May 28, 2020

May 28, 2020

Subscribe to Latest Legal News and Analysis

May 27, 2020

Subscribe to Latest Legal News and Analysis

May 26, 2020

Subscribe to Latest Legal News and Analysis

Simplified Savings in Wisconsin – New Procurement Rules Ease Tax and Administrative Burden on Public Projects

For many years, Wisconsin's tax rules required local governments and school districts to purchase materials and supplies directly from vendors (as opposed from the contractor) for use in a public construction project if the materials and supplies were to be considered exempt from sales tax. In order to ensure that a contractor that specified what materials and supplies to use on the project remained legally responsible for the materials and supplies, many public agencies would work with a contractor to establish a separate entity that would apply for the sales tax exemption and operate as a purchasing agent. Absent a special purchasing agent entity, public agencies found themselves the recipients of sometimes hundreds of purchase orders that needed to be processed, approved and paid. Under either scenario, the administrative burdens were excessive and unnecessary – it seemed illogical that taxpayers would be forced to undergo such measures to avoid sales tax on a project already funded by taxpayer dollars.

The Wisconsin Legislature has now forwarded a bill (SB 227) to Governor Walker for signature that would allow contractors to directly purchase materials and supplies for public projects they are building and have the sales tax exemption apply. It appears as though the Governor is poised to sign the bill, at which point it will become law upon publication. If enacted, the new law will affect contracts entered into after December 31, 2015. Assuming the bill is signed into law, it will greatly simplify the process of buying materials and supplies on a tax exempt basis for local governments and school districts as the contractor will be able to purchase on a tax exempt basis if the materials and supplies are used in the public project.

One cautionary note is that the Department of Revenue rules implementing this change may not be drafted or published for a considerable period after January 1, 2016. Therefore, the existing regulations may continue to be at odds with the terms of the new law. However, since this law affects contractors, not owners, the burden of determining its applicability to construction contracts falls mainly on the contractor.

©2020 von Briesen & Roper, s.c


About this Author

Donald Schoenfeld, von Briesen Roper Law Firm, Milwaukee, Real Estate, Construction and Finance Law Attorney

Don Schoenfeld is a shareholder and past chair of the firm’s Real Estate Practice Group. His expertise includes all aspects of real estate acquisition, construction, performance contracting, leasing, finance and development. He has extensive experience in representing hospitals in construction and real estate projects, with over $1 billion in projects developed. He also has significant experience in representing school districts in connection with performance contracting and construction projects, with over $75 million dollars in performance service contracts completed....

Andrew Phillips, von Briesen Roper Law Firm, Milwaukee, Litigation Law Attorney

Andy Phillips has dedicated his career to assisting local governments, school districts and businesses with their most challenging legal problems. Andy brings innovative solutions to the organizational, operational and personnel problems facing local governments and has been a leader in creating consortiums efficiently in areas such as Medicaid programming, human services and long term care. Andy serves as General Counsel for the Wisconsin Counties Association, a position which he has held for the past decade. 

Andy is also an experienced litigator with a background in complex commercial, employment and public sector litigation. He has extensive knowledge of state and federal employment laws and has represented public and private clients in administrative proceedings, arbitration, collective bargaining and employment litigation.