A boost in the number of state tax auditors generated an additional $72 million in revenue for the state in 2018.
The additional funds, while $10 million short of the state’s 2018 goals, illustrate the increased focus on collecting taxes from out-of-state businesses that may not be aware they owe Wisconsin taxes.
State revenue will get a continued boost from the out-of-state businesses that auditors found owe a variety of Wisconsin taxes under existing law. The state’s coffers will also soon get a windfall from a 2018 U.S. Supreme Court decision allowing for easier state collection of remote online sales tax.
Lawmakers in the 2015 state budget set aside nearly $14 million to fund more than 100 additional positions with the state Department of Revenue to better ensure businesses outside the state were paying their required Wisconsin taxes. Before the state added the additional positions, it had a running average of 290 tax auditors.
A report released by DOR Friday shows the auditors largely completed their task, exceeding stated goals for three of the four areas of tax revenue targeted under the 2015 budget.
The additional auditors, for example, exceeded revenue goals related to sales and use taxes some out-of-state sellers are already required to collect.
The additional auditors were found to have generated nearly $30 million in such taxes over fiscal 2018, exceeding the state’s goal of $15 million for that category.
The state is positioned to collect more in online sales tax in coming years after a 2018 U.S. Supreme Court decision allowing states to require out-of-state sellers without a physical presence in their state to collect sales taxes on items delivered there. Before the court’s decision, out-of-state companies were generally required to collect sales tax only if they held property in Wisconsin, such as an office.
Gov. Scott Walker and legislative Republicans in December’s lame-duck session passed a law that requires the state to put new revenue from online sales tax toward a tax cut. State revenues are expected to increase $60 million annually due to collection of the tax.
The additional auditors the state hired generated revenue in other areas, such as an additional $17 million from pass-through entities, a business structure created to reduce the effects of double taxation; and $35 million from “nexus auditors,” who determine which businesses should be collecting Wisconsin sales tax but are not.
Auditors also targeted $149 million in corporate and income tax that are awaiting payment as well as $171 million in tax assessments in the category that were assessed and are pending appeal.