Milwaukee could implement a new sales tax. Here's how it work and what items would be taxed.
The City of Milwaukee and Milwaukee County are now empowered to put new or increased sales taxes in place.
On Tuesday, Gov. Tony Evers signed a local government funding bill that allows city and county elected leaders to each implement sales taxes that would help avoid serious funding shortfalls in the coming years.
The new law allows the city to levy a 2% sales tax while Milwaukee County could levy a 0.4% sales tax on top of its existing 0.5% tax — but each tax must be approved by two-thirds votes of the city's Common Council or the County Board of Supervisors, respectively. Mayor Cavalier Johnson and County Executive David Crowley, key negotiators on the new state law, are expected to sign the local sales tax legislation.
More: There's a lot of talk of Milwaukee going 'bankrupt.' It's more complicated than that.
Here is what you should know about these potential new taxes.
How did the sales tax changes come about?
As cities and other municipalities struggle financially despite a growing state surplus, Evers and Republican state legislative leaders reached a local government funding deal on June 8 after months of negotiations. Part of that deal included the ability to levy new sales taxes in the city and county.
The City of Milwaukee and Milwaukee County have sought local sales taxes in order to address fiscal challenges that are threatening to force deep cuts in services in the coming years.
What does the sales tax apply to?
According to the state Department of Revenue, the local sales taxes would be made up of the same general base as the state sales tax. This means that nothing would be added to or subtracted from items that the existing state sales tax already applies to.
Generally, items (tangible personal property) are subject to tax unless specifically exempt, and services are not subject to tax unless they are specifically deemed taxable. Tangible personal property is defined by the state Department of Revenue as, "personal property that can be seen, weighed, measured, felt, or touched, or that is in any other manner perceptible to the senses."
Taxable goods include but are not limited to:
Clothing
Computers
Office equipment
Electricity (with exceptions)
Gas (with exceptions)
Steam
Water (with exceptions)
Cigarettes
Cable television, including installation
Interstate telephone and telegraph services
Magazines other than those sold by subscription
Telephone company central office equipment and coin-operated telephone services
Telephone answering and messaging services and telecommunications services terminating in and billed to a service address in the state
Taxable services include:
Rooms or lodging for less than one month by hotelkeepers, motel operators and other persons furnishing accommodations to the public.
Admissions to amusement, athletic, entertainment or recreational events or places. Admissions to places or events that are educational in nature, such as museums or zoos, and admissions to county fairs are exempt from sales tax.
Laundry, dry cleaning, pressing, and dyeing services (exemptions here)
Prepaid calling, telecommunications, and ancillary services, if the service takes place in Wisconsin.
Photographic services, including the processing, printing, and enlarging of film, and the services of photographers for the taking, reproducing, and sale of photographs.
Parking or providing parking space for motor vehicles and aircraft; docking or providing storage space for boats.
The repair, inspection, and maintenance of tangible personal property, and the installation of tangible personal property, except when such installation constitutes a capital improvement to real property.
The production, printing, or imprinting of tangible personal property for consumers who furnish directly or indirectly the materials used in such processes.
Landscaping and lawn maintenance services.
Towing and hauling of motor vehicles.
You can find more examples here and more sales tax information here.
What does the sales tax exclude?
The exemptions for the proposed sales tax change would be no different than those exempt from the current sales taxes.
Items include:
Food and food ingredients except candy, soft drinks, dietary supplements, and prepared food; Food for direct consumption on the premises, such as meals sold in restaurants, cafes, and cafeterias, is taxable; dried fruit
Bottled water, water sold through public water mains
Meals furnished by institutions of higher education
Fuel and electricity for residential use, biomass used for residential fuel; deer and other cervids sold to hunting preserves
Motor fuels; vegetable oil and animal fats converted to exempt vehicle fuels
Fuel and electricity used in manufacturing
Fuels converted to electric energy, gas or steam by utilities
Waste treatment facilities and machinery and equipment used in recycling
Mobile and manufactured homes
Newspapers, subscription periodicals and shoppers guides; catalogs and catalog envelopes
Caskets and burial vaults
United States of America and State of Wisconsin flags
Self-service laundry and dry cleaning services (list here)
Prescription drugs (excluding insulin), insulin for the treatment of diabetes and supplies for blood sugar testing
Commercial vessels and barges
Containers, labels, sacks, cans, boxes, and other packaging and shipping materials
Restaurant employee meals
Servers and computers used in commercial printing
Amusement devices-video and electronic games
Tournament or league entrance fees
You can view the entire list of items exempt from sales tax here and more information on exemptions here.
How much would the new sales tax(es) be in Milwaukee?
There are two separate sales tax changes allowed per the local government funding deal. One is specifically for the City of Milwaukee that allows the city to levy 2% sales tax. This would be the first sales tax levied by the city alone.
More: If Milwaukee gets its own sales tax, it will get funding that cities across the nation have
More: There's a lot of talk of Milwaukee going 'bankrupt.' It's more complicated than that.
The other local sales tax chance is the allowance of Milwaukee County to levy an additional 0.4% sales tax on top of the existing 0.5% sales tax in the county.
Both sales taxes would be on top of the state's 5% sales tax. If both new sales taxes were implemented, the sales tax in the city of Milwaukee would be 7.9% and 5.9% in the rest of the county.
How would it be implemented?
According to the local government funding deal, the Milwaukee Common Council will need a two-thirds vote for the city to levy a 2% sales tax.
The Milwaukee County Board of Supervisors would also need a two-thirds vote to levy a 0.4% sales tax on top of its existing 0.5% sales tax, per the agreement.
Is a city sales tax common?
Yes. According to a study from the Wisconsin Policy Forum, many cities have their own sales taxes. Cities that have them are Chicago (10.25% with state sales tax), Kansas City, Kan. (9.125% with state sales tax), Kansas City, Mo. (8.85% with state sales tax), Minneapolis (8.025% with state sales tax) and Cleveland (8% with state sales tax).
How much money would the sales taxes generate if implemented?
If the sales taxes were implemented with a Jan. 1, 2024, start date, the Department of Revenue estimated that the city sales tax (2%) would generate $193.6 million in revenue and the additional county sales tax (0.4%) would generate $77.4 million in revenue on top of the 0.5% tax already in place in the first year.
The county received $96.3 million in sales tax revenue in 2022, $90.1 million in 2021 and $79.9 million in 2020, according to state Department of Revenue data on county sales tax distributions.
Alison Dirr contributed to this report.
Drew Dawson can be reached at ddawson@jrn.com or 262-289-1324.
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This article originally appeared on Milwaukee Journal Sentinel: What you need to know about the proposed sales tax in Milwaukee
