United States

Wisconsin enacts marketplace facilitator law and biennial budget

TAX ALERT  | 

On July 3, 2019, Wisconsin Governor Tony Evers signed bills relating to the 2019-2021 biennial budget and marketplace provider sales tax nexus. A brief summary of those bills is highlighted below.

2019-2021 biennial budget

Governor Evers’ proposed budget included numerous tax changes, including a gasoline tax increase, a cap on the manufacturing and agriculture tax credit, a limitation on capital gain exclusions and an increase in the refundable portion of the R&D tax credit, among other provisions. However, those proposals did not survive in the final version. Although the mostly minor tax changes align closely with the status quo, this latest budget process highlights the policy differences between the governor and legislature, and may foreshadow an eventual shift in Wisconsin tax policy.

Wisconsin is one of about a dozen states with a divided government – the governor, a first term democrat and both chambers of the legislature controlled by republicans. The differences between Governor Evers’ proposal and the budget bill passed by the legislature prompted calls for an unprecedented veto of the budget in its entirety. Ultimately, a compromise was reached with an additional 78 line item vetoes from the governor.

The 2019-2021 biennial budget was enacted through Wisconsin Act 9. Several notable provisions are summarized below.

Individual income tax rate reduction

Effective for tax years beginning after Dec. 31, 2018, the second lowest tax bracket for individuals is decreased from 5.84% to 5.21%. The remaining brackets remain unchanged.  

Real estate transfer fee

Act 9 clarifies the exemption from the real estate transfer fee for certain conveyances from a subsidiary corporation to its parent, explaining that both entities must be corporations. Additionally, the Act provides that the exemption for conveyances solely to provide or release security for a debt or obligation to not apply if the debt or obligation was incurred as the result of a conveyance.

Motor vehicle fuel tax

Act 9 reduces the administrative allowance from 1.35% to 0.675% and repeals the 0.5% refund that may be claimed by retailers to cover shrinkage and evaporation losses.

Marketplace provider nexus

Wisconsin became the latest state to adopt marketplace provider nexus through Wisconsin Act 10 by requiring marketplace providers to collect and remit tax on a sale facilitated on behalf of a marketplace seller. The provisions are effective Oct. 1, 2019.

Under the new law, a “marketplace provider” means any person who facilitates a retail sale by a seller by listing or advertising goods or services for sale by the seller, in any manner, and, who directly or indirectly, through agreements or arrangements with third-parties, processes the payment from the purchaser, regardless of whether the marketplace provider receives compensation. Waivers are available for marketplace providers that only facilitate sales on behalf of marketplace sellers operating under a hotel, motel or restaurant brand name shared with the provider, or if there is evidence that marketplace sellers will reliably collect and remit tax.

Wisconsin joins almost three dozen other states in adopting similar marketplace facilitator provisions after codifying economic sales tax nexus for remote sellers – previously effective under an emergency administrative rule on Oct. 1, 2018. All but three states have adopted an enforcement date for economic sales tax nexus enforcement in the wake of South Dakota v. Wayfair. For more information on those provisions, please read our previous alert, Wisconsin enacts SALT deduction workaround with pass-through tax.

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