Wisconsin: Department Addresses Post-Wayfair Sales Tax Collection Requirements

The Wisconsin Department of Revenue recently ruled that a taxpayer making remote sales of prepackaged brownies and cookies to customers in Wisconsin was not required to register with the state, despite meeting the state’s economic nexus threshold. The taxpayer made sales via its website and through a third-party marketplace. Under Wisconsin law, effective October 1, 2018, a remote seller is required to collect and remit sales tax if, in the previous or current taxable year, it has annual gross sales into the state exceeding $100,000 or has 200 or more separate sales transactions into the state.

The Department first addressed the taxability of the taxpayer’s food products. In Wisconsin, “food or food ingredients,” except candy, soft drinks, dietary supplements, or prepared foods, are exempt from sales and use tax. The definition of “candy” excludes any item that contains flour or requires preparation. Moreover, bakery items are excluded from the definition of “prepared food.” The Department concluded that the taxpayer’s products were exempt “food” items because they were neither a “candy” product nor a “prepared food” product. Particularly, the brownies and cookies contained flour and were bakery goods sold without eating utensils in an unheated state. Accordingly, the Department ruled that because taxpayer’s sales were exempt from Wisconsin sales and use tax, the taxpayer was not required to register with the state. Importantly, the Department noted that despite the Wayfair decision, the taxpayer had no sales or use tax obligation in Wisconsin because it was making only nontaxable sales. Please contact Jill Nielsen at (312) 665-2794 with questions on Private Letter Ruling No. W1911005.