by David Herring August 24, 2023

Wisconsin Court Declares Trailers Sold to Out-of-State Customers Not Tax-Exempt

Wisconsin assesses a 5 percent sales tax on most goods sold in the state. One exemption from sales tax is for "[m]otor vehicles or truck bodies sold" to out-of-state residents who will not use their vehicles in Wisconsin (except to remove them from the state). So if a person from, say, Minnesota purchased a truck from a Wisconsin dealer and immediately took it back to Minnesota, they would not have to pay Wisconsin sales tax on the purchase, although they might owe use tax to Minnesota.

While this exemption may seem straightforward, there was a recent dispute before the Wisconsin courts over the precise definition of "truck bodies" as defined by the sales tax exemption. Specifically, if a Wisconsin dealer sells a trailer that attaches to a motor vehicle--think of a trailer you might use for camping--are those part of the "truck body"? And if so, do they qualify for the exemption?

What is a truck body?

The case before the courts, Becker v. Wisconsin Department of Revenue, involved a Wisconsin company, Becker Trailers, LLC, that sold a variety of "trailer-type vehicles." Many of those sales were to out-of-state customers. Becker assumed that their trailers were classified as "truck bodies" and therefore did not collect or remit any Wisconsin sales tax on its out-of-state sales.

But in 2013, the Wisconsin Department of Revenue assessed Becker for unpaid sales tax of $526,262.62 on sales made to out-of-state customers made between 2008 and 2011. Becker asked the Department to reconsider the assessment, which was denied. This prompted Becker to file an appeal with the Wisconsin Tax Appeals Commission, which again upheld the assessment.

The next step was the courts. A Wisconsin circuit court judge actually sided with Becker, holding the trailers it sold were tax-exempt "truck bodies." But the Department appealed that decision. And in July 2023, the Wisconsin District I Court of Appeals reinstated the Tax Appeals Commission's ruling upholding the original sales tax assessment.

Trailers Not Part of a "Truck Body" Under Prior State Supreme Court Ruling

Deputy Chief Judge M. Joseph Donald, writing for a three-judge panel of the Court of Appeals, explained that in general, the Wisconsin courts must defer to the Tax Appeals Commission's findings of fact in these kinds of disputes. More to the point, the burden is on the taxpayer--in this case Becker--to prove they are entitled to an exemption. If there is any ambiguity, Donald said, it must be "resolved in favor of taxation."

Here, the statute as it was written when the sales were made said the exemption covered the sale of truck bodies to non-residents provided they did not use the "trucks for which the truck bodies were made in this state." The Department argued this wording meant that the truck body itself had to be a "part of a complete truck" and not a separate trailer. Donald agreed. Becker sold trailers that were meant to be towed by a car or truck, which were "not truck bodies under the plain language of the statute."

Donald also rejected a separate argument raised by Becker that its sales were tax-exempt under a 1981 Wisconsin Supreme Court decision, Department of Revenue v. Trudell. In that case, the taxpayer sold semi-trailers to out-of-state customers. The Tax Appeals Commission held these sales were exempt "truck bodies," and the Supreme Court concurred. The Court noted that a semi-trailer was designed to carry cargo and without a truck or "some other unit to carry the load," the trailer served no purpose. The Department of Revenue subsequently amended its own regulations to specify that sales of "semi-trailers" to non-residents were covered by the truck body exemption.

The trailers did not "become the body of a completed truck" as with a semi-trailer attached to a cab.

But Donald said this case was different. Becker did not sell semi-trailers. It sold trailers that were designed to function separately from a car or truck. The trailers did not "become the body of a completed truck" as with a semi-trailer attached to a cab. So Becker's trailers did not meet the Supreme Court's definition. And even if its trailers qualified as part of a "truck body" under the revised regulations, Donald said the Department did not have the authority "to add a rule that goes beyond the statute."

David Herring
David Herring


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