We address Sales & Use Tax Issues faced by the non-profit sector in Wisconsin.

1. SALES AND USE TAX
FOR NONPROFIT ORGANIZATIONS
AND
WISCONSIN PROPERTY TAX
EXEMPTIONS
May 22, 2014
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2. PART ONE
SALES TAX BASICS
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3. Wisconsin Sales Tax Is:
• Measured by gross selling price
• On retail sales
• In Wisconsin
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4. Calculation of Gross Sales Price
Includes:
• Shipping and handling
• Fuel surcharges
• Installation
• Training and customer support
• Warranties and maintenance

5. • Retailers must have a seller’s permit
• Returns must be filed whether or not there
are taxable sales
• Penalties are imposed for failure to file or
late filings
Basic Rules

6. What is Use Tax?
• Complementary to sales tax
• Tax on use of tangible personal property or
taxable services
• Imposed on buyer
• Due on taxable items where sales tax is
not charged
• Common on purchases from
out-of-state or online vendors

7. When is Use Tax Due?
When items are:
• Stored
• Used or
• Consumed
in Wisconsin

8. Measure of Use Tax
• Based on purchaser’s cost
• Includes labor, shipping, and other
charges that purchaser has paid for

9. PART TWO
SALES TAX ON
WHAT YOU SELL
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10. INTRODUCTION
• All organizations are required to
charge WI sales tax on sales of
taxable products and services
• Exemptions may apply
 Occasional sales
 Other exemptions
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11. WHAT IS A NONPROFIT
ORGANIZATION?
• Org. not organized for profit
• No part of the net earnings of the org.
directly benefits any private shareholder or
individual
• Examples:
Neighborhood association
Church
Civic group
Garden club / Social club
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12. WHAT IS SUBJECT TO TAX?
• Tangible personal property (TPP)
• Specified digital goods and digital codes
• Certain services
Parking
Lodging
Admissions to amusement, athletic,
entertainment, or recreational events
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13. OCCASIONAL SALE EXEMPTION:
OVERVIEW
• A nonprofit org. must meet all of the following
standards for its sales to qualify for the
occasional sales exemption:
 Standard 1: Not engaged in trade or business
 Standard 2: Entertainment is not
involved at an event for which
charges constitute admissions
 Standard 3: Org. does not and is
not required to have seller’s permit
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14. OCCASIONAL SALE EXEMPTION:
STANDARD 1
• Two standards are used to determine that
org. is not engaged in trade or business:
20-day test
$25,000 receipts test
• Both of the standards must be
exceeded before a nonprofit
organization is considered to be in a
trade or business
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15. OCCASIONAL SALE EXEMPTION:
STANDARD 1
• 20-day test:
Otherwise taxable sales occur on 20 days or
less during calendar year
Dollar amount disregarded
Example: Tickets for an event are on sale for three
months but since the event is only one day
the 20-day test is not exceeded
Example: Church group sells cookbooks
every Sunday
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16. OCCASIONAL SALE EXEMPTION:
STANDARD 1
• $25,000 receipts test:
Receipts are $25,000 or less during calendar
year
Number of days sales occur disregarded
Example: Church group only sells $1,000 of
cookbooks throughout the year
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17. OCCASIONAL SALE EXEMPTION:
STANDARD 1, CONT.
• If both tests are exceeded, only sales
occurring after both tests were exceeded are
subject to tax
Example: Church group’s sales of cookbooks
exceed $25,000 on their 40th Sunday of selling.
Since their sales have never been above $25,000
they do not hold a seller’s permit. Now that
they have met both tests, every sale after
the $25,000 is subject to tax.
In subsequent years, all of the group’s sales
would be subject to tax.
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18. OCCASIONAL SALE EXEMPTION:
STANDARD 2
• “Entertainment” defined
Entertainment provided at an
“admission” event by all persons or
groups who are paid at least $500 in
total per event
Payment does not have to come
directly from nonprofit org.
i.e. Sponsor pays performer
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19. OCCASIONAL SALE EXEMPTION:
STANDARD 2, CONT.
• “Admissions” defined
Access to event involving entertainment
is restricted to only those who pay a
required fee, make a “required donation,”
or who must make a purchase (i.e. meal
or raffle ticket)
Admissions to educational events
are not taxable, even if entertainment
is involved
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20. OCCASIONAL SALE EXEMPTION:
STANDARD 2, CONT.
• If “entertainment” criteria is met but
“admissions” criteria is not met,
admissions are not taxable
Example: Nonprofit holds a pig roast in a city
park. The city hired a band for $600 to
entertain. There is a charge for the meal
but anyone can come and listen to the
band for free. This is not an admission
event.
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21. OCCASIONAL SALE EXEMPTION:
STANDARD 2, CONT.
• Exception available if entertainment is
deemed to be involved:
Step 1 – Obtain seller’s permit from DOR for
days of event involving entertainment
Step 2 – Pay sales tax on sales of TPP or
taxable services on these days
Step 3 – Request inactivation of seller’s
permit after event
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22. OCCASIONAL SALE EXEMPTION:
STANDARD 2, CONT.
• If all three of these steps are
taken, an org. may still make
exempt occasional sales on days
not covered by the event
• NOTE: Days and receipts from
events for which seller’s permit
was obtained are included in
determining the 20-day test and
$25,000 receipts test in Standard
1
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23. OCCASIONAL SALE EXEMPTION:
STANDARD 3
• Nonprofit org. is not required to hold
seller’s permit if its sales are exempt from
sales and use tax (meets Standard 1 and
Standard 2)
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24. SELLER’S PERMIT
INFORMATION
• If a nonprofit org. does not qualify for the
occasional sale exemption, it is required to
obtain a seller’s permit and charge sales tax
on taxable sales
• “Change in activities”
Org. holds seller’s permit in current year
but believes “in good faith” that it will
qualify for occasional sale exemption in
following year
Org. may request inactivation of its seller’s permit
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25. SELLER’S PERMIT
INFORMATION, CONT.
• Two questions to help determine “good faith”
effort:
1. What did org. do in current calendar year?
2. What does it expect to do differently in following
year, and why?
• If org. requests inactivation of seller’s permit but
later exceeds standards, only sales occurring
after standards are exceeded are subject to
tax
• Sales made before requesting inactivation
do not qualify as exempt occasional sales,
even if all other standards are met
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26. FUNDRAISERS AND OTHER
SALES BY NONPROFITS
• Admissions to amusement, athletic,
entertainment, or recreational events/places are
taxable
Entries to runs, walks, golf, and other
participation events are subject to tax
Example: Nonprofit organization holds a
5K run to raise money. The mandatory
$50 participation fee is a taxable
admission.
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27. FUNDRAISERS AND OTHER
SALES BY NONPROFITS, CONT.
• Silent auctions – sales of gift certificates and
other products
Sales of tangible personal property at silent
auctions are subject to sales tax
Sales of gift certificates for a specific item can be
subject to sales tax
The certificate is considered the sale of the specific
item
Sales of gift cards are not subject to WI
sales tax
When the gift certificate is redeemed, the
applicable sales tax will be computed by
the retailer
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28. FUNDRAISERS AND OTHER
SALES BY NONPROFITS, CONT.
• Sales that bear little or no relation to the
value received
Tax may be based on reasonable value of TPP or
taxable service
Burden is on the nonprofit org. to determine that
the amount charged bears little/no relation to
value received
How does an org. do this?
Determine actual value received by buyer
Document and “reasonably determine” that the
charge bears little/no relationship to value rec’d.
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29. FUNDRAISERS AND OTHER
SALES BY NONPROFITS, CONT.
• Sales that bear little or no relation to the
value received, continued
Example: Nonprofit organization is holding a
fundraising dinner at a restaurant. The cost to attend
is $100 for a steak dinner. Persons buying the dinner
only receive the steak dinner. The restaurant usually
charges $40 for the steak dinner. The organization
can base the sales tax on the $40 because the
actual value is determinable and it can
document and reasonably determine the
charge ($100) bears little or no relationship
to the actual value received ($40).
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30. PART THREE
SALES TAX ON
WHAT YOU BUY
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31. PURCHASES BY NONPROFIT
ORGANIZATIONS
• Certain nonprofit orgs. are exempt from WI
sales and use tax on purchases of TPP or
taxable services
• Orgs. qualify if operated exclusively for:
Religious purposes
Charitable purposes
Scientific purposes
Educational purposes
Prevention of cruelty to children or animals
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32. PURCHASES BY NONPROFIT
ORGANIZATIONS, CONT.
• Such orgs. must apply for a Certificate of
Exempt Status (CES)
• CES number will be issued and must be
provided to sellers when making
purchases
• Exceptions:
Federal gov’t. units
WI state and municipal gov’t. units
Out-of-state orgs.
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33. Valid Exemption Certificate Must
Include (Form S-211)
1. Name and address of buyer
2. Name of seller
3. Description of property
4. Reason for exemption and CES
5. Signed by buyer
6. Dated
Alternative form

34. PART FOUR
WISCONSIN PROPERTY TAX
EXEMPTIONS
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35. WHAT PROPERTY QUALIFIES
FOR EXEMPTION?
• General Rule: All property in WI is taxable
unless specifically exempt
• Burden is on property owner to prove a
piece of property qualifies for exemption
• NOTE: WI statute section 70.11 lists
about 40 categories of specific
exemptions
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36. PROPERTIES THAT QUALIFY
FOR EXEMPTION
• Educational
• Religious
• Woman’s Clubs
• Fraternal Organizations (Lodges)
• Low Income Housing
• Non-profit Retirement Homes
• 501(c)(3) Charitable Organizations
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37. DO ORGS. EXEMPT FROM
FEDERAL INCOME TAX
AUTOMATICALLY QUALIFY FOR
WI PROPERTY TAX EXEMPTION?
• No!
• Federal income tax exemption does
not guarantee WI property tax
exemption
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38. CAN PROPERTY BE PARTIALLY
EXEMPT?
• Yes – Property used in part for exempt
purposes and in part for an unrelated trade
or business
• Portion attributable to trade or business
may be subject to tax
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39. WHAT IF I THINK MY PROPERTY
QUALIFIES FOR EXEMPTION?
• File a WI DOR application form with local
assessor
• Form must be filed for any property that
was taxed in previous year but now may
qualify for exemption
• Deadline is March 1 of year for which
exemption is sought
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40. WHAT IF MY ORG. PURCHASES
EXEMPT PROPERTY?
• If exempt property changes ownership, the
new owner needs to apply for exemption
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41. DO NEW PURCHASES OF REAL
PROPERTY AUTOMATICALLY
QUALIFY IF MY ORG. ALREADY
OWNS EXEMPT REAL
PROPERTY?
• No – An org. acquiring additional real
property must apply with local assessor
by March 1
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42. MY ORG DOES NOT OWN REAL
ESTATE. MUST IT FILE
APPLICATION FOR PERSONAL
PROPERTY?
• Yes – WI statute section 70.11 applies to
real property and personal property
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43. WHAT IF I MISS THE MARCH 1
FILING DEADLINE?
• If the deadline is missed, no exemption
can be granted for that year
• If you think your property qualifies for the
exemption, you must file an application by
March 1
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44. WHO MAKES THE EXEMPTION
DETERMINATION?
• Local assessor determines whether or not
an owner’s exemption claim is valid
• Case-by-case basis
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45. WHAT IF I DISAGREE WITH THE
ASSESSOR’S DETERMINATION?
• Owner must follow procedure set forth in
WI statute section 74.35
• Local board of review does not have any
authority regarding exemption issues
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46. QUESTIONS?
Julie Bogle, JD
julie.bogle@sgcpa.com
828-3119
Peter Soman, CPA
peter.soman@sgcpa.com
828-3174
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