Building Materials Exemption (Section 77.54(9m), Wis. Stats.)
Wisconsin's building materials exemption allows contractors to purchase materials consumed in real property construction without sales tax — but only when specific requirements are met and the end customer is a qualifying exempt entity.
The building materials exemption applies to the contractor's purchase of materials consumed in real property construction activities when three requirements are met: the construction must be for a qualifying exempt entity; the property must become part of a "facility" in WI that is owned by the exempt entity; and the property must be transferred to the qualifying exempt entity.
Contractor Responsibility
The contractor determines whether its material purchases qualify for this exemption and is liable for any use tax, interest and penalties due in the case that the exemption criteria are not met or cannot be substantiated.
This Exemption Is Limited
- Only applies to contracts with certain exempt entities — not all exempt entities qualify.
- A manufacturer, farmer, or other entity that presents a use-based exemption is NOT an exempt entity.
- Location of facility must be in Wisconsin.
- "Facility" is narrowly defined.
- Facility must be owned by the qualifying exempt entity.
- Upon completion of the contract, the facility must be transferred to/first used by the qualifying exempt entity.
Qualifying Exempt Entities
A Qualifying Exempt Entity is:
Any county, city, village, town within Wisconsin.
Any public school district within Wisconsin.
A county-city hospital established under sec. 66.0927, Wis. Stats.
A sewerage commission organized under sec. 281.43(4), Wis. Stats.
A metropolitan sewerage district organized under secs. 200.01 to 200.15 or 200.21 to 200.65 Wis. Stats.
Any joint local water authority created under sec. 66.0823, Wis. Stats.
Any nonprofit organization that holds a WI Certificate of Exempt Status (CES) number.
A nonprofit organized under sec. 501(c)(3), IRC — Federal determination letter.
Technical college district.
The Board of Regents of the University of Wisconsin System.
An institution, as defined in s. 36.05(9).
College campus, as defined in s. 36.05(6m).
University of Wisconsin-Extension.
State veterans organization (exempt entity status does not include bar or food service related items).
501(c)(2) holding company — organized under sec. 501(c)(2), IRC; exempt from federal income tax under sec. 501(a), IRC; and organized for the exclusive purpose of holding title to property, collecting income from that property, and turning over the entire amount of that income, less expenses, to any 501(c)(3) organization.
University of Wisconsin Hospitals and Clinics Authority (contracts effective 2/1/2021 and thereafter).
General Contractor to Subcontractor — Important
A General Contractor does NOT provide its subcontractor an exemption certificate claiming the building materials exemption and/or claiming its customer's CES information. If the end customer is a qualifying exempt entity, the General Contractor should pass on the following information, along with a copy of the customer's CES information or federal determination letter, to a subcontractor (as referenced in WI Department of Revenue Form S-227).
Additional Resources
For additional information and training on this topic refer to the WI Dept of Revenue video or contact Holly Hoffman, owner of Sales Tax Advisory Network at [email protected]
Questions About the Building Materials Exemption?
Holly Hoffman is a former WI Dept. of Revenue auditor and the owner of Sales Tax Advisory Network, LLC. She helps contractors, subcontractors, and project owners navigate Wisconsin's building materials exemption and avoid costly audit exposure.