Some items, such as fresh fruits and vegetables, are exempt from a sales tax, although piñatas are not. (NNS file photo by Edgar Mendez)
By Edgar Mendez
This story was originally published by Milwaukee Neighborhood News Service, where you can find other stories reporting on fifteen city neighborhoods in Milwaukee. Visit milwaukeenns.org.
This summer, both the Milwaukee Common Council and the Milwaukee County Board of Supervisors approved sales tax increases.
The city’s increase was 2%, while the county approved an additional 0.4% tax on top of the existing 0.5% county sales tax.
Combined with the longstanding 5% Wisconsin sales tax, the new sales tax that City of Milwaukee residents will pay will be 7.9%.
Here’s what that means for you:
When will the new sales taxes go into effect?
The increased sales taxes will go into effect in January.
How much will I pay?
Instead of paying a 5.5%, or 5.5 cent tax for every dollar spent on most goods or services, Milwaukee residents will pay nearly 8 cents (7.9) on the dollar.
People who live and/or spend money in Milwaukee County, but not the City of Milwaukee, will pay a 5.9% sales tax.
How will the new rates affect me?
The new rates might not dent your wallet on most purchases, but you could feel the difference on big-ticket items.
Say, for example, you purchase a used car off the lot in the City of Milwaukee for $5,000. Currently, you’d pay $275 in sales taxes. Beginning in January, you’ll pay $395.
If the car you’re buying costs $25,000, then your sales tax bill would increase from $1,375 to $1,975.
If you make that same purchase outside of Milwaukee, but within the Milwaukee County limits, your sales tax for a $5,000 car would be $295 and for a $25,000 car, the sales tax would be $1,475.
What about smaller purchases?
Obviously, most purchases are not that grand. Say, for example, you spend $50 on clothes in the city. Your sales tax today would be $2.75. In January, that will increase to $3.95.
For a $500 flat screen TV, you’re looking at a $12 increase from $27.50 to $39.50. Outside of Milwaukee but within Milwaukee County, the taxes on your TV would be $29.50.
Those amounts might not seem significant. But if you factor in purchases of fast food, clothes, entertainment and other goods during the year, the new sales tax could easily cost you hundreds.
What’s exempt from a sales tax?
Not every item or service you purchase is subject to a sales tax. Here are some common things that you don’t pay a sales tax on.
Exempt items include prescription drugs; durable medical equipment such as wheelchairs, prosthetics and other mobility enhancing equipment; and unprepared food and groceries (except soft drinks, candy and dietary supplements). There is an exemption for prepared food that is sold frozen and without utensils.
Fuel oil, propane, coal and steam made from wood used for fuel or produced from solid waste for residential use are exempt as is electricity and natural gas for residential use from November to April.
A few other items that are exempt include medical records, printed newspapers and Wisconsin and U.S. flags. Gamers will be happy to know that amusement devices, video or electronic games are also exempt.
What items are taxed?
These are items you’ve already been paying a sales tax on. They include clothes; computers; repairs; fast food; liquor and cigarettes; cable and satellite television; tickets for the Brewers, Bucks and other athletic events; and lodging.
Why the increase?
A historic shared revenue bill passed by the Wisconsin Legislature earlier this summer allowed municipalities in the state, including Milwaukee, to implement a city sales tax to supplement the state tax.
The tax, leaders say, will help the city avoid bankruptcy, maintain jobs and fund crucial services for residents. The bill also included provisions that gave the state more power over local decisions.
What will the increased taxes pay for?
A major provision of the shared revenue bill and subsequent sales tax requires the city to maintain its current level of staffing for the police and fire departments.
The city must use 90% of the revenue generated from the new sales tax to help cover its annual pension contribution and other pension-related costs, and 10% to maintain police and fire staffing levels.
In future years, the revenue generated must also be used to hire more police and fire department personnel. The county will also use funds from the increased tax to support its troubled pension system, and other funds to support services such as transportation and public parks.
How much money will be raised?
The new county tax will generate an estimated additional $82 million in the first year alone. The city sales tax increase is expected to raise more than $190 million in the first year.
Do you have questions?
You can email us, and we will try to get you answers.