Section 11.925. Sales and use tax security deposits.

 

(1)   General.

(a) Under s. 77.61 (2) (a) , Stats., the department may require a person liable for sales and use taxes to make a security deposit before or after a seller's permit is issued. The amount of the security deposit determined by the department may not exceed $15,000. If a person fails or refuses to make a security deposit as requested, the department may refuse to issue a permit or revoke the permit.

(b) As provided in s. 77.61 (2) (b) , Stats., a certified service provider who has contracted with a seller and filed an application to collect and remit sales and use taxes on behalf of the seller shall submit a surety bond within 60 days after the department notifies the certified service provider that the certified service provider is registered to collect Wisconsin sales and use taxes, to guarantee the payment of such sales and use taxes. However, the secretary of revenue or the secretary's designee may waive this requirement or release the liability with respect to any certified service provider.

(2)   Factors for department's consideration.

(a) In determining whether or not security will be required and the amount of security to be required, the department may consider all relevant factors including the person's:

1. Evidence of adequate financial responsibility. Evidence may include a person's assets and liabilities, liquidity of assets, estimated expenditures, and potential sales tax liability.

2. Prior record of filing tax returns and paying taxes of any kind with the department.

3. Type of business.

Example: A temporary or seasonal business having no fixed location which is frequently moved from city to city may be a greater security risk than one operating continually at a fixed location.

4. Type of entity.

Example: A sole proprietor or partner having nonbusiness financial resources may be a better risk than a corporation having limited assets.

(b) Although the individual factors listed in par. (a) may be considered in determining security requirements, each case shall be determined on its merits as evaluated by the department. Protection of the sales and use tax revenues shall be the major consideration in determining security requirements. However, due consideration shall be given to reasonable evidence that security is not necessary.

(c) In instances in which the department determines that a security deposit in excess of $50.00 is required, notification of this requirement shall include a written statement clearly describing the reasons for the requirement and a description or calculation showing how the amount of the security requirement was determined.

(3)   Types of security. Acceptable types of security include, but are not limited to:

(a) Non interest-bearing.

1. Cash, certified check, or money order.

2. Surety bonds issued by authorized underwriters.

(b) Interest-bearing.

1. Time certificates of deposit issued by financial institutions and made payable to the department. Interest earned on those certificates shall be paid to the depositor.

2. Fully paid investment certificates issued by savings and loan associations made payable to the depositor. A security assignment, form S-127, shall be completed if this type of security is selected.

3. Bearer bonds issued by the U.S. government, any unit of Wisconsin municipal government or by Wisconsin schools. The depositor should clip 2 full years' coupons before depositing this type of security.

(4)   Determination of amount.

(a) If a security deposit is required, the amount generally shall be equal to the depositor's average quarterly Wisconsin sales and use tax liability increased to the next highest even $100 amount. The average quarterly sales and use tax liability shall be based on whichever of the following the department considers most appropriate in the circumstances:

1. The depositor's previous sales and use tax liability at the location specified on the permit.

2. The predecessor's sales and use tax liability at the location specified on the permit,

3. The estimated tax liability shown on the application for permit.

4. Other factors, such as the department's estimate of estimated tax liability based on its experience with other similar activities.

(b) If at the time of the security review the retailer has an outstanding sales and use tax delinquency, the delinquent amount shall be added to the average quarterly sales and use tax liability.

(5)   Return of deposit.

(a) Section 77.61 (2) (a) , Stats., provides any security deposited under s. 77.61 (2) , Stats., shall be returned to the taxpayer if the taxpayer has, for 24 consecutive months, complied with all the requirements of subch. III of ch. 77 , Stats.

(b) The 24 month compliance requirement described in par. (a) shall begin on the day the deposit is received by the department.

(c) Within 30 days after the conclusion of the 24-month period described in par. (a) , the department shall review the taxpayer's compliance record. If the taxpayer has complied with subch. III of ch. 77 , Stats., the department shall within 60 days after the expiration of the 24-month period certify the deposit for refund.

(d) Compliance with subch. III of ch. 77 , Stats., means that:

1. Sales and use tax returns were timely filed.

2. All payments were made when due.

3. No delinquencies of sales or use tax, interest, or other charges existed.

4. No penalties due to negligence or fraud were assessed for filing periods within the 24-month compliance period.

5. No assessment of additional tax, interest, or other charges for filing periods within the 24-month compliance period is unpaid at the end of the 24-month compliance period.

(e) If a taxpayer does not meet the compliance requirements set forth in par. (d) , the deposit shall be retained by the department until the taxpayer is in compliance for 24 consecutive months from the date of the latest non-compliance.

History: Cr. Register, July, 1981, No. 307 , eff. 8-1-81; am. (1), (2) (a) 1., 3., and 4., (3) (b) 2., and (5) (c), Register, March, 1991, No. 423 , eff. 4-1-91; am. (1), (2) (b), (3) (b) 1., (5) (c), (d) 4. and 5., r. (3) (a) 3., Register, December, 1992, No. 444 , eff. 1-1-93; EmR0924 : emerg. renum. (1) to be (1) (a) and am., cr. (1) (b), am. (2) (a) 1., (3) (a) 1., (5) (a), (d) 3. and 5., eff. 10-1-09; CR 09-090 : renum. (1) to be (1) (a) and am., cr. (1) (b), am. (2) (a) 1., (3) (a) 1., (5) (a), (d) 3. and 5. Register May 2010 No. 653 , eff. 6-1-10.

Note

Form S-127 may be obtained from any Department of Revenue office or by writing or calling: Wisconsin Department of Revenue, P.O. Box 8902, Madison, WI 53708, [phone]. Microsoft Windows NT 6.1.7601 Service Pack 1 Section Tax 11.925 interprets s. 77.61 (2) , Stats. Microsoft Windows NT 6.1.7601 Service Pack 1 Note: The interpretations in s. Tax 11.925 are effective under the general sales and use tax law on and after September 1, 1969, except: (a) The return of deposit provisions in sub. (5) became effective March 13, 1980, pursuant to Chapter 125, Laws of 1979 ; (b) The $15,000 limit for security deposits became effective October 1, 1985, pursuant to 1985 Wis. Act 29 ; and (c) The provision to require certified service providers to submit surety bonds and the provision to allow the secretary of revenue to waive the requirement became effective October 1, 2009, pursuant to 2009 Wis. Act 2 . Microsoft Windows NT 6.1.7601 Service Pack 1