In Wisconsin, sales tax is imposed on “total sales.” “Total sales” is the total amount of the sale, license, lease, or rental price from retail sales of tangible personal property and certain taxable services, whether received in money or something other than money. “Total sales” also includes separately stated charges made by a retailer for shipping or handling charges, fuel or energy surcharges, service calls, and mileage charges.
However, “total sales” does not include charges for interest, financing, or insurance, if such charges are separately stated on the invoice given to the purchaser. In addition, “total sales” does not include cash or term discounts taken on sales.
For example, if your company purchases materials for $5,000 and takes advantage of the vendor’s 2% discount for making your payment within ten days, the “total sales” subject to sales tax is $4,900 ($5,000 less the $100 discount). The sales tax owed is $245 ($4,900 x 5%), not $250 ($5,000 x 5%).
If the early pay discount is taken, many vendors do not issue two separate invoices. It is important to recalculate the sales tax when taking advantage of these discounts. Also, talk with your vendors so they are aware that you are recalculating your sales tax, as Wisconsin statutes allow.
If you’ve overpaid sales tax, you have three options:
- Discuss the overpayment with your vendor and seek a credit of the overpaid sales tax.
- File a Buyer’s Claim for Refund (Form S-220) with the Wisconsin Department of Revenue. However, make sure no other sales or use tax liability exists.
- Do nothing in the past and take corrective action going forward.
Our Sales & Use Tax team has significant experience helping contractors ensure compliance in this area. Contact any member of our team to discuss which of these options would be best for your company.
Crystal Krenke, senior accountant, helps businesses ensure their sales and use tax practices are in compliance with state regulations by reducing their exposure and identifying potential liabilities. She has experience with the State of Wisconsin’s recent acceptance into the Streamlined Sales & Use Tax Agreement (SSUTA) and the legislative changes to Wisconsin’s statutes.