Small businesses in Wisconsin can run into a range of state taxes on top of federal obligations. Your state tax requirements can vary greatly depending on several factors, including your choice of business entity and your gross receipts. Read on to learn the answers to many of the most common questions about business taxes in Wisconsin.
How are corporations taxed in Wisconsin?
Wisconsin corporations may be liable for a franchise tax or an income tax for the privilege of doing business in the state. The good news is that only one of these taxes is imposed on a corporation in a taxable year.
The franchise tax and income tax are nearly identical. For example, the tax rate for both is 7.9%. The primary difference is that income from federal obligations (for example, interest on a U.S. Treasury bond) is subject to the franchise tax but not the income tax.
The franchise tax applies to:
- All domestic corporations (those organized under Wisconsin law) with nonexempt income, and
- Foreign corporations (those not organized under Wisconsin law) doing business in Wisconsin, except where taxation is exempted by statute or barred by federal law.
The income tax applies only to foreign corporations that:
- Aren’t subject to the franchise tax, and
- Own property in Wisconsin or whose business in Wisconsin is exclusively in foreign or interstate commerce.
What are the filing requirements for corporations?
Every corporation organized under the laws of Wisconsin or licensed to do business in Wisconsin is required to file a Wisconsin corporate franchise or income tax return, regardless of whether it’s actually transacted business. Unlicensed corporations are also required to file returns for each year they do business or have certain business activities in Wisconsin. The filing requirement applies to limited liability companies treated as corporations for federal income tax purposes, too.
Corporate returns must be filed electronically unless an approved electronic waiver is received from the Wisconsin Department of Revenue. Paper filed returns without an electronic filing waiver attached will be returned.
Wisconsin corporate returns are due at the same time as your federal tax returns. So, generally, a corporation must file its franchise or income tax return by the 15th day of the fourth month following the close of its taxable year.
Are filing extensions available?
If the IRS allows you an extension to file your federal return, it automatically extends the Wisconsin due date to 30 days after the federal extended due date. There’s no need to submit a copy of the federal extension or an application for a Wisconsin extension to the Department of Revenue by the original due date of your return. But you must include a copy of the federal extension when you file your Wisconsin return.
If you aren’t requesting a federal extension, Wisconsin law provides an automatic extension of seven months or until the original due date of your corresponding federal return, whichever is later.
What is the economic development surcharge?
The economic development surcharge applies to corporations with gross receipts from all activities of $4 million or more. Corporations that must file Wisconsin franchise or income tax returns must pay the economic development surcharge, with certain exceptions.
For corporations, the minimum economic development surcharge is $25 or 3% of Wisconsin gross tax liability, not to exceed $9,800. For tax-option S corporations, the surcharge is the greater of $25 or 0.2% of Wisconsin net income as allocated or apportioned to Wisconsin, but not more than $9,800.
Does Wisconsin require corporations to pay estimated taxes?
Corporations, including S corporations, must make estimated tax and surcharge installment payments if the sum of the net tax and economic development surcharge for the taxable year will be $500 or more. An exception applies for corporations that owed no tax for the previous 12-month taxable year if their Wisconsin net income is less than $250,000 for the current taxable year.
Corporations use Form Corp-ES, “Corporation Estimated Tax,” to make estimated tax and economic development surcharge payments. The first estimated tax and surcharge payment is generally due on the 15th day of the fourth month of the taxable year and is equal to 25% of the total estimated tax and surcharge due.
You can make estimated tax and surcharge payments using electronic funds transfer (EFT) or through your My Tax Account. You also have the option to mail your estimated tax voucher and payment to:
Wisconsin Department of Revenue
P.O. Box 930208
Milwaukee, WI 53293-0208
Do partnerships have any filing obligations?
A partnership or limited liability company treated as a partnership that has income from Wisconsin sources—regardless of the amount—must file Form 3, “Wisconsin Partnership Return.” For example, a partnership must file a return if it has income from any of the following:
- Business transacted in Wisconsin,
- Personal or professional services performed in Wisconsin,
- Real or tangible personal property located in Wisconsin, or
- A noncompete agreement, if the agreement was based on a Wisconsin-based activity.
Partnerships generally must file Form 3 returns electronically and can file through the Federal/State E-Filing Program. But, if the partnership has ten or fewer partners and its income is $20,000 or less, it needn’t file Form EFT-102, “Electronic Filing or Electronic Payment Waiver Request,” and can file a paper return on Form 5S. The paper return should be mailed to:
Wisconsin Department of Revenue
P.O. Box 8965
Madison WI 53708-8965
A partnership must file its partnership return by the 15th day of the third month after the close of its taxable year.
Are extensions available for partnerships?
Any extension allowed by the IRS to file the federal return automatically extends the Wisconsin due date, provided the partnership includes a copy of the federal extension with its Wisconsin return. In general, the IRS allows an extension period of six months for partnerships.
If a partnership isn’t requesting a federal extension but needs additional time to file a Wisconsin tax return, it can obtain an extension available to partnerships under federal law. To receive a Wisconsin extension, the partnership must include a completed copy of the appropriate federal extension application form or a statement explaining which federal extension provision is being used.
Does Wisconsin offer small businesses any tax incentives?
Wisconsin has a variety of tax credits and other incentives businesses can use to offset their income or franchise taxes. Many are industry-specific, but general incentives are also available (for example, business development credits).
What is pass-through entity withholding?
Partnerships, limited liability companies, and S corporations are generally considered pass-through entities. In a pass-through entity, the business’s income, loss, deductions, and credits flow through and are taxed on the individual tax returns of the partners, members, or shareholders.
Any pass-through entity that has Wisconsin income for a taxable year that’s allocable to a nonresident owner generally must withhold Wisconsin state tax on that income to the extent it’s Wisconsin income for the nonresident. The withholding applies regardless of whether the income is actually distributed by the pass-through entity. Pass-through entity withholding isn’t required, though, if the business has elected the pass-through entity-level tax (see below).
Pass-through entities must make their nonresident withholding payments electronically. Quarterly estimated payments are due on or before the 15th day of the third, sixth, ninth, and 12th month of the business entity’s taxable year.
Pass-through entities must also file Form PW-1, “Wisconsin Nonresident Income or Franchise Tax Withholding on Pass-Through Entity Income,” annually and pay any additional withholding tax due that exceeds the estimated payments.
Form PW-1 is due on the unextended due date of the pass-through entity’s Wisconsin income or franchise tax return. For S corporations, partnerships, and limited liability companies treated as an S corporation or partnership, the filing deadline is the 15th day of the third month following the close of the entity’s taxable year.
Note: Pass-through entity withholding doesn’t relieve nonresidents from their obligation to file a Wisconsin individual income tax return. For nonresidents who elect to be included in a composite Wisconsin income tax return, the pass-through entity must report such nonresidents on both Form PW-1 and the composite income tax return (Form 1CNS,
“Composite Wisconsin Individual Tax Return for Nonresident Tax-Option (S) Corporation Shareholders,” or Form 1CNP, “Composite Wisconsin Individual Tax Return for Nonresident Partners”).
Does Wisconsin have a pass-through tax election?
The Tax Cuts and Jobs Act of 2017 created a $10,000 limit on the federal individual income tax deduction for state and local taxes—with negative consequences for many owners of pass-through businesses, who pay taxes on their business income on their individual income tax returns. More than 30 states have responded by enacting some type of workaround, including Wisconsin.
Wisconsin allows a partnership, S corporation, or limited liability company treated as a partnership or S corp to pay tax on items that would otherwise be reported by the partners, shareholders, or members on their individual tax returns. This is referred to as the pass-through entity-level tax.
For any year in which an election is made, owners can exclude their proportionate share of all items of income, gain, loss, or deduction of the business from their Wisconsin adjusted gross income. The net income reportable to Wisconsin is taxed at 7.9% (compared with the highest individual Wisconsin tax rate of 7.65%).
For partnerships, the election must be made annually on Form 3, on or before the extended due date for the form. For S corporations, it’s also made annually but on Form 5S, “Wisconsin Tax-Option (S) Corporation Franchise or Income Tax Return.”
A partnership must have consent from partners who hold a total of more than 50% of the capital and profits of the business on the day of the election. Similarly, an S corporation must have consent from shareholders who hold a total of more than 50% of the corporation’s shares on the day of the election.
Are estimated tax payments required for the pass-through entity-level tax?
Yes. Estimated payments of the pass-through tax should be made according to the requirements for corporations’ estimated taxes.
Does Wisconsin tax business personal property?
Wisconsin has repealed its business personal property tax effective Jan. 1, 2024.
Does Wisconsin have any excise taxes?
Wisconsin imposes several excise taxes, including on:
Does Wisconsin have sales taxes and use taxes?
A 5% sales tax is generally imposed on retailers that make taxable retail sales, licenses, leases, or rentals in Wisconsin of tangible personal property, certain digital goods, and specified services that are sold, licensed, performed, or furnished at retail in Wisconsin.
Use tax is the counterpart of sales tax. Use tax must be paid when Wisconsin sales tax (state and county) isn’t charged, and no exemption applies (see below). You’ll owe use tax if you 1) purchase taxable items from retailers that don’t collect Wisconsin sales tax, or 2) bring taxable items into Wisconsin from other states or foreign countries.
In addition to the state-level sales tax, you’ll need to collect county sales taxes if you make taxable retail sales, licenses, leases, or rentals or provide taxable services in a Wisconsin county that has adopted the 0.5% county tax.
Prior to Jan. 1, 2024, sixty-eight Wisconsin counties had adopted a 0.5% county tax. On Jan. 1, 2024, Milwaukee County’s sales tax rose to 0.9%.
County use tax is imposed if your small business purchases items used, stored, or consumed in counties that impose the 0.5% county tax. Like the state use tax, county use taxes must be paid when Wisconsin county sales tax isn’t charged, and no exemption applies.
And it doesn’t end there—you could also run into municipal sales taxes and use taxes. Fortunately, Milwaukee is the only municipality that imposes a city sales and use tax. Its 2% sales and use tax is effective January 1, 2024.
Are remote sellers subject to Wisconsin’s sales tax requirements?
Wisconsin generally requires remote out-of-state sellers without a physical presence in Wisconsin to collect and remit sales or use tax on sales of taxable products and services in Wisconsin.
The state recognizes a small seller exception, though. It applies to remote sellers with gross sales of $100,000 or less in both the previous and the current calendar years. The exception doesn’t apply to remote sellers with a physical presence in Wisconsin.
Are there any exemptions from sales taxes and use taxes in Wisconsin?
Wisconsin grants some exemptions based on:
- Type of product or service (for example, food sold by grocery stores that doesn’t meet the definitions of “candy,” “soft drinks,” or “prepared food”),
- How the product or service is used or other criteria, and
- Type of buyer.
Typically, a buyer must present an exemption certificate to purchase taxable products or services in Wisconsin without tax. But certificates aren’t required for retail sales of certain exempt property.
How do businesses pay their sales taxes and use taxes?
You must electronically file your return by either of the following methods:
- My Tax Account.
- Telefile. You can reach the Wisconsin Department of Revenue’s telephone filing and payment system at(608) 261-5340 or (414) 227-3895.
Returns are due by the last day of the month following the end of the reporting period, with one exception. Early monthly sales tax filers are required to file by the 20th of the month following the end of the reporting period. So, for example, an early monthly filer’s February sales tax return is due March 20 rather than March 31.
A return must be filed for each period, even if no tax is due.
Can a business obtain an extension for paying sales taxes and use taxes?
You may request an extension of time to file by completing the Request Extension to File in My Tax Account. Alternatively, you can:
- Email your request to [email protected].
- Mail it to:
MS 3-80
Wisconsin Department of Revenue
Tax Operations Business
P.O; Box 8902
Madison WI 53708-8902
- Fax it to (608) 224-5761.
Requests must be submitted by the due date for the return.
The Department of Revenue may grant you an additional month from the original due date of the return to file it. The department will notify you if the extension is granted. However, if the tax isn’t paid by the original due date, the tax will be subject to 1% interest per month during the extension period and 1.5% interest per month thereafter.
On the other hand, a retailer’s discount is allowed if the taxes are paid on or before the expiration of any extension period if an extension has been granted.
What is the retailer’s discount?
As partial compensation for collecting, accounting for, and reporting the tax, Wisconsin allows retailers to take a credit against their sales and use tax liability. The discount isn’t permitted on any tax paid after the due date (or extended, in the case of an extension, after the due date) of the sales and use tax return.
The retailer’s discount is generally 0.5% of your sales and use tax payable. If multiplying the sales and use tax payable by 0.5% results in $10 or less, the discount is the lesser of $10 or the sales and use tax payable.
The retailer’s discount is limited to $1,000 per reporting period.
What are the withholding obligations for Wisconsin employers?
In addition to federal withholding for Social Security, Medicare, and federal unemployment taxes, you generally must withhold Wisconsin income taxes from wages paid to state residents (regardless of where the services were performed) or nonresidents for services performed if you:
- Engage in business in Wisconsin,
- Are licensed to do business in Wisconsin,
- Transact business in Wisconsin,
- Are organized under Wisconsin law, or
- Are primarily engaged in business outside of Wisconsin and licensed to do business in Wisconsin or transact business in Wisconsin.
Covered employers must register for a Wisconsin withholding tax number. You can register online or complete and submit Form BTR-101, “Application for Wisconsin Business Tax Registration.”
The Department of Revenue will assign you a filing frequency based on the information in your application. If your withholding liability changes, you may be notified of a change to your filing frequency for the next calendar year.
To determine the proper amount to withhold, you’ll use the information on Form WT-4, “Employee’s Wisconsin Withholding Exemption Certificate/New Hire Reporting,” and the state’s withholding tables.
Quarterly, monthly, and semi-monthly filers must file an electronic deposit report (Form WT-6) even if no tax is withheld during the period covered. Filing options include:
- My Tax Account
- Third-Party Software
- Telefile at (608) 261-5340 or (414) 227-3895
- ACH Credit
- WT-6 file transmission
For monthly or quarterly filers, reports are due on or before the last day of the month following the monthly or quarterly withholding period.
For semi-monthly filers, the due dates depend on when payday occurs. If payday is on or between the first and the 15th of the month, the amount of Wisconsin income tax you withheld is due on or before the last day of the month. When the payday falls on or between the 16th and the last day of the month, the amount withheld is due on or before the 15th of the following month.
For example, if your employee is paid on December 16, you’ll report withholding on the deposit report for the period ending December 31. This deposit report is due January 15.
Monthly, quarterly, and semi-monthly filers must also file Form WT-7, “Employers Annual Reconciliation of Wisconsin Income Tax Withheld.” It’s due on the January 31 after the calendar year-end and also must be filed electronically. Annual filers are required to file only Form WT-7; they don’t need to file any deposit reports.
The Wisconsin Department of Revenue may grant a one-month extension to file the deposit report, the annual reconciliation, and supporting statements and returns if you can show good cause. You can request an extension by:
- Completing the Request Extension to File in My Tax Account,
- Emailing [email protected], or
- Writing to:
MS 3-80
Wisconsin Department of Revenue
Tax Operations Business
P.O. Box 8902
Madison, WI 53708-8902
Extension requests must be received by the original due date of the deposit report or return.
How do unemployment insurance taxes work in Wisconsin?
Generally, you’re required to pay unemployment insurance “contributions” after you have:
- Paid wages of $1,500 or more in a quarter in any calendar year, or
- Employed one or more individuals for some part of a day in 20 or more weeks in any calendar year. The weeks needn’t be consecutive, and part-time employees must be included in your employee count.
Coverage is retroactive to January 1 of the year in which you become liable. State unemployment insurance taxes are in addition to the federal unemployment tax.
Reporting requirements
For every quarter, you must file a wage report and contribution report (or tax payment). Reports are due as follows:
Jan. 1 – March 31: April 30
April 1 – June 30: July 31
July 1 – Sept. 30: October 31
Oct. 1 – Dec. 31: Jan. 31
You can report online or, if you have fewer than 25 employees, with Form UC-7823-E, “Quarterly Wage Report.”
Employers with a first quarter tax liability of $1,000 or more can defer paying up to 60% of the total liability to future quarters. You must file the election electronically between Feb. 15 and April 30 of the year in which you’d like to take the deferral. A new election must be filed each year that you wish to defer your first quarter tax liability. Tax and wage reports must be filed electronically for all calendar quarters of the year elected for deferral.
Excluded wages
You generally must report all wages paid, but some wages may be excluded. For example, you aren’t required to report the wages of a sole proprietor’s father, mother, spouse, or children who are under the age of 18 (this doesn’t apply to a corporation and only applies to a partnership if the employee has the same type of relationship with all of the partners—for example, in a two-person partnership where the partners are both parents of the employee).
Small employers can elect to exclude the wages of all principal corporate officers as long as they have a direct or indirect ownership interest in the corporation (meaning they own or control at least 25% of the business). But these excluded officers won’t be eligible to receive unemployment benefits. Annual taxable payroll must be less than $500,000 for the calendar year preceding the year of the election.
The corporation must file Form UCT 7937, “Election to Exclude All Principal Officers,” by March 31 of the year you’re requesting to elect out of coverage. In the case of new employers, it’s due when the first quarterly report is due.
Certain employers may elect to be designated as “seasonal employers,” which could result in a lower tax rate. Seasonal employees may not be eligible to collect uninsurance benefits, but wages would still be reported, and taxes would continue to be paid on these wages. As a seasonal employer, you would also pay an additional 2% solvency tax on all of your taxable payroll for the calendar year, to a limit of the maximum rate in effect for the calendar year.
Rate determination
New employers are assigned a standard fixed rate for the first three calendar years.
For 2023, the new employer rate for non-construction employers is 3.05% for small employers with taxable payroll under $500,000 or 3.25% for large firms with taxable payroll over $500,000. The taxable wage base is $14,000, meaning you pay the tax only on the first $14,000 of an employee’s earnings. These figures will remain the same for 2024.
After the first three calendar years, you’ll be assigned an annually determined “experience” rate based on the activity in your account. Your account balance increases with each tax payment and declines with every unemployment benefit payment made to one of your former employees.
Your experience rate is determined by:
1. Calculating your “reserve percentage” (your account balance as of June 30 divided by your fiscal year taxable payroll as of June 30).
2. Applying the reserve percentage to the rate schedule, which shows a basic rate, a solvency rate, and a total rate.
- The basic rate portion of each tax payment is credited to your account balance.
- The solvency rate portion of each tax payment is credited to a shared risk account called the balancing account.
- Your total rate is the sum of your basic rate and your solvency rate and is the rate shown on your quarterly tax report.
The total rate applies for all quarters for the following calendar year. You’ll normally receive your notice of rate in mid-October for the following calendar year. For both 2023 and 2024, the highest rate is 12%. The rate schedules can change from year to year, though, depending on the overall condition of Wisconsin’s Unemployment Reserve Fund.
You can make an extra “voluntary contribution” every year, which is credited directly to your June 30 account balance to reduce your rate for the following year by one rate bracket on the rate schedule. You may submit a voluntary contribution to obtain a lower rate for the upcoming year only from mid-October through November each year. These payments must be received by Nov. 30.
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