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As a result of the Menasha decision, Wisconsin amended its definition of "tangible personal property" to include prewritten computer software, regardless of how it is delivered to the purchaser. Previously, "tangible personal property" included computer programs except custom programs. This amendment, which reverses the decision made in the Menasha case, has an effective date of March 6, 2009. Therefore, sales of prewritten computer software with a modification or enhancement that is designed and developed to the specifications of a specific purchaser will be taxable in full if there is not a reasonable separately-stated charge on an invoice or other statement of the price given to the purchaser for the modification or enhancement. If, however, there is a reasonable separately stated charge for the modification or enhancement, that portion of the charge will be exempt. (News for Tax Practitioners, Wisconsin, Department of Revenue, March 16, 2009)


The Streamlined Sales Tax (“SST”) Governing Board has approved Wisconsin’s membership petition during its meeting in Arlington, Virginia, on May 12, 2009. Wisconsin will become an associate member of the SST Agreement, effective July 1, 2009, and a full member, effective October 1, 2009. (SST Governing Board Meeting, Arlington, Virginia, May 12, 2009)


Wisconsin has conformed its laws to the Streamlined Sales and Use Tax (“SST”) Agreement with the enactment of Act 2 (S.B. 62), Laws 2009, effective October 1, 2009. Therefore, On February 26, 2009, Wisconsin petitioned for membership in the Streamlined Sales and Use Tax (“SST”) Agreement and has asked that its petition be considered at the May 2009 meeting of the SST Governing Board. The petition for membership requests that Wisconsin be approved as an associate member effective July 1, 2009, through September 30, 2009, and approved as a full member effective October 1, 2009. (Streamlined Sales and Use Tax Agreement Petition for Membership, Wisconsin Department of Revenue, February 26, 2009)


On February 19, 2009, Wisconsin Governor, Jim Doyle, signed a budget repair and economic stimulus bill that enacts provisions conforming Wisconsin sales and use tax laws to the Streamlined Sales and Use Tax (“SST”) Agreement, effective October 1, 2009. The bill imposes sales and use taxes on digital products and considerably modified computer software that was previously ruled exempt. Furthermore, the bill modifies the taxability of drop shipments; updates sourcing regulations, and provides an amnesty provision. With the enactment of this bill, Wisconsin may petition to become a full member of the Agreement. Additional rules and regulations apply. (S.B. 62, Laws 2009, effective as noted; Analysis of Budget Adjustment Legislation, Wisconsin Legislative Fiscal Bureau)


The Wisconsin Supreme Court ruled that an application software system purchased by a taxpayer fit the requirements to qualify as custom software and, therefore, was exempt from sales and use tax. The basic modules purchased contained a business and accounting system that had to be customized to fit their specific operations. Under audit, the Wisconsin Department of Revenue declared that the software sold by SAP was noncustom and subject to Wisconsin’s sales tax. The taxpayer petitioned and the Commission ruled in their favor. The Commission concluded that the system was a custom program because of the significant investment in presale consultation and analysis, testing, training, enhancement, and maintenance support, and because it was not a prewritten program. The distinction between the custom and prewritten programs hinges on the amount of effort necessary to get the software operational for the particular customer’s needs. The Wisconsin Supreme Court found that the Commission’s overall conclusions regarding the several circumstances that determine whether a program is a custom program were reasonable. (Wisconsin Department of Revenue v. Menasha Corp., Wisconsin Supreme Court, No. 2004AP3239, July 11, 2008)



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