A Wisconsin Department of Revenue bulletin announces that the motor vehicle dealers’ measure of use tax will be increased from $154 to $157 per plate per month, effective January 1, 2018. The bulletin also discusses statistical sampling in sales and use tax audits; sales tax collection requirements for nonprofit organizations; sales and use tax law changes made by previously reported legislation, Act 217 (S.B. 89), Laws 2017 (TAXDAY, 2017/06/23, S.25); and other matters.
Part of statistical sampling in Wisconsin Department of Revenue sales and use tax audits involves defining the sample population. This includes prescreening, considering possible refund items, and evaluating alternative review methods.
In prescreening, the auditor and computer audit specialist (CAS) prescreen the data to identify transactions that may be excluded from the sample population, such as certain accounts or vendors that are unlikely to have taxable sales or transactions that did not take place in Wisconsin.
The auditor, CAS, and taxpayer should discuss possible refund items as early as possible in the audit process. If a refund claim is filed late in the audit, the auditor may not be able to include the refund claim in the audit and the taxpayer would need to appeal the audit determination. The auditor and CAS will try to limit the sample population but the taxpayer may ask to have certain types of transactions included because items could be taxed in error. The auditor and CAS will work with the taxpayer to include the transactions in the audit as appropriate. Options include (1) keeping the transactions in the sample population; (2) using a separate sampling class; and (3) 100% review.
The auditor and CAS will also consider alternate review methods. Generally, the statistical sample is the group of transactions for which the auditor will review source documentation, but some types of transactions can be more efficiently reviewed by looking at other supporting detail such as utilities with an exempt percentage, intercompany transactions, or allocated or ratio-computed exemptions. Transactions examined using an alternative method are typically excluded from the sample population.
Nonprofit Organization Tax Collection Requirements
A nonprofit organization must charge Wisconsin sales tax unless an exemption such as the occasional sale exemption for nonprofit organizations applies. A nonprofit that sells taxable products or services is required to obtain a seller’s permit and must collect and remit sales tax on those sales.
A nonprofit’s sales are exempt as occasional sales if all of the following standards are satisfied: (1) the nonprofit’s sales of otherwise taxable products occur on 75 or fewer days in a calendar year or amount to $50,000 or less in a calendar year; (2) entertainment is not involved at an event for which admission is charged; and (3) the nonprofit does not have and is not required to have a seller’s permit. (Note: Entertainment is not involved if the total amount paid for all entertainment is $10,000 or less.) If the nonprofit holds a seller‘s permit, but its sales would otherwise qualify as exempt occasional sales, the nonprofit is still required to collect and remit Wisconsin sales tax on all of its sales of taxable products and services unless another exemption applies.
A nonprofit that obtains a seller’s permit solely for an admission event involving entertainment, and that does not request inactivation of the seller’s permit after the event, does not qualify for the occasional sale exemption on its sales of taxable products and services after the event, regardless of the number of days and dollar amount of its sales. The nonprofit must request inactivation of the seller’s permit for the occasional sale exemption to apply to such sales.
Tax Bulletin No. 198, Wisconsin Department of Revenue, July 2017