Wisconsin introduces use tax reporting legislation

Legislation that would require certain noncollecting out-of-state sellers to provide itemized statements to Wisconsin customers is now under consideration in the Wisconsin Senate.

Under Senate Bill 259, introduced May 17, 2017, any person who makes more than $50,000 in sales of tangible personal property (TPP) and taxable services to customers in Wisconsin during the year must “provide an itemized statement to each customer in [Wisconsin] of the person’s sales to that customer in the previous year.” This requirement would not apply to any remote seller who voluntarily collects and remits Wisconsin sales and use tax.

Alternatively, the measure allows a person who would be required to provide these itemized statements to customers to instead give the Wisconsin Department of Revenue “a summary of all of the person’s sales to customers [in Wisconsin] that includes the name and address of each customer and the sales price of each sale.”

No matter which option is chosen, the Department “may impose a fee” on each seller who provides itemized statements. Revenue generated by such fees would pay administrative costs. If enacted as written, the use tax reporting requirement would apply to sales made on and after January 1, 2018.

Use tax complements sales tax and applies to taxable sales whenever sales tax wasn’t collected by the retailer at checkout. While sellers are liable for sales tax, use tax is owed by the consumer. It can be remitted directly to the state department of revenue at any time, or included with state income tax returns.

It is difficult and expensive for states to try to enforce use tax compliance. Use tax notification and reporting requirements are a way for states to facilitate collections: Notification requirements inform consumers of their use tax obligation (many are unaware of it); reporting requirements give states a list of names to audit, as well as the amount of use tax owed to each reporting vendor.

Use tax reporting requirements are becoming more commonplace, likely because the Supreme Court of the United States in December allowed Colorado’s policy, which had been embroiled in litigation since its adoption in 2010, to stand. Shortly thereafter, the Tenth Circuit Court of Appeals decided it was legal. In a concurring opinion, now Supreme Court Justice Neil Gorsuch wrote, “The plaintiffs haven’t come close to showing that the notice and reporting burdens Colorado places on out-of-state mail order and internet retailers compare unfavorably to the administrative burdens the state imposes on in-state brick-and-mortar retailers who must collect sales and use taxes.”

The following states have already enacted use tax notification and/or reporting requirements:

• Alabama, effective as of July 1, 2017
• Colorado, effective as of July 1, 2017
• Louisiana, effective as of July 1, 2017
• Oklahoma, effective as of November 1, 2016
• Vermont, effective “on the earlier of July 1, 2017 or when the State of Colorado implements a similar requirement.” Vermont has not yet committed to a start date even though Colorado has announced its policy will take effect on July 1.

In addition to Wisconsin, use tax notification and reporting requirements are under consideration in Pennsylvania and Washington. Similar measures introduced this session have stalled in Hawaii and failed in Arkansas.

Companies that make sales in any of the above states and wish to avoid the hassle of use tax reporting requirements have another option: tax automation software. Learn more.

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