in (3) (intro.) made under s. 13.92 (4) (b) 7., Stats., Register June 2010 No. 654; CR 17-018: am. (3) (intro.), cr. (3) (c), am. (3) (c) (Examples), (4) (b) (Examples) Register September 2019 No. 765, eff. 10-1-19; correction in (4) (b) (Examples) made under s. 13.92 (4) (b) 7., Stats., Register September 2019 No. 765. Tax 11.905(1)(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. Tax 11.905(2)(a)(a) “Annual sales” means net sales reportable for federal income tax purposes for the person’s taxable year. Tax 11.905(2)(b)(b) “Electronic records” means machine readable records that include electronic transactions and electronic source documents. Tax 11.905(2)(c)(c) “Electronic transaction” means a record produced by a computerized data processing accounting system that is used for recording an accounting transaction. Tax 11.905(2)(d)(d) “Maximum sample size” means the maximum number of sample units selected using statistical sampling for each sample population identified. Tax 11.905(2)(e)(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. Tax 11.905(2)(h)(h) “Relative precision” means the accuracy of the sample projection compared to the real or inherent value of the net error sampled for in the population. Tax 11.905(2)(i)(i) “Sample population” means the electronic transactions from the total population that will be used to draw the sample. More than one sample population may exist in the total population. Tax 11.905 NoteExample: A person uses separate accounting systems to record purchase and sales transactions. The department draws samples from two sample populations; one for purchase transactions and one for sales transactions.
Tax 11.905(2)(j)(j) “Sample unit” means a single electronic transaction within the sample population. A sample unit may be a single transaction or separate items of a transaction depending on how the person records the transaction in its data processing accounting system. Tax 11.905 NoteExample: For each equipment sales transaction, person enters two transactions in its data processing accounting system; equipment and delivery. Equipment and delivery are each sample units.
Tax 11.905(2)(k)(k) “Source document” means a record containing the detail of a transaction entered in a data processing accounting system. Tax 11.905(2)(L)(L) “Statistical sampling” means a sampling method in which the department randomly selects a sample of electronic transactions and uses probability theory to evaluate the sample results. Tax 11.905(2)(m)(m) “Total population” means all of a person’s electronic transactions produced by a computerized data processing accounting system. Tax 11.905(3)(a)(a) The department may, by field audit, determine the tax required to be paid to the state or the refund due to any person on the basis of sampling, whether or not any of the following is true: Tax 11.905(3)(b)(b) Any person with less than $10,000,000 annual sales during any year at issue in a field audit may require the department to use statistical sampling in that field audit, if all of the criteria in sub. (4) are met. Tax 11.905(3)(c)(c) Upon the department’s determination of the sample population, a sample is generated of sample units and source documents for those sample units are made available to the department’s auditor. Tax 11.905(3)(d)(d) The department may use more than one sample population to draw sample units for purposes of determining an error rate and tax due or refund. The department may use a separate sample population and sampling method to select sample units in any of the following circumstances: Tax 11.905(3)(d)1.1. Significant changes in the person’s computerized data processing accounting software. Tax 11.905(3)(d)2.2. Changes to laws that affect the tax treatment or recordkeeping of a person’s sales or purchases. Tax 11.905 NoteExample: A new exemption for certain supplies used by the person occurs in the third year of a four-year audit period. The sample units randomly selected for review occur in the first and second year of the audit period, when the exemption did not apply. If the department finds that no tax was paid on the supplies, a projection of the error for the audit period may result in an over-assessment of tax on the supplies.
Tax 11.905(3)(d)3.3. Changes to the person’s internal procedures for reporting sales and use tax. Tax 11.905(3)(d)4.4. Changes to the person’s business operations or organizational structure. Tax 11.905 NoteExample: The person began selling a new line of products in the audit period.
Tax 11.905(3)(d)5.5. Other relevant circumstances in which the use of more than one sample population or a separate sampling method to select sample units would be reasonably necessary to maintain statistical quality. Tax 11.905(4)(4) Criteria for statistical sampling. All of the following criteria must be met before statistical sampling may be used on a sample population: Tax 11.905(4)(a)(a) All accounting transactions must be maintained in an electronic format and must be capable of secure electronic transfer to the department, in a form useable by the department. Tax 11.905(4)(b)(b) The data processing accounting system must be capable of producing and transferring to the department an electronic spreadsheet of all accounts for each period under audit, including account number, account description, and year-end and pre-closing balances. Tax 11.905(4)(c)(c) All electronic sales transactions must include all of the following: Tax 11.905(4)(c)2.2. Electronic transaction number that identifies and leads to the source document. Tax 11.905(4)(d)(d) All electronic purchase transactions must include all of the following: Tax 11.905(4)(d)2.2. Electronic transaction number that identifies and leads to the source document. Tax 11.905(4)(d)5.5. Account number from accounting system or other information that identifies where the purchased item was stored, used or consumed. Tax 11.905(4)(e)(e) Documentation used to prepare each sales and use tax return filed with the department to report sales and use tax paid must be available for review by the department, including transaction detail, reports, and work papers. Tax 11.905(4)(f)(f) All sample unit source documents must be available for review by the department. Tax 11.905(4)(g)(g) There must be at least 10,000 sample units in the sample population. Tax 11.905(5)(a)(a) Except as provided in par. (b), the maximum number of sample units selected for review for each sample population from which a statistical sample is drawn may not exceed 10 percent of the sample population or 15,000 transactions, whichever is less. Tax 11.905(5)(b)(b) Paragraph (a) does not apply if the relative precision of the sample is greater than 20 percent. In determining an acceptable sample size, the department must consult with the person. Tax 11.905 NoteExample: If the relative precision of a sample is 20 percent and the net error is $100,000, there is 90% confidence that the true error of the sample population is between $80,000 and $120,000.
Tax 11.905 HistoryHistory: CR 18-080: cr. Register April 2019 No. 760, eff. 5-1-19; correction in (2) (f), (h) made under s. 35.17, Stats., Register April 2019 No. 760. Tax 11.91(1)(a)(a) A purchaser or assignee of the business or stock of goods, including furniture, fixtures, equipment, and inventory, of any retailer liable for sales or use tax shall be personally liable for the payment of the sales or use tax if the purchaser or assignee fails to withhold a sufficient amount of the purchase price to cover the taxes due. Tax 11.91(1)(b)(b) If a corporation is created and acquires the assets of a sole proprietor in consideration for the corporation’s capital stock, the corporation is liable for any sales or use tax liability of the sole proprietorship. Tax 11.91(1)(c)(c) A surviving joint tenant shall not have successor’s liability for delinquent sales or use tax where the business or inventory passes by law to the remaining joint tenant. Tax 11.91(1)(d)(d) A financial institution or mortgagee who forecloses on a loan to a retailer owing delinquent sales or use tax shall not incur successor’s liability. Tax 11.91(1)(e)(e) If a retail business or stocks of goods shall pass from A to B to C, and B’s successor’s liability shall be unpaid, such liability shall not pass to C. The new successor, C, shall be liable only for B’s unpaid sales and use tax. Tax 11.91(1)(f)(f) Successor’s liability is not incurred in a sale by a trustee in bankruptcy, in a transfer by gift or inheritance, in a sheriff’s sale, or in a sale by a personal representative or special administrator. Tax 11.91(1)(g)(g) If a creditor, including a financial institution, actually operates a business which has been voluntarily surrendered by a delinquent debtor in full or partial liquidation of a debt, the creditor is a successor. The creditor is not a successor if it acquires possession of a business voluntarily surrendered, if it never operates the business and if its sole purpose is to sell the business in its entirety, as a whole or piecemeal, at whatever price it can obtain to recover its investment. Tax 11.91(2)(a)(a) If there is no purchase price, there shall be no successor’s liability. Tax 11.91(2)(b)(b) A successor shall be liable to the extent of the purchase price. The purchase price shall include: Tax 11.91(2)(b)1.1. Consideration paid for tangible property and items, property, and goods, under s. 77.52 (1) (b), (c), and (d), Stats., and for intangibles such as leases, licenses, and good will. Tax 11.91(2)(c)(c) A successor shall be liable only for the amount of the tax liability, not for penalties and interest. Although based on the predecessor’s tax, the successor’s liability shall not bear interest. Tax 11.91(2)(d)(d) A successor’s liability shall be limited to amounts owed by the predecessor which were incurred at the location purchased. If the seller operated at more than one location while incurring a total liability for all locations, its liability incurred at the location sold shall be determined and shall represent the amount for which the successor may be held liable. Tax 11.91(2)(e)(e) Successor’s liability is determined by law and shall not be altered by agreements or contracts between a buyer and seller. Tax 11.91(3)(a)(a) A purchaser shall withhold a sufficient amount from the purchase price to cover any possible sales or use tax liability. Tax 11.91(3)(b)(b) The purchaser shall submit a written request to the department for a clearance certificate. An oral request for a clearance certificate shall not be accepted. The letter requesting the certificate shall include the real name, business name, and seller’s permit number, if known, of the prior operator. All sales tax returns for all periods during which the predecessor operated shall be filed with the department before it may issue the certificate. Tax 11.91(3)(c)(c) Under s. 77.52 (18) (bm), Stats., the department has 60 days from the date it receives the request for a clearance certificate or from the date the former owner makes its records available, whichever is later, but no later than 90 days after it receives the request, to ascertain the amount of sales tax liability, if any. The department shall within these periods, issue either:
