Is Sales Tax Deductible in Wisconsin?
In Wisconsin, sales tax is generally not deductible as a business expense when calculating your state or federal income taxes. Sales tax is considered a “pass-through” cost collected from customers on taxable goods or services and then remitted to the Wisconsin Department of Revenue. Because businesses are acting as intermediaries, these funds don’t belong to the company and therefore cannot be deducted as an expense.
However, there are a few key points worth noting:
- Sales Tax Paid on Purchases: If your business buys goods or services subject to sales tax, that cost may be deductible as part of the purchase expense. For example, sales tax paid on office supplies can typically be included in the total deductible business expense.
- Sales Tax vs. Income Tax: Though sales tax may not be directly deducted, enterprises could be allowed to deduct state income taxes or specific excise taxes, contingent upon their structural type and qualification.
- Consumer Deduction: Individual taxpayers sometimes wonder whether they may deduct sales tax on their personal income tax returns. IRS rules at the federal level give taxpayers an option to deduct either state income tax or state and local sales tax, but not both simultaneously. This choice may affect the residents of Wisconsin who itemize their deductions.
Business owners must carefully track the sales tax they collect from customers and remit it to the state to avoid legal issues. While sales tax collected is not deductible, they should also keep accurate records of sales tax paid on business purchases, as those amounts can be included in deductible business expenses.
That’s where OneIBC USA can help. Beyond company registration and corporate compliance, OneIBC USA assists clients with sales tax registration, reporting, and coordination with tax professionals, ensuring businesses in Wisconsin remain compliant while maximizing allowable deductions.
