Chapter Tax 2

Tax 2.495(4)(d)3. 3. Subdivision 2. does not apply to any taxpayer who, before January 1, 2023, elected to use the customer billing address method defined in subd. 1m. if the taxpayer has not revoked that election, and who, for any taxable year beginning after December 31, 2021, determines its receipts factor under this section by using the average of the receipts factors determined by using (a) gross receipts, net of commissions, and (b) net gain, net of commissions, from sales of trading assets for the taxable year, with all other components of the receipts factor remaining the same. Any such taxpayer may compute its receipts factor under this subsection using that averaging method. The department cannot require any taxpayer who elected before January 1, 2023, to use the customer billing address method, if the taxpayer has not revoked that election, to use any other method of determining its receipts factor under this section.

Tax 2.495(4)(e) (e) Investment company receipts. The numerator of the receipts factor includes gross payments received on investment contracts issued by the taxpayer and held by customers if the billing address of the customer is in this state. “Investment contract” includes any bonds, shares, coupons, certificates of membership, or other obligations or agreements issued by the taxpayer to return to the holders or owners money or anything of value at some future date.

Tax 2.495(4)(f) (f) Gross receipts from underwriting services. The numerator of the receipts factor includes gross receipts, including gross commissions, gross management fees, or gross underwriting fees, earned in performing underwriting activities on behalf of the issuer of the securities if either of the following applies:

Tax 2.495(4)(f)1. 1. The issuer of the securities is not engaged in a trade or business, and the issuer’s billing address is in this state.

Tax 2.495(4)(f)2. 2. The issuer of the securities is engaged in a trade or business, the issuer of the securities maintains a regular place of business in this state, and the securities relate to that person’s business in this state. If the securities relate to that person’s regular place of business in more than one state, the receipts from the performance of the service are included in the numerator of the receipts factor according to the portion of the service received in this state. If the regular place of business to which the securities relate cannot be determined, the service is received in this state if the issuer of the securities, in the regular course of the issuer’s business, ordered the service from an office in this state. If the ordering office cannot be determined, the service is received in this state if the issuer’s billing address is in this state.

Tax 2.495(4)(g) (g) Other gross receipts or net gains. The numerator of the receipts factor includes any other gross receipts or net gains as provided in s. Tax 2.49 (4).

Tax 2.495(4)(h) (h) Receipts not taxed. For taxable years beginning before January 1, 2009, fifty percent of the taxpayer’s receipts that are apportioned under this section to a state which does not have jurisdiction to impose an income tax or franchise tax measured by net income on the taxpayer shall be included in the numerator of the apportionment fraction if the taxpayer’s commercial domicile is in this state. With regard to receipts described in pars. (a) to (f), this paragraph does not apply to taxable years beginning on or after January 1, 2009.

Tax 2.495(5) (5) Payroll factor. The payroll factor is the ratio of the total compensation paid to employees located in this state to the total compensation paid to employees located everywhere, determined in accordance with the provisions of ss. 71.04 (6) and 71.25 (8), Stats., and s. Tax 2.39 (5). “Compensation paid to employees” includes deductible management or service fees paid to a related entity directly or indirectly for the performance of personal services, and the situs of the fees is in this state if the services are performed in this state. The recipient of the fees may not include the compensation paid to its employees with respect to the personal services in either the numerator or denominator of its payroll factor.

Tax 2.495(6) (6) Property factor. The property factor is determined in accordance with the provisions of ss. 71.04 (5) and 71.25 (7), Stats., and s. Tax 2.39 (4).

Tax 2.495 Note Note: The provisions of s. Tax 2.495 first apply for taxable years beginning on January 1, 2006.

Tax 2.495 History History: CR 04-031: cr. Register June 2006 No. 606, eff. 7-1-06; corrections in (1), (2) (d) and (3) (intro.) made under s. 13.92 (4) (b) 7., Stats., Register April 2010 No. 652; EmR0943: eff. 12-31-09 and CR 10-001: am. (1), (3) (intro.), (4) (intro.) and (h), cr. (2) (em) and (3) (d), r. (3) (c), renum. (3) (d) to be (3) (c) Register June 2010 No. 654, eff. 7-1-10; CR 14-077: am. (4) (d) 1., cr. (4) (d) 1m. Register May 2015 No. 713, eff. 6-1-15; 2023 Wis. Act 19: am. (4) (d) 1., cr. (4) (d) 3. Register July 2023 No. 811, eff. 7-7-23.

Tax 2.50 Tax 2.50 Apportionment of apportionable income of interstate public utilities.

Tax 2.50(1) (1) Scope. A public utility that is engaged in business both in and outside this state shall apportion its apportionable income as provided in this section, except if the public utility is in a combined group, its 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). Nonapportionable income shall be allocated as provided in s. 71.25 (5) (b), Stats.

Tax 2.50 Note Note: A public utility that is 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 2.50(2) (2) Definitions. In this section:

Tax 2.50(2)(a) (a) “Engaged in business in and outside this state” has the same meaning as in s. Tax 2.39 (2) (b).

Tax 2.50(2)(b) (b) “Payroll factor” means the payroll fraction computed under s. 71.04 (6) or 71.25 (8), Stats., and s. Tax 2.39.

Tax 2.50(2)(c) (c) “Property factor” means the property fraction computed under s. 71.04 (5) or 71.25 (7), Stats., and s. Tax 2.39.

Tax 2.50(2)(d) (d) “Public utility” means any business entity that owns or operates any plant, equipment, property, franchise, or license for 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.

Tax 2.50(2)(e) (e) “Sales factor” means the sales fraction computed under ss. 71.04 (4m) and (7) or 71.25 (6m) and (9), Stats., and s. Tax 2.39.

Tax 2.50(3) (3) Apportionment formula computation. For taxable years beginning after December 31, 2004, a public utility that is engaged in business in and outside this state shall determine its net income for state franchise or income tax purposes as provided in this section. The public utility shall first deduct from its total net income its nonapportionable income, less related expenses. Nonapportionable income shall be allocated as provided in s. 71.25 (5) (b), Stats. The public utility shall apportion its remaining net income to this state as follows:

Tax 2.50(3)(a) (a) For taxable years beginning before January 1, 2006, apportionable income shall be apportioned using an apportionment fraction obtained by taking the arithmetical average of the sales factor, property factor, and payroll factor.

Tax 2.50(3)(b) (b) For taxable years beginning after December 31, 2005, and before January 1, 2007, apportionable income shall be apportioned using an apportionment fraction composed of the sales factor representing 60% of the fraction, the property factor representing 20% of the fraction, and the payroll factor representing 20% of the fraction.

Tax 2.50(3)(c) (c) For taxable years beginning after December 31, 2006, and before January 1, 2008, apportionable income shall be apportioned using an apportionment fraction composed of the sales factor representing 80% of the fraction, the property factor representing 10% of the fraction, and the payroll factor representing 10% of the fraction.

Tax 2.50(3)(d) (d) For taxable years beginning after December 31, 2007, apportionable income shall be apportioned using an apportionment fraction composed of the sales factor.

Tax 2.50 Note Note: Public utilities that are in combined groups must adjust the numerator and denominator of the sales factor as described in s. Tax 2.61 (7).

Tax 2.50 Note Note: The provisions of s. Tax 2.50 first apply for taxable years beginning on January 1, 2005.

Tax 2.50 Note Note: Section Tax 2.50 interprets ss. 71.04 (8) (b) and (c) and 71.25 (10) (b) and (c), Stats.

Tax 2.50 History History: Cr. Register, August, 1973, No. 212, eff. 9-1-73; am. (1), Register, February, 1990, No. 410, eff. 3-1-90; emerg. r. and recr. eff. 12-5-05; CR 05-117: r. and recr. Register June 2006 No. 606, eff. 7-1-06; corrections in (1) and (3) (intro.) made under s. 13.92 (4) (b) 7., Stats., Register April 2010 No. 652; EmR0943: eff. 12-31-09 and CR 10-001: am. (1) and (3) (intro.), renum. (2) (a) to (d) to be (2) (b) to (e), cr. (2) (a) Register June 2010 No. 654, eff. 7-1-10.

Tax 2.502 Tax 2.502 Apportionment of apportionable income of interstate telecommunications companies.

Tax 2.502(1) (1) Scope. A telecommunications company that is engaged in business both in and outside this state shall apportion its apportionable income as provided in this section, except if the telecommunications company is in a combined group, its 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). Nonapportionable income shall be allocated as provided in s. 71.25 (5) (b), Stats.

Tax 2.502 Note Note: A telecommunications company that is 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 2.502(2) (2) Definitions. In this section:

Tax 2.502(2)(a) (a) “Cable television service” means cable service as defined in 47 USC 522(6) when provided over a cable system as defined in 47 USC 522(7).

Tax 2.502(2)(am) (am) “Engaged in business in and outside this state” has the same meaning as in s. Tax 2.39 (2) (b).

Tax 2.502(2)(b) (b) “Payroll factor” means the payroll fraction computed under s. 71.04 (6) or 71.25 (8), 2001 Stats., and s. Tax 2.39.

Tax 2.502(2)(c) (c) “Property factor” means the property fraction computed under s. 71.04 (5) or 71.25 (7), 2001 Stats., and s. Tax 2.39.

Tax 2.502(2)(d) (d) “Telecommunications company” means any person that owns, operates, manages, or controls any plant or equipment used to furnish telecommunications services and cable television services within this state directly or indirectly to the public and derives at least 70% of its gross income for the current taxable year from the provision of telecommunications services and cable television services, excluding internet service and the resale of telecommunications by telecommunications resellers as defined in s. 196.01 (9), Stats. For purposes of the 70% test, gross income does not include interest, dividends, rents, royalties, capital gains or ordinary gains from asset dispositions, other than in the normal course of business. “Telecommunications company” does not include internet service providers.

Tax 2.502(2)(e) (e) The following terms have the same definitions as provided in ss. 77.51 and 77.522 (4) (a), Stats.:

Tax 2.502(2)(e)1. 1. “Ancillary services” (s. 77.51 (1ba), Stats.).

Tax 2.502(2)(e)2. 2. “Call-by-call basis” (s. 77.522 (4) (a) 2., Stats.).

Tax 2.502(2)(e)3. 3. “Communications channel” (s. 77.522 (4) (a) 3., Stats.).

Tax 2.502(2)(e)4. 4. “Customer” (s. 77.522 (4) (a) 4., Stats.).

Tax 2.502(2)(e)5. 5. “Customer channel termination point” (s. 77.522 (4) (a) 5., Stats.).

Tax 2.502(2)(e)6. 6. “Home service provider” (s. 77.522 (4) (a) 7., Stats.).

Tax 2.502(2)(e)7. 7. “Interstate telecommunications services” (s. 77.51 (5n), Stats.).

Tax 2.502(2)(e)8. 8. “Intrastate telecommunications services” (s. 77.51 (5r), Stats.).

Tax 2.502(2)(e)9. 9. “Mobile telecommunications service” (s. 77.522 (4) (a) 8., Stats.).

Tax 2.502(2)(e)10. 10. “Place of primary use” (s. 77.522 (4) (a) 9., Stats.).

Tax 2.502(2)(e)11. 11. “Postpaid calling service” (s. 77.522 (4) (a) 10., Stats.).

Tax 2.502(2)(e)12. 12. “Prepaid calling service” (s. 77.51 (10d), Stats.).

Tax 2.502(2)(e)13. 13. “Prepaid wireless calling service” (s. 77.51 (10f), Stats.).

Tax 2.502(2)(e)14. 14. “Private communication service” (s. 77.51 (11c), Stats.).

Tax 2.502(2)(e)15. 15. “Service address” (s. 77.51 (17m), Stats.).

Tax 2.502(2)(e)16. 16. “Telecommunications services” (s. 77.51 (21n), Stats.).

Tax 2.502(3) (3) Apportionment formula computation. For taxable years beginning after December 31, 2004, a telecommunications company that is engaged in business in and outside this state shall determine its net income for state franchise or income tax purposes as provided in this section. The telecommunications company shall first deduct from its total net income its nonapportionable income, less related expenses. Nonapportionable income shall be allocated as provided in s. 71.25 (5) (b), Stats. The telecommunications company shall apportion its remaining net income to this state using an apportionment fraction obtained by taking the arithmetical average of the property factor, payroll factor, and sales factor. The sales factor is determined as prescribed in subs. (4) and (5), as applicable.

Tax 2.502(4) (4) Sales factor for taxable years beginning before January 1, 2009. For taxable years beginning before January 1, 2009, the sales factor is the sales factor as would be determined under s. 71.25 (9), 2001 Stats.

Tax 2.502(5) (5) Sales factor for taxable years beginning on or after January 1, 2009. For taxable years beginning on or after January 1, 2009, the sales factor is determined as provided in s. 71.25 (9), Stats., as effective for the current taxable year. For purposes of computing the numerator of a telecommunications company’s sales factor under this subsection, the following rules apply:

Tax 2.502(5)(a) (a) General. Except as provided otherwise in par. (b) to (f), gross receipts from the sale of a telecommunications service or mobile telecommunications service are in this state if the customer’s place of primary use of the service is in this state.

Tax 2.502(5)(b) (b) Telecommunications services on call-by-call basis. Gross receipts from the sale of telecommunications services sold on an individual call-by-call basis are in this state if either of the following applies:

Tax 2.502(5)(b)1. 1. The call both originates and terminates in this state.

Tax 2.502(5)(b)2. 2. The call either originates or terminates in this state and the service address is located in this state.

Tax 2.502(5)(c) (c) Postpaid calling services, prepaid calling services, and prepaid wireless calling services. Gross receipts from the sale of postpaid calling services, prepaid calling services, and prepaid wireless calling services are in this state if the origination point of the telecommunication signal, as first identified by the service provider’s telecommunication system or, if the system used to transport telecommunication signals is not the seller’s, as identified by information received by the seller from its service provider, is located in this state.

Tax 2.502(5)(d) (d) Private communication services. The following gross receipts from the sale of private communication services are in this state:

Tax 2.502(5)(d)1. 1. Any separate charge attributable to a customer channel termination point located within this state.

Tax 2.502(5)(d)2. 2. If all customer channel termination points are located entirely in this state, the gross receipts attributable to those customer channel termination points.

Tax 2.502(5)(d)3. 3. Fifty percent of the gross receipts attributable to segments of a channel between two customer channel termination points located in different states, if one of those customer channel termination points is located in this state.

Tax 2.502(5)(d)4. 4. If the segments are not charged separately, the gross receipts attributable to segments of a communications channel that is located in this state and in more than one other state or equivalent jurisdiction, computed based on a percentage determined by dividing the number of customer channel termination points in this state by the total number of customer channel termination points in all jurisdictions where segments of the communications channel are located.

Tax 2.502(5)(e) (e) Ancillary services. Gross receipts from the sale of ancillary services are in this state if the customer’s place of primary use is in this state.

Tax 2.502(5)(f) (f) Carrier network access and sales for resale. The following gross receipts from carrier network access and from the sale of telecommunications services for resale are in this state:

Tax 2.502(5)(f)1. 1. Gross receipts from access fees attributable to intrastate telecommunications service that both originates and terminates in this state.

Tax 2.502(5)(f)2. 2. Where subd. 1. does not apply, 50 percent of the gross receipts from access fees attributable to interstate telecommunications service if the interstate call either originates or terminates in this state.

Tax 2.502(5)(f)3. 3. Gross receipts from interstate end user access line charges, including the surcharge approved by the federal communications commission and levied pursuant to 47 CFR 69, if the customer’s service address is in this state.

Tax 2.502(5)(f)4. 4. Gross receipts from sales of telecommunications services to other telecommunication service providers for resale if the reseller’s sale to the customer would be sourced to this state under the rules of this subsection, provided the information is readily available to make that determination. If the information is not readily available, the taxpayer must use a reasonable and consistent method to determine the amount of gross receipts from sales for resale that are derived from Wisconsin, based on the information that is available.

Tax 2.502(5)(g) (g) Other sales. Sales other than those described in pars. (a) to (f) are in this state if so determined under s. 71.25 (9), Stats., and s. Tax 2.39.

Tax 2.502 Note Note: Telecommunications companies that are in combined groups must adjust the numerator and denominator of each of their apportionment factors and then convert the arithmetical average of these factors to the modified sales factor. The modified sales factor then determines the company’s Wisconsin share of the combined group’s apportionable income. See s. 71.255 (5), Stats., and s. Tax 2.61 (7) for details.

Tax 2.502 Note Note: The provisions of s. Tax 2.502 first apply for taxable years beginning on January 1, 2005.

Tax 2.502 Note Note: Section Tax 2.502 interprets ss. 71.04 (8) (b) and (c) and 71.25 (10) (b) and (c), Stats.

Tax 2.502 History History: Emerg. cr., eff. 12-5-05; CR 05-117: cr. Register June 2006 No. 606, eff. 7-1-06; corrections in (1) and (3) (intro.) made under s. 13.92 (4) (b) 7., Stats., Register April 2010 No. 652; EmR0943: eff. 12-31-09 and CR 10-001: am. (1) and (3), cr. (2) (am), (e), (4) and (5), r. (2) (d) and (f), renum. (2) (e) to be (2) (d) and am. Register June 2010 No. 654, eff. 7-1-10; correction in (5) (f) 3. made under s. 13.92 (4) (b) 4., Stats., Register June 2010 No. 654; correction in (2) (e) 14. made under s. 13.92 (4) (b) 7., Stats., Register June 2018 No. 750.

Tax 2.505 Tax 2.505 Apportionment of apportionable income of interstate professional sports clubs.

Tax 2.505(1) (1) Scope. The apportionable income of professional sports clubs engaged in business in and outside Wisconsin during the year shall be apportioned to Wisconsin using the apportionment fraction described in s. 71.25 (6), Stats., and the apportionment formula computation described in s. 71.25 (6m), Stats., if applicable, except if the professional sports club is in a combined group, its 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). The property, payroll, and sales factors described in s. 71.25 (6) and (6m), Stats., shall be determined as described in this section.

Tax 2.505 Note Note: A professional sports club that is 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 2.505(2) (2) Definition. In this section, “engaged in business in and outside this state” has the same meaning as in s. Tax 2.39 (2) (b).

Tax 2.505(3) (3) Property factor. The property factor is a fraction as defined in s. 71.25 (7), Stats. Owned or rented real and tangible personal property shall be included in the factor as provided in s. 71.25 (7), Stats., and s. Tax 2.39 (4). Minor equipment, such as uniforms, and playing and practice equipment, need not be included in the factor.

Tax 2.505 Note Note: The property factor does not apply to taxable years beginning after December 31, 2007.

Tax 2.505(4) (4) Payroll factor. The payroll factor is a fraction as defined in s. 71.25 (8), Stats. Compensation shall be reported as provided in s. 71.25 (8), Stats., and s. Tax 2.39 (5). Bonuses and payments shall be included in the payroll factor on a prorated basis in accordance with internal revenue service ruling 71-137, Cum. Bull., 1971-1. Compensation paid for optioned players shall be included in the factor only if paid directly to the player by the taxpayer.

Tax 2.505 Note Note: The payroll factor does not apply to taxable years beginning after December 31, 2007.

Tax 2.505(5) (5) Sales factor. The sales factor is a fraction as defined in s. 71.25 (9), Stats. Sales shall be included in the factor in accordance with s. 71.25 (9), Stats., s. Tax 2.39 (6) and the following rules:

Tax 2.505(5)(a) (a) Gate receipts. Gate receipts include all receipts from games played at the taxpayer’s home facility plus any gate receipts received from games played away from the taxpayer’s home facility. The numerator of the sales fraction for taxpayers whose home facility is in Wisconsin shall include all gate receipts from games played in its home facility. The numerator of the sales fraction for taxpayers whose home facility is outside Wisconsin shall include the percentage of gate receipts received from games played in Wisconsin.