SALES TAX TUESDAY 2018: Rhode Island

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Founded in 1636, Rhode Island is one of the original 13 colonies of these United States. As you might expect the state is full of ‘colonial’ history that is so much a part of the birth of our nation. Fortunately, much of this history, and the places that make it up have been preserved and are available for us to see during our Sales Tax 2018 road trip. But since Rhode Island is known as ‘The Ocean State’, then we may have to spend our time and sales tax dollars checking out less history and more of what the Rhode Island Ocean has to offer.

Thanks to Avalara, the 'tax people', this article is one in a new (2018) 50 part series, covering sales tax issues associated with each and every state tax jurisdiction in the United States. Insightful Accountant is publishing Sales Tax Tuesday 2018" articles every Tuesday to give you updated information as well as another look at some of the key information from our 2015 series. So, come take a ride with me in my big RV as we journey from state-to-state looking for what's great, and paying sales taxes all along the way.

This second state of Rhode Island in our series is another state offering a ‘tax amnesty’ program that we felt was important enough to accelerate its position within this series.  Unfortunately for our readers, this amnesty program concludes tomorrow on February 15 (2018), so you only have today and tomorrow to take advantage of this offering which does NOT forgive past tax liabilities, but which waives applicable penalties and offers reduced interest.  For specific details about Rhode Island’s tax amnesty, see this website.

With tax amnesty out of the way, let’s focus on some of the things that make Rhode Island the state of “Hope”, the motto that appears on the coat of arms, state seal and state flag. More than likely this motto was derived from the biblical phrase “hope we have as anchor of the soul” because the anchor is also prominent in these monikers of the state.

Perhaps that ‘hope’ began with the Colonial Charter granted by King Charles II of England in 1663 which we find in the museum within the majestic State House shown above. Most certainly we find that sense of ‘hope’ evidenced in the statue of Rhode Island’s ‘Independent Man’ standing atop the dome.

Not far from the State House is as section of Providence known as Benefit Street which contains the most significant concentration of original 18th and 19th century wooden framed homes in America.  Don’t you just love the idea of living in such a quaint neighborhood as this…of course, thousands of tourists checking out your front door might not be so great after all.

The colonial nature of these homes seems to go right along with the history of the place, after all it was the first of the original 13 colonies to declare independence from British rule, even if was the last colony to ratify the U.S. Constitution.  You with think with it being the smallest of places in terms of colony size, it would have been simple to get everyone to agree on a little think like a constitution. Of course, today, while it's sill the smallest of places as in our smallest state, it is home to nearly 1.2-million residents. They obviously find it a nice place to live.

Talk about some nice places to live, check out these ‘Gilded Age Mansions’ just outside of Newport.  Must be a neighborhood of hard working ProAdvisors, right?  Believe it or not, some of these mansions are included in a tour that is offered for just $99 per person, plus sales tax.  I guess the tour proceeds help to pay for the lawn manicures.

Or maybe these are the homes of the state Sales Tax collectors.  This is in an area that is called the ‘Ocean Cliff Walk’, I admit it is pretty spectacular whether you are looking out at the Atlantic as in the picture below, or look back as these stately mansions you certain realize that "Toto, we're not in Kansas anymore."

With more than 400 miles of coastline the water of the Atlantic beckons off Rhode Island, especially for those who love sailing. If you want to go 'sailing...' (as Christopher Cross would have sung it) you can rent anything from a dingy to a 70 foot America’s Cup 12-Meter yacht either with or without crew. 

Why not take along 100 of your friends on an afternoon or evening outing, and sail on over to Block Island for a clambake. After all the state is home to more than 100 beaches as well as a multitude of harbors, docks and marinas offering the flavor of the ocean.

Yum yum, lobsters, clams, shrimp, corn, muscles, potatoes, and fun, not to mention ‘melted butter’.  Of course, all of this ocean life goodness is costing plenty, including sales tax.

I need to get hold of my senses and come back from living the lifestyles of the rich and famous and down to earth once again.  So I think I will take in a performance at the Stadium Theater of the Performing Arts in Woonsocket, of course I will be paying sales tax on that admission. But look at how glorious the decor.

Did you notice that the ‘Wizard of Oz’ was playing? "Maybe we are in Kansas after all." But really is the town of Woonsocket named for what happens to the end of your finger when you accidentally stick it in a lamp socket?  Don’t worry, you won’t pay sales tax when you have to go to the minor emergency room.

Speaking of sales tax, did you realize that sales tax, for many states is the largest source of tax revenue other than income states.  Similarly, for many local jurisdictions, like counties, cities and town, sales tax is secondary only to property taxes.  But Rhode Island is a little different, they are one of only a few states with a single statewide sales tax, they actually don’t allow local governments to impose any additional sales taxes.

Some people might argue that a single sales tax like in Rhode Island makes it simple enough to process, but if that were true, then Rhode Island wouldn’t be having to offer sales tax amnesty, now would they? No, the reality is that no matter where you are, governments are out to collect every dollar of sales tax they think is due them, along with plenty of fines, and penalties if they decide you are delinquent, past due, or have underpaid.

In fact, because of a single state-wide tax, it’s probably easier for a merchant to get lured into a false sense of compliance thinking that they are collecting when they should, or when they shouldn’t.  Did you know it’s just as big an offense to collect tax on things you shouldn’t collect it, as it is on things you should? That’s why you need a sales tax expert like  Avalara helping you ‘chart the course’ of choppy sales tax waters even in an ocean state like Rhode Island.

So, let’s take a look at some Rhode Island sales tax facts. By the way, for some essential sales tax definitions be sure to check out the opening article to this series.

Sales Tax Facts by Avalara:

  • SAME: The Rhode Island Division of Taxation administers tax revenue for the state.
  • SAME: The state sales tax rate is currently 7.0%.
  • SAME: Rhode Island is one of the few states with a single, statewide sales tax. No municipality can add sales tax on top of the state rate.
  • SAME: Sales tax in Rhode Island is destination-based, meaning the rate is determined by the state rate of where the item is shipped to (the buyer’s location). This means sellers must know the exact current sales tax rate for every shipment they send to a purchaser.
  • SAME: Rhode Island is a Streamlined Sales Tax (SST) state.
  • SAME: All businesses that sell, rent or lease taxable tangible personal property at retail must register with the state and collect sales tax. Providers of taxable services must also register with the state.
  • SAME: Shipping is taxable in Rhode Island.
  • SAME: Clothing is exempt from sales tax with some exceptions for clothing and footwear worn exclusively for athletic/sporting activities, protective clothing and certain accessories, all of which are taxable.
  • SAME: Rhode Island has no sales tax holidays.
  • SAME: Operators of eating and/or drinking establishments must also collect and remit a 1% local meals and beverage tax in addition to sales tax.
  • SAME: Rhode Island nexus laws specifically require out-of-state mail order and catalog sellers to pay sales tax, but only if they have a physical presence in the state.

Did you know that Rhode Island is one of four states that have enacted new marketplace fairness laws that require E-commerce giants like Amazon to collect sales taxes by their marketplace selects or comply with new use tax requirements for non-collecting retailers?  In other words, if the individual marketplace sellers don’t collect and remit tax, then Amazon and similar facilitators will be responsible for the tax under Rhode Island’s August 2017 enactment.

As with Ohio, the state with which we opened this new series, Rhode Island is another state that contends that out-of-state internet companies establish a physical presence in Rhode Island when they place software or web-cookies on any in-state computer, phone or tablet. While Rhode Island is taxing your computer cookies, you won't be brushing away those chocolate chips or the lobster meat stuck between your teeth because you still can't buy both a toothbrush and toothpaste on a Sunday.

Rhode Island's legislature can change their state sales tax amount, rules or regulations at will, as can many places. Are you sure you are up-to-date on the sales and use taxes impacting your business? Manual sales and use taxes are prone to error and can consume hours of your time in collection, accounting and reporting for what is pass-through paperwork rather than revenue-generating activities.

Avalara provides solutions for sales tax automation, including tax calculation, exemption certificate management, returns processing and 1099 filing and reporting. Automation via Avalara allows businesses to be fully sales tax compliant without sacrificing productivity so you won't spend time digging yourself out from under sales tax burdens or audits.