On July 3, 2019, Wisconsin Governor Tony Evers signed 2019 Wisconsin Act 9 (AB 56), the State's 2019-21 biennial budget legislation, and 2019 Wisconsin Act 10 (AB 251), which imposes sales/use tax collection requirements on marketplace facilitators.

What ultimately was enacted under AB 56 was a significant departure from the Governor's original budget proposal in February. That proposal had called for increased fuel taxes to pay for infrastructure improvements and a 10% refundable income tax credit for single filers earning less than $80,000 (married-joint filers earning less than $125,000).The proposed income tax credit would have been funded, in part, by limiting the existing Manufacturing and Agricultural Credit to $300,000 of a person's income. The Governor's proposal also called for significant increases in spending on education and health care.

Many of the Governor's proposals were removed in AB 56. The increased fuel taxes were replaced with more modest increases in certain motor vehicle title fees to support infrastructure improvements. The limitation on the Manufacturing and Agricultural Credit also was removed from the final version of the legislation. The major tax changes adopted by AB 56 and AB 251 are discussed next.

AB 56 provides a rate reduction in the second lowest individual income tax bracket from 5.84% to 5.21% for tax years beginning after 2018.

AB 251 requires marketplace providers to collect and remit sales tax on sales facilitated on behalf of marketplace sellers. A "marketplace provider" is defined as a person that: (1) facilitates a seller's retail sale by listing or advertising for sale the seller's products or taxable services; and (2) processes the purchaser's payment, directly or indirectly, through agreements or arrangements with third parties. AB 251 defines "marketplace seller" to mean a seller that sells products through a physical or electronic marketplace operated by a marketplace provider, regardless of whether the seller must be registered with Wisconsin Department of Revenue (Department). These requirements begin on October 1, 2019.

AB 251 also provides for a one-time reduction from the total tax due from an audit determination equal to 10% of the additional sales tax imposed for each year of the audit period. This reduction applies if the annual gross sales of the person being audited are less than $5 million for each year of the audit period and, at the time that the Department sends an audit notice, the Department has received all returns required from the person being audited for the entire audit period. This provision will first apply to written notices of audit determinations made on October 1, 2019.

Finally, AB 251 would provide additional individual income tax rate relief for 2019 dependent upon increased sales/use tax revenues.

Implications

Wisconsin joins the ranks of states that have now adopted marketplace provider legislation. Sellers should review their business operations and sales data related to Wisconsin to assess their Wisconsin filing obligations and whether they qualify for the one-time assessment reduction, or if a voluntary disclosure is more beneficial.

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