Wis. Admin. Code Department of Revenue Tax 11.15

Current through September 30, 2024

Section Tax 11.15 - Containers and other packaging and shipping materials

(1) PROPERTY EXEMPT UNDER S. 77.54(6) (AM) 2, STATS.

(a) To be exempt, containers, labels, sacks, cans, boxes, drums, bags, or other packaging and shipping materials for use in packing, packaging, or shipping tangible personal property or items or property under s. 77.52(1) (b) or (c), Stats., shall be "used by the purchaser to transfer merchandise to customers." Whether the containers or other packaging or shipping materials are returnable or nonreturnable is not a factor. The exemption does not apply to containers used in the incidental transfer of property to customers by persons providing services.

(b) Containers include barrels, bottles, cartons, chemical carboys, and kegs. Packaging and shipping materials include property used inside a package to shape, form, preserve, stabilize, or protect the contents, such as excelsior, straw, cotton, cardboard fillers, separators, shredded paper, ice, dry ice, and batting, and rope, twine, gummed tape, wrapping paper, rubber bands, crates, and crating materials, pallets, skids, and mailing tubes.

(c) The sales price from the sale of the following items is within the exemption:

1. Cans in which canned goods, paints, and other commodities are contained; medicine bottles; boxes in which jewelry, candy, suits, dresses, and hats are delivered to customers; and ice cream cartons.

2. Bottles and cases used by breweries, wineries, or soda water beverage producers to transfer the product to customers.

3. Barrels, half-barrels, kegs, and the like, used by a brewery to transfer draft beer to wholesalers or retailers.

4. Caps for milk, beer, and soda water bottles.

5. "Fragile," "Handle with Care," or other shipping labels.

6. Paper food dividers used to separate food sections in a container for transfer to a customer.

7. Paper bags purchased by grocery stores, bakeries, or other retailers and used by their customers in carrying out their purchases.

8. Feed bags purchased by feed dealers who use the bags to transfer merchandise sold to their customers.

9. Bale ties sold to a hay owner and used to deliver hay to the owner's customers.

10. Ice used by a commercial fisher inside a box of fish to preserve the fish during shipment to market.

11. LPG tanks used to transfer fuel to customers which are replaced each time the fuel is exhausted.

12. Packaging and shipping materials for use in packing, packaging, or shipping meat or meat products, regardless of whether these items are used to transfer merchandise to customers.

Note: See Tax 11.12 for information on farmer's container exemption.

(2) PROPERTY NOT EXEMPT UNDER S. 77.54(6) (AM) 2, STATS. Sales of the following items are not within this exemption:

(a) Wrapping equipment such as paper holders, tape dispensers, staplers, and string holders.

(b) Coat hangers used on display racks in stores.

(c) Shopping carts or baskets and similar equipment.

(d) Computer produced gummed label mailing lists used to address envelopes. However, labels for envelopes used to transfer tangible personal property or items or property under s. 77.52(1) (b) or (c), Stats., to customers are exempt.

(e) Containers or other packaging and shipping materials used merely for storage or to transfer merchandise owned by a person from one location to another, such as bakery delivery carts and containers used in delivering bakery products to retailers, where the carts are not transferred by the bakery to the retailer.

Examples:

1) Wholesaler A's truck driver delivers bakery products to Grocery Store B. The truck driver brings the bakery products into Grocery Store B on a cart, puts the bakery products from the cart onto Grocery Store B's shelves and returns the cart to the truck and provides Grocery Store B with an invoice for the bakery products. The cart is not transferred to Grocery Store B (the bakery retailer), and is not an exempt container.

2) Wholesaler C's truck driver delivers bread to Grocery Store D. The truck driver brings the bread into Grocery Store D on a cart, and leaves the bread on the cart at Grocery Store D. The truck driver picks up the cart that was left with the last delivery. The truck driver provides Grocery Store D with an invoice for the bread. Grocery Store D's employees stock its shelves as needed with the bread from the cart. The cart is transferred to Grocery Store D (the bakery retailer), and is an exempt container.

(f) Lumber or other material used for bracing, blocking, skidding, or shoring items while in transit that is not transferred to the customer of the shipped items; and cardboard and paper used to line box cars.

(g) Price tags and advertising matter used in connection with the sale of tangible personal property or items, property, or goods under s. 77.52(1) (b), (c), or (d), Stats., including counter display cards used for advertising and display purposes.

(h) Tanks on trucks used to deliver merchandise to customers.

(i) Corrugated boxes and other containers and related packing materials purchased by movers for use in transporting a customer's goods.

(j) Bags, boxes, hangers, and other containers transferred to customers by laundries, dry cleaners, and other persons providing services.

Note: In a decision dated November 23, 1979 in the case of Leicht Transfer & Storage Co., Inc. vs. Wisconsin Department of Revenue the Wisconsin Tax Appeals Commission held that corrugated boxes and related packing materials used by Leicht to transport a customer's property from one location to another do not come within the exemption in s. 77.54(6) (b), 2011 Stats. This decision was affirmed by the Dane County Circuit Court on May 19, 1980, by the Court of Appeals, District IV on May 26, 1981.

(3) DEPOSITS ON RETURNABLE CONTAINERS.

(a) Returnable container deposits received by a retailer at the time of the retail sale of tangible personal property or items or property under s. 77.52(1) (b) or (c), Stats., such as soft drink bottles, beer bottles and containers, and refunds of the deposits may be excluded from the computation of the taxable sales price if they are excluded from the sales price on the retailer's books of account.

(b) If a retailer's books of account include container deposits in the sales price and if refunds of the deposits are deducted from the sales price, the retailer shall use this method of reporting the taxable sales price on a sales tax return. Under this method, the sales price from the deposit is subject to the tax and the tax may be collected from the customer. However, when the deposit is refunded to the customer, the applicable sales tax shall also be refunded to the customer.

(4) DISPOSABLE ITEMS USED BY RESTAURANTS.

(a) The sales price from sales to restaurants, cafeterias, caterers, nursing homes, or vending machine operators of disposable items, including paper and plastic cups, plates, butter chips, hamburger and frankfurter baskets or buckets, utensils, straws, placemats, napkins, doggie bags, wrapping materials, and toothpicks, transferred to customers for a valuable consideration by these persons as part of the sale of food, food products, and beverages to customers are not subject to the tax.

(b) The sales price from the sale of disposable products to a restaurant that are transferred with candy, soft drinks, dietary supplements, and prepared foods furnished for no consideration by the restaurant to the restaurant's own employees during the employee's work hours is not subject to the tax.

(5) DEMURRAGE, LEASE, OR RENTAL OF FUEL STORAGE TANKS. A gas supplier's monthly charge to a customer for the use of an LPG or other fuel storage tank which remains indefinitely on the customer's premises is taxable. The charge a supplier makes because a gas cylinder is retained by a customer beyond a 30-day period is also taxable. These "demurrage" charges constitute taxable rentals paid for the continuation of possession of the container. If a charge is made to the customer for the use of the container and the container is used exclusively for those leasing purposes, the gas supplier may issue an exemption certificate claiming resale when the supplier purchases the container.

(6) CONTAINERS AND PACKAGING MATERIALS SOLD.

(a) If a charge is made by a seller or lessor of tangible personal property or items or property under s. 77.52(1) (b) or (c), Stats., to a customer for a container or packaging materials used in connection with the shipment of the property or item, the charge for the container or packaging materials becomes a part of the sales price or rental charge. If the sale of the property or item shipped is not subject to or is exempt from tax, the charge for the container or packaging materials is not subject to or is exempt from tax. If the sale of the property or item shipped is subject to tax, the charge for the container or packaging materials is subject to tax. This paragraph is applicable to the taxation of containers and packaging materials regardless of whether the charge for the containers or packaging materials is separately stated or not separately stated.

(b) Any credit given by a seller or lessor to a customer for the container or packaging materials used in connection with the shipment of property or items which the customer returns to the seller or lessor shall reduce the seller's or lessor's sales price subject to tax in the reporting period during which the materials are returned, if the seller or lessor included the selling price of the container or packaging materials in the sales price subject to tax, and the seller or lessor returns the tax to the customer.

(7) GIFT WRAPPING. The amount charged for gift wrapping packages is taxable.

Wis. Admin. Code Department of Revenue Tax 11.15

Cr. Register, November, 1978, No. 275, eff. 12-1-78; am. (5) (a) and (8), r. (5) (b), Register, June, 1983, No. 330, eff. 7-1-83; cr. (2) (k), Register, December, 1983, No. 336, eff. 1-1-84; renum. (2) (j) to be (1) (c) 12., and am., Register, September, 1984, No. 345, eff. 10-1-84; am. (1) (a), (b), (c) 8., 11. and 12., (2) (g), (4) (a) and (b) and (5) (a), cr. (2) (L), Register, March, 1991, No. 423, eff. 4-1-91; renum. (2) (k) and (L) to be (2) (j) and (k), am. (7), cr. (7) (b), Register, July, 1993, No. 451, eff. 8-1-93; correction in (1) (c) 10. made under s. 13.93(2m) (b) 5, Stats., Register, July, 1993, No. 451; am. (1) (a) and (c) 5., r. (3), renum. (4), (5), (6), (7) and (8) to be (3), (4), (5), (6) and (7) and am. (5), Register, December, 1997, No. 504, eff. 1-1-98; EmR0924: emerg. am. (1) (a), (c) (intro.), (2) (title), (intro.), (a), (d) to (f), (3), (5) and (6), r. (2) (g), renum. (2) (h) to (k) and (4) to be (2) (g) to (j) and (4) (a) and am. (2) (g) and (4) (a), cr. (4) (b), eff. 10-1-09; CR 09-090: am. (1) (a), (c) (intro.), (2) (title), (intro.), (a), (d) to (f), (3), (5) and (6), r. (2) (g), renum. (2) (h) to (k) and (4) to be (2) (g) to (j) and (4) (a) and am. (2) (g) and (4) (a), cr. (4) (b) Register May 2010 No. 653, eff. 6-1-10; CR. 10-094: am. (1) (title), (a), (b), (c) 1. to 5., 7., 12., (2) (title), (j), (3) (a), (4), (5) Register November 2010 No. 659, eff. 12-1-10; CR 12-014: am. (3) (a) Register August 2012 No. 680, eff. 9-1-12; corrections in (1) (title), (2) (title) made under s. 13.92(4) (b) 7, Stats., Register August 2014 No. 704.

Section Tax 11.15 interpretss. 77.51(14) (intro) and (j) and (15b), 77.52(1) and (2) (a) 10., and 77.54 (3m), (6) (am) 2. and 2m., and (20r), Stats.

The interpretations in s. Tax 11.15 are effective under the general sales and use tax law on and after September 1, 1969, except: (a) The exemption for meat packaging and shipping materials became effective on May 20, 1978, pursuant to Chapter 368, Laws of 1977; (b) Laundries and dry cleaners became the consumers of bags, boxes, hangers, and other containers transferred to customers effective September 1, 1983, pursuant to 1983 Wis. Act 27; and (c) The change of the term "gross receipts" to "sales price" and the separate impositions of tax on coins and stamps sold above face value under s. 77.52(1) (b), Stats., certain leased property affixed to real property under s. 77.52(1) (c), Stats., and digital goods under s. 77.52(1) (d), Stats., became effective October 1, 2009, pursuant to 2009 Wis. Act 2.

In Dernehl-Taylor Co. v. Department of Revenue (Wisconsin Tax Appeals Commission, May 26, 1978), it was held that the gross receipts for doggie bags qualify for the exemption under s. 77.54(6) (b), 2011 Stats., because they are used to transfer merchandise to customers.