Situs of income; allocation and apportionment
Wis. Stat. § 71.25
in effectFor purposes of determining the situs of income under this section and s. 71.255 (5) (a) 1. and 2.:
(1) Beneficiaries. The situs of income derived by any taxpayer as the beneficiary of the estate of a decedent or of a trust estate shall be determined as if such income had been received without the intervention of a fiduciary.
(2) Grantor trusts. The situs of income received by a trustee, which income, under the internal revenue code, is taxable to the grantor of the trust or to any person other than the trust, shall be determined as if such income had been actually received directly by such grantor or such other person, without the intervention of the trust.
(4) Corporations engaged in business wholly within this state. For corporations engaged in business wholly within this state, all income is subject to, or included in the measure of, the Wisconsin income or franchise tax.
(5) Corporations engaged in business both within and without the state.
(a) Apportionable income. Except as provided in sub. (6), corporations engaged in business both within and without this state are subject to apportionment. Income gain or loss from the sources listed in this paragraph is presumed apportionable as unitary or operational income or other income that has a taxable presence in this state. Apportionable income includes all income or loss of corporations, other than nonapportionable income as specified in par. (b), including, but not limited to, income, gain or loss from the following sources:
1. Sale of inventory.
2. Farms, mines and quarries.
3. Sale of scrap and by-products.
4. Commissions.
5. Sale of real property or tangible personal property used in the production of business income.
6. Royalties from intangible assets.
7. Redemption of securities.
8. Interest on trade accounts and trade notes receivable.
9. Interest and dividends if the operations of the payer are unitary with those of the payee, or if those operations are not unitary but the investment activity from which that income is derived is an integral part of a unitary business and the payer and payee are neither affiliates nor related as parent company and subsidiary. In this subdivision, “investment activity” includes decision making relating to the purchase and sale of stocks and other securities, investing surplus funds and the management and record keeping associated with corporate investments, not including activities of a broker or other agent in maintaining an investment portfolio.
10. Sale of intangible assets if the operations of the company in which the investment was made were unitary with those of the investing company, or if those operations were not unitary but the investment activity from which that gain or loss was derived is an integral part of a unitary business and the companies were neither affiliates nor related as parent company and subsidiary. In this subdivision, “investment activity” has the meaning given under subd. 9.
11. Management fees.
12. Franchise fees.
13. Treble damages.
14. A partner’s share of income or loss from a partnership or a member’s share of income or loss from a limited liability company.
16. Foreign exchange gain or loss.
17. Sale of receivables.
18. Rentals of, or royalties from, real property or tangible personal property if that real property or tangible personal property is used in the business.
19. Sale or exchange of petroleum at the wellhead.
20. Personal services performed by employees of the corporation.
21. Patents, copyrights, trademarks, trade names, plans, specifications, blueprints, processes, techniques, formulas, designs, layouts, patterns, drawings, manuals and technical know-how.
22. Redemption of the corporation’s bonds.
23. Interest on state and federal tax refunds on business income or business property.
24. Pari-mutuel wager winnings or purses under ch. 562.
(b) Nonapportionable income. Income, gain or loss from the sale of nonbusiness real property or nonbusiness tangible personal property, rental of nonbusiness real property or nonbusiness tangible personal property and royalties from nonbusiness real property or nonbusiness tangible personal property are nonapportionable and shall be allocated to the situs of the property, except that all income that is realized from the sale of or purchase and subsequent sale or redemption of lottery prizes if the winning tickets were originally bought in this state shall be allocated to this state.
(6) Allocation and separate accounting and apportionment formula. Corporations engaged in business within and without the state shall be taxed only on such income as is derived from business transacted and property located within the state. The amount of such income attributable to Wisconsin may be determined by an allocation and separate accounting thereof, when the business of such corporation within the state is not an integral part of a unitary business, but the department of revenue may permit an allocation and separate accounting in any case in which it is satisfied that the use of such method will properly reflect the income taxable by this state. In all cases in which allocation and separate accounting is not permissible, the determination shall be made in the following manner: for all businesses except air carriers, financial organizations, telecommunications companies, pipeline companies, public utilities, railroads, car line companies and corporations or associations that are subject to a tax on unrelated business income under s. 71.26 (1) (a) there shall first be deducted from the total net income of the taxpayer the part thereof (less related expenses, if any) that follows the situs of the property or the residence of the recipient. The remaining net income shall be apportioned to this state by use of an apportionment fraction composed of the sales factor under sub. (9).
(6m) Apportionment formula computation.
(a) For taxable years beginning after December 31, 2007, if both the numerator and the denominator of the sales factor under sub. (9) related to a taxpayer’s remaining net income are zero, none of the taxpayer’s remaining net income is apportioned to this state.
(b) For taxable years beginning after December 31, 2007, if the numerator of the sales factor under sub. (9) related to a taxpayer’s remaining net income is a negative number and the denominator of the sales factor under sub. (9) related to a taxpayer’s remaining net income is a positive number, a negative number, or zero, none of the taxpayer’s remaining net income is apportioned to this state.
(c) For taxable years beginning after December 31, 2007, if the numerator of the sales factor under sub. (9) related to a taxpayer’s remaining net income is a positive number and the denominator of the sales factor under sub. (9) related to a taxpayer’s remaining net income is zero or a negative number, all of the taxpayer’s remaining net income is apportioned to this state.
(9) Sales factor. For purposes of sub. (5):
(a) The sales factor is a fraction, the numerator of which is the total sales of the taxpayer in this state during the tax period, and the denominator of which is the total sales of the taxpayer everywhere during the tax period. For sales of tangible personal property, the numerator of the sales factor is the sales of the taxpayer during the tax period under par. (b) 1. and 2. plus 100 percent of the sales of the taxpayer during the tax period under pars. (b) 2m. and 3. and (c). For purposes of applying pars. (b) 2m. and 3. and (c), if a taxpayer is within another state’s jurisdiction for income or franchise tax purposes for any part of the taxable year, it is considered to be within that state’s jurisdiction for income or franchise tax purposes for the entire taxable year.
(b) Sales of tangible personal property are in this state if any of the following occur:
1. The property is delivered or shipped to a purchaser, other than the federal government, within this state regardless of the f.o.b. point or other conditions of the sale.
2. The property is shipped from an office, store, warehouse, factory or other place of storage in this state and delivered to the federal government within this state regardless of the f.o.b. point or other conditions of sale.
2m. The property is shipped from an office, store, warehouse, factory or other place of storage in this state and delivered to the federal government outside this state and the taxpayer is not within the jurisdiction, for income or franchise tax purposes, of the destination state.
3. The property is shipped from an office, store, warehouse, factory or other place of storage in this state to a purchaser other than the federal government and the taxpayer is not within the jurisdiction, for income or franchise tax purposes, of the destination state.
(c) Sales of tangible personal property by an office in this state to a purchaser in another state and not shipped or delivered from this state are in this state if the taxpayer is not within the jurisdiction for income tax purposes of either the state from which the property is delivered or shipped or of the destination state.
(df)
1. Gross receipts from the use of computer software are in this state if the purchaser or licensee uses the computer software at a location in this state.
2. Computer software is used at a location in this state if the purchaser or licensee uses the computer software in the regular course of business operations in this state, for personal use in this state, or if the purchaser or licensee is an individual whose domicile is in this state. If the purchaser or licensee uses the computer software in more than one state, the gross receipts shall be divided among those states having jurisdiction to impose an income tax on the taxpayer in proportion to the use of the computer software in those states. To determine computer software use in this state, the department may consider the number of users in each state where the computer software is used, the number of site licenses or workstations in this state, and any other factors that reflect the use of computer software in this state.
(dh)
1. Gross receipts from services are in this state if the purchaser of the service received the benefit of the service in this state.
2. The benefit of a service is received in this state if any of the following applies:
a. The service relates to real property that is located in this state.
b. The service relates to tangible personal property that is delivered directly or indirectly to customers in this state.
c. The service is purchased by an individual who is physically present in this state at the time that the service is received.
d. The service is provided to a person engaged in a trade or business in this state and relates to that person’s business in this state.
3. Except as provided in subd. 4. if the purchaser of a service receives the benefit of a service in more than one state, the gross receipts from the performance of the service are included in the numerator of the sales factor according to the portion of the service received in this state.
4. For taxable years beginning after December 31, 2018, a broadcaster’s gross receipts from advertising are in this state only if the advertiser’s commercial domicile is in this state. With regard to a broadcaster who is a member of a combined group, as defined in s. 71.255 (1) (a), this subdivision does not apply to the gross receipts of the members who are not broadcasters.
(dj)
1. Except as provided in subd. 2m. and par. (df), gross royalties and other gross receipts received for the use or license of intangible property, including patents, copyrights, trademarks, trade names, service names, franchises, licenses, plans, specifications, blueprints, processes, techniques, formulas, designs, layouts, patterns, drawings, manuals, technical know-how, contracts, and customer lists, are sales in this state if any of the following applies:
a. The purchaser or licensee uses the intangible property in the operation of a trade or business at a location in this state. Except as provided in subd. 2m., if the purchaser or licensee uses the intangible property in the operation of a trade or business in more than one state, the gross royalties and other gross receipts from the use of the intangible property shall be divided between those states having jurisdiction to impose an income tax on the taxpayer in proportion to the use of the intangible property in those states.
b. The purchaser or licensee is billed for the purchase or license of the use of the intangible property at a location in this state.
c. The purchaser or licensee of the use of the intangible property has its commercial domicile in this state.
2m. For taxable years beginning after December 31, 2018, a broadcaster’s gross royalties and other gross receipts received for the use or license of intangible property are sales in this state only if the commercial domicile of the purchaser or licensee is in this state and the purchaser or licensee has a direct connection or relationship with the broadcaster pursuant to a contract under which the royalties or receipts are derived. With regard to a broadcaster who is a member of a combined group, as defined in s. 71.255 (1) (a), this subdivision does not apply to the gross royalties and receipts of the members who are not broadcasters.
(dk) Sales of intangible property, excluding securities, are sales in this state if any of the following applies:
1. The purchaser uses the intangible property in the regular course of business operations in this state or for personal use in this state. If the purchaser uses the intangible property in more than one state, the sales shall be divided between those states having jurisdiction to impose an income tax on the taxpayer in proportion to the use of the intangible property in those states.
2. The purchaser is billed for the purchase of the intangible property at a location in this state.
3. The purchaser of the intangible property has its commercial domicile in this state.
(e) In this subsection, “sales” includes, but is not limited to, the following items related to the production of business income:
1. Gross receipts from the sale of inventory.
2. Gross receipts from the operation of farms, mines and quarries.
3. Gross receipts from the sale of scrap or by-products.
4. Gross commissions.
5. Gross receipts from personal and other services.
6. Gross rents from real property or tangible personal property.
7. Interest on trade accounts and trade notes receivable.
8. A partner’s share of the partnership’s gross receipts or a member’s share of the limited liability company’s gross receipts.
9. Gross management fees.
10. Gross royalties from income-producing activities.
11. Gross franchise fees from income-producing activities.
(f) The following items are among those that are not included in “sales” in this subsection:
1. Gross receipts and gain or loss from the sale of tangible business assets, except those under par. (e) 1., 2. and 3.
2. Gross receipts and gain or loss from the sale of nonbusiness real or tangible personal property.
3. Gross rents and rental income or loss from real property or tangible personal property if that real property or tangible personal property is not used in the production of business income.
4. Royalties from nonbusiness real property or nonbusiness tangible personal property.
5. Proceeds and gain or loss from the redemption of securities.
6. Interest, except interest under par. (e) 7., and dividends.
7. Gross receipts and gain or loss from the sale of intangible assets, except those under par. (e) 1.
8. Dividends deductible by corporations in determining net income.
9. Gross receipts and gain or loss from the sale of securities.
10. Proceeds and gain or loss from the sale of receivables.
11. Refunds, rebates and recoveries of amounts previously expended or deducted.
12. Other items not includable in apportionable income.
13. Foreign exchange gain or loss.
14. Royalties and income from passive investments in the property under sub. (5) (a) 21.
16. Pari-mutuel wager winnings or purses under ch. 562.
17. Gross receipts from sales of property or services as part of performing disaster relief work, as defined in s. 323.12 (5) (a) 3.
(g)
1. For taxable years beginning after December 31, 2018, the amount of a broadcaster’s gross receipts from advertising and the use or license of intangible property, as determined under pars. (dh) 4. and (dj) 2m., shall be adjusted as follows:
a. Determine the amount of the numerator of the sales factor for a broadcaster as provided in this subsection.
b. Multiply .01 by the total amount of the domestic gross receipts of the broadcaster from advertising and royalties and other gross receipts for the use or license of intangible property.
c. Determine the numerator of the sales for a broadcaster by substituting the amount determined under subd. 1. b. for the total amount determined under subd. 1. a.
d. Except as provided in subd. 1. e., if the amount of the numerator determined under subd. 1. c. is more than the amount determined under subd. 1. a., substitute the amount of total gross receipts determined under subd. 1. b. for the total amount of the gross receipts determined under subd. 1. a. For purposes of this subd. 1. d., the amount of the numerator for a broadcaster is the amount determined under subd. 1. c.
e. If the amount of the numerator computed under subd. 1. c. is more than 140 percent of the amount determined under subd. 1. a., adjust the total amount of the gross receipts under subd. 1. a. so that the amount of the numerator for a broadcaster is 140 percent of the numerator otherwise determined under subd. 1. a.
2. The department may promulgate rules to administer this paragraph.
(10) Railroads, financial organizations and public utilities.
(a)
1. In this section, “financial organization” means any bank, trust company, savings bank, industrial bank, land bank, safe deposit company, private banker, savings and loan association, credit union, cooperative bank, small loan company, sales finance company, investment company, brokerage house, underwriter or any type of insurance company.
2. As used in this section, “financial organization” includes any subsidiary of an entity described in subd. 1., if a significant purpose for the subsidiary is to hold investments or if the subsidiary primarily functions to hold investments.
(b) In this section, for taxable years beginning after December 31, 2005, “public utility” means any business entity providing service to the public and engaged in the transportation of goods and persons for hire, as defined in s. 194.01 (4), regardless of whether or not the entity’s rates or charges for services have been established or approved by a federal, state or local government or governmental agency.
(c) The net business income of railroads, car line companies, pipeline companies, financial organizations, telecommunications companies, air carriers, and public utilities requiring apportionment shall be apportioned pursuant to rules of the department of revenue, but the income taxed is limited to the income derived from business transacted and property located within the state.
(12) Department may apportion by rule. If the income of any such corporation properly assignable to the state of Wisconsin cannot be ascertained with reasonable certainty by the methods under this section, then the same shall be apportioned and allocated under such rules as the department of revenue may prescribe.
(13) Unrelated business taxable income. The unrelated business taxable income of organizations that are subject to tax on that income under s. 71.26 (1) (a) shall be apportioned under the department of revenue’s rules.
(15) Partnerships and limited liability companies.
(a) A general or limited partner’s share of the numerator and denominator of a partnership’s apportionment factors under this section are included in the numerator and denominator of the general or limited partner’s apportionment factors under this section.
(b) If a limited liability company is treated as a partnership, for federal tax purposes, a member’s share of the numerator and denominator of a limited liability company’s apportionment factors under this section are included in the numerator and denominator of the member’s apportionment factors under this section.
(16) Disaster relief work. For purposes of the apportionment of any income under this section, the disaster relief work, as defined in s. 323.12 (5) (a) 3., of an out-of-state business, as defined in s. 323.12 (5) (a) 6., shall not increase the amount of income apportioned to this state. For purposes of sub. (9), gross receipts from the sale of property or services as part of performing any disaster relief work are not considered gross receipts from sales received in this state.
Source: WI Statutes (Official Site)URL: https://docs.legis.wisconsin.gov/document/statutes/71.25Fetched: 10/7/2026