Tax 11.29(2) (2) General rules.

Tax 11.29(2)(a) (a) The sales price from the lease, license, or rental of tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., shall be subject to the sales and use taxes to the same extent that the sales price from the sale of the same property, item, or good would be subject to the tax. A lease is a continuing sale in Wisconsin under s. 77.51 (14) (j), Stats., and a lessor or licensor shall pay tax on the lease, license, or rental receipts sourced to Wisconsin under s. 77.522, Stats., even though the property, item, or good may have been acquired, used, or both previously by the lessee or licensee in another state.

Tax 11.29 Note Note: See s. Tax 11.32 for information explaining what is included in the “sales price.”

Tax 11.29(2)(b) (b)

Tax 11.29(2)(b)1. 1. Transfers described in sub. (1) (a) are leases, licenses, or rentals regardless of whether such transfer is considered a lease, license, or rental under generally accepted accounting principles, or any other provision of federal, state, or local law.

Tax 11.29(2)(b)2. 2. Transfers described in sub. (1) (b) are not leases, licenses, or rentals, regardless of whether such transfer is considered a lease, license, or rental under generally accepted accounting principles, or any other provision of federal, state, or local law.

Tax 11.29(2)(c) (c)

Tax 11.29(2)(c)1. 1. If a transaction does not meet the definition of “lease or rental” because title to the property, item, or good transfers to the lessor or licensor under a security or deferred payment plan upon completion of the required payments, the transaction shall be treated as a sale of the property, item, or good and the retailer is liable for the tax on the sales price at the time the property, item, or good is received by the purchaser.

Tax 11.29(2)(c)2. 2. The retailer may exclude from the sales price, as provided in s. 77.51 (15b) (b) 2., Stats., the interest and financing charges if they are separately stated on the invoice, bill of sale, or similar document that the retailer gives to the purchaser.

Tax 11.29 Note Example: Company A purchases a piece of equipment for $10,000. On October 1, 2009, Company A enters into an agreement with Company B, whereas Company B will make 24 monthly payments of $625 each, for a total of $15,000, relating to the equipment. Company B receives the equipment on November 10, 2009. Once Company B makes the last payment, title to the equipment will transfer from Company A to Company B. Since title to the equipment transfers as soon as Company B makes the last payment, the transaction is not treated as a lease, but instead is treated as a sale. Therefore, Company A’s purchase of the equipment may be made without any Wisconsin sales or use tax because it is for resale. Company A’s charges to Company B ($15,000) are subject to Wisconsin sales or use tax at the time Company B first receives the piece of equipment (November 10, 2009). Company A may exclude from tax that portion of the $15,000 that is related to interest or financing charges if the amount of the interest or financing charges are separately stated on the invoice, bill of sale, or similar document provided by Company A to Company B.

Tax 11.29(2)(c)3. 3. If the retailer in a transaction described under subd. 1., has properly reported and paid to Wisconsin the tax due on its sales price from the transaction and the retailer has not excluded from the sales price an amount for interest or financing as described in subd. 2., if the retailer subsequently allows a reduction in the payments that must be made because the purchaser pays off the balance early, the retailer may claim a deduction on its sales and use tax return for this reduction in the sales price. The deduction is limited to the amount of the sales price that the retailer previously remitted tax on to Wisconsin.

Tax 11.29 Note Example: Company X enters into an agreement with Company Y that is not a lease or rental because it meets the requirements provided in subd. 1. The agreement provides that Company Y will provide 12 monthly payments of $1,000. Based on this agreement, Company X reported and paid the 5% Wisconsin sales tax on the $12,000. Company X did not separately state any amounts for interest or financing to Company Y and did not claim a deduction from the sales price related to that. After seven payments of $1,000 have been made to Company X, Company Y decides that it is going to pay off the remaining amounts due. Company X indicates to Company Y that if it pays off the entire balance by a particular date, Company Y only needs to pay an additional $4,700, instead of the full $5,000 that is still due based on the agreement. Company Y pays the $4,700 by the date required. Since Company X had previously reported the tax due based on the full $12,000 at the time the agreement was entered into, Company X may claim the $300 difference between the amount it previously reported as the taxable sales price on this transaction ($12,000) and the discounted sales price of the transaction ($11,700, made up of the $7,000 in monthly payments and the $4,700 early payoff amount). Company X would claim the deduction as a discount allowed.

Tax 11.29(2)(c)4. 4. If the property, item, or good to which subd. 1. applies is stored, used, or otherwise consumed in Wisconsin and then relocated to a location outside Wisconsin, no refund or partial refund of the Wisconsin tax paid is allowed since the transaction is treated as a “sale” and the property was first stored, used, or otherwise consumed in Wisconsin.

Tax 11.29(2)(d) (d)

Tax 11.29(2)(d)1. 1. If a transaction does not meet the definition of “lease or rental” because title to the property, item, or good transfers to the lessor or licensor under an agreement that requires transferring title to the property, item, or good after all required payments have been made and after paying an option price that does not exceed the greater of $100 or 1% of the total amount of the payments, the transaction shall be treated as a sale of the property, item, or good and the retailer is liable for the tax on the sales price at the time the property, item, or good is received by the purchaser.

Tax 11.29(2)(d)2. 2. The retailer may exclude from the sales price, as provided in s. 77.51 (15b) (b) 2., Stats., the interest and financing charges if they are separately stated on the invoice, bill of sale, or similar document that the retailer gives to the purchaser.

Tax 11.29 Note Example: Company C purchases a piece of equipment for $20,000. On October 25, 2009, Company C enters into an agreement with Company D, whereas Company D will make 12 monthly payments of $2,000 each, for a total of $24,000, relating to the equipment. In addition, the agreement provides that after all of the $2,000 payments have been made, Company D may pay an option price of $200 and title to the equipment will be transferred to Company D. Company D receives the equipment on November 10, 2009. Since the agreement provides that title to the equipment will transfer to Company D if company D makes all the required payments and then pays an option price of $200 (which is less than 1% of the total amount of the payments), the transaction is not treated as a lease, but instead is treated as a sale. Therefore, Company C’s purchase of the equipment may be made without any Wisconsin sales or use tax because it is for resale. Company C’s charges to Company D ($24,200) are subject to Wisconsin sales or use tax at the time Company D first receives the piece of equipment (November 10, 2009). Company C may exclude from tax that portion of the $24,200 that is related to interest or financing charges if the amount of the interest or financing charges are separately stated on the invoice, bill of sale, or similar document provided by Company C to Company D.

Tax 11.29(2)(d)3. 3. If the retailer in a transaction described under subd. 1., has properly reported and paid to Wisconsin the tax due on its sales price from the transaction and the retailer has not excluded from the sales price an amount for interest or financing as described in subd. 2., if the retailer subsequently allows a reduction in the payments that must be made because the purchaser pays off the balance early, the retailer may claim a deduction on its sales and use tax return for this reduction in the sales price. The deduction is limited to the amount of the sales price that the retailer previously remitted tax on to Wisconsin.

Tax 11.29(2)(d)4. 4. If the property, item, or good to which subd. 1. applies is stored, used, or otherwise consumed in Wisconsin and then relocated to a location outside Wisconsin, no refund or partial refund of the Wisconsin tax paid is allowed since the transaction is treated as a “sale” and the property was first stored, used, or otherwise consumed in Wisconsin.

Tax 11.29(2)(e) (e) If a transaction constitutes a sale-leaseback transaction, the original sale of the property, item, or good to a purchaser may be made without tax for resale if that purchaser makes no taxable storage, use, or other consumption in Wisconsin of the property, item, or good prior to selling it. The sale of the property, item, or good from the first purchaser to a second purchaser (i.e., the person who will lease the equipment back to the first purchaser), may also be made without tax for resale if the second purchaser makes no taxable storage, use, or other consumption in Wisconsin of the property, item, or good prior to selling, leasing, licensing, or renting the property, item, or good back to the first purchaser. If the transfer of that property, item, or good from the second purchaser back to the first purchaser meets the definition of lease or rental in s. 77.51 (7) (a), Stats., the tax will be due on each payment as described in par. (a). If the transfer of that property, item, or good from the second purchaser back to the first purchaser does not meet the definition of lease or rental in s. 77.51 (7) (a), Stats., the tax will be due on the sales price from the sale of the property, item, or good from the second purchaser back to the first purchaser, as described in pars. (b) to (d).

Tax 11.29 Note Example: Company F purchases a piece of equipment for $20,000 from Company X. Prior to making any other use of the equipment, Company F sells the piece of equipment to Company G for $20,000 and immediately enters into an agreement to “lease” it back from Company G based on 12 monthly payments of $2,000 each. Based on the agreement, the “leasing back” of the equipment does not meet the definition of lease or rental contained in s. 77.51(7)(a), Stats., because title to the piece of equipment will transfer to Company F once Company F has made all of the required payments under the agreement to Company G. In this example, Company F may purchase the piece of equipment from Company X without tax because it is for resale. Company G may also purchase the piece of equipment from Company F without tax because it is for resale. However, since the agreement relating to the leaseback of the piece of equipment to Company F does not meet the definition of lease or rental contained in s. 77.51(7)(a), Stats., Company G is required to charge Wisconsin sales or use tax on the sales price of the piece of equipment (that is, the $24,000 required under the agreement), to Company F. Company G may exclude from tax that portion of the $24,000 required under the agreement that is related to interest or financing charges if the amount of the interest or financing charges are separately stated on the invoice, bill of sale, or similar document provided by Company G to Company F.

Tax 11.29(3) (3) Purchases for lease, license, or rental.

Tax 11.29(3)(a) (a) A lessor’s or licensor’s purchase of tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., to be used solely for lease, license, or rental shall be exempt as a purchase for resale.

Tax 11.29(3)(b) (b) A lessor’s or licensor’s purchase of lubricants, repair parts, and repair services for tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), or (d), Stats., used solely for leasing, licensing, or renting shall also be exempt as a purchase for resale. However, if the same property, items, or goods are purchased by a lessee, licensee, or renter, the purchases shall be taxable.

Tax 11.29(3)(c) (c) Charges by a lessor or licensor to a lessee, licensee, or renter under a maintenance contract on leased tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., shall be taxable.

Tax 11.29(4) (4) Property both rented and used personally. If tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., are purchased by a person who uses them part of the time and leases, licenses, or rents them out part of the time, the sale of the property, item, or good to the person shall be taxable. The lessor’s or licensor’s rental receipts shall also be taxable, unless the transaction is specifically exempt by statute.

Tax 11.29(5) (5) Service vs. rental of equipment.

Tax 11.29(5)(a) (a)

Tax 11.29(5)(a)1. 1. If an item of tangible personal property or item, property, or good under s. 77.52 (1) (b), (c), or (d), Stats., is provided along with an operator that is necessary for the tangible personal property or item, property, or good to operate in the manner for which it is designed and does more than maintain, inspect, or set up the tangible personal property or item, property, or good, the transaction is considered a service and not a lease, license, or rental of tangible personal property or item, property, or good under s. 77.52 (1) (b), (c), or (d), Stats.