Wisconsin: Destination of Sale Is Not End-User Location

On August 19, 2026, a Wisconsin Circuit Court concluded that income received by an out-of-state software developer from licensing its software must be sourced to Wisconsin, where its contracting party was billed, rather than to the out-of-state locations of the software’s users.¹ The court noted that the statute that sources the license of software to where a licensee uses the software does not apply because the taxpayer (the developer) did not enter into a contract with the end users. The decision requires software developers to examine their contract language when contracting with parties that subsequently license the software to others.  

The taxpayer, InterSystems Corporation (InterSystems), contracted with Epic Systems Corporation (Epic), a Wisconsin-based company that subsequently delivered InterSystems’s software to various end users. Under the operating agreements, InterSystems issued a license key to each end user, which was delivered to the user by Epic. The end users made payments to Epic, not InterSystems. The issue before the court was how income earned by InterSystems should be sourced—to the out-of-state locations of the end users or to Epic, the Wisconsin company with whom InterSystems contracted.  

InterSystems argued that Wisconsin Stat. § 71.25(9)(df) applies and requires the income to be sourced to the location of the end users. This statute sources gross receipts from the use of computer software to Wisconsin if the purchaser or licensee uses the computer software in the state. However, the court explained that for this provision to apply, the software must be used by a purchaser or licensee. In this instance, there was no contract between InterSystems and the end user. The end user was not a licensee but a sublicensee. Moreover, citing the state appeals court decision in Microsoft,² the court here found that the nonexistence of a contract is dispositive in determining the existence of a licensee-licensor relationship.  

Sourcing is instead governed by § 71.25(9)(dj). That section sources gross receipts received for the use or license of intangible property to Wisconsin if the purchaser or licensee uses the property in the operation of a trade or business at a location in the state or is billed in the state for the purchase or license of the use of the property. The intangible property at issue in this case is Epic’s right to sell sublicenses to the end users—not the right to use the software. Epic is billed in Wisconsin for the purchase or license of the property, making that state the situs of the income.  

Ryan’s Take and Action Steps 

Ultimately, this case came down to which of the two sourcing provisions applies to the taxpayer’s sales: subsection (df), under which gross receipts from the use of software are sourced to the place of use, or subsection (dj), under which gross receipts from the sale of intangibles follow where the property is used or where the purchase is billed. The court rejected looking through the transactions at issue, declining to source the sales based on the location of the licensee’s customers (sublicensees). Software developers need to consider whether their customer is actually using the software or merely sublicensing the software to end users. Additionally, if it cannot be determined where the customer uses the “intangible,” consideration must be given to where the developer’s customer is located and where the customer is billed.  

Companies that license software to Wisconsin companies or end users should carefully consider this decision and determine how it affects their business. Please contact our experts below for assistance in evaluating its potential impact.  

¹ InterSystems Corporation v. Wisconsin Department of Revenue, Wisconsin Circuit Court, Dane County, Case No. 2025CV4117 (August 19, 2026). 

² Wisconsin Dep’t of Revenue v. Microsoft Corp., 2019 WI App 62, 389 Wis. 2d 350.