Wisconsin Updates Guidance For Qualified Research Exemption

Wednesday, February 25th, 2015

A scientists working with a micoscope.

The Wisconsin Department of Revenue released updated guidance on its qualified research exemption.

Wisconsin exempts sales of certain items used in "qualified research." To use the exemption, a person must (1) be engaged in manufacturing in Wisconsin, (2) be engaged primarily in biotechnology in Wisconsin, or (3) be doing qualified research for a combined group member that does (1) or (2).

The exemption applies to sales of two kinds of property. First, the exemption applies to sales of machinery and equipment used exclusively and directly in qualified research. It applies to attachments, parts, and accessories as well. Second, the exemption applies to sales of tangible personal property that is consumed or destroyed or loses its identity while being used exclusively and directly in qualified research.

To be "qualified research," a research activity must meet five criteria. First, the research must be in connection with the taxpayer's trade or business. Second, it must be research and development in the in the experimental or laboratory sense. Third, it must be undertaken to discover information that is technological in nature. Fourth, it must be intended to be useful in the development of a new or improved business component of the taxpayer. Fifth, it must be part of a process of experimentation related to a new or improved function, performance, or quality. It does not include research related to existing business components, marketing or efficiency research, or the development of computer software to be used by the taxpayer.


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