Selling TITLED equipment? Wisconsin Sales Tax Changes October 1, 2009

The Wisconsin Department of Revenue has posted its latest Sales Tax Bulletin on its website:  http://www.revenue.wi.gov/ise/sales/09-5.pdf

One huge change is requiring ANY BUSINESS that already has a SELLERS PERMIT, to collect and remit sales tax on the sale of any motor vehicle, trailer, ATV or any other equipment item with a title requiring registration.  This is a major change from the law prior to October 1, 2009 wherein only the dealers of such property had to collect and remit the tax. 

This new provision will catch a number of small business owners, even sole proprietors, by surprise.  The Department of Revenue will be able to target you for audit when the buyer goes to register the title.  

And you will also have to include sales of these items in your company’s gross sales reported on the sales tax returns.  This is contrary to what any unincorporated business would report on their Federal income tax returns.  When you sell equipment used in the business, it is NOT SELF-EMPLOYMENT INCOME and will appear on Form 4797.  The gain or loss on this equipment sale will be separately reported on the Form 1040 so that it is not subject to self-employment tax.  This law change will require a reconciliation be provided on your income tax return to show the Wisconsin Department of Revenue the difference between Sales reported on the sales tax returns as compared to sales reported on the income tax returns.