How to charge appropriately for tax in Wisconsin... Can't get any answers anywhere

You need to contact the state agency that regulates the tax in your state.

Every state is different.

MA. charges sales tax on material. You buy the material from a wholesaler who does not charge you tax (as long as you file for the tax exemption) then you charge tax on the material based on the price you sell it to your customer for and you pay that tax to the state.

Ct. does the same for material and in addition charges tax on labor depending on what customer you have, residential, commercial etc.

So every state is different you have to check it out.

If your CPA does not know then I would suggest a new one. He can't do your company income tax without knowing this.

@Mail4tommo

I suspect what the other contractors are doing is wrong. AFAIK (and I could well be wrong) the tax is paid by the end user….the last one in the supply chain and the tax is paid based on the final sales price.

The state wants all they can get. They don't want the sales tax paid on the lower wholesale price. You wouldn't want the state to get cheated out of their tax money, do you? LOL just kidding.

Don't trust what I say I was in business myself but that was 35 years ago and that's how it worked around hear at that time.

Its good that you will check at the start and get to someone that knows. You don't want to get messed up and have the state haunting you down the road.

In MN, it supposedly depends on whether or not you pay tax when you purchase material. I pay sales tax on my purchases and do not charge my customers sales tax, which my CPA is cool with. Now it seems most other contractors in the same field DO charge sales tax on everything including labor, which nobody has ever been able to explain to me either. I have a friend who is an arborist (tree trimmer) and is required by his CPA to charge sales tax on every penny he bills out, despite 100% of it being labor. I can't make sense of it but based on what I pay in every year, I am not eating the sales tax

I'm from Illinois. In the past I have called our tax department in Springfield with questions, and they were very helpful. As an example, I asked if a manufacturing company buys pumps or parts from me for the heating plant in their building, is this sale subject to a manufacturer's sales tax exemption? Answer, no, not tax exempt if they are using what you sell them. Only exempt if they are reselling what they bought from you.

You might find the same from the tax folks in Madison.

Going by what happens in Illinois, if you are a registered retailer in Wisconsin, you get a resale number assigned to you and/or your company. You have to file annually, quarterly, or monthly, depending on your previous reported taxable sales volume. If it's your first time filing, your CPA should be able to guide you through this, and once you know how, it's a piece of cake. Thats how I got started.

For me, when I make most of my business related material purchases, I provide the vendor with my state retailer's certificate, and don't get charged sales tax. Examples are eBay, Supply House.com, McMaster Carr, pump and control OEMs, etc. Exception is minor bits and pieces from the hardware store. I just pay the tax and take a deduction on the whole amount when I prepare my list for my CPA to do my Schedule C.

I would say, if you pay sales tax on all the material you buy, you wouldn't again charge sales tax. If you did, you could be in for problems with the folks in Madison. You have to file and pay to the DoR in Madison on all the sales tax you collect, minus a pittance discount the state allows for your collecting and paying the collected sales tax to your state.

In short, based on the reselling customers I deal with, If they don't collect and pay sales tax, they are taxable. Exception here is, if their customer is tax exempt, that carries over to me and that sale is tax exempt. Documentation from the end user tax exempt entity is needed.

If my customer is a registered reseller, I report this sale as RESALE, and don't charge or pay sales tax.

Sorry for this long winded reply, but this is something that needs to be understood and complied with if you're going to operate a legitimate business.

Go here . . .

https://www.revenue.wi.gov/Pages/Training/contractors.aspx

. . . and take a look at Publication 207.

Installations page 7 sections 2 part a.b.c
Parts page 4 section B and real world examples page 8
Service call and labor page 7 section 2
+1 to getting a hold of the DOR. Contact info on page 53.
+1 to a new CPA . . . . these are easy questions for a good one. No locals. Big 4 or Baker Tilly only.

Good luck!

@Pumpguy

The one that I laughed at was the liability insurance. They asked me when i started how much business will you do in a year? Gross $$$. How would I know?

I didn't realize that is what they based the liability premium off of.

Then they audit you when the year is done and if you had more business (not necessarily profit) they bang you harder.

The Secretary of State should have all of the tax answers.