Wisconsin models sales tax collection off South Dakota

MADISON, Wis. (AP) — Small businesses not located in Wisconsin won’t have to collect sales tax on internet purchases made by consumers in the state, but larger companies will have to charge the tax beginning in October.

The state Department of Revenue said Thursday that its enforcement of the law will be consistent with the U.S. Supreme Court ruling last week. The court upheld a South Dakota law requiring the collection of the tax but that also exempted businesses with less than $100,000 in sales or less than 200 transactions a year.

All other larger businesses will have to start collecting Wisconsin’s 5.6 percent sales tax in October. The Revenue Department said Thursday it is in the process of notifying businesses about the change.

Prior to the court’s ruling, the court had held that states could only require retailers to collect tax for online sales if they also had a physical presence in the state.

“Wisconsin businesses, especially Wisconsin small businesses, will no longer be operating at a competitive disadvantage to out-of-state competitors that will now be required to collect the tax,” the department said.

Collection of the sales tax is expected to bring in about $120 million a year to Wisconsin.

A 2013 state law currently calls for the income tax to be lowered by an equal amount as the new sales tax, which the nonpartisan Legislative Fiscal Bureau said would result in tax cut of $52 for the average taxpayer.

The income tax reduction would range from a low of $3 for filers at the lowest 4 percent bracket to a high of $592 for those subject to the highest 7.65 percent rate, based on the Fiscal Bureau analysis.

Gov. Scott Walker has said he’s open to looking at other tax reductions instead of the income tax. That alternative tax cut would be a part of Walker’s state budget he’d propose in 2019 if he wins re-election in November.