Tax 11.66 History History: Cr. Register, December, 1977, No. 264, eff. 1-1-78; am. (1) (a), (b), (d) and (e), (2), Register, January, 1983, No. 325, eff. 2-1-83; cr. (1) (f), Register, July, 1987, No. 379, eff. 8-1-87; emerg. r. and recr. (1) (a) and (b), eff. 10-1-89; r. and recr. Register, April, 1990, No. 412, eff. 5-1-90; renum. (3) (d) and (e) to be (4) (f) and (3) (d), Register, March, 1991, No. 423, eff. 4-1-91; r. and recr., Register, September, 1993, No. 453, eff. 10-1-93; am. (2) (intro.) and (5), Register, September, 1997, No. 501, eff. 10-1-97; CR 99-101: r. and recr. (1) (a) and (3), renum. (1) (b), (2), (4) (intro.) to (c), (f), and (5) to be (1) (d), (2) (a), (5) (intro.) to (c), (e) and (8) and am. (2) (a) (intro.), 1., 2. (intro.), (5) (intro.), (a), (c) and (e), cr. (1) (b), (c) and (e), (2) (intro.) and (b), (4), (5) (d), (6) and (7), r. (4) (d) and (e), Register November 2002 No. 563, eff. 12-1-02; EmR0924: emerg. r. and recr. eff. 10-1-09; CR 09-090: r. and recr. Register May 2010 No. 653, eff. 6-1-10; correction in (2) (d) (intro.) made under s. 13.92 (4) (b) 7., Stats., Register May 2010 No. 653; CR 10-094: am. (2) (intro.) Register November 2010 No. 659, eff. 12-1-10; CR 12-014: r. (2) (a) 9., cr. (2) (cm), am. (3) (a) 2., 3., (b), (c) Register August 2012 No. 680, eff. 9-1-12; CR 14-006: r. and recr. (1) (u), am. (1) (x) Register August 2014 No. 704, eff. 9-1-14; CR 20-018: am. (4) (b) Register July 2021 No. 787, eff. 8-1-21; CR 22-044: am. (3) (intro.), r. (3) (c), am. (3) (d) Register June 2023 No. 810, eff. 7-1-23.

Tax 11.67 Tax 11.67 Service enterprises.

Tax 11.67(1) (1) General. When a transaction involves the transfer of tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., along with the performance of a service, and the transaction is neither a bundled transaction, as defined in s. Tax 11.985, nor a transaction to which s. 77.52 (2m) (b), Stats., applies, the true objective of the purchaser shall determine whether the transaction is a sale of tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., or the performance of a service with the transfer of the property, item, or good being incidental to the performance of the service. If the objective of the purchaser is to obtain the personal property, item, or good, a taxable sale of that property, item, or good is involved. However, if the objective of the purchaser is to obtain the service, a sale of a service is involved even though, as an incidence to the service, some tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., may be transferred.

Tax 11.67 Note Example: A person performing business advisory, record keeping, payroll, and tax services for small businesses is providing a service even though this person may provide forms and binders without charge as part of the service. The person is the consumer, not the seller, of tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., furnished as an incidence to the service.

Tax 11.67(2) (2) Receipts and purchases of persons providing services.

Tax 11.67(2)(a) (a) Since persons engaged in the business of furnishing services are consumers, not retailers, of the tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., which they use in rendering their services, tax applies to the sale of the tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., to them.

Tax 11.67 Note Example: Persons engaged in the business of furnishing services include physicians, lawyers and accountants.

Tax 11.67(2)(b) (b) A person who performs a nontaxable service in conjunction with the sale of tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., is a retailer with respect to the sale, and the tax applies to the total sales price from the sale without any deduction for the work, labor, skill, time spent, or other expense of producing the property, item, or good.

Tax 11.67(2)(c) (c)

Tax 11.67(2)(c)1. 1. If there is a single charge for providing both taxable and nontaxable services that are not a bundled transaction as defined in s. 77.51 (1f), Stats., the entire charge is subject to the tax, unless it is determined by the department that another method, such as allocation or primary purpose of the transaction, more accurately reflects the tax. If the charges for taxable and nontaxable services are separately stated on an invoice, the tax applies only to the charge properly attributable to the taxable services, unless it is determined by the department that the primary purpose of the transaction method for computing the tax more accurately reflects the tax.

Tax 11.67(2)(c)2. 2. If there is a single charge for providing both taxable and nontaxable services in a transaction that is a bundled transaction as defined in s. 77.51 (1f), Stats., the entire charge is subject to the tax, except as provided in s. 77.52 (20) (b), Stats.

Tax 11.67(3) (3) Special situations.

Tax 11.67(3)(a) (a) Hospitals and clinics. Hospitals and medical clinics generally provide nontaxable professional services. They are, therefore, the consumers of tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., used in rendering the services. Hospitals and clinics which, in addition to rendering professional services, also sell tangible personal property, items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., or taxable services are retailers and shall obtain a seller’s permit and report the tax on these sales.

Tax 11.67 Note Examples: 1) Sales of drugs by a hospital or clinic pharmacy are taxable if they are not dispensed under a prescription.

Tax 11.67 Note 2) Sales of parking for motor vehicles by a hospital or clinic are taxable.

Tax 11.67 Note Note: Refer to s. Tax 11.002 for a description of permit requirements, how to apply for a permit, and the 15-day time period within which the department is required to act on permit applications.

Tax 11.67(3)(b) (b) Original manuscripts or musical arrangements. The transfer to a publisher of an original manuscript or musical arrangement for publication is not a sale of tangible personal property or a digital good under s. 77.52 (1) (d), Stats., and is not subject to the tax. However, the sale of copies of an author’s or composer’s work is a sale of tangible personal property or a digital good under s. 77.52 (1) (d), Stats., and is taxable. The sale of a manuscript is taxable if the manuscript itself is of particular value as an item of tangible personal property or as a digital good under s. 77.52 (1) (d), Stats., and the purchaser is buying the property or good, and not the service which went into it.

Tax 11.67(3)(c) (c) Artistic expressions. Sales of works of art, such as paintings and sculptures, are taxable.

Tax 11.67(3)(d) (d) Interior designer’s fee.

Tax 11.67(3)(d)1. 1. An interior designer’s fee is taxable when the designer’s services are part of a sale of tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats. If a designer bills a client only for the full list price of the property, item, or good sold and then receives the equivalent of a fee through the designer’s supplier in the form of a trade discount, the designer shall pay a tax on the full amount billed the client without any deduction for services performed.

Tax 11.67 Note Example: A designer’s fee is taxable when it is added to the bill for tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., on a cost-plus arrangement.

Tax 11.67(3)(d)2. 2. A designer’s fee is not taxable if the fee is solely for services rendered and there is no sale of tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., involved with the transaction.

Tax 11.67(3)(d)3. 3. If there is a separate charge for the designer’s fee in addition to a separate and optional charge for any tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., the designer sells to the client, the designer’s fee is not part of the sales price of the tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., if the client had all of the following choices:

Tax 11.67(3)(d)3.a. a. Purchasing the tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., from the designer for an additional, optional, fee.

Tax 11.67(3)(d)3.b. b. Purchasing the tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., from another party.

Tax 11.67(3)(d)3.c. c. Not purchasing the tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats.

Tax 11.67 Note Example: Designing a decorative scheme, advising clients or recommending colors, paints, wallpaper, fabrics, brands, or sources of supply are nontaxable services.

Tax 11.67(3)(e) (e) Research and development.

Tax 11.67(3)(e)1. 1. The development of information pursuant to a research and development contract is a sale of a service which is not subject to the sales tax. Although the person performing the research and development may be under contract to provide plans, designs, and specifications, or to test and evaluate a proposed product, the primary objective of the customer is to obtain the results of the technical skill and the experimental and research work of the engineers and other technicians of the researcher.