Wisconsin: Charges to Dining Customers for Access to Games and Songs on Mobile Games Are Taxable
Many restaurant chains have begun putting tablets at each table which offer the ability to play games, listen to music and more for a fee. Wisconsin recently ruled that those charges are subject to sales tax.
By Jeff Glickman, SALT partner
Technology advancements continue to change the way in which businesses provide goods and services to consumers. For example, some national restaurant chains are putting tablets at each table for customers to use to order food and pay the bill. In addition, many of these also offer, for a fee, the opportunity to play games, listen to music and access other content (e.g., news, social media, sports, etc.). Of course, the inevitable tax question is whether or not that fee is subject to sales tax.
That question was the subject of a recent Wisconsin private letter ruling.  The taxpayer, a large national casual dining chain, put an Android tablet (the “device”) on each of the tables in its restaurants, including those in Wisconsin. Customers used the device to order food and drinks and pay the bill. The devices also provided customers with access to premium content, for a fee. That premium content included access to content, as well as selected games and songs that were on the device. The fee was added separately to the customer’s bill at the end of the meal. The vendor of the devices (who retains title to the devices) charges the taxpayer for use of the devices in one of two ways: (1) a flat monthly fee for use of the devices plus a percentage of the premium content fees or (2) all of the premium content fees up to a maximum amount, and then any excess fees are split as agreed by the parties.
With regard to the fees for premium content, the Wisconsin Department of Revenue (DOR) concluded that the fees are subject to sales tax as “taxable admissions.” Under Wisconsin law, taxable admissions includes “the furnishing, for dues, fees or other consideration…the privilege of having access to or the use of amusement, entertainment, athletic or recreational devices or facilities.”  The DOR determined the charges were “taxable admissions” regardless of whether the charges for games, content and songs were separately stated or combined and regardless of whether the charges were based on usage or were for unlimited access.
In addition, the DOR also ruled that payments to the vendor – both the monthly service charge and the commissions for premium content fees – were subject to tax as a lease or rental of tangible personal property. The ruling notes that the taxpayer is the end user of the devices and thus is not entitled to give a resale exemption certificate to the vendor. If the vendor does not charge Wisconsin sales/use tax to the taxpayer, then the taxpayer is required to self-remit the tax directly to the DOR.
As businesses continue to use technology to change the manner in which they provide goods and services, the sales and use tax consequences must be addressed. States continue to focus on sales tax issues related to digital products and services, such as streaming video/music services and access to interactive games, as well as downloadable books, videos, music and other digital content. Aprio’s SALT team has experience addressing these sales and use tax issues on a multistate basis and can help make sure that you remain in compliance with the ever-changing sales and use tax rules.
This article was featured in the September 2016 SALT Newsletter. To view the newsletter, click here.
 Wisconsin Private Letter Ruling W1618001 (Feb. 11, 2016). This ruling was released to the public on July 29, 2016.
 Wis. Stat. § 77.52(2)(a)2.a.
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