Sales and purchases of the United States and Wisconsin state flags are exempt from Wisconsin sales and use tax pursuant to section 77.54(46), Wis. Stats. This exemption does not apply to flag poles and flag pole accessories. Other types of flags (e.g., sports teams, military, other state’s flags, decorative, etc.)  are subject to Wisconsin sales and use tax.

 

The tax treatment of a flag pole differs depending upon whether it is installed at a residential facility or a commercial facility.

 

  • A flag pole installed at a residential facility (e.g., a personal residence) is considered a real property improvement. The sale of a real property improvement is not taxable. The installer is considered the consumer of the materials (e.g., flag pole, rope, pulley, cement) used in the installation of the flag pole and must pay sales or use tax on its purchases of those materials.
  • A flag pole installed at a commercial facility (e.g., a business) is considered to retain its character as personal property even after installation. The sale of the flag pole and its accessories (including labor) is taxable. The portion of the sale related to the U.S. or Wisconsin state flag is exempt (pursuant to sec. 77.54(46), Wis. Stats.). The portion of the sale related to the materials and labor for the foundation is not taxable. The installer would be required to remit sales or use tax on its purchase of the cement and any other materials used in the foundation. The installer’s purchase of the flag, pole and accessories qualify for resale.

 

Note: A flag pole installed at a qualifying exempt entity’s facility would not meet the criteria for the building materials exemption (sec. 77.54(9m), Wis. Stats.) since it retains its character as tangible personal property. The materials for the flag pole’s foundation, though it is a real property improvement, would not qualify for the building materials exemption because it does not become a component part of a “facility,” as defined in the exemption criteria.

 

Below is a chart of common types of sales and purchases of flags to make identifying the tax treatment quick and easy.

 

Basic WI Sales & Use Tax Treatment of U.S. and Wisconsin State Flags

 

Item: Classification of Property: Tax Treatment of Sale: Tax Treatment of Seller’s Purchase of Property:
Miniature flag with permanently attached staff Tangible Personal Property Exempt (sec. 77.54(46), Wis. Stats.) Exempt (sec. 77.54(46), Wis. Stats.)
Flag Tangible Personal Property Exempt (sec. 77.54(46), Wis. Stats.) Exempt (sec. 77.54(46), Wis. Stats.)
Flag with pole kit (sold as 1 item) – without installation Tangible Personal Property – “Bundled Transaction”

1. If seller’s purchase/sale price of pole and accessories are 10% or more of total bundle purchase/sale price the entire sale is taxable.

2. If seller’s purchase/sale price of pole and accessories are less than 10%, entire sale is not taxable.

3. Or seller can choose to unbundle and charge sales tax on the pole and accessories only.

Purchase of flag is exempt (sec. 77.54(46), Wis. Stats.).

 

May purchase the flag pole and accessories without tax, for resale.

Installation of flag pole at a residential facility Sale must be allocated between real and personal property activities Installer’s purchase of materials
Flag Tangible Personal Property Exempt (sec. 77.54(46), Wis. Stats.) Exempt (sec. 77.54(46), Wis. Stats.)
Pole & accessories Real Property Improvement Materials & labor not taxable Taxable
Foundation Real Property Improvement Materials & labor not taxable Taxable
Installation of flag pole at a commercial facility Sale must be allocated between real and personal property activities Installer’s purchase of materials
Flag Tangible Personal Property Exempt (sec. 77.54(46), Wis. Stats.) Exempt (sec. 77.54(46), Wis. Stats.)
Pole & accessories Tangible Personal Property Materials & labor taxable Without tax, for resale
Foundation Real Property Improvement Materials & labor not taxable Taxable

 

 

 

If you have any questions, please contact Holly Hoffman at hhoffman@salesandincometax.com.