United States

Wisconsin ends tax pyramiding on heavy truck and trailer purchases

Retroactively exempts federal excise tax from sales tax base

TAX ALERT  | 

On April 15, 2016, Wisconsin Gov. Scott Walker signed into law Assembly Bill 629, which provides that, retroactive to purchases on or after Sept. 1, 2014, sales and use tax does not apply to the separately-stated amount of federal excise tax imposed under section 4051 on the seller in a retail sale of a heavy truck or trailer.

Section 4051 imposes a 12 percent excise tax on the seller in the retail sale of a new heavy automobile truck chassis, automobile truck body, truck trailer or semitrailer chassis, truck trailer or semitrailer body, or tractors of the kind chiefly used for highway transportation in combination with a trailer or semitrailer. Where no other Wisconsin sales or use tax exemption applied to the sale of a heavy truck or trailer, the amount of section 4051 excise tax imposed on the seller and charged through to the buyer has historically been included in the purchase price for the purposes of computing the sales and use tax due. To eliminate this pyramiding of tax, Assembly Bill 629 provides an exemption that eliminates the federal excise tax from the purchase price for sales and use tax purposes as long as the excise tax is separately stated on the invoice, bill of sale, or similar document that the seller gives to the purchaser.

When purchasing a heavy truck or trailer in a taxable transaction, purchasers should consider negotiating the terms to obtain separate statement of the federal excise tax when the seller issues an invoice, bill of sale or similar document. Further, as the exemption is retroactive back to Sept. 1, 2014, owners of heavy trucks or trailers that previously purchased the equipment on or after that date should consider seeking refunds.

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