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Lev
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I have a MN business (sole proprietor) who sold some urethene

Resolved Question:

I have a MN business (sole proprietor) who sold some urethene foam products to a WI contractor, collected WI sales tax on the sale and paid it to the state of WI in 2011. Now the WI dept of Revenue is requesting a 2011 WI income tax return. The business does not have any WI location or WI sales people in WI so he was under the understanding that he only had to remit WI sales taxes on the sales. Is he correct or is WI Revenue correct?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

Lev :

Hi and welcome to Just Answer!
In order to correct WI sales tax - registration is required.
-- A seller's permit is required for every individual, partnership, corporation, or other organization making retail sales, leases, or rentals of tangible personal property or taxable services in Wisconsin, unless all sales are exempt from sales or use tax.
After the seller's permit is issued - the business is required to file the sale tax return as long as seller's permit is valid. Please be aware that WI
DOR requires all sales and use tax returns be filed electronically.


If you do not plan to conduct any taxable sales in WI - the business must file a final sales tax return - and after that - the seller's permit would be terminated and the sales tax account would be closed - thus no further sales tax returns will be required.

Lev :

You may also Inactivate your Account. For that - please submit the following information to WI DOR


-The current name on your account
-Your tax account number
-The date you want the inactivation to take effect (this should be the last day you are making sales)
-Return your permit


You may submit a request to inactivate an account online in My Tax Account.
However - as long as your account is active - WI DOR expects to see your sales tax returns.

Customer:

I am not asking about sales tax ...I am asking about Wisconsin income tax. Is a MN business responsible to pay Wisconsin income taxes on Wisconsin sales even through it does not have a physical location in Wisconsin. The business nexus is in MN and he pays MN income taxes on all sales.

Lev :

If the entity has NO nexus Wisconsin - it is generally not responsible for income taxes.
As long as the entity is a nonresident of WI - income should be apportioned as from WI sources and outside of WI sources. Only income from WI sources would be subject of WI income taxes.
You might want to reply with explanation of facts and that your entity did not conduct any any business activities in WI.
However - the fact of collecting WI sales tax is the evidence that the sale transaction took place in WI - and your business entity most likely had income from WI sources.

Lev :

For WI income tax purposes - it doesn't matter that the business pays MN income taxes on all sales. The matter - if that income from WI sources or not.
Each state has own rules how income is apportioned for state income tax purposes. In particular - WI apportionment is based strictly on sales and that is why you received the notice.
See here a brief description of how states apportion corporate income - http://www.taxadmin.org/fta/rate/apport.pdf

Customer:

ok...thank you

Lev :

Sorry if you expected differently.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 23251
Experience: Taxes, Immigration, Labor Relations
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