Citing Wisconsin statute, the Wisconsin Tax Appeals Commission held that Oshkosh Corporation (Oshkosh) can by contract transfer title to certain materials to the federal government and avoid paying Wisconsin taxes on such property.
In its argument, the Department of Revenue (Department) purported that Oshkosh cannot contract away tax liability for materials like office supplies and security cameras when they were in the possession of and used by Oshkosh and not physically transferred to the federal government.
“This seems to us a slippery slope ...”
Four Wheel Drive
Oshkosh has designed, manufactured and sold military tactical wheeled vehicles to the US Department of Defense (DoD) for more than 90 years. In order to fulfill its government contractual obligations, Oshkosh purchased direct and indirect materials, both of which were reimbursed by the federal government.
Examples of the type of indirect materials that were purchased include office supplies and equipment, computer supplies and related equipment, building repairs and supplies, repairs to security cameras, crane inspections, gas purchases, building prototypes, step rear ladders, hand tools, cleaning supplies, vehicles leases, landscaping services, promotion items, among others.
None of the indirect material items that were part of the refund claim were eligible for the state’s manufacturing exemption.
Sale for Resale ~ Title Transfer
The company was assessed a use tax or paid sales tax on the indirect materials that were purchased and allocated to their government contract account pursuant to GAAP and Federal Acquisition Regulations. Subsequently, Oshkosh filed a sales and use tax refund claim for the amounts.
The validity of the company’s refund claim centered on the state’s definition of “sale” in that it includes the transfer of only the title to tangible personal property, not physical possession.
Oshkosh maintained that its purchases of indirect materials in furtherance of its contract with the DoD were a sale for resale to the federal government and therefore exempt from sales and use tax pursuant to Wisconsin statutes.
As set forth in the Federal Acquisition Regulations examples, title transfers for both direct and indirect materials used in connection with a government contract from the contracting party to the federal government.
Based on the state’s definition of “sale”, the contract language, how the purchases were accounted for by Oshkosh and the Federal Acquisition Regulations, the Tax Commission properly found in favor of Oshkosh and approved their refund request.
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