Business Taxes & Costs
Wisconsin’s tax reform measure brought on the following: modification of the calculation of the enterprise zones tax credit based on jobs; an increase in credits available under our state’s angel and early-stage seed investment programs; creation of income and franchise tax credits for investments in healthcare medical records hardware and software, dairy manufacturing modernization or expansion and biodiesel production.
Another new law provides that a TIF district’s project costs may be expended in territory that is located within a one-half-mile radius of the tax incremental district’s boundaries if the territory is within the creating city’s or village’s boundaries.
Wisconsin’s business–friendly attitude is reflected in positive business tax changes that have been made in every biennial legislative session since the early 1970s. For a summary of Wisconsin taxes, see Major Taxes of Interest to Business. There, you will find an overview of Wisconsin’s business tax structure.
Corporate Income Tax
Businesses that are incorporated in Wisconsin and foreign corporations that have nexus with the state are subject to a 7.9% tax on the income of the corporation. That flat 7.9% rate has not been changed in the past 20 years.
Doing business in Wisconsin will soon become even less taxing for companies that conduct business in more than one state. Beginning in 2006, an apportionment formula based solely on the sales factor (as opposed to the current property / payroll / sales formula) was phased in over a 3–year period. The change resulted in corporate income tax savings of more than $45 million for Wisconsin companies.
Available credits against corporate income tax include research credits for both capital investments and noncapital expenditures related to R&D as well as a credit for sales tax paid on fuel and electricity used directly in manufacturing operations.
Wisconsin’s Worker’s Compensation premium rates are among the lowest in the country. During the 1990s, rates declined by 33% resulting in more than $1 billion in savings for Wisconsin companies. Since then, rates have continued to decline and compare very well to the overall average against 3 bordering states.
Risk and Insurance, a national trade magazine, has called Wisconsin "a worker’s comp utopia." The national Worker’s Compensation Research Institute has concluded that Wisconsin has "the lowest rate of requests for litigation of any state we have studied" because "management and labor control the system through a labor and management advisory council." Wisconsin’s Worker’s Compensation rates typically provide significant savings over those of neighboring states as illustrated in the WC Rate Comparisons posted on the Fact Sheets page.
Wisconsin pioneered unemployment insurance in the United States more than 70 years ago and takes pride in its ability to serve both Wisconsin workers and Wisconsin business. Employers paid the lowest possible unemployment compensation (U.C.) taxes in 2004 for the 13th straight year. The average Wisconsin employer in 2009 paid between .05% and 9.8%, depending on the category of compensation, of taxable wages in U.C. taxes, well below the U.S. average. Employers pay U.C. taxes on the first $10,500 of wages paid annually to each employee.
All property located in the state, except personal furnishings, clothing and property for which there is a specific exemption, is subject to taxation. Manufacturing, telecommunication and utility properties are assessed by the Department of Revenue while all other property is assessed by the municipal assessor. Exemptions from property tax include:
- Machinery and equipment used in manufacturing
- Merchants’ and manufacturers’ inventories
- Computer equipment
- Pollution abatement equipment
Wisconsin imposes a 5% tax on the sale or use of tangible personal property that is not specifically exempted from the tax as well as some services. Counties have the option of imposing a 0.5% local sales and use tax on the same items. See Sales Tax Rate by County for the complete list.
The use tax is a tax on the use, consumption, or storage of property in the state and applies to property brought into the state without payment of sales taxes.
Exemptions from the sales and use tax include:
- Manufacturing machinery and equipment
- Manufacturers’ raw materials
- Pollution abatement, waste treatment and recycling equipment
- Fuel and electricity used in manufacturing
Individual Income Tax
Wisconsin’s individual income tax, to a large extent, conforms to the federal personal income tax base. The tax rates are shown in this chart of WI Individual Income Tax Rates. Since 2001, all individual income tax brackets have been indexed each year based on the consumer price index.