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Wisconsin Expands Exemption for Construction Contracts


Construction

Effective December 1, 2017, Wisconsin is expanding its exemption from sales tax for lump sum contracts to apply to all construction contracts and to subcontractors. An exempt construction contract is defined as a “contract to perform real property construction activities and to provide products.” This rule exempts the sale of tangible property that is not affixed to real property from sales tax on either a time and material or a lump sum contract.  In these cases, the contractor is deemed the consumer and owes the use tax on the cost of the materials. The expanded exemption is first applicable to a contract that is entered into or extended, modified, or renewed on December 1, 2017.



Additionally, products sold by a subcontractor to a prime contractor, or to another subcontractor for eventual sale to the prime contractor, as part of a construction contract are exempt if:
 

  • the total sales price of all products is less than 10% of the total amount of the construction contract; or
  • the products will be sold by the prime contractor as part of a construction contract, and that sale is exempt as a sale of products by a prime contractor.


The subcontractor is considered the consumer of the products and must pay the sales or use tax on them.
 

The subcontractor is considered the consumer of all products used by the subcontractor in real property construction activities, but the subcontractor may purchase, without tax, for resale, products that are sold by the subcontractor to the prime contractor or another subcontractor as part of the subcontractor’s construction contract for resale to the entity and that are not consumed by the subcontractor in real property construction activities.
 

No use tax is due by either the prime or subcontractor for materials incorporated or sold to an exempt entity for a real property project. (Act 59 (A.B. 64), Laws 2017)

(11/28/2017)
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