New income tax and franchise tax regulations, CR 18-081, were finalized by the Wisconsin Department of Revenue. The new rules provide guidance on the level and types of activities that will create nexus for out-of-state businesses.
Wisconsin’s new rules define “regular” and “regularly” as 15 or more days of activity. Fifteen days of activity means one person for 15 days or 15 persons for one day, or any combination of persons and days that results in 15 person-days of activity. Days of activity include any day, or portion thereof, upon which business activity took place. Days of activity do not include travel days, holidays, or weekends, unless business activities were conducted on those days.
For many years, businesses have created nexus by having regular or frequent physical presence in Wisconsin. Examples of in-state physical presence include permanent employees, traveling employees, sales representatives, certain independent contractors, inventory, and office locations. Like most states, subjectivity has surrounded the measurement of temporary Wisconsin business activities and whether they rise to the level of being substantial. The term substantial nexus is itself a subjective federal requirement that state nexus rules must meet. Most states provide no explicit number of days, while others indicate that even one or two days spent working in the state may be enough to create filing obligations. Courts have upheld that one day is enough when considering all nexus creating activities as a whole, so taxpayers have long needed to be thoughtful with nexus decisions.
Remember that Boulay offers both nexus and sourcing consulting services to help identify and quantify nexus exposure and sourcing requirements. Ask your trusted Boulay advisor for details.
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