77.59 Deficiency and refund determinations.

(1) The department may, by office audit, determine the tax required to be paid to the state or the refund due to any person pursuant to this subchapter. The determination may be made upon the basis of the facts contained in the return being audited or upon the basis of any other information within the department's possession. The determination shall be presumed to be correct and the burden of proving it to be incorrect shall be upon the person challenging the correctness thereof. One or more such office audit determinations may be made of the amount due for any one or for more than one period.

(2) Except as provided in sub. (2g), the department may, by field audit, determine the tax required to be paid to the state or the refund due to any person under this subchapter. The determination may be made upon the basis of the facts contained in the return being audited or upon any other information in the department's possession. The determination may be made on the basis of sampling, whether or not the person being audited has complete records of transactions and whether or not the person being audited consents. The department may examine and inspect the books, records, memoranda and property of any person in order to verify the tax liability of that person or of another person. The department may subpoena any person to give testimony under oath before it and to produce whatever books, records or memoranda are necessary in order to enable the department to verify the tax liability of that person or of another person. The determination shall be presumed to be correct and the burden of proving it to be incorrect shall be upon the person challenging its correctness. A determination by the department in a field audit becomes final at the expiration of the appeal periods provided in sub. (6), and the tax liability of the taxpayer for the period audited may not be subsequently adjusted except as provided in sub. (4) (b), (8) or (8m). If the taxpayer files or is required to file more than one return for the taxpayer's fiscal year or for a calendar year, the determination made by field audit for that fiscal or calendar year shall be based on the receipts, purchases, deductions and exemptions for the entire fiscal or calendar year.

(2g) The department shall promulgate rules to establish criteria applicable to field audits conducted under this subchapter for which an auditor uses a statistical sampling method whereby the auditor randomly selects a sample of transactions and uses probability theory to evaluate the sample results. The department shall establish criteria under this subsection to provide that any person with less than $10,000,000 in annual sales during any year at issue in a field audit may choose to have the audit conducted using statistical sampling as described in this subsection. In addition, the department shall establish criteria under this subsection that specifies the number of transactions necessary to qualify for statistical sampling and the maximum sample size.

(2m) The department may audit, or may authorize others to audit, sellers and certified service providers who are registered with the department pursuant to the agreement, as defined in s. 77.65 (2) (a).

(3) The department may not make a determination of the tax liability of a person unless the department gives written notice of the determination to the person within 4 years after the due date of the person's Wisconsin income or franchise tax return that corresponds to the date the sale or purchase was completed or, if exempt, within 4 years of the 15th day of the 4th month of the year following the close of the calendar or fiscal year that corresponds to the date the sale or purchase was completed; within 4 years of the dissolution of a corporation; or within 4 years of the date any sales and use tax return required to be filed for any period in that year was filed, whichever is later. The notice required under this subsection shall specify whether the determination is an office audit determination or a field audit determination, and the notice shall be in writing. If the department is unable to obtain service as provided in s. 73.03 (73m), publication of the notice as a class 3 notice, under ch. 985, is considered service of notice in any case where notice is required under this subchapter.

(3m) If the taxpayer has consented in writing to the giving of notice of determination after the time under sub. (3), the notice may be given, and the taxpayer may file a claim for a refund, at any time prior to the expiration of the period agreed upon. The period so agreed upon may be extended by subsequent agreements in writing.

(4)

(a) Except as provided in sub. (3m), at any time within 4 years after the due date of a person's Wisconsin income or franchise tax return that corresponds to the date the sale or purchase was completed or, if exempt, within 4 years of the 15th day of the 4th month of the year following the close of the calendar or fiscal year that corresponds to the date the sale or purchase was completed, that person may, unless a determination by the department by office audit or field audit of a seller has been made, and unless a determination by office audit of a buyer other than an audit in which the tax that is the subject of the refund claim was not adjusted has been made, and unless a determination by field audit of the buyer has been made, file with the department a claim for refund of taxes paid to the department by that person. If the amount of the claim is at least $50 or if either the seller has ceased doing business, the buyer is being field audited, or the seller may no longer file a claim, the buyer may, within the period under this subsection, file a claim with the department for a refund of the taxes paid to the seller. A claim is timely if it fulfills the requirements under s. 77.61 (14). A buyer may claim a refund under this paragraph only on a form prescribed by the department, only by signing that form, and only if the seller signs the form unless the department waives that requirement. If both a buyer and a seller file a valid claim for the same refund, the department may pay either claim. The claim for refund shall be regarded as a request for determination. The determination thus requested shall be made by the department within one year after the claim for refund is received by it unless the person has consented in writing to an extension of the one-year time period prior to its expiration.

(b) A claim for refund that is not to be passed along to customers under sub. (8m) may be made within 2 years of the determination of a tax assessed by office audit or field audit and paid if the tax was not protested by the filing of a petition for redetermination. No claim for refund may be allowed with regard to items that were not adjusted in the office audit or field audit. A claim is timely if it fulfills the requirements under s. 77.61 (14). If a claim is filed under this paragraph, the department may make an additional assessment in respect to any item that was a subject of the prior assessment.

(5) The department may offset the amount of any refund for a period, together with interest on the refund, against deficiencies for another period, and against penalties and interest on the deficiencies, or against any amount of whatever kind, due and owing on the books of the department from the person who is entitled to the refund. If the refund is to be paid to a buyer, the department may also set off amounts in the manner in which it sets off income tax and franchise tax refunds under s. 71.93 and may set off amounts for child support or maintenance or both in the manner in which it sets off income taxes under ss. 49.855 and 71.93 (3), (6) and (7). No person has any right to, or interest in, any refund under this chapter until setoff under ss. 49.855, 71.93, and 71.935 has been completed.

(5m) A seller who receives a refund under sub. (4) (a) or (b) of taxes that the seller has collected from buyers, who collects amounts as taxes erroneously from buyers, but who does not remit such amounts to the state, or who is entitled to a refund under sub. (4) (a) or (b) that is offset under sub. (5), shall submit the taxes and related interest to the buyers from whom the taxes were collected, or to the department if the seller cannot locate the buyers, within 90 days after the date of the refund, after the date of the offset, or after discovering that the seller has collected taxes erroneously from the buyers. If the seller does not submit the taxes and related interest to the department or the buyers within that period, the seller shall submit to the department any part of a refund or taxes that the seller does not submit to a buyer or to the department along with a penalty of 25 percent of the amount not submitted or, in the case of fraud, a penalty equal to the amount not submitted. A person who collects amounts as taxes erroneously from buyers for a real property construction activity or nontaxable service may reduce the taxes and interest that he or she is required to submit to the buyer or to the department under this subsection for that activity or service by the amount of tax and interest subsequently due and paid on the sale of or the storage, use, or other consumption of tangible personal property, or items, property, or goods under s. 77.52 (1) (b), (c), or (d) that are used by the person in that activity or service and transferred to the buyer.

(5r) A seller that continues to collect tax erroneously on a product after receiving 2 or more written notices from the department indicating that the product is not taxable is entitled to an adjustment or refund of the tax collected only if the seller returns the tax and related interest to the buyers from whom the seller collected the tax. The seller shall submit the tax and related interest to the buyers, or to the department if the seller can not locate the buyers, no later than 90 days after the date of the adjustment or refund. If the seller does not submit the tax and related interest to the buyers or to the department by the end of the 90-day period, the seller is subject to the penalties described in sub. (5m).

(6) Except as provided in sub. (4) (b), a determination by the department is final unless, within 60 days after receipt of the notice of the determination, the taxpayer, or other person directly interested, petitions the department for a redetermination. A petition is timely if it fulfills the requirements under s. 77.61 (14). In the case of notice served by publication, the 60-day period commences with the last day of publication of the notice.

(a) Within 6 months of the receipt by the department of the petition for redetermination, the department shall notify the petitioner of its redetermination. The redetermination shall become final 60 days after receipt by the petitioner of notice of the redetermination unless, within that 60-day period, the petitioner appeals the redetermination under par. (b).

(b) Appeals from the department's redeterminations shall be governed by the statutes applicable to income or franchise tax appeals but all appeals from decisions of the tax appeals commission with respect to the taxes imposed by this subchapter shall be appealed to the circuit court for Dane County or to the circuit court for the county where the taxpayer's commercial domicile, as defined in s. 71.01 (1b), is located, where the taxpayer owns other property, or where the taxpayer transacts business in this state.

(c) The department shall notify any person who files a petition for redetermination that the person may deposit the entire deficiency determination, including any penalty or interest, with the department when the petition is filed or at any time before the department makes its redetermination. Any deposited amount which is refunded shall bear interest at the rate of 3 percent per year during the time the funds were on deposit. A person may also pay any portion of a deficiency determination admitted to be correct and the payment shall be considered an admission of the validity of that portion of the deficiency determination and may not be recovered in an appeal or in any other action or proceeding.

Cross-reference: See also s. Tax 1.14, Wis. adm. code.

(7) If the department believes that the collection of any tax imposed by this subchapter will be jeopardized by delay, the department shall notify the person determined to owe the tax of the department's intention to proceed under s. 71.91 (5) for collection of the amount determined to be owing, including penalties and interest. The department shall serve the notice as provided in s. 73.03 (73m), and the warrant of the department shall not issue if the person, within 10 days after such notice, furnishes a bond in such amount not exceeding double the amount determined to be owing and with such sureties as the department approves, conditioned upon the payment of so much of the taxes, interest, and penalties as shall finally be determined to be due. Nothing in this subsection affects the review of determinations of tax as provided in this subchapter, and any amounts collected under this subsection shall be deposited with the department and disbursed after final determination of the taxes as are amounts deposited under ss. 71.89 (1) and 71.90 (2).

(8) Notwithstanding any other provision of this subchapter, if a person fails to file a report or return required by this subchapter or files a false or fraudulent report or return with the intent in either case to defeat or evade tax required to be paid, the department may determine the proper tax due at any time and without regard to when such failure or filing occurred and without regard to whether a field audit determination was previously made. The department may, at any time, examine and inspect any of the books, records, memoranda, or property of any person and make whatever inquiry, including the subpoena of persons, necessary to the determination of whether a failure to file or a filing was with the intent to defeat or evade the tax.

(8m) Within the time period under sub. (4), the department of revenue may refund excess taxes paid to it under this chapter, even if the person applying for the refund has been field audited in respect to those taxes, if the applicant's customers have filed valid claims for refunds with the applicant and if the refund is passed along to those customers.

(9)

(a) Except as provided in par. (b), if any person fails to file a return, the department shall make an estimate of the amount of the sales price of the person's sales, or, as the case may be, of the amount of the total purchase price of tangible personal property, or items, property, or goods under s. 77.52 (1) (b), (c), or (d), or taxable service sold or purchased by the person, the sale by or the storage, use, or other consumption of which in this state is subject to sales or use tax. The estimate shall be made for the period in respect to which the person failed to make a return and shall be based upon any information which is in the department's possession or may come into its possession. Upon the basis of this estimate the department shall compute and determine the amount required to be paid to the state, adding to the sum thus arrived at a penalty equal to 25 percent thereof. One or more such determinations may be made for one or for more than one period. When a business is discontinued a determination may be made at any time thereafter, within the periods specified in sub. (3), as to liability arising out of that business.

(b) If a seller is not required to register and obtain a permit under s. 77.52 (7) or 77.53 (9), but has registered and obtained a permit under s. 77.52 (7) or 77.53 (9) and has failed to timely file a return that is due, the department shall notify the seller of the failure to file and provide the seller at least 30 days to file the return prior to making the estimate described in par. (a), except that if the seller has a history of not filing returns, or filing returns late, the department may make the estimate under par. (a) without providing such notice.

(9m) If the department determines that a liability exists under this subchapter and that the liability may be owed by more than one person, the department may assess the entire amount to each person, specifying that it is assessing in the alternative. If the department determines that a liability exists under this subchapter and that the liability may be for either sales taxes or use taxes, the department may make an assessment for both taxes, specifying that it is assessing in the alternative.

(9n)

(a) Notwithstanding s. 73.03 (47), and except as provided in par. (b), no seller or certified service provider is liable for tax, interest, or penalties imposed on a transaction under this subchapter if the seller or certified service provider charged and collected the incorrect amount of the sales or use tax as a result of relying on erroneous data provided in the databases under s. 73.03 (61) (e) and (f).

(b) Notwithstanding s. 73.03 (47), no seller or certified service provider is liable for the tax, interest, or penalties imposed on a transaction under this subchapter if the seller or certified service provider failed to collect the sales and use taxes due on an item or transaction because the seller or certified service provider relied on the certification under s. 73.03 (61) (b). This paragraph does not apply to a seller or certified service provider who has incorrectly classified an item or transaction into a specific product category, unless such classification was approved by the states that are signatories to the agreement, as defined in s. 77.65 (2) (a). If the state determines that it has incorrectly classified an item or transaction, sellers and certified service providers that do not revise the classification of the item or transaction within 10 days after receiving notice from the department that an item or transaction was incorrectly classified are liable for the tax, interest, or penalties imposed on the item or transaction for the incorrect classification after the 10-day period.

(c) Except as otherwise provided in this paragraph, a purchaser is not liable for the tax, interest, or penalties imposed on a transaction under this subchapter if the seller or certified service provider from whom the purchaser made the purchase relied on erroneous data provided in the databases under s. 73.03 (61) (e) and (f) or if the purchaser relied on erroneous data provided in the databases under s. 73.03 (61) (e) and (f). With respect to reliance on the database provided under s. 73.03 (61) (e), the relief provided under this paragraph is limited to the erroneous classification in the database of terms defined in this subchapter and specifically identified in the database as being “taxable," “exempt," “included in sales price" or “excluded from sales price," or “included in the definition" or “excluded from the definition." With respect to reliance on the database provided under s. 73.03 (61) (f), the relief provided under this paragraph does not apply to transactions by which the product is received by the purchaser at the business location of the seller.

(9p)

(a) If a customer purchases a service that is subject to 4 USC 116 to 126, as amended by P.L. 106-252, and if the customer believes that the amount of the tax assessed for the service under this subchapter or the place of primary use or taxing jurisdiction assigned to the service is erroneous, the customer may request that the service provider correct the alleged error by sending a written notice to the service provider. The notice shall include a description of the alleged error, the street address for the customer's place of primary use of the service, the account name and number of the service for which the customer seeks a correction, and any other information that the service provider reasonably requires to process the request. Within 60 days from the date that a service provider receives a request under this paragraph, the service provider shall review its records to determine the customer's taxing jurisdiction. If the review indicates that there is no error as alleged, the service provider shall explain the findings of the review in writing to the customer. If the review indicates that there is an error as alleged, the service provider shall correct the error and shall refund or credit the amount of any tax collected erroneously, along with the related interest, as a result of the error from the customer in the previous 48 months, consistent with s. 77.59 (4). A customer may take no other action against the service provider, or commence any action, to correct an alleged error in the amount of the tax assessed under this subchapter on a service that is subject to 4 USC 116 to 126, as amended by P.L. 106-252, or to correct an alleged error in the assigned place of primary use or taxing jurisdiction, unless the customer has exhausted his or her remedies under this paragraph.

(b) If a customer purchases a service that is not subject to 4 USC 116 to 126, as amended by P.L. 106-252, tangible personal property, or items, property, or goods under s. 77.52 (1) (b), (c), or (d), and if the customer believes that the amount of the tax assessed for the sale of the service, property, items, or goods under this subchapter is erroneous, the customer may request that the seller correct the alleged error by sending a written notice to the seller. The notice shall include a description of the alleged error and any other information that the seller reasonably requires to process the request. Within 60 days from the date that a seller receives a request under this paragraph, the seller shall review its records to determine the validity of the customer's claim. If the review indicates that there is no error as alleged, the seller shall explain the findings of the review in writing to the customer. If the review indicates that there is an error as alleged, the seller shall correct the error and shall refund the amount of any tax collected erroneously, along with the related interest, as a result of the error from the customer, consistent with s. 77.59 (4). A customer may take no other action against the seller, or commence any action against the seller, to correct an alleged error in the amount of the tax assessed under this subchapter on a service that is not subject to 4 USC 116 to 126, as amended by P.L. 106-252, tangible personal property, or items, property, or goods under s. 77.52 (1) (b), (c), or (d) unless the customer has exhausted his or her remedies under this paragraph.

(9r) With regard to a purchaser's request for a refund under this section, a seller is presumed to have reasonable business practices if the seller uses a certified service provider, a certified automated system, as defined in s. 77.524 (1) (am), or a proprietary system certified by the department to collect the taxes imposed under this subchapter and if the seller has remitted to the department all taxes collected under this subchapter, less any deductions, credits, or allowances.

(10) As used in this section, “tax" or “taxes" include penalties and interest.

History: 1975 c. 186; 1979 c. 174, 203, 221; 1981 c. 20; 1983 a. 27; 1985 a. 29; 1985 a. 261 ss. 13g, 13m, 13t; 1987 a. 312 s. 17; 1991 a. 39, 269; 1993 a. 308, 437; 1995 a. 404; 2003 a. 33; 2005 a. 49; 2007 a. 20; 2009 a. 2 ss. 386, 493 to 498; 2009 a. 28, 330; 2013 a. 20; 2015 a. 55, 216; 2017 a. 59, 324.

A “spot check" by the Department of Revenue of a taxpayer's records for a single month was a “field audit" under sub. (2) covering that period only. DOR v. Moebius Printing Co. 89 Wis. 2d 610, 279 N.W.2d 213 (1979).

All persons who have paid excess sales tax may file a claim for a refund under sub. (4) regardless of whether the taxes were paid to a retailer or to the Department of Revenue. Dairyland Harvestore v. DOR, 151 Wis. 2d 799, 447 N.W.2d 56 (Ct. App. 1989).

If a sales and use tax return is never filed, the statute of limitations under sub. (3) never begins to run. Zignego Co., Inc. v. DOR, 211 Wis. 2d 819, 565 N.W.2d 590 (Ct. App. 1997), 96-1965.

Sub. (3) did not preclude the Department of Revenue (DOR) from raising before the tax appeals commission an alternative legal basis for taxation simply because it was not first asserted in DOR's written notices of determination. Sub. (3) only requires the notice of determination to “be in writing” and to “specify whether the determination is an office audit determination or a field audit determination.” DOR's general practice of including the legal theory on which the tax liability is based is just that, a practice, not a statutory requirement. Tetra Tech EC, Inc. v. DOR, 2017 WI App 4, 373 Wis. 2d 287, 890 N.W.2d 598, 15-2019.

Affirmed on other grounds. 2018 WI 75, 382 Wis. 2d 496, 914 N.W.2d 21, 15-2019.