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How to Update your Wisconsin NAICS Code
byNovember 1, 2020
We recently heard from many confused Wisconsin sales tax payers that they received the following secure notice from the Wisconsin Department of Revenue:
Starting June 1, the Wisconsin Department of Revenue will require My Tax Account users to update the North American Industry Classification System (NAICS) code associated with a business.
We need Wisconsin businesses to update their NAICS codes so we can better communicate directly with business sectors on tax law or filing changes and correctly estimate the fiscal impact of tax law changes. The United States Office of Management and Budget regularly updates the codes, so some businesses currently may not have correct codes.
The first My Tax Account user to log in for a business, including a third-party, will be prompted to update its 6-digit NAICS code. The user must either confirm the current NAICS code, if available, or select a different code using the search feature available. Once the code is updated for a business, no other users will be prompted to do the update.
The NAICS is a 6-digit code system used by businesses and governments to classify and measure economic activity in the United States, Canada, and Mexico. For more information, go to: https://www.census.gov/eos/www/naics/faqs/faqs.html
What does this Wisconsin notice mean?
As the notification states, a NAICS code is simply a 6-digit code used to report statistical data about an industry. You are often asked to include it on government forms, such as your sales tax registration or business registration with the Secretary of State, or information for the IRS. For example, say a state wants to report on the health of it’s soybean farming businesses in order to apply for a federal grant. They would compile those numbers but looking up all the businesses registered under the soybean farming NAICS code (which is 111110, by the way.)
*If you are an online seller, your NAICS code is: 454110*
We asked Alex Oxford, the Founder of Permitted (a company that specializes in registering online sellers for sales tax permits) for his opinion on why Wisconsin is asking taxpayers to update their NAICS code information. He said:
“When businesses registers for a sales tax permit in Wisconsin, they are required to provide the state with their North American Industry Classification Code. Wisconsin has been collecting Industry Classification codes for a number of years, and periodically requests that businesses update their code since ‘another NAICS code would be more accurate than the NAICS code originally selected.’ States use NAICS code information for two main reasons:
First, it provides state economists with valuable information they can use to forecast how much sales tax the Department of Revenue will be collecting in future years. This is important so that policymakers have a solid understanding of their state’s cash flows and can make informed investment decisions.Second, it enables states to create appropriate benchmarks for each industry. This is important because if a business falls outside of these benchmarks, it might increase the chance that your business is audited. For example, if a business is classified as a consumer clothing retailer (as indicated by their NAICS code) but consistently has a majority of their sales labeled as tax-exempt, then an auditor might seek to collect more information because most consumer retailers make taxable—and not exempt—sales. So long as you are using a tool like TaxJar to correctly calculate tax based on the products you are selling, you should have nothing to worry about.”
You can read our entire blog post on NAICS codes here.
What do Wisconsin Taxpayers Do Now?
The next time you or someone else logs into your Wisconsin My Tax Account, you will be asked to assign your business a NAICS code. Here’s how to do that:
- Go to My Tax Account and login
- When prompted to enter a NAICS code, enter 454110 if you are an online seller. If you are in a different industry, you can choose from a searchable list of NAICS codes here.
After that, you are all set!
Do you have questions or something to say about Wisconsin requesting NAICS codes? Start the conversation in the comments!Please note: This blog is for informational purposes only. Be advised that sales tax rules and laws are subject to change at any time. For specific sales tax advice regarding your business, contact a tax advisor.
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