Wisconsin Joins Streamline Sales Tax Agreement

Marie Millard, CPA, Tax Manager   email
September 2009

 The Streamline Sales and Use Tax Agreement (SSUTA) is intended to simplify and modernize sales and use tax administration by making tax reporting more uniform across state and local taxing jurisdictions. Effective October 1, 2009, Wisconsin will be the 23^rd state to adopt SSUTA.

Currently, it is difficult for businesses to navigate through the sales and use tax regulations for Wisconsin and other states where they do business. SSUTA simplifies these regulations making it easier for businesses to comply, and in turn, members expect it will increase the amount of taxes collected, especially from out of state businesses.

One of the ways SSUTA simplifies compliance is by establishming uniform definitions in the sales tax base. It does not dictate what types of items are taxable, but it does standardize the definitions of items. For example, two states might have a sales tax exemption on clothing, however, their definitions of what constitutes "clothing" may differ (e.g., fur may have been defined as clothing in one state but not in another). Under SSUTA, the definitions of clothing would now be the same. Wisconsin businesses may be affected by the standardization, as some items that were previously subject to sales and use tax are now exempt and vice versa.

Other changes that may affect Wisconsin businesses include:

• Previously, Wisconsin manufacturers were required to collect sales tax from the purchaser on drop shipments. A "Drop Shipment" occurs when a Wisconsin purchaser orders items from an out-of-state retailer and the product is delivered directly to the customer from a Wisconsin manufacturer, without the retailer ever taking possession of the product. Under SSUTA, the Wisconsin manufacturer would no longer need to collect sales tax on the sale; rather the Wisconsin purchaser would be required to pay a use tax. 
• Previously, a seller could only accept a sales tax exemption certificate from a purchaser if it was taken "in good faith." Under SSUTA, the "good faith" standard is no longer applicable.  
   
• Wisconsin is offering a limited amnesty program to previously unregistered sellers for uncollected sales and use taxes, including penalties and interest. This amnesty covers prior sales to Wisconsin purchasers if the seller:

1.  Registers with the Wisconsin Department of Revenue (WDR) to collect sales and use tax on such SSUTA sales within one year of the Wisconsin effective date, by October 1, 2010; and  

2.  Collects and remits sales and use tax on Wisconsin sales for three consecutive years after registration. 

• SSUTA allows the WDR to simplify Wisconsin's sales and use tax returns. 

The WDR has indicated they will be issuing expanded guidance and online tools in the coming months to help businesses transition to the SSUTA system. Please contact your Kolb+Co. adviser with any questions.