When: This exemption is effective for the sales and use of qualifying materials on June 1, 2020.
What: The sale/purchase of tangible personal property stored in Wisconsin for 120 days or less, that is used in fulfillment of certain real property construction activities outside of Wisconsin. The qualifying property stored in Wisconsin includes property that is altered by converting, fabricating, manufacturing, printing, processing, or shaping before its use outside of Wisconsin.
Note: The exemption does not apply to materials that are stored in Wisconsin, leaves Wisconsin, and are subsequently returned to Wisconsin.
How the materials must be used:
This is a use-based exemption. So effective June 1st, the above tangible personal property qualifies for exemption as long as its use meets the following criteria:
- Property is used in fulfillment of a real property construction activity that occurs solely outside Wisconsin at a:
- Nonprofit organization
- Public school district, or
- Business district where business tax incentives have been granted, AND
- Property is used by a person engaged in an activity classified as construction under sector 23 of the North American Industry Classification System (NAICS), 2017 edition, published by the federal office of management and budget.
Exemption form to provide vendor:
If your material purchases qualify for this exemption, you will need to provide your vendor one of the following exemption certificates:
- WI DOR Form S-211 – Fully complete the form, check “Other purchases exempted by law,” and write in “Section 77.54(69), Wis. Stats.” Don’t forget to sign and date the form.
- WI DOR Form S-211E – Fully complete the form, this specific contractor exemption option should be added to Tab 4. soon but is not currently available so write in “Section 77.54(60), Wis. Stats.” on the body of the form after you create the form.
Documentation to maintain:
Any time you claim an exemption from sales or use tax on your purchases, you must maintain certain records to show that your purchases qualified for the exemption. Documenting this exemption is similar to the documentation required for the building materials exemption, with the fun twist of end customers located out-of-state.
TIP: Retain as much of the criteria information on the sales invoice to your customer for the job that these materials were used in.
- Job Location
- Customer Information and Business District Information (if applicable)
- Description of Job (to show it was real property construction activities)
Additional documentation to maintain:
- Purchase invoices
- Federal 501(c)3 determination letter of end customer (if applicable)
- Contract with end customer or other documentation that business tax incentives have been granted to customer based on business district location
Good News/Bad News
Services provided to tangible personal property that is able to be purchased exempt at the time of service, are not taxable. Therefore, if the contractor hires a subcontractor or fabricator to alter the property before it is removed from Wisconsin and installed in real property outside of the state, the service is also not subject to tax. To document this, the contractor should provide the service provider with a fully completed exemption certificate claiming the temporary storage exemption (sec. 77.54(69), Wis. Stats.).
While contractors are able to exempt their purchases from Wisconsin sales and use tax, they may be subject to tax on those materials in the state in which the materials are installed. So be sure to check into the laws in the state your job is located in!