On July 17, 2018, the Wisconsin Court of Appeals held that a taxpayer’s services qualified as taxable “laundry services” and were subject to Wisconsin sales tax. The taxpayer entered into service agreements with clients and provided them contract cleaning services. The taxpayer would hire its clients’ existing laundry department workforces as employees, who would then use the clients’ equipment to clean their laundry. The procedures used to process the laundry would typically not change, and the employees would usually perform their duties in the same manner as they did when employed by the clients. The court held that the taxpayer provided taxable “laundry services,” finding that the relevant statute was “about as clear and unambiguous as it gets.” The court rejected the argument that the taxpayer instead engaged in nontaxable managerial and supervisory functions, concluding that these activities were for ensuring that the taxable laundry services were accomplished. Interestingly, the clients did not have sales tax liabilities before contracting with the taxpayer, despite their laundry being cleaned by the same people using the same equipment.
