Tax 2.39(5)(a)3. 3. A portion of the service is performed in Wisconsin and the base of operations of the individual is in Wisconsin.

Tax 2.39 Note Example: Corporation C has a sales office located in Wisconsin. A salesperson working out of the Wisconsin office solicits sales in Wisconsin, Minnesota and Iowa. Since a portion of the salesperson’s service is performed in Wisconsin and the salesperson’s base of operations is in Wisconsin, the compensation of the salesperson is included in the numerator of the payroll factor.

Tax 2.39(5)(a)4. 4. A portion of the service is performed in Wisconsin and, if there is no base of operations, the place from which the individual’s service is directed or controlled is in Wisconsin.

Tax 2.39 Note Example: Corporation D has its regional sales office in Wisconsin. An Iowa resident works out of her home as a salesperson for Corporation D and solicits sales in Iowa, Illinois and Wisconsin. The salesperson is directed from the regional sales office located in Wisconsin. The compensation of the Iowa salesperson is included in the numerator of the payroll factor since a portion of her service is performed in Wisconsin, she has no base of operations and she is directed from Wisconsin.

Tax 2.39(5)(a)5. 5. A portion of the service is performed within Wisconsin and neither the base of operations of the individual nor the place from which the service is directed or controlled is in any state in which some part of the service is performed, but the individual’s residence is in Wisconsin.

Tax 2.39 Note Example: Corporation E is headquartered in and has its sales office in Indiana and maintains inventory in Wisconsin. A Wisconsin resident salesperson solicits sales in Wisconsin and Minnesota. The compensation of the Wisconsin salesperson is included in the numerator of the payroll factor since a portion of the salesperson’s service is performed in Wisconsin, the salesperson is a resident of Wisconsin and the salesperson is directed or controlled from Indiana but performs no services in Indiana.

Tax 2.39(5)(a)6. 6. The individual is neither a resident of nor performs services in Wisconsin but is directed or controlled from an office in Wisconsin and returns to Wisconsin periodically for business purposes and the state in which the individual resides does not have jurisdiction to impose income or franchise taxes on the employer.

Tax 2.39 Note Example: Corporation F has its sales office in Wisconsin. A salesperson resides in Nebraska and solicits sales in Nebraska and Kansas. Corporation F does not have nexus in Nebraska or Kansas. The salesperson returns to the Wisconsin sales office for two weeks each year for meetings and training. The compensation of the Nebraska salesperson is included in the numerator of the payroll factor since he is directed from an office in Wisconsin, returns to Wisconsin periodically for business purposes and Corporation F does not have nexus in Nebraska.

Tax 2.39 Note Note: Refer to ss. 71.04 (6) (a) and (b) and 71.25 (8) (a) and (b), Stats.

Tax 2.39(5)(b) (b) Services. An individual shall be considered to be performing a service in Wisconsin during the year if the individual performs services in Wisconsin for at least 5 days during the year. The compensation of any one employee may not be split between 2 or more states during the year; however, this does not apply if the employee is transferred or changes positions during the year.

Tax 2.39(5)(c) (c) Compensation. Compensation includes:

Tax 2.39(5)(c)1. 1. Wages, salaries, commissions and any other form of remuneration paid to employees for personal services including amounts contributed to a qualified cash or deferred arrangement under section 401 (k) of the Internal Revenue Code on behalf of employees who have elected to participate in the plan. However, matching contributions to the trust by an employer under section 401 (k) of the Internal Revenue Code are not included since the employees do not have a right to receive the matching contributions directly in cash.

Tax 2.39(5)(c)2. 2. The value of board, rent, housing, lodging and other benefits or services furnished to employees by the taxpayer in return for personal services, provided that these amounts constitute income to the recipient under the federal Internal Revenue Code for the year for which the payroll factor is computed. In the case of employees not subject to the federal Internal Revenue Code, such as citizens of foreign countries employed in foreign countries, the determination of whether the benefits or services constitute income to the employees shall be made as though the employees are subject to the federal Internal Revenue Code.

Tax 2.39(5)(c)3. 3. Deductible management or service fees paid, or management or service fees allocated by the department under s. 71.10 (1), 71.30 (2) or 71.80 (1) (b), Stats., to a related corporation, as defined in section 267 (f) (1) of the Internal Revenue Code, as consideration for the performance of personal services. As provided in s. 71.25 (8) (d), Stats., the recipient of these 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 and the situs of the fees is in Wisconsin if the services fulfill one of the requirements of par. (a). Except for these management or service fees, payments made to an independent contractor or any other person not properly classifiable as an employee are excluded.

Tax 2.39 Note Examples: 1) Corporation A, headquartered in Illinois, owns 100% of the stock of Corporation B which is headquartered in Wisconsin. Employees of Corporation A perform all the accounting functions for Corporation B. For these services Corporation A charged $30,000 of office payroll as management fees to Corporation B, which paid that amount to Corporation A. If the employees of Corporation A that performed the accounting services for Corporation B were based in Illinois and spent only part of their time in Wisconsin while performing these services, no portion of the $30,000 is includable in the numerator of the payroll factor of Corporation B because the services do not meet the requirements of par. (a). The entire $30,000 is includable in the denominator of the payroll factor of Corporation B. If Corporation A files a Wisconsin return on the apportionment basis, it may not include in its computation of the payroll factor the $30,000 paid to its employees for services they performed for Corporation B.

Tax 2.39 Note 2) Corporation C, headquartered in Wisconsin, owns 100% of the stock of Corporation D which is also headquartered in Wisconsin. Employees of Corporation C prepare all tax returns for Corporation D. For these services Corporation C charged $20,000 of tax department payroll as management fees to Corporation D, which paid that amount to Corporation C. All of the services were performed in Wisconsin. The $20,000 is included in both the numerator and denominator of the payroll factor of Corporation D. Corporation C may not include the $20,000 in either the numerator or denominator of its payroll factor.

Tax 2.39 Note Note: Refer to ss. 71.04 (6) (d) and 71.25 (8) (d), Stats.

Tax 2.39(5)(d) (d) Excludable compensation. Compensation paid to produce nonapportionable income or losses or income exempt from taxation under ch. 71, Stats., may not be included in the numerator or denominator of the payroll factor.

Tax 2.39 Note Note: Refer to ss. 71.04 (6) (c) and 71.25 (8) (c), Stats.

Tax 2.39(6) (6) Sales factor.

Tax 2.39(6)(a) (a) Numerator; denominator. The numerator of the sales factor shall include the taxpayer’s gross receipts from sales that are in this state and the denominator shall include the taxpayer’s gross receipts from sales everywhere during the taxable year. Gross receipts that are not derived in the production of apportionable income and items described in ss. 71.04 (7) (f) and 71.25 (9) (f), Stats., may not be included in the sales factor.

Tax 2.39 Note Note: A corporation that is a combined group member must adjust its sales factor numerator and denominator as described in s. Tax 2.61 (7).

Tax 2.39(6)(b) (b) Sales of tangible personal property attributable to Wisconsin.

Tax 2.39(6)(b)1. 1. Gross receipts from the sales of tangible personal property, except sales to the federal government as described in subd. 4., are in Wisconsin if the property is delivered or shipped to a purchaser within Wisconsin regardless of the f.o.b. point or other conditions of the sales. Some situations in which property is considered to be delivered or shipped to a purchaser within Wisconsin are if:

Tax 2.39(6)(b)1.a. a. The property is picked up outside Wisconsin by a purchaser having a Wisconsin business location and the purchaser returns to Wisconsin with the property.

Tax 2.39 Note Example: Corporation B is a Minnesota brewer that sells beer to a Wisconsin purchaser to be picked up at the brewer’s shipping dock in Minnesota. The purchaser is a beer distributor which used its own vehicle to pick up the beer and haul it back to Wisconsin. Corporation B is subject to the tax by the state of Wisconsin. These dock sales are assigned to Wisconsin in Corporation B’s sales factor in its apportionment formula for Wisconsin tax purposes, since the purchaser’s location is in Wisconsin and the product is shipped to Wisconsin. Therefore, Corporation B, for Wisconsin franchise tax purposes, will include the amount of this dock sale in both the numerator and the denominator of the sales factor.

Tax 2.39 Note Note: In Pabst Brewing Co. v. Wisconsin Department of Revenue (Ct. App. Dist. IV, 1986), 130 Wis. 2d 291, the taxpayer sold beer to an Illinois distributor who picked it up in its own truck at the taxpayer’s Wisconsin shipping dock and hauled it to Illinois. The Court held that the sales were not Wisconsin sales, since the location of the purchaser, rather than the location of the pickup of the product, controlled the determination of where the sale was assigned for purposes of the sales factor. The Court noted that if the sales were assigned to Wisconsin, the method of delivery, a condition of the sale, would be the determinative, which is contrary to statute. These sales are referred to as “dock sales,” which are those sales where a purchaser uses its owned or rented vehicles or a common carrier it has made arrangements with to take delivery of the product at the seller-taxpayer’s shipping dock.

Tax 2.39(6)(b)1.b. b. The taxpayer, at the designation of the purchaser, or the purchaser delivers to or has the property shipped to a recipient other than the purchaser within Wisconsin.

Tax 2.39 Note Example: Corporation M is a Wisconsin manufacturer that sells plumbing ware to an Illinois wholesaler and retailer to be picked up at the manufacturer’s shipping dock in Wisconsin. The purchaser has its corporate headquarters in Illinois. The purchaser uses its own vehicle to pick up plumbing ware and haul it to the job site of the purchaser’s customer. The customer is a plumbing contractor that is working on a new motel being constructed in Madison, Wisconsin. These dock sales are assigned to Wisconsin in Corporation M’s sales factor in its apportionment formula for Wisconsin tax purposes, since the purchaser’s customer’s location is in Wisconsin and the product is shipped to Wisconsin. The delivery to the plumbing contractor was at the designation of the purchaser and that is where the product was delivered. Therefore, Corporation M, for Wisconsin franchise tax purposes, is required to include the amount of this dock sale in both the numerator and the denominator of the sales factor.