Sales and Use Tax for Public Schools Wisconsin Association of School Business Officials March 15, 2017 Becky Haines and Tanya Schaefer Wisconsin Department of Revenue Sales and Use Tax Law In today's presentation, "schools" refers to Wisconsin public elementary and secondary schools. "Schools" do not include: - Art schools - Charm schools - Dance schools - Driving schools - Flying schools - Modeling schools - Music schools 2 Sales and Use Tax Law The following ARE NOT Wisconsin public elementary and high schools: Private elementary and high schools Other states public elementary and high schools School related organizations which are not subject to the control and supervision of school officials 3 1
Sales and Use Tax Law What sales are subject to sales tax? - Tangible personal property - Certain coins or stamps - Certain leased property affixed to real property - Certain digital goods These are referred to collectively as tangible personal property, items, property, and goods. - Specified services 4 Sales and Use Tax Law Taxable Services (not all-inclusive): Repair or other service to tangible personal property Parking (for motor vehicles and aircraft) Admissions to amusement, athletic, recreational, and entertainment events or facilities Landscaping 5 Rates Sales and Use Tax Law State tax 5.0% County tax - 0.5% Baseball stadium district tax - 0.1% Local food and beverage tax - 0.5% Premier resort area tax - 0.5% or 1.25% 6 2
Sales and Use Tax Law New for 2017! Effective January 1, 2017 - Sheboygan County Tax Effective April 1, 2017- Kewaunee County Tax 7 Use Tax Sales and Use Tax Law Imposed on storage, use, or consumption of tangible personal property, property, items and goods. Applies when sales tax has not been paid. 8 Purchases by School All purchases by governmental units are exempt from Wisconsin sales and use tax. Other states governmental units are not exempt. 9 3
Purchases by School Wisconsin public elementary schools and high schools are considered to be Wisconsin governmental units. Therefore, all purchases by Wisconsin public elementary schools and high schools are exempt from tax. 10 Purchases by School Invoices must be made in name of public school to be exempt from tax. For sales to employees to be exempt: 1. The school district (or a school in the district) gives the retailer a purchase order or similar written document (such as a letter indicating that the employee is traveling on government business and funds are being provided to the employee to pay any expenses), and 2. The retailer (such as a motel or restaurant) issues the billing or invoice for the meal or lodging in the name of the school district (or the school in the district). The retailer must keep a copy of the documents mentioned in 1 and 2. 11 Purchases by Employees How does a school ensure that a school employee traveling on school business is not charged tax on meals and lodging? 1. The school must give the seller a purchase order or similar written documentation (for example, a letter stating that the employee is traveling on school business and that funds are being provided to the employee to pay any expenses) AND 2. Billing must be in the name of the school 12 4
Purchases by Employees Suggestion: If the employee is traveling on school business, paying for lodging and being reimbursed by the school the school may want to mail or fax a purchase order or letter to the hotel prior to the employee's arrival. This may alleviate problems which could result in the employee paying the tax and the school later having to request a refund of the tax from the lodging provider. 13 Exempt Sales Sales by Schools Tangible personal property, items, property, and goods sold by elementary and secondary schools Tickets or admissions to elementary and secondary school activities (if proceeds used for educational, religious, or charitable purposes) Admissions to sports activities, such as league entry fees, if more than 50 percent of the participants are 19 years old or younger 14 Sales by Schools Examples of exempt sales by schools Books Musical instruments Computers School supplies (e.g., pens, paper) Candy Sports equipment Clothing (e.g., sweatshirts) School lunches Hats Uniforms Locks Yearbooks and annuals Motor vehicles Used school equipment 15 5
Sales by Schools Examples of exempt sales of admissions and other nontaxable services School athletic events (e.g., high school football game) Art or science fair Student awards banquet Furnishing rooms and lodging to students and nonstudents Library and book fines Tuition 16 Sales by Schools Taxable sales by schools Parking Admissions to amusement, athletic, recreational and entertainment events or facilities (e.g., gymnasium rented for party) Charges for "open swim," "open gym," etc. 17 Multipurpose Facilities Taxable sales by schools include: Fees or admission charges to the general public by the school to permit persons to swim, play golf, baseball, softball, racquetball, basketball, volleyball, or tennis, or dance in or on the school s facilities. Exceptions: 1. The person uses the facility for a purpose other than amusement, recreation, athletic, or entertainment. 2. The organization paying for the use of the facility use is exempt from tax (e.g., a church). 3. The facility will be used for a recreational, amusement, entertainment, or athletic event, but the person renting the facility sells admission to the event to the public. 18 6
Multipurpose Facilities 1. The person uses the facility for a nontaxable type of event (religious meeting, political meeting, trade show, educational seminar, lessons). Records to Keep: The amount of receipts the school received for this purpose, the name and address of the person or organization who paid the school for use of the facility, and the nontaxable purpose for which the facility was used by the purchaser. 19 Multipurpose Facilities 2. The organization paying for use of the facility is exempt from tax Records to Keep: An exemption certificate completed by the exempt organization, or A bill of sale on which the seller has recorded the exempt organization's CES number, or A purchase order or similar written document identifying the purchaser, if the purchaser is a federal, state, or municipal government agency, or a federally recognized American Indian tribe or band in Wisconsin 20 Certificate of Exempt Status What is a certificate of exempt status (CES)? Wisconsin non-profit organizations organized and operated exclusively for religious, charitable, scientific, educational, or for the prevention of cruelty to children or animals purposes, may apply to the Department of Revenue for a CES and if approved, will be issued an exempt status number by the Department. 21 7
Multipurpose Facilities 3. The facility will be used for an amusement, recreational, athletic, or entertainment event, but the person renting the facility sells admission to the event to the public. Records to Keep: The school must obtain a fully completed exemption certificate claiming resale from the person to verify that the charge is exempt from tax. 22 Occasional Sale Exemption If a school's otherwise taxable sales qualify as exempt occasional sales, no seller's permit is required. Occasional sale exemption applies if ALL of the following are met: A. School is not engaged in a trade or business. B. Entertainment is not involved at an event where admissions are charged, AND C. School does not have and is not required to have a seller's permit, except if required for bingo sales 23 Occasional Sale Exemption A. School is not engaged in a trade or business NEW standards for 2017 A school is engaged in a trade or business if it exceeds BOTH of the following standards: 1. Its taxable sales of services (not including sales of tickets to events), or its events, occur on more than 75 days during the year 2. Its taxable receipts from sales of services exceed $50,000 for the year 24 8
Occasional Sale Exemption B. Entertainment is not involved at an event where admissions are charged NEW standard for 2017 Entertainment is involved (at an event for which an admission is charged by the school) if the total amount that ALL entertainers are paid is more than $10,000, including amounts for entertaining, reimbursement of expenses, and prize money. 25 Occasional Sale Exemption C. School does not have and is not required to have a seller's permit, except for bingo sales 26 Occasional Sale Exemption What if a school would qualify for this exemption except for the involvement of entertainment? A school that would otherwise qualify for exempt occasional sales, except for the involvement of entertainment, may do the following: Obtain a seller s permit for the day or days of the event involving entertainment, Pay the sales tax on sales of taxable services on these days, and Request inactivation of the seller s permit after the event. If the above three steps have been taken, the school may still make exempt occasional sales on days not covered by the permit. 27 9
Occasional Sale Exemption What if a school would qualify for this exemption except for the involvement of entertainment? However, if the school does not request inactivation of its permit after the event, its sales while continuing to hold the permit do not qualify for the exemption, except if the school must hold the seller's permit for conducting bingo. 28 Construction Projects Sales of real property improvements are not taxable Contractor is consumer of building materials and owes tax on purchase of such materials, unless an exemption applies School's exemption does not "flow through" to the contractor School may, however, purchase materials directly from vendor (who is not also the installer) 29 Construction Projects NEW! A contractor's purchase of building materials are exempt when used to build certain real property improvements for a Wisconsin pubic school. Applies to building materials for any building, shelter, parking lot, parking garage, athletic field, athletic park, storm sewer, water supply system, or sewerage and waste treatment facility, but not any highway, street, or road. First applies as of January 1, 2016 to contracts entered into on or after January 1, 2016. 30 10
Construction Projects Sales of tangible personal property to school are exempt from tax Contractor may purchase materials without tax, for resale, that are physically transferred to school as a sale of tangible personal property 31 Construction Projects Sales of taxable services to school are exempt from tax Landscaping services Services to tangible personal property (e.g., installing lockers purchased by school from someone other than the installer) 32 Construction Projects Examples of Real Property vs. Personal Property Real Property Parking lot Building Security monitoring equipment (that is permanently affixed to the realty and is installed to prevent unauthorized entry into the building Sidewalks Personal Property Auditorium seating Basketball backstops Flag poles (except their concrete foundations) Chalkboards and whiteboards Laboratory cabinets Projection screens Trophy cases 33 11
School-Related Organizations Tax treatment depends on: 1. Whether the organization is subject to the control and supervision of the school, and 2. Who has control over the use of the organization's funds 34 School-Related Organizations If school has control over the school-related organization's funds, the organization is NOT separate from the school The school-related organization is entitled to the same exemption on its purchases as the school If the school has or is required to have a seller's permit, the school-related organization's sales of taxable services are taxable (same extent as school) The school-related organization's sales count towards school's occasional sale exemption standards 35 School-Related Organizations If school DOES NOT have control over the schoolrelated organization's funds, the organization is considered to be a separate organization from the school The school-related organization IS NOT entitled to the same exemption on its purchases as the school (but may qualify for its own CES) The school-related organization may qualify for the occasional sale exemption The school's sales do not count towards the school-related organization's occasional sale exemption standards (and vice versa) 36 12
Sales and Use Tax Updates How to keep on top of changes: www.revenue.wi.gov Subscribe to receive email alerts Wisconsin Tax Bulletins (quarterly) Publications Pub 245 for schools Pub 201 for general sales and use tax information Pub 206 for occasional sale exemption for nonprofit orgs Fact sheet 2106 for occasional sale exemption Fact sheet 2107 for rentals of multipurpose facilities Section 11.03, Wisconsin Administrative Code 37 38 Contact Information Wisconsin Department of Revenue P.O. Box 8949 Madison, WI 53708-8949 (608) 266-2776 DORSalesandUse@wisconsin.gov 39 13
Questions? 14