2.39 Apportionment method. (1) GENERAL. Ex-

cept as provided in sub. (3), any person, except resident individu- als, 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 cor- poration 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 re- quired to use combined reporting. (2) DEFINITIONS. In this section: (a) XApportionable incomeY has the meaning given in s. 71.25 (5) (a), Stats. (ag) XCombined groupY has the meaning given in s. 71.255 (1) (a), Stats. (ar) XCommercial domicileY has the meaning given in s. 71.22 (1g), Stats. (b) XEngaged in business in and outside this stateY means hav- ing business activity which is sufficient to create nexus in this state and at least one other state or foreign country. For a com- bined group, the activities of the combined group are taken as a whole in determining if the combined group is engaged in busi- ness in and outside this state, as provided in s. 71.255 (5) (a), Stats. (c) XGross receiptsY means gross sales less returns and al- lowances, 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) XIntangible propertyY 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) XNexusY 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 deter- mining 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 tax- payer. Conversely, voluntary filing and paying income or fran- chise taxes when not required to do so, or paying a fee for qualifi- cation, 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 de- termining whether nexus exists. Examples: 1) State A imposes a corporation franchise tax measured by net in- come 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. Cor- poration 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 Published under s. 35.93, Stats. Updated on the first day of each month. Entire code is always current. The Register date on each page is the date the chapter was last published. 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 im- poses a corporation income tax. Nonresident Corporation Y is qualified to do busi- ness 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 busi- ness 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 manufactur- ing 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) XNonapportionable incomeY has the meaning given in s. 71.25 (5) (b), Stats. (f) XStateY 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. (3) APPORTIONMENT FRACTION. (a) 1. For taxable years be- ginning before January 1, 2006, persons engaged in business in and outside this state, except direct air carriers, financial organi- zations, telecommunications companies, pipeline companies, public utilities, and railroads, as defined in ss. 71.04 (8) (a) and (b) 1. and 71.25 (10) (a) and (b) 1., Stats., and corporations that are authorized to use an alternative method of apportionment un- der s. 71.25 (14), Stats., shall use an apportionment fraction as described in s. 71.04 (4) (a) or 71.25 (6) (a), Stats. Property, pay- roll, or sales related to the production of nonapportionable in- come may not be included in either the numerator or the denomi- nator of any of the apportionment factors. 2. If one of the factors described in subd. 1. is omitted pur- suant to s. 71.04 (10) or 71.25 (11), Stats., the percentages of the fraction represented by the remaining factors shall be adjusted as follows: a. If either the property factor or payroll factor is omitted, the other factor shall represent 33.3333 percent of the fraction and the sales factor shall represent 66.6667 percent of the fraction. b. If the sales factor is omitted, the property factor and the payroll factor shall each represent 50 percent of the fraction. 3. If either the numerator or the denominator of the sales fac- tor is zero or a negative number, the sales factor shall be deter- mined as described in s. 71.04 (4m) (a) 1., (b) 1., or (c) 1. or 71.25 (6m) (a) 1., (b) 1., or (c) 1., Stats. (b) 1. For taxable years beginning after December 31, 2005, and before January 1, 2007, persons engaged in business in and outside this state, except direct air carriers, financial organiza- tions, telecommunications companies, pipeline companies, pub- lic utilities, and railroads, as defined in ss. 71.04 (8) (a) and (b) 2. and 71.25 (10) (a) and (b) 2., Stats., and corporations that are au- thorized to use an alternative method of apportionment under s. 71.25 (14), Stats., shall use an apportionment fraction as de- scribed in s. 71.04 (4) (b) or 71.25 (6) (b), Stats. Property, pay- roll, or sales related to the production of nonapportionable in- come may not be included in either the numerator or the denomi- nator of any of the apportionment factors. 2. If one of the factors described in subd. 1. is omitted pur- suant to s. 71.04 (10) or 71.25 (11), Stats., the percentages of the fraction represented by the remaining factors shall be adjusted as follows: a. If either the property factor or payroll factor is omitted, the other factor shall represent 25 percent of the fraction and the sales factor shall represent 75 percent of the fraction. b. If the sales factor is omitted, the property factor and the payroll factor shall each represent 50 percent of the fraction. 3. If either the numerator or the denominator of the sales fac- tor is zero or a negative number, the sales factor shall be deter- mined as described in s. 71.04 (4m) (a) 1., (b) 1., or (c) 1. or 71.25 (6m) (a) 1., (b) 1., or (c) 1., Stats. (c) 1. For taxable years beginning after December 31, 2006, and before January 1, 2008, persons engaged in business in and outside this state, except direct air carriers, financial organiza- tions, telecommunications companies, pipeline companies, pub- lic utilities, and railroads, as defined in ss. 71.04 (8) (a) and (b) 2. and 71.25 (10) (a) and (b) 2., Stats., and corporations that are au- thorized to use an alternative method of apportionment under s. 71.25 (14), Stats., shall use an apportionment fraction as de- scribed in s. 71.04 (4) (c) or 71.25 (6) (c), Stats. Property, pay- roll, or sales related to the production of nonapportionable in- come may not be included in either the numerator or the denomi- nator of any of the apportionment factors. 2. If one of the factors described in subd. 1. is omitted pur- suant to s. 71.04 (10) or 71.25 (11), Stats., the percentages of the fraction represented by the remaining factors shall be adjusted as follows: a. If either the property factor or payroll factor is omitted, the other factor shall represent 11.1111 percent of the fraction and the sales factor shall represent 88.8889 percent of the fraction. b. If the sales factor is omitted, the property factor and the payroll factor shall each represent 50 percent of the fraction. 3. If either the numerator or the denominator of the sales fac- tor is zero or a negative number, the sales factor shall be deter- mined as described in s. 71.04 (4m) (a) 1., (b) 1., or (c) 1. or 71.25 (6m) (a) 1., (b) 1., or (c) 1., Stats. (d) For taxable years beginning after December 31, 2007, per- sons engaged in business in and outside this state, except direct air carriers, financial organizations, telecommunications compa- nies, pipeline companies, public utilities, and railroads, as de- fined in ss. 71.04 (8) (a) and (b) 2. and 71.25 (10) (a) and (b) 2., Stats., and corporations that are authorized to use an alternative method of apportionment under s. 71.25 (14), Stats., shall use only the sales factor to compute the apportionment fraction, as provided in s. 71.04 (4) (d) or 71.25 (6) (d), Stats. Sales related to the production of nonapportionable income may not be included in either the numerator or the denominator of the sales factor. If either the numerator or the denominator of the sales factor is zero or a negative number, the sales factor shall be determined as de- scribed in ss. 71.04 (4m) (a) 2., (b) 2., or (c) 2. or 71.25 (6m) (a) 2., (b) 2., or (c) 2., Stats. Note: See ss. Tax 2.46, 2.47, 2.475, 2.48, 2.49, 2.495, 2.50, 2.502, and 2.505 for special apportionment fractions of interstate direct air carriers, motor carriers, rail- roads, pipelines, financial institutions, broker-dealers, investment advisers, invest- ment companies, underwriters, public utilities, telecommunications companies, and professional sports clubs. Note: Corporations that are in combined groups use a modified sales factor to compute their Wisconsin share of apportionable income of the entire combined group. See s. 71.255 (5), Stats., and s. Tax 2.61 (7) for details. (e) The apportionment method may be used only if the tax- payer or combined group is engaged in business both in Wiscon- sin and at least one other state or foreign country and its business in Wisconsin is an integral part of a unitary business. For a com- bined group that has made the controlled group election provided Published under s. 35.93, Stats. Updated on the first day of each month. Entire code is always current. The Register date on each page is the date the chapter was last published. WISCONSIN ADMINISTRATIVE CODE in s. 71.255 (2m), Stats., the entire combined group[s business is deemed to be a single unitary business. Note: A qualifying combined group may petition for an alternative apportion- ment method. See s. Tax 2.64 for details. (4) PROPERTY FACTOR. (a) Numerator; denominator. The numerator of the property factor shall include the average value of the real and tangible personal property owned or rented and used by the taxpayer in Wisconsin in the production of apportion- able income during the tax period. The denominator shall in- clude the average value of all of the real and tangible personal property located everywhere owned or rented and used by the taxpayer in the production of apportionable income during the tax period. Property in transit on the date or dates for determin- ing its average value, as described in par. (f), shall be considered to be at its destination, for purposes of computing the property factor. The value of mobile or movable property such as con- struction equipment, trucks, airplanes or other equipment which is located within and without Wisconsin during the tax period shall be determined for purposes of the numerator of the factor on the basis of the ratio of time used, serviced and stored within Wisconsin to total time used, serviced and stored during the tax period. However, an automobile assigned to a traveling employee shall be included in the numerator of the factor if the employee[s compensation is assigned to Wisconsin under the payroll factor. Note: Refer to ss. 71.04 (5) and 71.25 (7), Stats. (b) Owned property. Property owned by the taxpayer is val- ued at its original cost for purposes of computing the property factor. As a general rule Xoriginal costY is deemed to be the basis of the property for federal income tax purposes, prior to any ad- justments, at the time of acquisition by the taxpayer and adjusted by subsequent capital additions or improvements to the property and partial disposition of the property, by reason of sale, ex- change, abandonment or other means. If the original cost of property is unascertainable, the property shall be included in the factor at its fair market value as of the date of acquisition by the taxpayer. Any subsequent adjustments, other than depreciation or amortization, to net income which affect property, such as cap- italizations of repairs and adjustments to inventory, shall also be included in the property factor. The original cost of depletable property such as mines, oil and gas wells and timber shall be re- duced by any extraction to the extent that cost depletion has been allowed. Inventories shall be included in the factor in accordance with the valuation method used for Wisconsin income or fran- chise tax purposes. Property acquired by gift or inheritance shall be included in the factor at its basis for federal income tax pur- poses. Pollution abatement equipment or waste treatment facili- ties written off as an expense under s. 71.04 (2b) and (2g), 1985- 86 or prior years Stats., but still in use, shall be included at origi- nal cost. Note: Refer to ss. 71.04 (5) (c) and 71.25 (7) (c), Stats. (c) Rented property. Property rented by the taxpayer is val- ued at 8 times the net annual rental determined at arm[s length for purposes of computing the property factor. Net annual rental is the annual rental paid by the taxpayer, or allocated by the depart- ment pursuant to s. 71.10 (1), 71.30 (2) or 71.80 (1) (b), Stats., less any annual rental received by the taxpayer from sub-rentals. In exceptional cases this definition of net annual rental may result in a negative value or clearly inaccurate valuation. In these ex- ceptional instances, any other method which will properly reflect the net annual rental value may be required by the department or may be requested by the taxpayer; however, in no case may the net annual rental be less than an amount which bears the same ra- tio to the total annual rental paid by the taxpayer as the rental value of the part of the property used by the taxpayer in the pro- duction of apportionable income bears to the total rental value of the same rental property. (cm) Annual rental. In this subsection, annual rental: 1. Is the amount paid as rental for the property for a 12- month period. Where property is rented for less than a 12-month period, the net rent paid for the actual period of rental shall con- stitute the Xannual rentalY for the tax period. Where a taxpayer has rented property for a term of 12 or more months and the tax period for which the property factor is being computed covers a period of less than 12 months, such as may be due to a reorgani- zation or change of accounting period, the net rent paid for the short tax period shall be annualized; however, if the rental term is for less than 12 months, the rent shall be adjusted accordingly. 2. Is the actual sum of money or other consideration payable, directly or indirectly, by the taxpayer or for its benefit for the use of the property and includes: a. Any amount payable for the use of real or tangible per- sonal property, or any part of the property, whether designated as a fixed sum of money or as a percentage of sales, profits, or otherwise. b. Any amount payable as additional rent or in lieu of rents, such as interest, taxes, insurance, repairs or any other items which are required to be paid by the terms of the lease or other arrange- ment, but does not include amounts paid as service charges, such as utilities or janitor services. If a payment includes rent and other charges unsegregated, such as rental charges for public warehouses, the amount of rent shall be determined by making a reasonable allocation between the rent and the other items. 3. Does not include incidental day-to-day expenses such as hotel or motel accommodations, daily rental of automobiles or royalties based on extraction of natural resources, whether repre- sented by delivery or purchase. For this purpose, a royalty in- cludes an amount paid to a holder of an interest in real property which constitutes a sharing of current or future production of nat- ural resources from the property, whether denominated as roy- alty, advanced royalty, rental, delay rental or otherwise. Note: Refer to ss. 71.04 (5) (c) and 71.25 (7) (c), Stats. (d) Leasehold improvements. Leasehold improvements shall, for the purposes of the property factor, be treated as property owned by the taxpayer regardless of whether the taxpayer is enti- tled to remove the improvements or the improvements revert to the lessor upon expiration of the lease. The original cost of lease- hold improvements shall be included in the factor. (e) Construction in progress. Property or equipment under construction during the tax period, except inventoriable goods in process, shall be excluded from the factor until the property is ac- tually used by the taxpayer in the regular course of its trade or business. If the property is partially used by the taxpayer in the regular course of its trade or business while under construction, the value of the property to the extent used shall be included in the property factor. (f) Averaging property values. As a general rule the Xaverage valueY of property shall be determined by averaging the value at the beginning and ending of the tax period, but the department may require or the taxpayer may utilize the averaging of monthly values during the tax period if reasonably required to properly re- flect the average value of the taxpayer[s property. Averaging by monthly values shall generally be applied if substantial fluctua- tions in the values of the property exist during the tax period, or where property is acquired after the beginning of the tax period or disposed of before the end of the tax period. Note: Refer to ss. 71.04 (5) (d) and 71.25 (7) (d), Stats. (5) PAYROLL FACTOR. (a) Numerator; denominator. The nu- merator of the payroll factor shall include the total amount paid in Wisconsin during the tax period by the taxpayer for compensa- tion in the production of apportionable income and the denomi- Published under s. 35.93, Stats. Updated on the first day of each month. Entire code is always current. The Register date on each page is the date the chapter was last published. nator shall include the total compensation paid everywhere dur- ing the tax period by the taxpayer in the production of apportion- able income. Compensation is paid in Wisconsin and included in the numerator if, as provided in ss. 71.04 (6) (b) and 71.25 (8) (b), Stats., one of the following applies: 1. The individual[s service is performed entirely within Wisconsin. Example: Corporation A has a manufacturing plant located in Wisconsin. The compensation of an Illinois resident who works at the Wisconsin manufacturing plant is included in the numerator of the payroll factor since the employee[s service is performed entirely in Wisconsin. 2. The individual[s service is performed within and without Wisconsin, but the service performed without Wisconsin is inci- dental to the individual[s service within Wisconsin. Example: Corporation B has its headquarters and a manufacturing plant in Wis- consin. Corporation B also has a manufacturing plant located in Indiana. The man- ager of the Wisconsin manufacturing plant spends two weeks during the tax year at the manufacturing plant located in Indiana training the new plant manager. The compensation of the Wisconsin plant manager is included in the numerator of the payroll factor because the purposes performed in Indiana is incidental to the service performed in Wisconsin. 3. A portion of the service is performed in Wisconsin and the base of operations of the individual is in Wisconsin. Example: Corporation C has a sales office located in Wisconsin. A salesperson working out of the Wisconsin office solicits sales in Wisconsin, Minnesota and Iowa. Since a portion of the salesperson[s service is performed in Wisconsin and the salesperson[s base of operations is in Wisconsin, the compensation of the salesper- son is included in the numerator of the payroll factor. 4. A portion of the service is performed in Wisconsin and, if there is no base of operations, the place from which the individ- ual[s service is directed or controlled is in Wisconsin. Example: Corporation D has its regional sales office in Wisconsin. An Iowa resident works out of her home as a salesperson for Corporation D and solicits sales in Iowa, Illinois and Wisconsin. The salesperson is directed from the regional sales office located in Wisconsin. The compensation of the Iowa salesperson is included in the numerator of the payroll factor since a portion of her service is performed in Wisconsin, she has no base of operations and she is directed from Wisconsin. 5. A portion of the service is performed within Wisconsin and neither the base of operations of the individual nor the place from which the service is directed or controlled is in any state in which some part of the service is performed, but the individual[s residence is in Wisconsin. Example: Corporation E is headquartered in and has its sales office in Indiana and maintains inventory in Wisconsin. A Wisconsin resident salesperson solicits sales in Wisconsin and Minnesota. The compensation of the Wisconsin salesperson is included in the numerator of the payroll factor since a portion of the salesperson[s service is performed in Wisconsin, the salesperson is a resident of Wisconsin and the salesperson is directed or controlled from Indiana but performs no services in Indiana. 6. The individual is neither a resident of nor performs ser- vices in Wisconsin but is directed or controlled from an office in Wisconsin and returns to Wisconsin periodically for business purposes and the state in which the individual resides does not have jurisdiction to impose income or franchise taxes on the employer. Example: Corporation F has its sales office in Wisconsin. A salesperson resides in Nebraska and solicits sales in Nebraska and Kansas. Corporation F does not have nexus in Nebraska or Kansas. The salesperson returns to the Wisconsin sales office for two weeks each year for meetings and training. The compensation of the Ne- braska salesperson is included in the numerator of the payroll factor since he is di- rected from an office in Wisconsin, returns to Wisconsin periodically for business purposes and Corporation F does not have nexus in Nebraska. Note: Refer to ss. 71.04 (6) (a) and (b) and 71.25 (8) (a) and (b), Stats. (b) Services. An individual shall be considered to be per- forming a service in Wisconsin during the year if the individual performs services in Wisconsin for at least 5 days during the year. The compensation of any one employee may not be split between 2 or more states during the year; however, this does not apply if the employee is transferred or changes positions during the year. (c) Compensation. Compensation includes: 1. Wages, salaries, commissions and any other form of remu- neration paid to employees for personal services including amounts contributed to a qualified cash or deferred arrangement under section 401 (k) of the Internal Revenue Code on behalf of employees who have elected to participate in the plan. However, matching contributions to the trust by an employer under section 401 (k) of the Internal Revenue Code are not included since the employees do not have a right to receive the matching contribu- tions directly in cash. 2. The value of board, rent, housing, lodging and other bene- fits or services furnished to employees by the taxpayer in return for personal services, provided that these amounts constitute in- come to the recipient under the federal Internal Revenue Code for the year for which the payroll factor is computed. In the case of employees not subject to the federal Internal Revenue Code, such as citizens of foreign countries employed in foreign countries, the determination of whether the benefits or services constitute in- come to the employees shall be made as though the employees are subject to the federal Internal Revenue Code. 3. Deductible management or service fees paid, or manage- ment or service fees allocated by the department under s. 71.10 (1), 71.30 (2) or 71.80 (1) (b), Stats., to a related corporation, as defined in section 267 (f) (1) of the Internal Revenue Code, as consideration for the performance of personal services. As pro- vided in s. 71.25 (8) (d), Stats., the recipient of these fees may not include the compensation paid to its employees with respect to the personal services in either the numerator or denominator of its payroll factor and the situs of the fees is in Wisconsin if the services fulfill one of the requirements of par. (a). Except for these management or service fees, payments made to an indepen- dent contractor or any other person not properly classifiable as an employee are excluded. Examples: 1) Corporation A, headquartered in Illinois, owns 100% of the stock of Corporation B which is headquartered in Wisconsin. Employees of Corporation A perform all the accounting functions for Corporation B. For these services Cor- poration A charged $30,000 of office payroll as management fees to Corporation B, which paid that amount to Corporation A. If the employees of Corporation A that performed the accounting services for Corporation B were based in Illinois and spent only part of their time in Wisconsin while performing these services, no por- tion of the $30,000 is includable in the numerator of the payroll factor of Corpora- tion B because the services do not meet the requirements of par. (a). The entire $30,000 is includable in the denominator of the payroll factor of Corporation B. If Corporation A files a Wisconsin return on the apportionment basis, it may not in- clude in its computation of the payroll factor the $30,000 paid to its employees for services they performed for Corporation B. 2) Corporation C, headquartered in Wisconsin, owns 100% of the stock of Corpo- ration D which is also headquartered in Wisconsin. Employees of Corporation C prepare all tax returns for Corporation D. For these services Corporation C charged $20,000 of tax department payroll as management fees to Corporation D, which paid that amount to Corporation C. All of the services were performed in Wiscon- sin. The $20,000 is included in both the numerator and denominator of the payroll factor of Corporation D. Corporation C may not include the $20,000 in either the numerator or denominator of its payroll factor. Note: Refer to ss. 71.04 (6) (d) and 71.25 (8) (d), Stats. (d) Excludable compensation. Compensation paid to produce nonapportionable income or losses or income exempt from taxa- tion under ch. 71, Stats., may not be included in the numerator or denominator of the payroll factor. Note: Refer to ss. 71.04 (6) (c) and 71.25 (8) (c), Stats. (6) SALES FACTOR. (a) Numerator; denominator. The nu- merator of the sales factor shall include the taxpayer[s gross re- ceipts from sales that are in this state and the denominator shall include the taxpayer[s gross receipts from sales everywhere dur- ing the taxable year. Gross receipts that are not derived in the production of apportionable income and items described in ss. 71.04 (7) (f) and 71.25 (9) (f), Stats., may not be included in the sales factor. Note: A corporation that is a combined group member must adjust its sales factor numerator and denominator as described in s. Tax 2.61 (7). (b) Sales of tangible personal property attributable to Wis- consin. 1. Gross receipts from the sales of tangible personal property, except sales to the federal government as described in subd. 4., are in Wisconsin if the property is delivered or shipped to a purchaser within Wisconsin regardless of the f.o.b. point or Published under s. 35.93, Stats. Updated on the first day of each month. Entire code is always current. The Register date on each page is the date the chapter was last published. WISCONSIN ADMINISTRATIVE CODE other conditions of the sales. Some situations in which property is considered to be delivered or shipped to a purchaser within Wisconsin are if: a. The property is picked up outside Wisconsin by a pur- chaser having a Wisconsin business location and the purchaser returns to Wisconsin with the property. Example: Corporation B is a Minnesota brewer that sells beer to a Wisconsin purchaser to be picked up at the brewer[s shipping dock in Minnesota. The pur- chaser is a beer distributor which used its own vehicle to pick up the beer and haul it back to Wisconsin. Corporation B is subject to the tax by the state of Wisconsin. These dock sales are assigned to Wisconsin in Corporation B[s sales factor in its ap- portionment formula for Wisconsin tax purposes, since the purchaser[s location is in Wisconsin and the product is shipped to Wisconsin. Therefore, Corporation B, for Wisconsin franchise tax purposes, will include the amount of this dock sale in both the numerator and the denominator of the sales factor. Note: In Pabst Brewing Co. v. Wisconsin Department of Revenue (Ct. App. Dist. IV, 1986), 130 Wis. 2d 291, the taxpayer sold beer to an Illinois distributor who picked it up in its own truck at the taxpayer[s Wisconsin shipping dock and hauled it to Illinois. The Court held that the sales were not Wisconsin sales, since the location of the purchaser, rather than the location of the pickup of the product, controlled the determination of where the sale was assigned for purposes of the sales factor. The Court noted that if the sales were assigned to Wisconsin, the method of delivery, a condition of the sale, would be the determinative, which is contrary to statute. These sales are referred to as Xdock sales,Y which are those sales where a purchaser uses its owned or rented vehicles or a common carrier it has made arrangements with to take delivery of the product at the seller-taxpayer[s shipping dock. b. The taxpayer, at the designation of the purchaser, or the purchaser delivers to or has the property shipped to a recipient other than the purchaser within Wisconsin. Example: Corporation M is a Wisconsin manufacturer that sells plumbing ware to an Illinois wholesaler and retailer to be picked up at the manufacturer[s shipping dock in Wisconsin. The purchaser has its corporate headquarters in Illinois. The purchaser uses its own vehicle to pick up plumbing ware and haul it to the job site of the purchaser[s customer. The customer is a plumbing contractor that is working on a new motel being constructed in Madison, Wisconsin. These dock sales are as- signed to Wisconsin in Corporation M[s sales factor in its apportionment formula for Wisconsin tax purposes, since the purchaser[s customer[s location is in Wiscon- sin and the product is shipped to Wisconsin. The delivery to the plumbing contrac- tor was at the designation of the purchaser and that is where the product was deliv- ered. Therefore, Corporation M, for Wisconsin franchise tax purposes, is required to include the amount of this dock sale in both the numerator and the denominator of the sales factor. c. The shipment by either the taxpayer or the purchaser ter- minates in Wisconsin, even though the property is subsequently transferred by the purchaser to another state. Example: Corporation B has a Wisconsin manufacturing plant which makes en- gines for an Indiana based manufacturer. Title to the engines passes to the purchaser after the engines are tested. Corporation B, at the direction of the purchaser, ships the tested engines to a public warehouse in Wisconsin. The warehouse stores the en- gines until directed to ship them by the purchaser. These sales are included in the numerator of the sales factor for Corporation B since the public warehouse is con- sidered to be a business location of the Indiana purchaser and the warehouse is lo- cated in Wisconsin. d. The recipient is in Wisconsin, even though the property is ordered from outside Wisconsin. Example: Corporation A manufactures batteries at a location in Wisconsin. It sells batteries to an Illinois retailer which operates stores nationwide. The purchaser orders the batteries from its Illinois location and directs Corporation A to ship the batteries to its warehouse in Wisconsin. These sales are included in the numerator of the sales factor since the batteries were shipped to a Wisconsin location. e. The property is being shipped by a seller or purchaser from one state to a consignee in another state and is diverted while enroute to a purchaser in Wisconsin, or the designee of a purchaser who is in Wisconsin. Example: Corporation X, a manufacturer located in Superior, Wisconsin, sells a portion of its manufactured product via a consignment arrangement with a retailer- consignee in Chicago, Illinois. Pursuant to an order from the Chicago consignee for additional inventory, Corporation X ships via its own trucks additional inventory of its product to Chicago. After entering Illinois but before reaching Chicago, the driver receives instructions from the consignee to deliver the entire load to a cus- tomer in Beloit, Wisconsin. Since the property was shipped to a purchaser in Wis- consin, the sale is attributable to Wisconsin and the gross receipts from the sale are included in both the numerator and denominator of Corporation X[s sales factor. 2. If the taxpayer does not have nexus in the state of destina- tion, the sale is attributed to Wisconsin if the property is shipped from an office, store, warehouse, factory or other place of storage in Wisconsin. For taxable years beginning before January 1, 2009, the amount included in the numerator of the sales factor shall be 50% of the gross receipts from the sale. For taxable years beginning on or after January 1, 2009, the amount included in the numerator of the sales factor shall be the total gross re- ceipts from the sale. For purposes of this subdivision: a. Sales are attributed to Wisconsin even though the taxpayer has a certificate of authority in the state of destination but the business activities in the destination state do not result in nexus based on the standards in s. Tax 2.82. b. Sales are not attributed to Wisconsin if the taxpayer is in- corporated in the state of destination other than Wisconsin. 3. If a taxpayer[s salesperson located in an office in Wiscon- sin makes a sale to a purchaser in another state in which the tax- payer does not have nexus and the property is not shipped or de- livered from Wisconsin, the following rules apply: a. If the taxpayer has nexus in the state from which the prop- erty is delivered or shipped, then the sale is in that state. b. If the taxpayer does not have nexus in the state from which the property is delivered or shipped, then the sale is in Wisconsin. For taxable years beginning before January 1, 2009, the amount included in the numerator of the sales factor shall be 50% of the gross receipts from the sale. For taxable years beginning on or af- ter January 1, 2009, the amount included in the numerator of the sales factor shall be the total gross receipts from the sale. 4. With respect to sales to the federal government: a. Gross receipts from the sales of tangible personal property are in Wisconsin if the property is shipped from an office, store, warehouse, factory or other place of storage in Wisconsin and de- livered to the federal government, including its agencies and in- strumentalities, in Wisconsin regardless of the f.o.b. point or other conditions of sale. For purposes of this section, only sales for which the federal government makes direct payment to the seller pursuant to the terms of its contract constitute sales to the federal government. Thus, sales by a subcontractor to the prime contractor, the party to the contract with the federal government, do not constitute sales to the federal government. b. Gross receipts from the sales of tangible personal property are in Wisconsin if the property is shipped from an office, store, warehouse, factory or other place of storage in Wisconsin and de- livered to the federal government, including its agencies and in- strumentalities, outside Wisconsin and the taxpayer does not have nexus in the destination state. For taxable years beginning before January 1, 2009, the amount included in the numerator of the sales factor shall be 50% of the gross receipts from the sale. For taxable years beginning on or after January 1, 2009, the amount included in the numerator of the sales factor shall be the total gross receipts from the sale. 5. For purposes of applying subds. 2. to 4., whether the tax- payer has nexus in the destination state is determined using the same standards as set forth in s. Tax 2.82. (c) Leases, rentals, or licensing of tangible personal property attributable to Wisconsin. 1. Except as described in subd. 2., the numerator of the sales factor includes gross receipts from the lease, rental, licensing, or other use of tangible personal property owned by the taxpayer and the sublease of tangible personal property if the property is located in this state during the entire period of lease, rental, licensing, sublease, or other use. If the property is used in and outside this state during the period of lease, rental, licensing, or sublease, gross receipts are included in the numerator of the sales factor to the extent that the property is used in this state. The proportion of use in this state is deter- mined by multiplying the gross receipts from the lease, rental, li- censing, sublease, or other use of the property by a fraction hav- ing as a numerator the number of days the property is in this state while leased, rented, licensed, or subleased in the taxable year and having as a denominator the total number of days that the Published under s. 35.93, Stats. Updated on the first day of each month. Entire code is always current. The Register date on each page is the date the chapter was last published. property is leased, rented, licensed, or subleased in all states hav- ing jurisdiction to tax the taxpayer during the taxable year. 2. Gross receipts from the lease, rental, or licensing of mov- ing property, including motor vehicles, rolling stock, aircraft, ves- sels, or mobile equipment, owned by the taxpayer and the sub- lease of moving property are included in the numerator of the sales factor to the extent that the property is used in this state. The proportion of use of moving property in this state is deter- mined as follows: a. The proportion of use of a motor vehicle or rolling stock in this state is determined by multiplying the gross receipts from the lease, rental, licensing, or sublease of the motor vehicle or rolling stock by a fraction having as a numerator the number of miles traveled within this state by the motor vehicle or rolling stock while leased, rented, licensed, or subleased in the taxable year and having as a denominator the total number of miles traveled by the motor vehicle or rolling stock while leased, rented, licensed, or subleased in the taxable year. b. The proportion of use of an aircraft in this state is deter- mined by multiplying the gross receipts from the lease, rental, li- censing, or sublease of the aircraft by a fraction having as a nu- merator the number of takeoffs and landings of the aircraft in this state while leased, rented, licensed, or subleased in the taxable year and having as a denominator the total number of takeoffs and landings of the aircraft while leased, rented, licensed, or sub- leased in the taxable year. c. The proportion of a vessel or mobile equipment in this state is determined by multiplying the gross receipts from the lease, rental, licensing, or sublease of the vessel or mobile equip- ment by a fraction having as a numerator the number of days that the vessel or mobile equipment is in this state while leased, rented, licensed, or subleased in the taxable year and having as a denominator the total number of days that the vessel or mobile equipment is leased, rented, licensed, or subleased in the taxable year. d. If the taxpayer is unable to determine the use of moving property under subd. 2. a., b., or c. while the property is leased, rented, licensed, or subleased in the taxable year, the moving property is conclusively deemed to be used in the state in which the property is located at the time that the lessee, licensee, or sub- lessee takes possession of the property. (d) Sales, leases, rentals, or licensing of real property attrib- utable to Wisconsin. The numerator of the sales factor includes gross receipts from the sale, lease, rental, licensing, or other use of real property owned by the taxpayer if the real property is lo- cated in this state and gross receipts from the sublease of real property if the real property is located in this state. (e) Receipts attributable to Wisconsin from the use of com- puter software. Receipts attributable to Wisconsin from provid- ing the use of computer software are determined as provided in ss. 71.04 (7) (df) and 71.25 (9) (df), Stats. Note: For taxable years beginning after December 31, 2004 and before January 1, 2009, subd. 3. of ss. 71.04 (7) (df) and 71.25 (9) (df), Stats., provided that if the taxpayer is not subject to income tax in the state in which the gross receipts are con- sidered received but the taxpayer[s commercial domicile is in Wisconsin, 50 percent of the taxpayer[s receipts from the transaction are included in the numerator of the sales factor. This provision was repealed by 2009 Wis. Act 28. (f) Sales of services attributable to Wisconsin. Sales of ser- vices are attributable to Wisconsin as provided in ss. 71.04 (7) (dh) and 71.25 (9) (dh), Stats. Note: For taxable years beginning after December 31, 2004 and before January 1, 2009, subd. 4. of ss. 71.04 (7) (dh) and 71.25 (9) (dh), Stats., provided that if the taxpayer is not subject to income tax in the state in which the benefit of the service is received, 50 percent of the taxpayer[s receipts from the transaction are included in the numerator of the sales factor to the extent the taxpayer[s employees or represen- tatives performed the service from a location in Wisconsin. This provision was re- pealed by 2009 Wis. Act 28. (g) Receipts from intangible property for taxable years begin- ning before January 1, 2009. For taxable years beginning before January 1, 2009, the numerator of the sales factor includes gross receipts from the sale, licensing the use of, or other use of intan- gible property, if the income producing activity occurs in this state during the taxable year. If the income producing activity oc- curs in and outside this state, the gross receipts shall be allocated between those states having jurisdiction to tax the taxpayer based on the direct costs of performance. For purposes of this para- graph, Xincome producing activityY means the act or acts engaged in by the taxpayer, or persons acting on behalf of the taxpayer, for the ultimate purpose of obtaining gains or profit, and Xcosts of performanceY means direct costs determined in a manner consis- tent with generally accepted accounting principles and in accor- dance with accepted conditions or practices in the trade or busi- ness of the taxpayer. Note: Refer to ss. 71.04 (7) (d), (df), and (dh) and 71.25 (9) (d), (df), and (dh), 2007-08 Stats., as affected by 2005 Wis. Act 25. (h) Receipts from intangible property for taxable years begin- ning on or after January 1, 2009. For taxable years beginning on or after January 1, 2009, the amount includable in the numerator of the sales factor for gross receipts from the sale of, license of, or allowing use of intangible property in this state is determined as provided in ss. 71.04 (7) (dj) and (dk) and 71.25 (9) (dj) and (dk), Stats. For purposes of applying these paragraphs, excluding ss. 71.04 (7) (dj) 2. and 71.25 (9) (dj) 2m., the following rules apply: 1. To determine the purchaser[s or licensee[s use of intangi- ble property in this state, factors that may be considered include the number of licensed sites in each state, the volume of property manufactured, produced, or sold pursuant to the arrangement at locations in this state, or other data that reflects the relative usage of the intangible property in this state. 2. If the purchaser[s or licensee[s billing address or commer- cial domicile is in this state, that billing address or commercial domicile may not conclusively determine that the transaction is in this state except in cases where the location of use of the intangi- ble property cannot be determined. If the location of use of the intangible property cannot be determined, subds. 3. and 4. apply. 3. If the location of use of the intangible property cannot be determined, the gross receipts from the sale of, license of, or other receipts from allowing use of intangible property are in this state if the purchaser[s or licensee[s commercial domicile is in this state. 4. If subd. 3. would otherwise apply except that the state of the purchaser[s or licensee[s commercial domicile cannot be de- termined, the gross receipts from the sale of, license of, or allow- ing use of intangible property are in this state if the purchaser or licensee is billed for the purchase, license, or use of the intangible property at a location in this state. (i) The provisions of pars. (c) to (h) shall also apply to sales to the federal government. Note: Section Tax 2.39 interprets ss. 71.04 (4), (4m), (5), (6), (7), (10), and (11), 71.25 (5), (6), (6m), (7), (8), (9), (11), and (15), and 71.255 (5), Stats. Note: The provisions of s. Tax 2.39 first apply for taxable years beginning on January 1, 2005. For returns required under combined reporting, the provisions of s. Tax 2.39 first apply for taxable years beginning on January 1, 2009. History: Cr. Register, August, 1973, No. 212, eff. 9-1-73; cr. (1m); r. and recr. (5) (f) 5., Register, November, 1973, No. 215; eff. 12-1-73; cr. (intro.), Register, Janu- ary, 1978, No. 265, eff. 2-1-78; r. and recr. Register, June, 1991, No. 426, eff. 7-1-91; am. (2) (f), (4) (c), (cm) 2. a. and (f), r. (6) (b) 2. b., renum. (6) (b) 2. c. to be (6) (b) 2. b., Register, May, 1995, No. 473, eff. 6-1-95; emerg. am. (3) (a) (intro.), eff. 9-19- 98; am. (3) (a) (intro.), Register, March, 1999, No. 519, eff. 4-1-99; CR 06-063: am. (1) and (2) (a), (b) and (e), (6) (a) and (b) 4. a., r. and recr. (3) and (6) (c), r. (6) (b) 4. b. and (7), renum. (6) (b) 4. c. to be (6) (b) 4. b. and am., Register November 2006 No. 611, eff. 12-1-06; EmR0943: eff. 12-31-09 and CR 10-001: am. (1), (2) (b), (d), (3) (d), (e), (6) (b) 1. d., 2. (intro.), 3. b., 4. b., and (6) (c) (title), cr. (2) (ag), (ar), (cm), (6) (b) 5., and (d) to (i), r. (6) (c) 1. to 4., 7. and 8., renum. (6) (c) 5. and 6. to be (6) (c) 1. and 2. and am. (6) (c) 1. and 2. d. Register June 2010 No. 654, eff. 7-1- 10; correction in (2) (cm) made under s. 13.92 (4) (b) 4., Stats., Register June 2010 No. 654; CR 17-019: am. (3) (a) 1., (b) 1., (c) 1., (d), Register June 2018 No. 750 eff. Published under s. 35.93, Stats. Updated on the first day of each month. Entire code is always current. The Register date on each page is the date the chapter was last published. WISCONSIN ADMINISTRATIVE CODE 7-1-18; CR 19-141: am. (6) (f), (h) (intro.) Register September 2020 No. 777, eff. 10-1-20.