Filing Sales and Use Tax
Sales tax is a tax paid to a governing body (state or local) on the sale of certain goods and services. As a company owner selling taxable products or services, you represent the state by collecting tax from customers and remitting it to the relevant tax authority.
The state owns any sales tax received from consumers, not you. It is your duty to keep track of the taxes you pay in order to comply with state and local regulations. Penalties and interest charges will be imposed if this is not done.
States are free to tax businesses based on their economic and virtual connections to the state, known as economic nexus. (While physical presence still requires a sales tax collection obligation in Wisconsin, it’s now possible for out-of-state sellers to have sales tax nexus with Wisconsin)
In some states, sales tax rates, rules, and regulations are based on the location of the seller and the origin of the sale. In others, sales tax is based on the location of the buyer and the destination of the sale. (Wisconsin is a destination-based state. This means you’re responsible for applying the sales tax rate determined by the ship-to address on all taxable sales)
First, you will need to register for a seller’s permit
You will need the following information...
- Business name, address, and contact info
- EIN number
- Date business activities began
- Projected monthly sales
- Projected monthly taxable sales
- Products to be sold
The cost of registering for a Wisconsin seller’s permit is $20.
Then, you will need to collect the sales tax
How you collect sales tax is influenced by how you sell your goods:
Brick-and-mortar store: Physical store sales allow owners to set the sales tax rate associated with the location of the store.
Marketplace: Online marketplaces like Amazon offer integrated sales tax rate determination and collection, usually for a fee.
Mobile point-of-sale: Mobile systems rely on GPS to determine sale location. The appropriate tax rate is determined there and then applied to the order. Specific tax rules can be set within the system to allow for specific product tax rules.
Considering Tax-Exempt...
Goods: Some goods are exempt from sales tax under law. Examples include prescription drugs, medical supplies, etc.
Customers: Some customers are exempt from paying sales tax. Examples include government agencies, some nonprofits, and merchants purchasing goods for resale. Sellers are required to collect a valid exemption certificate from buyers to validate each exempt transaction.
Holidays: Sales tax holidays exempt specific products from sales and use tax for a limited period, usually a weekend or a week. Approximately 17 states offer sales tax holidays every year.
How to file
Once you’ve collected sales tax, you’re required to remit it by a certain date.
Online filing
Many companies outsource their sales and tax filing to an accountant or bookkeeper like The Giersch Group to save time and prevent costly mistakes. This is a common business practice that can save time and help business owners avoid costly errors caused by inexperience and a lack of understanding of the Wisconsin sales tax code.
Filing when there are no sales
If you have a Wisconsin seller's permit, you must file returns at the end of each allocated collection period, regardless of whether you paid any sales tax. You must file a "zero return" if no sales tax was paid.
Closing a business
The Wisconsin DOR requires all businesses to "close their books" by filing a final sales tax return. This also holds true for business owners selling or otherwise transferring ownership of their business.
