Wisconsin Housing Alliance Basic Training Boot Camp Sales and Use Taxes on Manufactured Homes May...

Wisconsin Housing Alliance

Basic Training Boot Camp

Sales and Use Taxes on Manufactured Homes

May 12, 2015

Definitions

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• "Manufactured home"– Federal definition applies for state tax purposes:• Structure designed to be used as a dwelling

• With or without a permanent foundation• Meets HUD Code standards (42 USC 5401-5425)

Definitions

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• "New manufactured home"– Never been occupied, used, or sold

• "Used manufactured home"– Previously occupied, used, or sold

Definitions

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• "Used mobile home"– Vehicle manufactured or assembled before June

15, 1976

– Designed to be towed as a single unit or in sections on a highway by a motor vehicle

– Equipped and used, or intended to be used, primarily for human habitation

– With walls of rigid uncollapsible construction

– Overall length of more than 45 feet

Real Property vs. Personal Property

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• Real property improvement– Home is permanently affixed to land owned by the owner of

the manufactured home– Permanently affixed: Sits on a foundation (off the wheels

and on some other support) and connected to utilities

• Personal property

– Not permanently affixed to real estate, or

– Affixed to land owned by someone other than the owner of the home (e.g., home installed in manufactured home park)

Tax Treatment – New Manufactured Home is Real Property

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• Real property improvement in Wisconsin:

– Seller/installer pays tax on 65% of purchase price of home

– No deduction for trade-in

– No tax owed on sale of home by seller/installer to customer

– Seller/installer should include tax paid in its selling price of home

Tax Treatment –New Manufactured Home is Real Property

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Example: Dealer buys manufactured home for $70,000 and sells

home to Customer for $80,000 (labor and materials)

Dealer permanently affixes home

Land is owned by Customer

Land is in Wisconsin

Dealer owes sales or use tax on its purchase of home

Tax computed on 65% of Dealer's purchase price

Tax computation: $70,000 x 65% = $45,000 x 5% = $2,275


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• Real property improvement outside Wisconsin:

–No Wisconsin sales or use tax owed by seller/installer on purchase or sale of home - Exemption applies

– Seller/installer should contact other state to determine its tax responsibilities


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• Real property improvement outside Wisconsin:− Exemption from Wisconsin sales and use tax

applies for purchases on September 1, 2011 and after.

− Before September 1, 2011, purchases of manufactured homes in Wisconsin that were used for real property improvements outside Wisconsin were taxable.

Tax Treatment – New Manufactured Home is Personal Property

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• Seller/installer of home may buy home without tax, for resale

• If home sold in Wisconsin - seller/installer owes sales tax on 65% of selling price of home

• No deduction for trade-in

• If home sold outside Wisconsin (customer receives possession of the home at location outside Wisconsin), seller/installer does not owe Wisconsin sales or use tax on the sale of the home

Tax Treatment –New Manufactured Home is Personal Property

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Example: Dealer buys manufactured home for $70,000 and sells home to

Customer for $80,000 (labor and materials)

Dealer gives vendor exemption certificate claiming resale

Dealer permanently affixes home

Land is not owned by Customer

Land is in Wisconsin

Dealer owes sales tax on its sale of home

Tax computed on 65% of Dealer's sales price

Tax computation: $80,000 x 65% = $52,000 x 5% = $2,600

What’s Included in 65% Computation?

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• For an item to be taxed at 65%, both conditions must be met:

– Item must be part of the manufactured home structure

Examples: Plumbing, heating, electrical systems, appliances, or equipment carrying a manufacturer's warranty

– Item must be sold in the same transaction as the home


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Example 1: Dealer buys manufactured home for $72,000 and sells

home to Customer for $84,000 (labor and materials) Home is sold as real property For additional $2,800, Manufacturer includes central air

conditioning unit with manufacturer's warranty Air conditioning unit has manufacturer's warranty Dealer's entire purchase price ($74,800) is taxed at 65%


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Example 2: Dealer buys manufactured home for $72,000 and sells home

to Customer for $84,000 (labor and materials)

Home is sold as real property

Dealer buys central air conditioning unit for $2,800 from person other than the vendor of the home

Home taxed at 65% of Dealer's purchase price

Air conditioning unit taxed at 100% of Dealer's purchase price

Air conditioning unit does not qualify for 35% exemption because it was not purchased as part of the home


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Example 3: Dealer buys manufactured home for $76,000 and

sells home to Customer for $86,000 (labor and materials)

Central air conditioning unit included with home

Air conditioning unit carries manufacturer's warranty

Home is sold as personal property in Wisconsin

Dealer's entire sales price ($86,000) is taxed at 65%


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Example 4: Dealer buys manufactured home for $76,000 and sells home

to Customer for $86,000 (labor and materials)

Dealer buys central air conditioning unit for $2,500 from person other than the vendor of the home (without installation)

Dealer installs air conditioning unit in home

Air conditioning unit carries manufacturer's warranty

Home is sold as personal property in Wisconsin

Dealer's entire sales price ($86,000) is taxed at 65%


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• Examples of other items taxed at 65%, if they are part of the manufactured home and sold in same transaction as the home:

– Skirting

– Refrigerators

– Furnaces

– Washers

– Dryers

Foundations

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• Installed foundations are real property, regardless of where they are constructed

• Dealer or other contractor who installs foundation owes sales or use tax on purchases of concrete and other materials used for foundation

• Dealer's charge to customer for foundation is not taxable

Foundations

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• If dealer makes single combined charge for (1) manufactured home sold as personal property and (2) foundation, dealer should make reasonable allocation of selling price

• Amount of selling price allocated to home taxed at 65%

• Amount of selling price allocated to foundation is not taxable

Carport or Garages Sold With Home;Home Sold as Personal Property

• Carport/garage set in concrete or attached to a concrete foundation and attached to home

– Dealer may buy carport/garage without tax, for resale

– Dealer owes sales tax on total sales price of carport/garage

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Carport or Garages Sold With Home;Home Sold as Personal Property

• Carport/garage set in concrete or attached to a concrete foundation, but not attached to home

– Dealer must pay sales or use tax on purchase of materials for carport/garage (if Dealer buys installed carport or garage from subcontractor, Dealer's purchase is nontaxable)

– Dealer's sale of carport/garage is not taxable21

Carport or Garages Sold With Home;Home Sold as Real Property

• Carport/garage set in concrete or attached to a concrete foundation, and attached to home



Carport or Garages Sold With Home;Home Sold as Real Property

• Carport/garage set in concrete or attached to a concrete foundation, but not attached to home



Decks or Steps Sold With Home;Home Sold as Personal Property or Real Property

• Deck/steps attached to a concrete foundation, but not attached to home

– Dealer must pay sales or use tax on purchase of materials for deck/steps (if Dealer buys installed deck or steps from subcontractor, Dealer's purchase is nontaxable)

– Dealer's sale of deck/steps is not taxable24

Ramp Sold With Home;Home Sold as Personal Property or Real Property

• Dealer buys materials and builds ramp

• Ramp attached to a concrete foundation, but not attached to home

– Dealer must pay sales or use tax on purchase of materials for ramp

– Dealer's sale of ramp is not taxable

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Ramp Sold With Home;Home Sold as Personal Property or Real Property

• Dealer buys pre-built ramp

• Ramp attached to a concrete foundation, but not attached to home

– Dealer does not owe tax on purchase of ramp (exempt as "mobility-enhancing equipment")

– Dealer's sale of ramp is not taxable26

Dealer Mistakenly Charges Sales Tax on Real Property Improvement

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• Customer is eligible for refund of tax paid to dealer in error

• Dealer owes sales or use tax on its purchase price of the home

• Dealer may deduct amount of sales or use tax it owes on its purchase price of the home from the refund it gives to customer

Freight

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Manufacturer's freight charge is taxable if property sold by manufacturer is taxable

Example 1:

– Manufacturer invoices Dealer for new manufactured home

– Dealer will sell home as real property in Wisconsin

– Invoice: $70,000 manufactured home + $2,000 freight = $72,000 total charge.

– Dealer owes sales or use tax of $2,340 ($72,000 x 65% = $46,800 x 5% = $2,340)

Freight

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Example 2:

– Manufacturer invoices Dealer for new manufactured home

– Dealer gives manufacturer exemption certificate claiming resale

– Invoice: $70,000 manufactured home + $2,000 freight = $72,000 total charge

– Dealer will sell home for $82,000 as personal property in Wisconsin

– Dealer owes sales tax of $2,665 ($82,000 x 65% = $53,300 x 5% = $2,665)

County and Stadium Taxes – Dealer Sells Home as Personal Property

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• Sales takes place where customer receives possession of home

• If sales takes place in county that has adopted the tax (taxable county), sale is subject to county tax

• If sale takes place in baseball or football stadium district, baseball or football stadium district tax applies

County and Stadium Taxes – Dealer Sells Home as Real Property in Wisconsin

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• If dealer receives and stores home in taxable county, dealer owes county sales or use tax on purchase price of home

• If dealer receives and stores home in baseball or football stadium district, dealer owes baseball or football stadium sales or use tax on purchase price of home

• If total county and stadium tax rate for location where home is permanently affixed to land is higher than the total county and stadium tax rate where home was received or stored, dealer owes difference for county where home is affixed


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Example 1:

– Dealer buys manufactured home and receives and stores home in Fond du Lac County

– Dealer permanently affixes the home to Customer's land in Winnebago County (nontaxable county)

– Dealer owes 5.5% tax on its purchase price of the home, since it first received or stored the home in Fond du Lac County


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Example 2:– Dealer buys manufactured home for $70,000

– Dealer gives manufacturer exemption certificate claiming resale

– Dealer receives and stores home in Dodge County

– Dealer permanently affixes the home on Customer's land in Milwaukee County (total state, county, and stadium tax rate in Milwaukee County is 5.6%)

– Dealer owes state, county, and stadium use tax, as follows:• Wisconsin state use tax: $2,275 ($70,000 x 65% = $45,500 x 5%)

• Dodge County use tax: $227.50 ($70,000 x 65% = $45,500 x 65% x 0.5%)

• Additional use tax for Milwaukee County and baseball stadium district: $45.50 ($70,000 x 65% = $45,500 x 0.1%)


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Example 2 (cont'd):– Dividing the additional $45.50 between Milwaukee County and the

baseball stadium district:

» Milwaukee County portion $37.92 ($45.50 x 5/6)

» Baseball stadium portion $7.58 ($45.50 x 1/6)

– Reporting on sales and use tax return:

» Milwaukee County use tax – report $7,584 of taxable purchases for Milwaukee County ($7,584 x 0.5% = $37.92)

» Baseball stadium use tax – report $7,580 of taxable purchases for baseball stadium district ($7,580 x 0.1% = $7.58)


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• Dealer receives and stores home in nontaxable county (county where neither county or stadium taxes apply), and

• Dealer permanently affixes the home to customer's land in a nontaxable county

• Dealer does not owe county or stadium tax on its purchase price of the home


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• Dealer receives and stores home in nontaxable county (county where neither county or stadium taxes apply), and

• Dealer permanently affixes the home to customer's land in a taxable county and/or in a stadium district

• Dealer owes county and/or stadium tax on its purchase price of the home


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Example:

Dealer buys manufactured home and receives and stores it in Sheboygan County (nontaxable county)

Dealer gives its vendor an exemption certificate claiming resale

Dealer permanently affixes the home on customer's lane in Milwaukee County

Dealer owes 5.6% use tax on 65% of its purchase price of the home (0.5% Milwaukee County use tax and 0.1% baseball stadium use tax)


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Dealer receives home at jobsite in taxable county or in a stadium district

Dealer owes county and/or stadium district tax on its purchase price of the home

Tax owed for county and/or stadium district where jobsite is located


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Dealer receives home at jobsite in nontaxable county that is not in a stadium district

Dealer does not owe county or stadium district tax on its purchase price of the home

County and Stadium Taxes – Dealer Sells Home as Real Property Outside Wisconsin

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Dealer receives and stores home anywhere (regardless of whether in Wisconsin or outside Wisconsin)

Dealer does not owe county or stadium district tax on its purchase price of the home

Used Manufactured Homes

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Home sold as real property No tax on seller/installer's purchase of home

No tax on sale of home to customer

Home sold as personal property No tax on seller/installer's purchase of home


Used Mobile Homes

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Home sold as real property No tax on seller/installer's purchase of home


Home sold as personal property No tax on seller/installer's purchase of home


Lease or Rental-New & Used Manufactured & Mobile Homes

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Real property Lease or rental for continuous period of less than one

month− Taxable (exception for leases and rentals by hospitals and

certain other organizations)

− Leases and rentals of manufactured and mobile homes are taxed at 100% of rental amount

Lease or rental for continuous period of one month or more− Not taxable

Lease or Rental-New & Used Manufactured & Mobile Homes

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Personal property Lease or rental for continuous period of less than one

month− Taxable (exception for leases and rentals by hospitals and

certain other organizations)

− Leases and rentals of manufactured and mobile homes are taxed at 100% of rental amount

Lease or rental for continuous period of one month or more− Not taxable

Installation or Complete Replacement of Item Permanently Affixed to Manufactured or Mobile Home

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Home permanently affixed to owner's land:• Treated as real property improvement

• No tax on charge for labor and materials

• Contractor pays tax on purchase of materials

Installation or Complete Replacement of Item Permanently Affixed to Manufactured or Mobile Home

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Home not permanently affixed to owner's land:• Exempt on charge for labor

• Tax on charge for materials

• No tax on contractor's purchase of materials (purchase for resale)

Repair of Items Permanently Affixed to Manufactured or Mobile Home ("Deemed Items" in sec. 77.52(2)(ag), Wis. Stats.)

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• Exempt on charge for labor



Repair of Items Permanently Affixed to Manufactured or Mobile Home (Items Not "Deemed Items" in sec. 77.52(2)(ag), Wis. Stats.)

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Home permanently affixed to owner's land:• No tax on charge for labor and materials

• Tax on contractor's purchase of materials

Repair of Items Permanently Affixed to Manufactured or Mobile Home (Items Not "Deemed Items" in sec. 77.52(2)(ag), Wis. Stats.)

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Home not permanently affixed to owner's land:• Exempt on charge for labor



Questions?

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Mike HinnendaelWisconsin Department of Revenue(608) [email protected]

Becky HainesWisconsin Department of Revenue(608) [email protected]

mailto:[email protected]

mailto:[email protected]

Wisconsin Housing Alliance Basic Training Boot Camp Sales and Use Taxes on Manufactured Homes May...

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