Buyers beware: Wisconsin passes remote seller guidance

November 6, 2018|Brian Clark

Many out-of-state vendors with Wisconsin sales will now be required to register and collect sales tax. For businesses within the state, you’ll want to review your purchases from remote sellers to ensure you are taxed appropriately.

The U.S. Supreme Court ruled on June 21, 2018, that state and local governments are permitted to require remote sellers to register and collect sales tax, overturning a 1992 decision that had required remote sellers to collect sales tax only when they had established a physical presence in the state. Shortly after the decision was announced, the state of Wisconsin jumped on board.

What has changed in Wisconsin as a result of the Wayfair ruling?

Beginning October 1, 2018, Wisconsin will require out-of-state sellers with no physical presence in Wisconsin (remote sellers) to collect and remit sales or use tax on sales of taxable products and services into Wisconsin. Wisconsin’s new economic nexus law was implemented to increase revenue from out-of-state companies doing business in Wisconsin, many of which were not previously required to apply sales tax due to a lack of physical presence in the state.

The thresholds to register and collect sales tax in Wisconsin are $100,000 in sales or 200 transactions. There will be numerous sellers scrambling to comply with the ever-expanding list of states joining the economic nexus windfall. As a buyer, be aware that this could result in sales tax being applied incorrectly on your purchases. The majority of Wisconsin-based businesses will be impacted. Have you considered if your out-of-state vendors will accurately apply sales tax to your purchases?

Wisconsin has a two-part system where sales tax due is either charged by the seller or paid directly to the state in the form of use tax. In other words, if sales tax is not charged, in most cases you owe use tax; however, many buyers do not understand the basis of use tax and therefore are not reporting or self-assessing the tax.

Consider these action items

  1. Use tax system already in place. Consistently screen out-of-state vendors that did not previously charge sales tax or you could end up paying both sales and use tax.
  2. Review how purchases by dealerships may be affected. Purchases for resale of tangible personal property physically transferred to the customer's vehicle and which leaves the repair facility with the vehicle. Such property includes filtrs, tires, paint and motor oil. Caution: Purchases of tangible personal property not physically transferred to a customer or attached to a customer's motor vehicle are subject to tax. Examples of taxable supplies include: sandpaper, masking paper and tape, buffing pads, paint and lacquer thinner, clean and glaze compound, disc pads, paint remover. See Wisconsin Publication 202 for additional information.
  3. Review how purchases from manufacturers may be affected. Vendors selling consumables and machines exempt from sales tax for process manufacturing could now apply tax. If tax is charged, reach out to the vendors to provide an exemption certificate to remove sales tax going forward.
  4. Look at goods purchased from a retailer/wholesaler. Prior to the Wayfair decision, vendors likely did not charge sales tax either due to lack of physical nexus or with the understanding that retailers/wholesalers purchase goods to resell to the end-consumer. These vendors could start charging sales tax until an exemption for “resale” is provided.

For background and additional information related to the Wayfair ruling, review these resources:

If you have specific questions, please reach out to Brian Clark, State and Local Tax supervisor, at or any member of the State and Local Tax team at 800-236-2246.

Brian Clark, CPA, MBA, is a supervisor on Schenck’s State and Local Tax team. His experience includes coordination of sales tax audits and reverse audits as well as research, planning and compliance related to sales and use tax.