Wisconsin recently expanded its tax incentives for businesses conducting qualified research in the state. Two legislative changes affect both the Wisconsin research expense credit and the sales and use tax exemption for property used in qualified research.
The changes may provide additional benefits to research-intensive businesses, particularly companies providing research services to customers.
Wisconsin Expands the Qualified Research Sales Tax Exemption
Effective July 1, 2026, 2025 Wisconsin Act 190 expands the sales and use tax exemption for qualified research to businesses engaged in contract research services in Wisconsin. Contract research services generally include research conducted on behalf of a customer that would constitute qualified research if the customer’s own employees performed the research.
This change is significant for businesses that conduct research for third parties. Previously, Wisconsin’s qualified research exemption was available to certain manufacturers, biotechnology companies, and members of combined groups.
The new law expands eligibility to contract research providers and modifies the definition of qualified research to include qualifying research funded by customers for whom contract research services are provided.
What Purchases May Qualify?
Eligible businesses may claim a Wisconsin sales and use tax exemption for certain property used exclusively and directly in qualified research, including:
- Machinery, equipment, attachments, parts, and accessories
- Tangible personal property consumed or destroyed in qualified research process
- Fuel and electricity used exclusively and directly in qualified research
For purposes of the exemption, property is generally considered used exclusively when at least 95% of its total use is directly in qualified research or manufacturing. Businesses must maintain records supporting the qualifying use of the property.
How Businesses Claim the Exemption
Businesses engaged in contract research services may claim the exemption for qualifying purchases made on or after July 1, 2026. To claim the exemption, the purchaser must provide the seller with a properly completed Wisconsin sales and use tax exemption certificate, such as Form S-211 or S-211E.
Because the expanded eligibility is effective July 1, 2026, contract research businesses should review purchases made after that date to determine whether sales or use tax was paid on property that now qualifies for exemption. They should also review their exemption certificate process to avoid unnecessary tax on future qualifying purchases.
Wisconsin Extends the Research Credit Carryforward Period
Wisconsin also enacted 2025 Wisconsin Act 220, which extends the carryforward period for certain unused
research expense credits from 15 years to 50 years.
The change may be particularly helpful for research-intensive businesses that generate significant credits while they are still growing or before they have sufficient Wisconsin tax liability to use the full credit.
Under the updated Wisconsin Department of Revenue guidance, certain unused credits claimed on or after January 1, 2025 that had not expired as of April 10, 2026 may also qualify for the extended carryforward period.
What Should Businesses Consider?
Companies conducting or providing qualified research in Wisconsin should consider whether these changes affect their current tax position.
Contract research providers should review purchases beginning July 1, 2026 for potential sales and use tax exemptions, while businesses with unused Wisconsin research credits should review their credit carryforward schedules considering the new 50-year period.
The sales tax exemption still depends on whether the underlying activities constitute qualified research and whether the purchased property satisfies Wisconsin’s direct and exclusive use requirements.
Maintaining project documentation, purchase records, employee time records, testing records, and other support for
qualified research activities remains important.
How Leyton Helps
At Leyton, our SALT experts help businesses identify sales and use tax exemptions and recover tax that may have been overpaid on qualifying purchases. For companies conducting research in Wisconsin, our team can review equipment, consumables, utilities, and other purchases to identify potential exemption and refund opportunities and help establish a process for applying the exemption going forward.
Leyton’s R&D tax specialists can also help businesses evaluate qualified research activities, substantiate research credits, and assess how changes to Wisconsin’s research incentives may affect available tax benefits.
For more information, visit: https://leyton.com/us/state-and-local-tax-s-a-l-t/