As we all are aware, each state differs in the way they handle taxes for businesses. In this post we will focus on Wisconsin state tax law, starting at a high level and working down to some key details which may spark some creative thinking for what you can do to decrease your business’s tax contribution. I would like to keep things as simple as possible here, so for further detail please visit revenue.wi.gov.
You are required to file an income or Wisconsin corporation franchise tax return if your corporation is:
- Organized under WI laws
- Licensed to do business in WI (some exceptions).
- Unlicensed, doing business in WI
- Foreign corps. with an interest in a partnership doing business in WI
- Publicly traded partnerships treated as corps.
- LLCs treated as corps. for federal income taxes
- Corps with income from the sale or purchase of lottery prizes if winning tickets are originally bought in WI
The corporation must also be registered with DFI – Dept of Financial Institutions.
It is now a requirement to file corporate returns electronically unless a waiver is filled out. These must be filed by the 15th day of the 3rd month after the close of your company’s particular taxable year. Other rules apply for nonprofits. If you file late without a proper extension, your company may be subject to interest and a penalty.
Income Tax vs. Corporate Franchise Tax
Both of these taxes exist in Wisconsin. Income tax is based on a corporation’s net income at a 7.9% rate, and is applied to companies not subject to the franchise tax and who own property in WI; franchise tax is a tax on the privilege of doing business in WI, which is based off net income and also at 7.9%.
Wisconsin business property taxes are the same as residential which are paid to the city, and the state gets a portion. There has been some recent controversy in the City of Wauwatosa with Nordstrom’s retail store’s assessed value. The city valued it at almost $30 million, including the property, building, AND merchandise, when Nordstrom’s claims just under $11 million, disregarding the merchandise and seeks a $444k refund. The controversial part here is, should the value be assessed as the property and building, or as a functioning business with merchandise included? Read the Nordstrom’s article here.
Wisconsin payroll taxes cover Social Security and Medicare; employees pay about 7.5%, and the business matches. This is where the self-employed have a disadvantage, as they must pay the entire 15%. If you need help with payroll paycheck processing, or would like an accountant to check over your books, feel free to contact D&M Accounting and we would be happy to help.
WI aims to be business-friendly, and offers various tax deductions and incentives to promote the creation of new business:
- Research and Development tax credit
- Sales and Use Tax Exemptions – for manufacturing or biotechnology
- Capital gains on a WI business investment are exempt from this tax after holding for five years.
- Credits for 25% of early stage investments in qualified new businesses
- credit for income from manufacturing or agricultural property
- equipment used exclusively in a manufacturing process is exempt from personal property taxes
- Sales Tax Exemptions
- equipment used by a manufacturer to produce tangible personal property
- tangible personal property which becomes part of the manufacturing process
- equipment and tangible personal property used in research with manufacturing or biotechnology starting in 2012
A business structure in WI is another important topic which we will go over in another blog. Stay tuned!