Numerous car rental charges are subject to both the 5% Wisconsin state sales or use tax and an additional local exposition 3% car rental tax.
The Wisconsin Department of Revenue updated information on local rental car tax in a January 2014 tax publication. Some of it reads a little like a nursery rhyme or tongue twister:
“If the lessee does not receive the automobile at the lessor’s business location, the sale takes place at the location where the lessee or the lessee’s designated donee receives the automobile, including the location indicated by the instructions known to the lessor for delivery to the lessee or the lessee’s designated donee.”
Can you say “lessee’s designated donee” 10 times, fast?
Whether you can or can't doesn’t really matter. However, the location where the lessee (or the lessee’s designated donee) receives the automobile does matter, as it impacts the taxability of the rented vehicle. Retailers need to know, as they are required to collect the tax when it's due. In addition, transactions “that are subject to the local exposition rental car tax" are also generally "subject to a state rental vehicle fee of 5%.”
Rental cars are exempt from tax in certain situations. These include, but are not limited to:
- Rerentals (exempt from both rental car tax and state sales tax);
- Service or repair replacement vehicles (exempt from rental car tax only);
- Rentals to the federal government (both);
- Rentals to any federally recognized American Indian Tribe or band in Wisconsin; and
- Rentals by any private or public elementary or secondary school exempt from Wisconsin income or franchise taxes, including school districts.
Without a valid exemption certificate to support an exempt sale, car rental businesses are liable for the tax.
Additional information on the taxation of rental cars in Wisconsin is available in Part II.A and Section VIII of Local Exposition Taxes, and in Tax Publication 202, Sales and Use Tax Information for Motor Vehicle Sales, Leases, and Repairs.
And next time you’re in Wisconsin, you may just want to ride the bus.
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