Financial Administration

PART II - Preaudit Steps

K. Taxes
  1. General Exemptions:

    1. Tax Exempt Status: All UW System institutions have tax exempt status under Section 115(a)(1), Internal Revenue Code, and qualify for tax exempt status under Section 501(c)(3), Internal Revenue Code as nonprofit educational institutions.

    2. Excise Taxes: Registration No. 39-73 1021-K was issued to the State of Wisconsin by the IRS to authorize tax-free transactions under Chapter 32 of the Internal Revenue Code. This registration number is on file with the District Director, U.S. Treasury Department, Internal Revenue Service, Milwaukee, Wisconsin.

      • The UW System is exempt from federal excise tax (18.4¢ per gallon)on both gasoline and diesel fuel purchases. This includes both bulk purchases and credit card purchases for fleet operations.

      • The UW System is exempt from state excise tax (24.8¢ per gallon) for fuel purchased for off-road use. Departments must individually file for refunds.

    3. Wisconsin Sales Tax: The Wisconsin Department of Revenue (DOR) has issued a sales and use tax exemption number to the UW System because it is exempt as an agency of the State of Wisconsin under Wis. Stats. s. 77.54(9a). The UW System's sales and use tax exemption number is ES 40706.

      • This exemption also applies to employe purchases of meals and lodging which will be reimbursed by the UW System. The employe must furnish the retailer with documentation from the UW which indicates that the employe is conducting university business for which the university will reimburse related travel expenses. The retailer or employe must also indicate the name of the Institution on the billing document. (Reference DOR Publication 219 for more information.)

    4. Room Taxes of Wisconsin Municipalities (Local Room Tax): This exemption applies when lodging is billed directly to the UW System and when the employe pays and provides the hotel with proper tax avoidance documentation (Form ES 40706).

    5. Other US States Sales and Use Tax: The exemption varies by state. In general, the purchase is exempt only when paid directly by University check. The exemptions for each state are included in the UW System Travel Regulations as Appendix I. Generally, goods purchased in another state and shipped to Wisconsin for use are not subject to the other state's sales/use tax.

    6. Withholding: The UW System must withhold federal taxes on payments for nonpayrolled services made to a U.S. Citizen if that person does not provide a federal employe identification number (FEIN) or social security number to the UW System. Federal withholding is also required on payments for scholarships and nonpayrolled services to a nonresident alien unless that person's country of residence has a treaty with the U.S. which exempts withholding or there is another valid reason. Refer to K.3 below for nonresident entertainer/public speaker tax withholding.

      Certain states have reciprocity agreements with the State of Wisconsin which exempts legal residents of those states from Wisconsin income taxes on compensation earned for personal services performed in Wisconsin. The individual providing the service must assume the primary responsibility for:

      1. Knowing that s/he may be eligible for the exemption.

      2. Obtaining, completing, signing and providing the proper form (W-220 or W-222) to the institution at the time the contract for services is negotiated.

  2. The UW System Pays the following Taxes:

    1. Wisconsin Excise or Occupation Tax: Tax imposed on the purchase of beer, liquor, wine, cigarettes, tobacco products, motor vehicle fuel, and general aviation fuel. [Ref. PRO-E-15 State Procurement Manual]

    2. Federal tax on airline tickets: [Ref. Internal Revenue Code 3261-4263]

    3. Other U.S. States Sales and Use Tax: [See 1.e above.]

    4. Taxes on Student Telephone Calls Billed Through the UW System: (The student pays the UW System rather than the telephone company.)

    5. Wisconsin Tax Adjustment on Long-Distance Telephone Company Invoices: This tax adjustment is based on the "gross receipts" tax which the state imposes on the telephone company in lieu of property taxes.

    6. Federal Super Fund Excise Tax: [Ref. Internal Revenue Code 4661, 4662, 4681]

    7. Vaccine Excise Tax: [Ref. Internal Revenue Code 4121, 4221]

    8. Tire Recovery Fee/Tax: [Ref. Wis. Stats. 341.04, 341.05, 342.05]

  3. Nonresident Entertainer/Public Speaker Tax Withholding

    Wisconsin Department of Revenue (DOR) Publication 508 outlines the withholding and documentation requirements under Wisconsin law. If the "total contract price" exceeds $3,200, the following is required:

    1. DOR Form WT-11: The entertainer may pay a surety bond or cash deposit to DOR in advance of the performance. If so, the entertainer must provide a copy of DOR Form WT-11 (Nonresident Entertainer's Application and Receipt for Surety Bond or Cash Deposit or Withholding by Employer) which indicates that 6% of the "total contract price" was paid to DOR.

      "Total Contract Price" includes the amounts payable in money or the cash value of any medium other than cash. The following should be included:

      1. Travel expenses which are either reimbursed to the entertainer or paid directly by the UW System. NOTE: These are not reportable on IRS Form 1099.

      2. A travel allowance (a specified amount stated in the contract) which is paid as part of the entertainer's fee. NOTE: This is reportable on IRS form 1099.)

      3. Subcontracted services: Specific amounts paid to the nonresident entertainer for subcontracted services such as lighting, sound or any other special services or properties required by the nonresident entertainer. NOTE: Do not include amounts paid by the UW System to persons other than the entertainer for ordinary and necessary expenses in the production of the event (building rent, staging material costs, utility connections, etc.) unless a specific dollar amount is specified in the contract for such expenses.

    2. If form WT-11 is not provided or if less than 6% was paid to DOR, the UW System must withhold 6% (or the balance of the 6%) of the "total contract price."

    3. DOR Form WT-11

      If the UW System withholds from the "total contract price," the UW System must complete DOR FORM WT-11 and send the first part of this form with the amount withheld to DOR within five days of the performance, regardless of when payment is made to the performer. Other requirements for form WT-11 include the following:

      NOTE: It is recommended that the following information be incorporated into the standard entertainment contract (or rider).

      1. True Name: In the true name box, enter the real name of the entertainer - the name that would be used on the tax returns filed. Do not enter the name or number of an agent who did not perform the entertainment service, even if the agent is the payee.

        1. If the payee is a corporation, partnership or other entity:

          1. Enter the name of the payee if the performer is a majority owner, partner, or employe of the payee.

          2. Enter the name of the performer if the performer is not a majority owner, partner or employe of the payee.

      2. Enter the Social Security or Federal Employer Identification Number (FEIN) of the individual or entity entered in the true name box.

        1. If the nonresident entertainer refuses to give this number, notate this on the form. The 6% must still be withheld, but the entertainer will not receive credit for the amount withheld.

        2. If the entity is a partnership, also provide the name and Social Security number or FEIN for each partner.

    4. Coding Entertainment Contract Related Payments

      1. Fees for entertainer services should be coded to account code 2620 (Services - reportable).

      2. Direct paid travel expenses and requests for travel reimbursement should be coded to 2162 (Non-employee travel). Travel expenses included in the entertainer's fee should be coded to 2620 (Services - reportable) and will be considered reportable income. Travel expenses itemized on the entertainer's invoice, that are in accordance with UW travel policy and supported by required receipts, may be charged to 2162 (Non-employee travel) and not reported as income.

      3. The withholding payment to DOR must be coded to account code 2620 (Services - reportable).
  4. Construction Contractors: Contractors performing construction activities for the UW System are required to pay state use tax on the cost of materials. The UW System should pay the contractor for these taxes included in the contractor's bill unless the contract was for a fixed price.