Wisconsin Administrative Code › Department of Revenue › Chapter Tax 2 - Income Taxation, Returns, Records And Gross Income › Section Tax 2.39 - Apportionment method

Current through June 24, 2024
(1) GENERAL. Except as provided in sub. (3),
			 any person, except resident individuals, resident estates, and resident trusts,
			 engaged in business both in and outside this state shall apportion its
			 apportionable income using the statutory apportionment method as provided in s.
			 71.04(4)
			 or
			 71.25(6),
			 Stats., when the person's business in this state is an integral part of a
			 unitary business unless the department, in writing, allows reporting on a
			 different basis. However, if a corporation is in a combined group, the
			 corporation's Wisconsin share of the combined group's apportionable income is
			 computed as provided in s.
			 71.255(5),
			 Stats., and further detailed in s.
			 Tax
			 2.61(7) or (8), as applicable.
			 Nonapportionable income shall be allocated as provided in s.
			 71.25(5)
			 (b), Stats.
Note:
See s.
				Tax
				2.62 for rules that apply to determining if a unitary
				business exists.
Note:
A corporation may be in a combined group for
				taxable years beginning on or after January 1, 2009. See s.
				Tax
				2.61(2) for a description of
				corporations required to use combined reporting.
(2) DEFINITIONS. In this section:
(a) "Apportionable income" has the meaning
			 given in s.
			 71.25(5)
			 (a), Stats.
(ag) "Combined group" has the meaning given
			 in s.
			 71.255(1)
			 (a), Stats.
(ar) "Commercial domicile" has the meaning
			 given in s.
			 71.22(1g),
			 Stats.
(b) "Engaged in business in
			 and outside this state" means having business activity which is sufficient to
			 create nexus in this state and at least one other state or foreign country. For
			 a combined group, the activities of the combined group are taken as a whole in
			 determining if the combined group is engaged in business in and outside this
			 state, as provided in s.
			 71.255(5)
			 (a), Stats.
(c) "Gross receipts" means gross sales less
			 returns and allowances, plus service charges, freight, carrying charges or
			 time-price differential charges incidental to the sales. Federal and state
			 excise taxes, including sales and use taxes, shall be included as part of the
			 receipts if the taxes are passed on to the purchaser or included as part of the
			 selling price of the product.
(cm)
			 "Intangible property" includes patents, copyrights, trademarks, trade names,
			 service names, franchises, licenses, plans, specifications, blueprints,
			 processes, techniques, formulas, designs, layouts, patterns, drawings, manuals,
			 technical know-how, contracts, and customer lists. Intangible property does not
			 include stocks, bonds, certificates of deposit, or other securities.
(d) "Nexus" means that a taxpayer's business
			 activity in a state or foreign country is of such a degree that the state or
			 foreign country has jurisdiction to impose an income tax or franchise tax
			 measured by net income on the taxpayer. For a combined group, the activities of
			 the combined group are taken as a whole in determining if the combined group
			 has nexus in a state or foreign country, as provided in s.
			 71.255(5)
			 (a), Stats. Nexus may exist even if a state
			 or foreign country does not impose a tax on the taxpayer. Conversely, voluntary
			 filing and paying income or franchise taxes when not required to do so, or
			 paying a fee for qualification, organization or for the privilege of doing
			 business in that state or foreign country does not, in itself, create nexus.
Note:
Refer to s.
				Tax
				2.82 for a description of factors which are recognized
				in determining whether nexus exists.
Examples:
1) State A imposes a corporation franchise
			 tax measured by net income for the privilege of doing business in that state.
			 Corporation X files a return and pays the $50 minimum tax, although it carries
			 on no activities in State A. Corporation X does not have nexus in State A under
			 these circumstances.
2) State B
			 requires all nonresident corporations which qualify or register to do business
			 in State B to pay to the secretary of state an annual license fee or tax for
			 the privilege of doing business in the state regardless of whether the
			 privilege is in fact exercised. The amount paid is determined according to the
			 total authorized capital stock of the corporation; the rates are progressively
			 higher by bracketed amounts. The statute sets a minimum fee of $50 and a
			 maximum fee of $500. State B also imposes a corporation income tax. Nonresident
			 Corporation Y is qualified to do business in State B and pays the required fee
			 to the secretary of state but does not carry on any activities in State B.
			 Corporation Y does not have nexus in State B under these
			 circumstances.
3) State C requires
			 all nonresident corporations qualified or registered to do business in State C
			 to pay to the secretary of state an annual permit fee or tax for doing business
			 in the state. The base of the fee or tax is the sum of (1) outstanding capital
			 stock, and (2) surplus and undivided profits. The fee or tax base attributable
			 to State C is determined by a three-factor apportionment formula. Nonresident
			 Corporation Z, which operates a plant in State C, pays the required fee or tax
			 to the secretary of state. Corporation Z by virtue of its operation of a plant
			 in State C has nexus in State C.
4)
			 State D imposes a corporation franchise tax measured by net income for the
			 privilege of doing business in that state. Corporation W files a return based
			 upon its business activities in the state but the amount of computed liability
			 is less than the minimum tax. Corporation W pays the minimum tax. Corporation W
			 has nexus in State D under these circumstances.
5) Corporation U is actively engaged in
			 manufacturing farm equipment in State E. State E imposes a net income tax but
			 exempts corporations engaged in manufacturing farm equipment. Corporation U has
			 nexus in State E under these circumstances.
6) Corporation V has a sales office and
			 warehouse located in State F. State F does not impose a corporation franchise
			 or income tax. Corporation V has nexus in State F.
(e) "Nonapportionable income" has the meaning
			 given in s.
			 71.25(5)
			 (b), Stats.
(f) "State" means any state of the United
			 States, the District of Columbia, the commonwealth of Puerto Rico, and any
			 territory or possession of the United States. A foreign country is not a
			 state.