As a business owner selling taxable goods or services, you act as an agent of the state of Wisconsin by collecting tax from purchasers and passing it along to the appropriate tax authority. Sales and use tax in Wisconsin is administered by the Wisconsin Department of Revenue (DOR).
Any sales tax collected from customers belongs to the state of Wisconsin, not you. It’s your responsibility to manage the taxes you collect to remain in compliance with state and local laws. Failure to do so can lead to penalties and interest charges.
In Wisconsin, sales tax is levied on the sale of tangible goods and some services. The tax is collected by the seller and remitted to state tax authorities. The seller acts as a de facto collector.
To help you determine whether you need to collect sales tax in Wisconsin, start by answering these three questions:
If the answer to all three questions is yes, you’re required to register with the state tax authority, collect the correct amount of sales tax per sale, file returns, and remit to the state.
If you meet the criteria for collecting sales tax and choose not to, you’ll be held responsible for the tax due, plus applicable penalties and interest.
It’s extremely important to set up tax collection at the point of sale — it’s near impossible to collect sales tax from customers after a transaction is complete.
Sales tax nexus in all states used to be limited to physical presence: A state could require a business to register and collect and remit sales tax only if it had a physical presence in the state, such as employees or an office, retail store, or warehouse.
In June 2018, the Supreme Court of the United States overruled the physical presence rule with its decision in South Dakota v. Wayfair, Inc. States are now free to tax businesses based on their economic and virtual connections to the state, or economic nexus.
While physical presence still triggers a sales tax collection obligation in Wisconsin, it’s now possible for out-of-state sellers to have sales tax nexus with Wisconsin.
Out-of-state sellers with no physical presence in a state may establish sales tax nexus in the following ways:
Affiliate nexus: Having ties to businesses or affiliates in Wisconsin. This includes, but isn’t limited to, the design and development of tangible personal property (goods) sold by the remote retailer, or solicitation of sales of goods on behalf of the retailer.
Click-through nexus: Having an agreement to reward a person(s) in the state for directly or indirectly referring potential purchasers of goods through an internet link, website, or otherwise. At this time, Wisconsin has not enacted a click-through nexus law.
Economic nexus: Having a certain amount of economic activity in the state. For sales made on and after October 1, 2018, a remote seller must register with the state then collect and remit Wisconsin sales tax if the remote seller meets either of the following criteria (the economic thresholds):
Inventory in the state: Storing property for sale in the state. This includes merchandise owned by Fulfillment by Amazon (FBA) merchants and stored in Wisconsin in a warehouse owned or operated by Amazon.
Marketplace sales: Making sales through a marketplace. Effective October 1, 2019, marketplace facilitators with nexus in the state will be responsible for collecting and remitting sales tax on behalf of marketplace sellers in Wisconsin.
Trade shows: Attending conventions or trade shows in Wisconsin. Generally, sellers making $2,000 or more in taxable sales in Wisconsin during a calendar year are required to have a seller’s permit and collect and remit tax. This is true even for sellers engaged in a “one-time” event.
An organization is deemed to be engaged in a trade or business if its sales of taxable products and services and its events occur on more than 75 days during the year. However, if its sales for taxable products and services don’t exceed $50,000 for the calendar year, it isn’t considered to be engaged in a trade or business even if its sales and/or events exceed 75 days.
If you have sales tax nexus in Wisconsin, you’re required to register with the Wisconsin DOR and to charge, collect, and remit the appropriate tax to the state. Once nexus is established, sellers are liable for Wisconsin sales or use tax on all Wisconsin sales through the end of the seller’s tax year.
Sales tax nexus can linger even after a retailer ceases the activities that caused it to be “engaged in business” in the state. This is known as trailing nexus. As of July 2019, Wisconsin does not have an explicitly defined trailing nexus policy.
If you’re an active Amazon seller and you use Fulfillment by Amazon (FBA), you need to know where your inventory is stored and if its presence in a state will trigger nexus. FBA sellers can also download an Inventory Event Detail Report from Amazon Seller Central to identify inventory stored in Wisconsin.
If you sell taxable goods to Wisconsin residents and have inventory stored in the state, you likely have nexus and an obligation to collect and remit tax. To begin to understand your unique nexus obligations, check out our free economic nexus tool or consult with a trusted tax advisor.
In some states, sales tax rates, rules, and regulations are based on the location of the seller and the origin of the sale (origin-based sourcing). In others, sales tax is based on the location of the buyer and the destination of the sale (destination-based sourcing).
Wisconsin is a destination-based state. This means you’re responsible for applying the sales tax rate determined by the ship-to address on all taxable sales.