1. (1) General. When a transaction involves the transfer of tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., along with the performance of a service, and the transaction is neither a bundled transaction, as defined in s. Tax 11.985, nor a transaction to which s. 77.52 (2m) (b), Stats., applies, the true objective of the purchaser shall determine whether the transaction is a sale of tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., or the performance of a service with the transfer of the property, item, or good being incidental to the performance of the service. If the objective of the purchaser is to obtain the personal property, item, or good, a taxable sale of that property, item, or good is involved. However, if the objective of the purchaser is to obtain the service, a sale of a service is involved even though, as an incidence to the service, some tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., may be transferred.

   Example: A person performing business advisory, record keeping, payroll, and tax services for small businesses is providing a service even though this person may provide forms and binders without charge as part of the service. The person is the consumer, not the seller, of tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., furnished as an incidence to the service.

2. (2) Receipts and purchases of persons providing services.

   1. (a) Since persons engaged in the business of furnishing services are consumers, not retailers, of the tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., which they use in rendering their services, tax applies to the sale of the tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., to them.

      Example: Persons engaged in the business of furnishing services include physicians, lawyers and accountants.

   2. (b) A person who performs a nontaxable service in conjunction with the sale of tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., is a retailer with respect to the sale, and the tax applies to the total sales price from the sale without any deduction for the work, labor, skill, time spent, or other expense of producing the property, item, or good.

   3. (c)

      1. 1. If there is a single charge for providing both taxable and nontaxable services that are not a bundled transaction as defined in s. 77.51 (1f), Stats., the entire charge is subject to the tax, unless it is determined by the department that another method, such as allocation or primary purpose of the transaction, more accurately reflects the tax. If the charges for taxable and nontaxable services are separately stated on an invoice, the tax applies only to the charge properly attributable to the taxable services, unless it is determined by the department that the primary purpose of the transaction method for computing the tax more accurately reflects the tax.
      2. 2. If there is a single charge for providing both taxable and nontaxable services in a transaction that is a bundled transaction as defined in s. 77.51 (1f), Stats., the entire charge is subject to the tax, except as provided in s. 77.52 (20) (b), Stats.

3. (3) Special situations.

   1. (a) Hospitals and clinics. Hospitals and medical clinics generally provide nontaxable professional services. They are, therefore, the consumers of tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., used in rendering the services. Hospitals and clinics which, in addition to rendering professional services, also sell tangible personal property, items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., or taxable services are retailers and shall obtain a seller’s permit and report the tax on these sales.

      Examples: 1) Sales of drugs by a hospital or clinic pharmacy are taxable if they are not dispensed under a prescription.

      2) Sales of parking for motor vehicles by a hospital or clinic are taxable.

      Note: Refer to s. Tax 11.002 for a description of permit requirements, how to apply for a permit, and the 15-day time period within which the department is required to act on permit applications.

   2. (b) Original manuscripts or musical arrangements. The transfer to a publisher of an original manuscript or musical arrangement for publication is not a sale of tangible personal property or a digital good under s. 77.52 (1) (d), Stats., and is not subject to the tax. However, the sale of copies of an author’s or composer’s work is a sale of tangible personal property or a digital good under s. 77.52 (1) (d), Stats., and is taxable. The sale of a manuscript is taxable if the manuscript itself is of particular value as an item of tangible personal property or as a digital good under s. 77.52 (1) (d), Stats., and the purchaser is buying the property or good, and not the service which went into it.
   3. (c) Artistic expressions. Sales of works of art, such as paintings and sculptures, are taxable.

   4. (d) Interior designer’s fee.

      1. 1. An interior designer’s fee is taxable when the designer’s services are part of a sale of tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats. If a designer bills a client only for the full list price of the property, item, or good sold and then receives the equivalent of a fee through the designer’s supplier in the form of a trade discount, the designer shall pay a tax on the full amount billed the client without any deduction for services performed.

         Example: A designer’s fee is taxable when it is added to the bill for tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., on a cost-plus arrangement.

      2. 2. A designer’s fee is not taxable if the fee is solely for services rendered and there is no sale of tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., involved with the transaction.

      3. 3. If there is a separate charge for the designer’s fee in addition to a separate and optional charge for any tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., the designer sells to the client, the designer’s fee is not part of the sales price of the tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., if the client had all of the following choices:

         1. a. Purchasing the tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., from the designer for an additional, optional, fee.
         2. b. Purchasing the tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., from another party.

         3. c. Not purchasing the tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats.

            Example: Designing a decorative scheme, advising clients or recommending colors, paints, wallpaper, fabrics, brands, or sources of supply are nontaxable services.

   5. (e) Research and development.

      1. 1. The development of information pursuant to a research and development contract is a sale of a service which is not subject to the sales tax. Although the person performing the research and development may be under contract to provide plans, designs, and specifications, or to test and evaluate a proposed product, the primary objective of the customer is to obtain the results of the technical skill and the experimental and research work of the engineers and other technicians of the researcher.
      2. 2. In certain instances under a research and development contract, the information cannot be developed without the production of a prototype. In this situation, if the primary objective of the customer in the transaction is to obtain tangible personal property or an item under s. 77.52 (1) (b), Stats., such as a prototype, the researcher may purchase the material used to construct the prototype without tax as property for resale. The subsequent sale of the prototype by the researcher to the customer is subject to tax unless an exemption applies. If the primary objective of the customer is to obtain the information resulting from production of the prototype, the prototype is considered transferred to the customer incidental to the research and development services. The researcher is subject to tax on the material purchased and used to construct the prototype. Determinations shall be made on a case-by-case basis.
   6. (f) Recording studios. When a recording studio agrees to furnish or supply records, acetates, compact discs, or other tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., which becomes the property, item, or good of others, the tax applies to the total sales price resulting from the sale of the tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats. The sales price may not be reduced for labor or service costs, including charges for the use or rental of studio facilities, even though those costs may be itemized in billing the customer.
   7. (g) Architects. Fees paid to architects, except fees paid to architects for landscaping planning, to design buildings or structures are for services performed, and are not subject to the tax. If, however, an architect has blueprints made from original drawings, the sale of the blueprints is subject to the tax.
   8. (h) Drafting. Charges made by a self-employed person for commercial drafting are subject to the tax when the charge is for detailed drawings based entirely on specifications and data supplied by architects, engineers, or other business firms. These charges are taxable if the concepts, ideas, specifications, or designs depicted in the drawings produced are the customer’s and the person performing the drafting simply transfers the details supplied by the customer to paper thereby producing a drawing, which is tangible personal property, for use by the customer. It would also be taxable if it is transferred electronically to the purchaser since it is an additional digital good. When the person performing drafting services uses his or her own concepts and ideas in producing detailed drawings for a customer, the sale of the drawings is not a sale of tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats.
   9. (i) Enuresis alarms. Charges for rental of bed-wetting alarm systems are taxable charges for the use of tangible personal property, not charges for a service, whether or not the lessor analyzes information about the user and completes a report based on the information.
   10. (j) Detonating explosives. Detonating explosives is a non-taxable service. A person who performs that service and furnishes the explosives used in conjunction with the service is the consumer of the explosives.
   11. (k) Taxidermists. The sales price from services taxidermists perform on tangible personal property is subject to the tax.
   12. (L) Car washes. The sales price received by persons providing car wash services, including those providing coin-operated self-service car washes consisting of a pressurized spray of soap and water, are taxable. These persons are the consumers of the tangible personal property such as soap, brushes, and towels they purchase, except for the wax, air freshener, and protectants physically transferred to a customer’s vehicle. Thus, suppliers may accept an exemption certificate claiming resale for the wax, air freshener, protectants, and other tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., sold to car wash operators, which will be physically transferred to the car wash operator’s customers. Car wash operators are liable for sales or use tax on their purchases of supplies that they use in providing their services unless those items are physically transferred to their customers.

   13. (m) Soliciting advertising for telephone directories. Persons who solicit advertising for telephone books and who, as an incident of the service, provide telephone books to telephone companies or their subscribers, are the consumers of and shall pay tax on all the telephone books they distribute in Wisconsin.

       Example: Company B located in Wisconsin solicits advertising for telephone books yellow pages and compiles, publishes, and delivers the directories to the subscribers of telephone companies. Company B contracts with an out-of-state corporation to print the directories. The printer delivers a portion of the directories to the U.S. Postal Service for delivery directly to telephone subscribers in Wisconsin. The remaining directories are delivered to Company B who in turn distributes them to subscribers in Wisconsin. Company B is subject to use tax on the directories delivered by the U.S. Postal Service as well as on the directories which it distributes to subscribers.

       Note: Section Tax 11.67 interprets ss. 77.51 (1f), (12), (12m), (13), (14) (intro.) and (h), (15a), (15b), (20), and (22) (a) and (b) and 77.52 (1), (2) (a), (2m) (a) and (b), (20), and (21), Stats.

       Note: The interpretations in s. Tax 11.67 are effective under the general sales and use tax law on and after September 1, 1969, except that (a) The fees paid to architects performing landscaping planning became taxable effective May 1, 1982, pursuant to Chapter 317, Laws of 1981; (b) The definition of bundled transactions became effective October 1, 2009, pursuant to 2009 Wis. Act 2; (c) The change of the term “gross receipts” to “sales price” and the separate impositions of tax on coins and stamps sold above face value under s. 77.52 (1) (b), Stats., certain leased property affixed to real property under s. 77.52 (1) (c), Stats., and digital goods under s. 77.52 (1) (d), Stats., became effective October 1, 2009, pursuant to 2009 Wis. Act 2; and (d) The clarification that a service provider who transfers tangible personal property, or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., incidentally with a taxable service is the consumer of such property, items, or goods became effective July 2, 2013, pursuant to 2013 Wis. Act 20.

History

History: Cr. Register, January, 1978, No. 265, eff. 2-1-78; am. (3) (n), Register, June, 1983, No. 330, eff. 7-1-83; r. (3) (k) and am. (3) (n), Register, September, 1984, No. 345, eff. 10-1-84; am. (3) (h), Register, April 1990, No. 412, eff. 5-1-90; am. (1), (2) (b) and (c), (3) (a), (d) 1. and 2., (e) 1. and 2., (g), (L), (m) and (n), Register, November, 1993, No. 455, eff. 12-1-93; am. (2) (a), (3) (e) 2., (f), (h) and (j), r. (3) (e) 3., renum. (3) (L) to (n) to be (3) (k) to (m) and am. (3) (L), Register, April, 2000, No. 532, eff. 5-1-00; EmR0924: emerg. am. (1), (2) (a), (b), (3) (a), (b), (d), (e), (f), (h), (i), (k) and (L), renum. (2) (c) to be (2) (c) 1. and am., cr. (2) (c) 2., eff. 10-1-09; CR 09-090: am. (1), (2) (a), (b), (3) (a), (b), (d), (e), (f), (h), (i), (k) and (L), renum. (2) (c) to be (2) (c) 1. and am., cr. (2) (c) 2. Register May 2010 No. 653, eff. 6-1-10; CR 10-094: am. (1), (2) (b), (3) (d) (title), 1., 2., cr. (3) (d) 3. Register November No. 659, eff. 12-1-10; correction in (1) made under s. 13.92 (4) (b) 7., Stats., Register November 2010 No. 659.