Sales/Use/Indirect:
Wisconsin DOR Summarizes Ruling that Contracts Created Taxable Sales/Leasebacks Rather than Nontaxable Refinancing

Wisconsin Tax Bulletin 227, Wis. Dept. of Rev. (10/24). A Wisconsin Department of Revenue (Department) bulletin summarizes a recent Wisconsin Tax Appeals Commission (Commission) ruling, which held that certain contracts for an aircraft and software created valid sales/leasebacks subject to Wisconsin sales tax rather than nontaxable refinancing agreements. According to the bulletin, the Department argued that the form of the leases was controlling and because the terms of the leases provided for a sale/leaseback, the lease receipts for tangible personal property were subject to Wisconsin sales tax. In contrast, the bulletin explains that the taxpayer argued that the form of the lease must be ignored, and the substance of the lease should be determinative and therefore, the leases constituted nontaxable financing arrangements. The bulletin explains that the Commission ultimately concluded that the Wisconsin statutory definitions of a lease and sale control over the form of the agreements, and therefore, the leases of the aircraft and software in this case constituted sales/leasebacks subject to sales tax under Wis. Stat. section 77.52(1b). According to the bulletin, the taxpayer has appealed this Commission decision. Please contact us with any questions.