Sales Tax Updates in Rhode Island

Tax Professionals' Resource
February 8, 2013 — 1,194 views  
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The state of Rhode Island has a 7% sales tax that is imposed on the gross receipts from sold, rented, or leased tangible personal properties and taxable goods and services. An additional 5% sales tax can be added to transient room rentals. Taxable services in Rhode Island include the preparation and serving of meals and drinks, the production of printed materials, furnishing for social or athletic clubs, rented living quarters at hotels, boarding houses, or tourist camps, and the transfer of property possession where the seller retains title as leverage to secure payment.

Rhode Island permits the use of a tax bracket system, increasing the sales tax in increments of one cent for sales between a penny and a $1.07. Once the total sale equals $1.07, the flat 7% sales tax rate is applied. This bracket system is adhered to by sellers when it comes to calculating the sales tax amount.

Rhode Island requires tax permits for anyone engaging in business transactions in the state for retail, rented/leased property, or goods and services. This permit is issued by the Tax Administer with a $10 fee and must be renewed annually by February 1st. This renewal also comes with a $10 fee. Anyone with retail space, a warehouse, office location, employees, or delivery trucks making frequent in-state deliveries has established physical presence in Rhode Island, which triggers tax liability.

It is mandated by law that the Rhode Island sales tax be added to the sales price or charge - shifting responsibility from the retailer to purchaser. Sellers are not permitted to absorb the sales tax. Any direct or indirect marketing where the seller promotes or markets absorbing the sales tax is in violation of state law.

Rhode Island has exempted certain items from sales or use taxes. For example, certain prescription drugs are exempt, along with property that is bought with the intent to resale. In the event of a resale, a resale exemption certificate is required. This form must include the purchaser's name, address, signature, retail sale permit number, and an explanation of the bought property and the nature of the purchaser's business.

Rhode Island imposes a use tax for any purchase outside state lines that is stored, used, or consumed in the state. A use tax exemption is made if a sales tax is paid out-of-state that is equal to or exceeds the Rhode Island sales tax amount.

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