The Wisconsin Department of Revenue published final regulations that create a 15 day threshold for activities in the state that establish both income and franchise tax nexus. Clearinghouse Rule 18-081 was published Sept. 30 and is effective Oct. 28.
In Wisconsin, corporations are considered to be doing business in the state if they ‘regularly’ sell products or services or solicit business from customers in the state. The new regulation defines regularly as 15 or more days of activity in the state. According to the regulations, the threshold can be met by one person with 15 days of activity or 15 persons with one day each of activity. Meeting the 15 day threshold for activity will require the filing of Wisconsin income/franchise tax returns. The new threshold is in addition to the activities that have long been considered doing business for income tax nexus purposes such as owning or leasing real or tangible personal property, maintaining inventory or owning an interest in a pass through entity that has nexus in the state.
According to the department, the new regulations create a bright line rule for companies doing business in Wisconsin. But the 15 day threshold does not apply in all cases. For example, the performance of services unrelated to the sale of tangible personal property for as little as 12 days may create nexus. Still, unlike nexus developments in other states this rule requires 15 days of activity within the state. Companies should be aware of the time spent within Wisconsin, particularly with respect to the sale of tangible personal property, and when possible plan accordingly. Companies should note that the 15 day nexus threshold will be enforced without regard to the amount of sales or transactions in the state.
Companies doing business in Wisconsin should also be aware that meeting the threshold could result in higher Wisconsin corporate income and franchise tax liabilities. However, those liabilities may be offset for out of state companies that were required to addback sales in other states. Please consult with your tax advisor for more details.