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Our company is
ONE of the following:
- Primarily engaged in biotechnology in Wisconsin on or after January 1, 2012
- Engaged in manufacturing in Wisconsin at a building assessed under sec. 70.995, Wis. Stats., on or after July 2, 2013
- A combined group member performing qualified research on or after July 2, 2013 for another member of the combined group who is described in (a) or (b)
In addition, our company uses fuel and electricity exclusively and directly in conducting qualified research. What do we need to do in order to purchase our fuel and electricity without sales or use tax?
You must furnish a fully completed sales tax exemption certificate to each seller from whom you purchase fuel or electricity that is exempt from Wisconsin sales and use tax. You may use the electronic certificate
S-211E or
Form S-211,
Wisconsin Sales Use Tax Exemption Certificate.
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Who may claim the exemption for fuel and electricity consumed exclusively and directly in conducting qualified research?
The exemption for fuel and electricity consumed in conducting qualified research applies to the following:
- Businesses engaged in manufacturing in Wisconsin at a building assessed under sec. 70.995, Wis. Stats.
- Businesses engaged primarily in biotechnology in Wisconsin
- A combined group member who performs qualified research for another combined group member described above
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Our company holds a direct pay permit issued by the department. Are we still required to furnish an exemption certificate to the seller in order to purchase fuel and electricity without tax?
A direct pay permit holder has the option of providing
ONE of the following:
- A fully completed exemption certificate
- A written document which includes all of the following:
- Name and address of the direct pay permit holder
- A statement that the purchases are being made without tax using the direct pay permit
- Direct pay permit number
- Effective date of the permit
- A copy of the direct pay permit and a written statement indicating whether the direct pay permit is for a single purchase or continuous
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Does the exemption include fuel and electricity used for plant heating, cooling, and lighting?
No. Fuel or electricity consumed while being used exclusively and directly in qualified research means only fuel and electricity used to operate machines and equipment used directly in the qualified research itself. Fuel and electricity are not "consumed while being used exclusively and directly in qualified research" if they are used in providing building heating, cooling, air conditioning, communications, lighting, safety and fire prevention, research and product development that is not qualified research, receiving, storage, sales, distribution, warehousing, shipping, advertising or administrative department activities.
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My business is engaged primarily in biotechnology in Wisconsin and some of my purchases of fuel and electricity qualify for the exemption from sales tax. I do not hold a direct pay permit. What happens if I do not furnish an exemption certificate to the seller?
The seller of the fuel or electricity is required to charge you the appropriate sales or use tax unless you furnish the seller with a fully completed exemption certificate prior to or at the time of sale.
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My business is engaged in manufacturing in Wisconsin at a building assessed under sec. 70.995, Wis. Stats. I paid sales tax in error to the seller on purchases of fuel and electricity consumed in conducting qualified research in Wisconsin. What should I do?
Furnish the seller with a fully completed exemption certificate as soon as possible to avoid paying tax on future purchases. In addition, you may seek a refund of the taxes paid in error using ONE of the two options below:
- Request a refund from the seller (see
Answer #7)
- File a Buyer's Claim for Refund directly with the department (see
Answer #8)
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How do I request a refund from the seller?
Furnish the seller a fully completed exemption certificate claiming the correct exemption percentage and request the sales tax previously paid be refunded.
If the seller has remitted the tax to the department on a previous sales and use tax return, the seller may be able to claim a deduction on its current return. See the Line 2 instructions in the Instructions for Wisconsin Sales and Use Tax Return
(Form S-114). If the seller is not able to take the deduction on its current return, the seller may amend its previously filed return to request a refund of the tax that it refunded back to the customer. See
Publication 216,
Filing Claims for Refunds of Sales or Use Taxes, for more information.
If the purchaser provides the exemption certificate to the seller more than 90 days after the date of the sale, the seller must be able to accept the exemption certificate in
good faith.
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How do I file a Buyer's Claim for Refund?
Generally, your refund must be a least $50, and must be filed within 4 years of the due date of your income or franchise tax return. See
Publication 216, Filing Claims for Refund of Sales or Use Tax, for more information.
For a refund of tax paid to a seller, do
ONE of the following:
The department will immediately acknowledge receipt of a refund claim filed electronically.
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We consumed less exempt electricity exclusively and directly in qualified research than what we originally claimed on the exemption certificate we previously gave to the electric utility. Do we need to do anything?
Yes. Based on your current knowledge, the exemption amount indicated on the exemption certificate is no longer valid. You should furnish your electric utility with a new exemption certificate claiming the current revised exempt usage for electricity consumed in qualified research. In addition, if for a period of time the utility exempted more of the electricity than actually qualified for exemption, you are required to report Wisconsin use tax to the department on the difference between what was claimed as being exempt and what was actually exempt.
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We gave an exemption certificate to our supplier, claimed a higher percentage of natural gas consumed exclusively and directly in qualified research than what actually qualified for exemption. The difference was used for taxable purposes. Do we need to do anything?
Yes. You are required to self-assess and pay Wisconsin use tax on the portion of the fuel purchased without tax but used in a taxable manner.
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We gave an exemption certificate to our supplier claiming a lower percentage of exempt natural gas consumed exclusively and directly in qualified research than what actually qualified for exemption. The difference was used for exempt purposes. Can we obtain a refund of the sales and use taxes we paid on the additional natural gas purchases we determine to be exempt?
Yes. See questions
#6-8 for refund options.
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We hold a direct pay permit and paid use tax on fuel purchased being consumed exclusively and directly in qualified research. At a later date, we determined that our exempt use of fuel purchased was greater than expected. Can we obtain a refund of the use tax we paid on the fuel purchases we subsequently determined was used in an exempt manner?
Yes. To file a claim for refund for use taxes paid directly to the department, you need to file amended returns for the periods in which you overpaid the use tax. The amended returns must be filed within four years of the due date for filing your income or franchise tax return for the year that includes purchases for which you overpaid the tax. See
Publication 216,
Filing Claims for Refunds of Sales or Use Taxes, for more information.
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We are a seller of fuel and electricity. We have received fully completed exemption certificates from various customers claiming the exemption for fuel and electricity consumed exclusively and directly in qualified research. These exemption certificates are marked "continuous." Based on the exemption percentages claimed on the exemption certificates, we do not charge tax to these customers. At a later date, it is determined that all or a portion of the fuel and electricity was used in taxable manner. Are we liable for any tax on these sales?
For your sales of fuel and electricity to these customers you are not liable for sales or use tax. This assumes that for each sale of fuel and electricity, you either had the exemption certificate on file before the sale or obtained the certificate within 90 days after the date of the sale.
Exception: A seller is not relieved of its liability to collect and remit the applicable Wisconsin sales or use tax on a sale to a purchaser if
ANY of the following apply:
- The seller fraudulently fails to collect the sales or use tax.
- The seller solicits the purchaser to claim an unlawful exemption.
- The seller accepts an exemption certificate from a purchaser claiming to be an entity that is not subject to sales and use taxes, if
both of the following apply:
- The subject of the transaction covered by the exemption certificate is received by the purchaser at the seller's Wisconsin location; and
- The exemption certificate clearly and affirmatively indicates that the claimed exemption is not available in Wisconsin.
Additional information regarding exemption certificates is provided in
sec. Tax 11.14(3) and
(4), Wis. Adm. Code.
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We are a seller of fuel and electricity. A purchaser contacts us, requesting a refund for overpayment of sales taxes. We are going to file a claim for refund with the department and refund the tax and interest we receive to the purchaser. Is there any documentation we should obtain from the purchaser?
You should obtain a fully completed exemption certificate from the purchaser that identifies the exempt percentage of fuel and electricity being refunded, or other documentation that provides proof that your sale was exempt.
If you received the exemption certificate more than 90 days after the date of the sale, you are not liable for sales or use tax, if the exemption certificate was fully completed and you accepted it in good faith. See question #13 for information on fully completed and good faith.
However, even if you obtain a fully completed exemption certificate, you will still be liable for the tax if it is discovered through the audit process that you had knowledge or reason to know at the time the information provided was materially false or if you knowingly participated in an activity intended to purposefully evade the tax due.
Additional information on obtaining documentation from a purchaser to prove an exemption is available in the following Common Question
Sales and Use Tax Exemptions, and
sec. Tax 11.14(3) and
(4), Wis. Adm. Code.
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We are a seller of fuel and electricity. A purchaser contacts us, requesting a refund for overpayment of sales taxes, and furnishes us with a fully completed exemption certificate for a prior sale. We have already filed the return and paid the tax for the prior sale. Can I obtain refund for these taxes without filing an amended return to claim the refund?
Yes. A retailer receiving a fully completed exemption certificate from the purchaser after reporting a sale covered by the exemption certificate as taxable may claim a deduction on its sales tax return for the sales price of the items covered by the exemption certificate if
ALL of the following conditions are satisfied:
- The retailer has paid the tax to the department
- The exemption certificate was received by the retailer in the same taxable year (for income or franchise tax purposes) of the retailer in which the sale covered by the exemption certificate occurred
- The retailer has returned to the buyer, in cash or credit, all tax previously paid by the buyer
The deduction is claimed on the return filed for the period in which the retailer receives the exemption certificate.
If the seller is ineligible to claim a deduction on its sales tax return, the seller must amend its previously filed return to request a refund of the tax.
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Does the department require a business to purchase a third party "utility usage study" as documentation for the percentage of fuel or electricity claimed to be used exclusively and directly in qualified research? If not, what evidence is acceptable?
The department does not require that a business purchase a third-party utility usage study to determine the percentage of fuel or electricity that is consumed exclusively and directly in qualified research. However, the purchaser is responsible for providing documentation to support the exempt percentage claimed and a third-party utility usage study is good supporting evidence.
Although the department may prefer to see an independent third-party utility usage study, there is nothing that would prevent you from doing a detailed analysis/study yourself of the fuel or electricity that is consumed exclusively and directly in qualified research. As long as the study is reasonable and you have documentation (e.g., list of exempt machines, how much energy each machine consumes, how many hours each machine operates a day) to support the study that proves it accurately reflects the fuel or electricity consumed exclusively and directly in qualified research, this would be acceptable to the department. This study would also need to be updated periodically to account for additions and deletions of the machinery and equipment used, plant expansions or downsizing, etc.
When claiming an exemption, it is up to the taxpayer to prove that a sale or purchase qualifies for a particular exemption. Therefore, regardless of the method you choose to determine the amount of fuel or electricity that qualifies for exemption, you will need documentation to support the method chosen and evidence (such as a detailed analysis of your energy consumption) to prove that this method is reasonable in your particular situation. The method you choose is also subject to review in the event that you are audited.
See
Fact Sheet 2111,
Sales and Use Tax Exemption for Fuel and Electricity Consumed in Manufacturing for additional information on methods used to determine exempt percentage. While the fact sheet is focused on the exemption for manufacturing, the methods used to determine the exempt percentage are applicable to the fuel and electricity consumed in qualified research.