Wis. Admin. Code § Tax 11.29 — Leases, licenses and rentals of tangible personal property and items, property and goods under s. 77.52 (1) (b), (c), and (d), Stats

77.52 (1) (b), (c), and (d), Stats.

Tax 11.29(1) (1) Definitions.

Tax 11.29(1)(a) (a) “Lease or rental,” as defined in s. 77.51 (7) (a) , Stats., means any transfer of possession or control of tangible personal property or items, property, or goods under s. 77.52 (1) (b) , (c) , or (d) , Stats., for a fixed or indeterminate term and for consideration and includes:

Tax 11.29(1)(a)1. 1. A transfer that includes future options to purchase or extend.

Tax 11.29(1)(a)2. 2. Agreements related to the transfer of possession or control of motor vehicles or trailers, if the amount of any consideration may be increased or decreased by reference to the amount realized on the sale or other disposition of such motor vehicles or trailers, consistent with section 7701 (h) (1) of the Internal Revenue Code.

Tax 11.29(1)(b) (b) “Lease or rental,” as defined in s. 77.51 (7) (a) , Stats., does not include:

Tax 11.29(1)(b)1. 1. A transfer of possession or control of tangible personal property or items, property or goods under s. 77.52 (1) (b) , (c) , or (d) , Stats., under a security agreement or deferred payment plan, if such agreement or plan requires transferring title to the tangible personal property or items, property, or goods under s. 77.52 (1) (b) , (c) , or (d) , Stats., after making all required payments.

Tax 11.29(1)(b)2. 2. A transfer of possession or control of tangible personal property or items, property, or goods under s. 77.52 (1) (b) , (c) , or (d) , Stats., under any agreement that requires transferring title to the tangible personal property or items, property, or goods under s. 77.52 (1) (b) , (c) , or (d) , Stats., after making all required payments and after paying an option price that does not exceed the greater of $100 or one percent of the total amount of the required payments.

Tax 11.29(1)(b)3. 3. Providing tangible personal property or items, property, or goods under s. 77.52 (1) (b) , (c) , or (d) , Stats., along with an operator, if the operator is necessary for the tangible personal property or items, property, or goods under s. 77.52 (1) (b) , (c) , or (d) , Stats., to perform in the manner for which it is designed and if the operator does more than maintain, inspect, or set up the tangible personal property or items, property, or goods under s. 77.52 (1) (b) , (c) , or (d) , Stats.

Tax 11.29(1)(c) (c) The definition of “lease or rental” provided in pars. (a) and (b) first applies to lease and rental contracts entered into on October 1, 2009 and has no effect on lease or rental contracts entered into prior to October 1, 2009 until such lease or rental contract is renewed, extended, or modified on or after October 1, 2009.

Tax 11.29(1)(d) (d) “Receive” as provided in s. 77.522 (1) (a) 1. , Stats., means taking possession of tangible personal property or items or property under s. 77.52 (1) (b) or (c) , Stats., or taking possession or making first use of digital goods under s. 77.52 (1) (d) , Stats., whichever comes first. “Receive” does not include a shipping company taking possession of tangible personal property or items or property under s. 77.52 (1) (b) or (c) , Stats., on a purchaser’s behalf.

Tax 11.29(1)(e) (e) “Transportation equipment” as provided in s. 77.522 (1) (a) 2. , Stats., means any of the following:

Tax 11.29(1)(e)1. 1. Locomotives and railcars that are used to carry persons or property in interstate commerce.

Tax 11.29(1)(e)2. 2. Trucks and truck tractors that have a gross vehicle weight rating of 10,001 pounds or greater, trailers, semitrailers, and passenger buses, if such vehicles are registered under the international registration plan under s. 341.405 , Stats., and operated under the authority of a carrier that is authorized by the federal government to carry persons or property in interstate commerce.

Tax 11.29(1)(e)3. 3. Aircraft that are operated by air carriers that are authorized by the federal government or a foreign authority to carry persons or property in interstate or foreign commerce.

Tax 11.29(1)(e)4. 4. Containers that are designed for use on the vehicles described in subds. 1. to 3. and component parts attached to or secured on such vehicles.

Tax 11.29(2) (2) General rules.

Tax 11.29(2)(a) (a) The sales price from the lease, license, or rental of tangible personal property or items, property, or goods under s. 77.52 (1) (b) , (c) , or (d) , Stats., shall be subject to the sales and use taxes to the same extent that the sales price from the sale of the same property, item, or good would be subject to the tax. A lease is a continuing sale in Wisconsin under s. 77.51 (14) (j) , Stats., and a lessor or licensor shall pay tax on the lease, license, or rental receipts sourced to Wisconsin under s. 77.522 , Stats., even though the property, item, or good may have been acquired, used, or both previously by the lessee or licensee in another state.

Tax 11.29(2)(b) (b)

Tax 11.29(2)(b)1. 1. Transfers described in sub. (1) (a) are leases, licenses, or rentals regardless of whether such transfer is considered a lease, license, or rental under generally accepted accounting principles, or any other provision of federal, state, or local law.

Tax 11.29(2)(b)2. 2. Transfers described in sub. (1) (b) are not leases, licenses, or rentals, regardless of whether such transfer is considered a lease, license, or rental under generally accepted accounting principles, or any other provision of federal, state, or local law.

Tax 11.29(2)(c) (c)

Tax 11.29(2)(c)1. 1. If a transaction does not meet the definition of “lease or rental” because title to the property, item, or good transfers to the lessor or licensor under a security or deferred payment plan upon completion of the required payments, the transaction shall be treated as a sale of the property, item, or good and the retailer is liable for the tax on the sales price at the time the property, item, or good is received by the purchaser.

Tax 11.29(2)(c)2. 2. The retailer may exclude from the sales price, as provided in s. 77.51 (15b) (b) 2. , Stats., the interest and financing charges if they are separately stated on the invoice, bill of sale, or similar document that the retailer gives to the purchaser.

Tax 11.29(2)(c)3. 3. If the retailer in a transaction described under subd. 1. , has properly reported and paid to Wisconsin the tax due on its sales price from the transaction and the retailer has not excluded from the sales price an amount for interest or financing as described in subd. 2. , if the retailer subsequently allows a reduction in the payments that must be made because the purchaser pays off the balance early, the retailer may claim a deduction on its sales and use tax return for this reduction in the sales price. The deduction is limited to the amount of the sales price that the retailer previously remitted tax on to Wisconsin.

Tax 11.29(2)(c)4. 4. If the property, item, or good to which subd. 1. applies is stored, used, or otherwise consumed in Wisconsin and then relocated to a location outside Wisconsin, no refund or partial refund of the Wisconsin tax paid is allowed since the transaction is treated as a “sale” and the property was first stored, used, or otherwise consumed in Wisconsin.

Tax 11.29(2)(d) (d)

Tax 11.29(2)(d)1. 1. If a transaction does not meet the definition of “lease or rental” because title to the property, item, or good transfers to the lessor or licensor under an agreement that requires transferring title to the property, item, or good after all required payments have been made and after paying an option price that does not exceed the greater of $100 or 1% of the total amount of the payments, the transaction shall be treated as a sale of the property, item, or good and the retailer is liable for the tax on the sales price at the time the property, item, or good is received by the purchaser.

Tax 11.29(2)(d)2. 2. The retailer may exclude from the sales price, as provided in s. 77.51 (15b) (b) 2. , Stats., the interest and financing charges if they are separately stated on the invoice, bill of sale, or similar document that the retailer gives to the purchaser.

Tax 11.29(2)(d)3. 3. If the retailer in a transaction described under subd. 1. , has properly reported and paid to Wisconsin the tax due on its sales price from the transaction and the retailer has not excluded from the sales price an amount for interest or financing as described in subd. 2. , if the retailer subsequently allows a reduction in the payments that must be made because the purchaser pays off the balance early, the retailer may claim a deduction on its sales and use tax return for this reduction in the sales price. The deduction is limited to the amount of the sales price that the retailer previously remitted tax on to Wisconsin.

Tax 11.29(2)(d)4. 4. If the property, item, or good to which subd. 1. applies is stored, used, or otherwise consumed in Wisconsin and then relocated to a location outside Wisconsin, no refund or partial refund of the Wisconsin tax paid is allowed since the transaction is treated as a “sale” and the property was first stored, used, or otherwise consumed in Wisconsin.

Tax 11.29(2)(e) (e) If a transaction constitutes a sale-leaseback transaction, the original sale of the property, item, or good to a purchaser may be made without tax for resale if that purchaser makes no taxable storage, use, or other consumption in Wisconsin of the property, item, or good prior to selling it. The sale of the property, item, or good from the first purchaser to a second purchaser (i.e., the person who will lease the equipment back to the first purchaser), may also be made without tax for resale if the second purchaser makes no taxable storage, use, or other consumption in Wisconsin of the property, item, or good prior to selling, leasing, licensing, or renting the property, item, or good back to the first purchaser. If the transfer of that property, item, or good from the second purchaser back to the first purchaser meets the definition of lease or rental in s. 77.51 (7) (a) , Stats., the tax will be due on each payment as described in par. (a) . If the transfer of that property, item, or good from the second purchaser back to the first purchaser does not meet the definition of lease or rental in s. 77.51 (7) (a) , Stats., the tax will be due on the sales price from the sale of the property, item, or good from the second purchaser back to the first purchaser, as described in pars. (b) to (d) .

Tax 11.29(3) (3) Purchases for lease, license, or rental.

Tax 11.29(3)(a) (a) A lessor’s or licensor’s purchase of tangible personal property or items, property, or goods under s. 77.52 (1) (b) , (c) , or (d) , Stats., to be used solely for lease, license, or rental shall be exempt as a purchase for resale.

Tax 11.29(3)(b) (b) A lessor’s or licensor’s purchase of lubricants, repair parts, and repair services for tangible personal property and items, property, and goods under s. 77.52 (1) (b) , (c) , or (d) , Stats., used solely for leasing, licensing, or renting shall also be exempt as a purchase for resale. However, if the same property, items, or goods are purchased by a lessee, licensee, or renter, the purchases shall be taxable.

Tax 11.29(3)(c) (c) Charges by a lessor or licensor to a lessee, licensee, or renter under a maintenance contract on leased tangible personal property or items, property, or goods under s. 77.52 (1) (b) , (c) , or (d) , Stats., shall be taxable.

Tax 11.29(4) (4) Property both rented and used personally. If tangible personal property or items, property, or goods under s. 77.52 (1) (b) , (c) , or (d) , Stats., are purchased by a person who uses them part of the time and leases, licenses, or rents them out part of the time, the sale of the property, item, or good to the person shall be taxable. The lessor’s or licensor’s rental receipts shall also be taxable, unless the transaction is specifically exempt by statute.

Tax 11.29(5) (5) Service vs. rental of equipment.

Tax 11.29(5)(a) (a)

Tax 11.29(5)(a)1. 1. If an item of tangible personal property or item, property, or good under s. 77.52 (1) (b) , (c) , or (d) , Stats., is provided along with an operator that is necessary for the tangible personal property or item, property, or good to operate in the manner for which it is designed and does more than maintain, inspect, or set up the tangible personal property or item, property, or good, the transaction is considered a service and not a lease, license, or rental of tangible personal property or item, property, or good under s. 77.52 (1) (b) , (c) , or (d) , Stats.

Tax 11.29(5)(a)2. 2. The purchaser of tangible personal property or items, property, or goods that are used in a transaction described in subd. 1. to provide a service is the consumer of that property, item, or good.

Tax 11.29(5)(a)3. 3. The charge by the person providing the service described in subd. 1. is subject to Wisconsin sales and use tax if the service is specifically identified as a taxable service in s. 77.52 , Stats.

Tax 11.29(5)(b) (b) If an item of tangible personal property or item, property or good under s. 77.52 (1) (b) , (c) , or (d) , Stats., is provided along with an operator that only maintains, inspects, or sets up the tangible personal property or item, property, or good, the transaction is considered a lease, license, or rental of the tangible personal property or item, property, or good.

Tax 11.29(5)(c) (c) Charges for the rental of motor trucks shall be taxable. However, if drivers are provided by the truck’s owner to operate the trucks, this shall be considered a service and not a lease or rental of the trucks.

Tax 11.29(5)(d) (d) The sales price from the lease, license, or rental of tangible personal property or items, property, or goods under s. 77.52 (1) (b) , (c) , or (d) , Stats., incidental to the providing of a nontaxable service shall not be taxable. If the tangible personal property or item, property, or good under s. 77.52 (1) (b) , (c) , or (d) , Stats., is incidental to the providing of a nontaxable service, the tangible personal property or item, property, or good under s. 77.52 (1) (b) , (c) , or (d) , Stats., is consumed by the service provider and the service provider is required to pay any applicable sales or use tax.

Tax 11.29(6) (6) Credit for sales tax paid. If a lessor of tangible personal property or items, property, or goods under s. 77.52 (1) (b) , (c) , or (d) , Stats., paid a Wisconsin sales tax on the acquisition of the property, item, or good used solely for leasing purposes, the lessor may either request a refund of the sales tax from the seller or the department or may claim a credit against the tax due on rental receipts from the property, item, or good involved, under s. 77.585 (2) , Stats. If a credit is claimed, it shall expire when the cumulative rental receipts equal the sales price upon which the vendor paid sales tax to Wisconsin.

Tax 11.29(7) (7) Sourcing lease, license and rental payments.

Tax 11.29(7)(a) (a) First or only payment. Except as provided in pars. (c) and (e) , for lease, license, and rental agreements that only require one payment and for the first payment on lease, license, and rental agreements that require more than one payment, the lease, license, or rental is sourced to the location where the purchaser receives the product, as follows:

Tax 11.29(7)(a)1. 1. If the tangible personal property or item, property, or good under s. 77.52 (1) (b) , (c) , or (d) , Stats., is received by the lessee or licensee at the lessor’s or licensor’s business location, the first or only payment is sourced to the lessor’s or licensor’s business location.

Tax 11.29(7)(a)2. 2. If the tangible personal property or item, property, or good under s. 77.52 (1) (b) , (c) , or (d) , Stats., is not received by the lessee or licensee at the lessor’s or licensor’s business location, the first or only payment is sourced to the location where the lessee or licensee or the lessee’s or licensee’s designated donee receives the product. This would include the location indicated by instructions known to the lessor or licensor for delivery to the lessee or licensee or the lessee’s or licensee’s designated donee. The delivery may be made by the lessor or licensor or by a shipping company hired by the lessee or licensee.

Tax 11.29(7)(a)3. 3. If the location cannot be determined under subds. 1. and 2. , the first or only payment is sourced to the lessee’s or licensee’s address as indicated by the lessor’s or licensor’s business records, if the records are maintained in the ordinary course of the lessor’s or licensor’s business and if using that address to establish the location of the lease, license, or rental is not in bad faith.

Tax 11.29(7)(a)4. 4. If the location cannot be determined under subd. 1. , 2. , or 3. , the first or only payment is sourced to the lessee’s or licensee’s address as obtained during the consummation of the lease, license, or rental, including the address indicated on the lessee’s or licensee’s payment instrument, if no other address is available and if using that address to determine the location of the lease, license, or rental is not in bad faith.