January 25, 2016
by Nick Novak
This column was originally published by The Daily Reporter.
The Legislature had a busy year in 2015, but that doesn’t mean they should head out the door early this year. There are still quite a few ideas that need to be discussed and bills that should be passed — particularly those that would be beneficial to the construction industry.
I’ve outline three items the Legislature should take up before they break for the summer campaign season.
Real vs. personal property
The first comes in the form of Assembly Bill 623 and Senate Bill 503, which were introduced by Rep. John Macco, R-De Pere, and Sen. Howard Marklein, R-Spring Green. In terms of red tape, the issue this bill aims to fix is a big one. Under current law, the sales tax is applied differently to goods and materials used to construct a building.
If a product is determined to be “real property,” the contractor pays the sales tax. If a product is determined to be “personal property,” the building owner pays the sales tax.
This may not sound terribly puzzling until it is revealed what is real property and what is personal property. Typically, anything that is a permanent part of the structure would be considered real property. Anything seen as removable would be considered personal property. Unfortunately, there are countless instances that are anything but typical.
As The Daily Reporter pointed out recently, security cameras count as real property if they monitor an entrance and personal property if they monitor inventory. Electric cables behind a wall are real property, but data cables behind that same wall are personal property. And cabinetry can change designations depending on the type of room it is installed in, even if it is the exact same cabinet.
AB 623 does not fix the problem with designating what is real or personal property — which would be welcomed — but it does expand a law that clarifies who would pay the sales tax. In 2013, Wisconsin changed its tax law so that if less than 10 percent of a building’s purchase price is personal property, and it is being sold for a single lump sum price, the contractor can pay all of the sales tax without having to do a separate sale to the owner.
This legislation would expand that law to apply to all construction projects, not just lump sum sales. With the passage of this bill, the time spent determining who pays for what could instead be spent planning another project and getting more people back to work.
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