Tax 2.31 HistoryHistory: Cr. Register, May, 1996, No. 485, eff. 6-1-96. Tax 2.32Tax 2.32 Economic development surcharge — gross receipts defined. Tax 2.32(1)(1) Purpose. This section defines “gross receipts” for purposes of the economic development surcharge under subch. VII of ch. 77, Stats. Tax 2.32 NoteNote: For taxable years beginning before January 1, 2013, an economic development surcharge is imposed on: (a) individuals, estates, trusts, statutory employees and partnerships that have at least $4,000,000 in gross receipts from a trade or business for the taxable year; (b) corporations and insurers that have at least $4,000,000 in gross receipts from all activities for the taxable year; and (c) individuals, estates, trusts and partnerships engaged in farming that have at least $4,000,000 in gross receipts from farming for the taxable year. For taxable years beginning on or after January 1, 2013, an economic development surcharge is only imposed on corporations and insurers that have at least $4,000,000 in gross receipts from all activities for the taxable year.
Tax 2.32(2)(a)(a) “Gross receipts from all activities of corporations” means the sum of the following items reportable by corporations other than those listed in pars. (c) and (d): Tax 2.32(2)(a)1.1. Gross receipts or sales reportable on federal Form 1120, U. S. corporation income tax return. Tax 2.32(2)(a)6.6. The gross sales price from the disposition of capital assets and business assets includable in computing the net gain or loss on federal Form 1120. Tax 2.32(2)(a)7.7. Gross receipts passed through from other entities, and all other receipts that are included in gross income for Wisconsin franchise or income tax purposes. Tax 2.32(2)(b)(b) “Gross receipts from all activities of exempt organizations taxable as corporations” means the sum of the following items reportable by those entities: Tax 2.32(2)(b)1.1. Gross receipts or sales reportable on federal Form 990-T, exempt organization business income tax return. Tax 2.32(2)(b)2.2. The gross sales price from the disposition of capital assets and business assets includable in computing the gain or loss on federal Form 990-T. Tax 2.32(2)(b)3.3. Gross rents includable in computing rent income on federal Form 990-T. Tax 2.32(2)(b)4.4. Gross income from unrelated debt-financed property includable in computing unrelated debt-financed income on federal Form 990-T. Tax 2.32(2)(b)5.5. Gross interest, annuities, royalties and rents from controlled organizations includable in computing those items of income on federal Form 990-T. Tax 2.32(2)(b)6.6. Gross investment income includable in computing investment income on federal Form 990-T. Tax 2.32(2)(b)7.7. Gross exploited exempt activity income includable in computing that item of income on federal Form 990-T. Tax 2.32(2)(b)8.8. Gross advertising income includable in computing advertising income on federal Form 990-T. Tax 2.32(2)(b)9.9. Gross receipts passed through from other entities, and all other receipts that are included in gross income for Wisconsin franchise or income tax purposes. Tax 2.32(2)(c)(c) “Gross receipts from all activities of insurance companies” means the sum of the following items reportable by insurance companies: Tax 2.32(2)(c)1.1. Gross premiums earned reportable on Schedule A on federal Form 1120-PC, U. S. property and casualty insurance company income tax return. Tax 2.32(2)(c)2.2. Gross dividends reportable on Schedule A, or Schedule B if applicable, of federal Form 1120-PC. Tax 2.32(2)(c)3.3. Gross interest income reportable on Schedule A, or Schedule B if applicable, of federal Form 1120-PC. Tax 2.32(2)(c)4.4. Gross rents reportable on Schedule A, or Schedule B if applicable, of federal Form 1120-PC. Tax 2.32(2)(c)5.5. Gross royalties reportable on Schedule A, or Schedule B if applicable, of federal Form 1120-PC. Tax 2.32(2)(c)6.6. The gross sales price from the disposition of capital assets and business assets includable in computing the gain or loss on Schedule A, or Schedule B if applicable, of federal Form 1120-PC. Tax 2.32(2)(c)7.7. Gross receipts passed through from other entities, and all other receipts that are included in gross income for Wisconsin franchise or income tax purposes. Tax 2.32(2)(d)(d) “Gross receipts from all activities of tax-option (S) corporations” means the sum of the following items reportable by S corporations: Tax 2.32(2)(d)1.1. Gross receipts or sales reportable on federal Form 1120S, U. S. corporation income tax return for an S corporation. Tax 2.32(2)(d)2.2. Gross rents includable in computing the income from real estate and other rental activities reportable on Schedule K of federal Form 1120S. Tax 2.32(2)(d)3.3. Gross interest income reportable on Schedule K of federal Form 1120S. Tax 2.32(2)(d)4.4. Ordinary dividends reportable on Schedule K of federal Form 1120S. Tax 2.32(2)(d)5.5. Gross royalties includable in computing royalty income reportable on Schedule K of federal Form 1120S. Tax 2.32(2)(d)6.6. The gross sales price from the disposition of capital assets and business assets includable in computing the gain or loss on federal Form 1120S and Schedule K of federal Form 1120S. Tax 2.32(2)(d)7.7. Gross receipts passed through from other entities, and all other receipts that are included in gross income for Wisconsin franchise or income tax purposes. Tax 2.32(3)(3) Combined groups. The economic development surcharge applies to each member of a combined group separately. See s. Tax 2.82 for rules pertaining to the imposition and calculation of the economic development surcharge for combined group members. Tax 2.32 NoteNote: Subchapter VII of ch. 77, Stats., was amended by 1999 Wis. Act 9 to replace the expired temporary recycling surcharge with a recycling surcharge, effective for taxable years beginning on or after January 1, 2000, and by 2011 Wis. Act 32 to change the recycling surcharge to the economic development surcharge effective July 1, 2011. This section applies to the economic development surcharge. Tax 2.32 HistoryHistory: Cr. Register, August, 2000, No. 536, eff. 9-1-00; CR 10-095: am. (2) (g) (intro.), cr. (3) Register November 2010 No. 659, eff. 12-1-10; CR 12-011: am. (title), (1), (2) (a) 1., (d), 1., 3. to 6., (e) 1., (g) 1., 2., (h) 1., (3) Register July 2012 No. 679, eff. 8-1-12; CR 14-005: r. (2) (e) to (h) Register August 2014 No. 704, eff. 9-1-14; CR 19-141: am. (2) (a) 1. to 6., (b) 1. to 8., (c) 1. to 6., (d) 1. to 6. Register September 2020 No. 777, eff. 10-1-20. Tax 2.39(1)(1) General. Except as provided in sub. (3), any person, except resident individuals, resident estates, and resident trusts, engaged in business both in and outside this state shall apportion its apportionable income using the statutory apportionment method as provided in s. 71.04 (4) or 71.25 (6), Stats., when the person’s business in this state is an integral part of a unitary business unless the department, in writing, allows reporting on a different basis. However, if a corporation is in a combined group, the corporation’s 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) or (8), as applicable. Nonapportionable income shall be allocated as provided in s. 71.25 (5) (b), Stats. Tax 2.39 NoteNote: See s. Tax 2.62 for rules that apply to determining if a unitary business exists. Tax 2.39 NoteNote: 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 2.39(2)(b)(b) “Engaged in business in and outside this state” means having business activity which is sufficient to create nexus in this state and at least one other state or foreign country. For a combined group, the activities of the combined group are taken as a whole in determining if the combined group is engaged in business in and outside this state, as provided in s. 71.255 (5) (a), Stats. Tax 2.39(2)(c)(c) “Gross receipts” means gross sales less returns and allowances, plus service charges, freight, carrying charges or time-price differential charges incidental to the sales. Federal and state excise taxes, including sales and use taxes, shall be included as part of the receipts if the taxes are passed on to the purchaser or included as part of the selling price of the product. Tax 2.39(2)(cm)(cm) “Intangible property” includes 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. Intangible property does not include stocks, bonds, certificates of deposit, or other securities. Tax 2.39(2)(d)(d) “Nexus” means that a taxpayer’s business activity in a state or foreign country is of such a degree that the state or foreign country has jurisdiction to impose an income tax or franchise tax measured by net income on the taxpayer. For a combined group, the activities of the combined group are taken as a whole in determining if the combined group has nexus in a state or foreign country, as provided in s. 71.255 (5) (a), Stats. Nexus may exist even if a state or foreign country does not impose a tax on the taxpayer. Conversely, voluntary filing and paying income or franchise taxes when not required to do so, or paying a fee for qualification, organization or for the privilege of doing business in that state or foreign country does not, in itself, create nexus. Tax 2.39 NoteNote: Refer to s. Tax 2.82 for a description of factors which are recognized in determining whether nexus exists. Tax 2.39 NoteExamples: 1) State A imposes a corporation franchise tax measured by net income for the privilege of doing business in that state. Corporation X files a return and pays the $50 minimum tax, although it carries on no activities in State A. Corporation X does not have nexus in State A under these circumstances.
Tax 2.39 Note2) State B requires all nonresident corporations which qualify or register to do business in State B to pay to the secretary of state an annual license fee or tax for the privilege of doing business in the state regardless of whether the privilege is in fact exercised. The amount paid is determined according to the total authorized capital stock of the corporation; the rates are progressively higher by bracketed amounts. The statute sets a minimum fee of $50 and a maximum fee of $500. State B also imposes a corporation income tax. Nonresident Corporation Y is qualified to do business in State B and pays the required fee to the secretary of state but does not carry on any activities in State B. Corporation Y does not have nexus in State B under these circumstances.
Tax 2.39 Note3) State C requires all nonresident corporations qualified or registered to do business in State C to pay to the secretary of state an annual permit fee or tax for doing business in the state. The base of the fee or tax is the sum of (1) outstanding capital stock, and (2) surplus and undivided profits. The fee or tax base attributable to State C is determined by a three-factor apportionment formula. Nonresident Corporation Z, which operates a plant in State C, pays the required fee or tax to the secretary of state. Corporation Z by virtue of its operation of a plant in State C has nexus in State C.
Tax 2.39 Note4) State D imposes a corporation franchise tax measured by net income for the privilege of doing business in that state. Corporation W files a return based upon its business activities in the state but the amount of computed liability is less than the minimum tax. Corporation W pays the minimum tax. Corporation W has nexus in State D under these circumstances.
Tax 2.39 Note5) Corporation U is actively engaged in manufacturing farm equipment in State E. State E imposes a net income tax but exempts corporations engaged in manufacturing farm equipment. Corporation U has nexus in State E under these circumstances.
Tax 2.39 Note6) Corporation V has a sales office and warehouse located in State F. State F does not impose a corporation franchise or income tax. Corporation V has nexus in State F.
Tax 2.39(2)(f)(f) “State” means any state of the United States, the District of Columbia, the commonwealth of Puerto Rico, and any territory or possession of the United States. A foreign country is not a state. Tax 2.39(3)(a)1.1. For taxable years beginning before January 1, 2006, persons engaged in business in and outside this state, except direct air carriers, financial organizations, telecommunications companies, pipeline companies, public utilities, and railroads, as defined in ss. 71.04 (8) (a) and (b) 1. and 71.25 (10) (a) and (b) 1., Stats., and corporations that are authorized to use an alternative method of apportionment under s. 71.25 (14), Stats., shall use an apportionment fraction as described in s. 71.04 (4) (a) or 71.25 (6) (a), Stats. Property, payroll, or sales related to the production of nonapportionable income may not be included in either the numerator or the denominator of any of the apportionment factors. Tax 2.39(3)(a)2.2. If one of the factors described in subd. 1. is omitted pursuant to s. 71.04 (10) or 71.25 (11), Stats., the percentages of the fraction represented by the remaining factors shall be adjusted as follows: Tax 2.39(3)(a)2.a.a. If either the property factor or payroll factor is omitted, the other factor shall represent 33.3333 percent of the fraction and the sales factor shall represent 66.6667 percent of the fraction. Tax 2.39(3)(a)2.b.b. If the sales factor is omitted, the property factor and the payroll factor shall each represent 50 percent of the fraction. Tax 2.39(3)(b)1.1. For taxable years beginning after December 31, 2005, and before January 1, 2007, persons engaged in business in and outside this state, except direct air carriers, financial organizations, telecommunications companies, pipeline companies, public utilities, and railroads, as defined in ss. 71.04 (8) (a) and (b) 2. and 71.25 (10) (a) and (b) 2., Stats., and corporations that are authorized to use an alternative method of apportionment under s. 71.25 (14), Stats., shall use an apportionment fraction as described in s. 71.04 (4) (b) or 71.25 (6) (b), Stats. Property, payroll, or sales related to the production of nonapportionable income may not be included in either the numerator or the denominator of any of the apportionment factors. Tax 2.39(3)(b)2.2. If one of the factors described in subd. 1. is omitted pursuant to s. 71.04 (10) or 71.25 (11), Stats., the percentages of the fraction represented by the remaining factors shall be adjusted as follows: Tax 2.39(3)(b)2.a.a. If either the property factor or payroll factor is omitted, the other factor shall represent 25 percent of the fraction and the sales factor shall represent 75 percent of the fraction. Tax 2.39(3)(b)2.b.b. If the sales factor is omitted, the property factor and the payroll factor shall each represent 50 percent of the fraction. Tax 2.39(3)(c)1.1. For taxable years beginning after December 31, 2006, and before January 1, 2008, persons engaged in business in and outside this state, except direct air carriers, financial organizations, telecommunications companies, pipeline companies, public utilities, and railroads, as defined in ss. 71.04 (8) (a) and (b) 2. and 71.25 (10) (a) and (b) 2., Stats., and corporations that are authorized to use an alternative method of apportionment under s. 71.25 (14), Stats., shall use an apportionment fraction as described in s. 71.04 (4) (c) or 71.25 (6) (c), Stats. Property, payroll, or sales related to the production of nonapportionable income may not be included in either the numerator or the denominator of any of the apportionment factors. Tax 2.39(3)(c)2.2. If one of the factors described in subd. 1. is omitted pursuant to s. 71.04 (10) or 71.25 (11), Stats., the percentages of the fraction represented by the remaining factors shall be adjusted as follows: Tax 2.39(3)(c)2.a.a. If either the property factor or payroll factor is omitted, the other factor shall represent 11.1111 percent of the fraction and the sales factor shall represent 88.8889 percent of the fraction. Tax 2.39(3)(c)2.b.b. If the sales factor is omitted, the property factor and the payroll factor shall each represent 50 percent of the fraction. Tax 2.39(3)(d)(d) For taxable years beginning after December 31, 2007, persons engaged in business in and outside this state, except direct air carriers, financial organizations, telecommunications companies, pipeline companies, public utilities, and railroads, as defined in ss. 71.04 (8) (a) and (b) 2. and 71.25 (10) (a) and (b) 2., Stats., and corporations that are authorized to use an alternative method of apportionment under s. 71.25 (14), Stats., shall use only the sales factor to compute the apportionment fraction, as provided in s. 71.04 (4) (d) or 71.25 (6) (d), Stats. Sales related to the production of nonapportionable income may not be included in either the numerator or the denominator of the sales factor. If either the numerator or the denominator of the sales factor is zero or a negative number, the sales factor shall be determined as described in ss. 71.04 (4m) (a) 2., (b) 2., or (c) 2. or 71.25 (6m) (a) 2., (b) 2., or (c) 2., Stats. Tax 2.39 NoteNote: See ss. Tax 2.46, 2.47, 2.475, 2.48, 2.49, 2.495, 2.50, 2.502, and 2.505 for special apportionment fractions of interstate direct air carriers, motor carriers, railroads, pipelines, financial institutions, broker-dealers, investment advisers, investment companies, underwriters, public utilities, telecommunications companies, and professional sports clubs. Tax 2.39 NoteNote: Corporations that are in combined groups use a modified sales factor to compute their Wisconsin share of apportionable income of the entire combined group. See s. 71.255 (5), Stats., and s. Tax 2.61 (7) for details. Tax 2.39(3)(e)(e) The apportionment method may be used only if the taxpayer or combined group is engaged in business both in Wisconsin and at least one other state or foreign country and its business in Wisconsin is an integral part of a unitary business. For a combined group that has made the controlled group election provided in s. 71.255 (2m), Stats., the entire combined group’s business is deemed to be a single unitary business. Tax 2.39 NoteNote: A qualifying combined group may petition for an alternative apportionment method. See s. Tax 2.64 for details.
