Mar 11, 201309:47 AMSmall Business, Big Ideas
with Jean Willard
Wisconsin use tax and how it affects you
(page 1 of 2)
Lately we’ve been hearing that Amazon may agree to charge sales tax on items purchased from its website. You might wonder why you should care. After all, those who purchase goods from Amazon are already paying use tax with their income tax returns, aren’t they? Well, if you’re a Wisconsin resident who owes use tax, you shouldn’t forget to include the tax when preparing your Wisconsin individual income tax return.
Currently, out-of-state vendors that are selling products over the Internet to Wisconsin residents might not be charging sales tax. How can that be? Here are the basic rules: Vendors who are physically located in Wisconsin are required to hold a valid sales tax permit and to charge the applicable sales taxes to people asking for the products to be delivered to a location in Wisconsin. But what if you buy goods from a retailer located in another state or buy the goods on the Internet and don’t know what state the seller is located in? If a retailer has no physical presence in Wisconsin, it may not have a responsibility to charge sales tax, but that doesn’t mean that you don’t have a responsibility to pay that tax, known as use tax.
Each year when we prepare our tax returns as Wisconsin residents, we are asked whether we have “sales tax due on Internet, mail order, or other out-of-state purchases.” At my firm, our policy has been to remind people of that responsibility and to ask whether they have any such purchases within the past year. Too often people forget about those purchases because their assumption is that all vendors charge the sales tax. But many people have purchased items over the Internet during the last year, and when we mention Amazon as a seller, they are able to provide some information on potential use tax owed.
Businesses also have a responsibility to pay use tax in addition to sales tax if they are consuming a product and did not pay the sales tax when it was purchased. For example, a retailer that buys products for resale may keep some of the products for its own use. The consumption of those products on which the sales tax was not paid requires that company to pay use tax. Many industry rules are even more complex. So keep track of those invoices on which you aren’t paying sales tax and evaluate whether additional taxes are owed. If you have a question, the Wisconsin Department of Revenue has a series of publications that are very detailed and will help you determine whether sales and/or use tax might be owed.