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Rhode Island Sales Tax Guide

By Cristina Garza

Rhode Island, “the Ocean state,” may be the smallest state in the union, but its small size belies its giant place in American history! Recognized as the starting point of the Industrial Revolution reaching the Americas, Rhode Island is also where the first American circus took place. The state has the shortest motto, which, like the state, packs a lot into a small package. It is, simply: “Hope.” If you’re one of the lucky Rhode Island small business owners keeping hope alive you’re going to want to be sure your business stays in line with Rhode Island's sales tax laws. No problem! That’s why we have assembled this all-in-one guide; so that you can readily meet the sales tax compliance requirements for a small business in Rhode Island. 

After reading this guide, you will have learned:

  • How to be prepared for your call with the Rhode Island Division of Taxation.
  • How to contact the Rhode Island Division of Taxation.
  • When to charge sales tax in Rhode Island.
  • What goods, products, and services are taxable in Rhode Island.
  • When you establish a sales tax nexus with the state of Rhode Island, and the nuances of various thresholds.
  • How to register for a sales tax license in Rhode Island.
  • How to collect sales tax in Rhode Island.
  • How to file and pay sales tax in Rhode Island.

If, after reading, you still have any questions to help you determine your tax sales obligations in Rhode Island and how to fulfill them, we are here for your small business bookkeeping needs! 

 

 


Rhode Island Sales Tax Contacts

Rhode Island Sales Tax Contacts

 

✅  Do you need to get in touch with the Rhode Island Division of Taxation?

✅  Are you uncertain about whether to visit, call them, or contact them through their website?  

✅ Do you wonder what information you should have ready before you contact them?

 

If you answered “Yes” to any of these questions, please read onward, as we have just the information you need! :)

The Rhode Island Division of Taxation is reachable by phone at (401)-574-8955. 

You can also visit their single taxpayer service center or send them an email. If you are hoping for the fastest response, we always suggest that you call rather than visit in person. 

When you do call the Rhode Island Division of Taxation, you will want to have some information on hand. It will save time to have the following information easily accessible before you call: 

  • Taxpayer Name
  • EIN
  • Sales & Use Tax ID Number

If you plan on having a third party contact them on your behalf, you’ll want to be sure to have completed a power of attorney form (RI-2848, PDF). If you don’t have a completed form they won’t be able to assist someone else on your behalf.

If you have any more questions, please feel free to contact us so we can assist you with your sales tax needs.

 

 


Rhode Island  Sales Tax Registration

Rhode Island Sales Tax Registration

 

Are you a new business selling tangible property in Rhode Island? If yes, you are going to want to register your business with the Rhode Island Division of Taxation so that you can pay your sales tax on time. 

You need not fret as this is a relatively simple process and one for which you’re about to be fully prepared. We are going to outline the steps below so you are totally ready to register for your sales tax license.

Here we go! Remember...

Preparation is key. 

Let’s get started!

 

 

How do I register to collect sales tax in Rhode Island?

You can apply or register for a Rhode Island sales tax permit by visiting the Rhode Island Business Registration site and following the instructions provided.

Rhode Island does offer an old school paper based form (PDF) you can print and mail in, but this is going to be a slower setup (six weeks!) and with greater possibility for errors. We don’t recommend it, and Rhode Island discourages it on their website, but we wanted to make the option available in case it suits the needs of someone out there. 

 

 

What information do I need to register for a Rhode Island sales tax permit?

Great question!

Before you sign up for Rhode Island sales tax permit you’ll want the following information on hand:

  • Business name
  • Business entity type 
  • Description of business activities
  • Date business activities began or will begin
  • Business address and mailing address
  • Business contact information
  • Associated business entities 
  • NAICS code that best matches the business
  • Federal Employer Identification Number (FEIN)
  • List of business officers, partners, managing members, and/or trustees

Don’t forget! Preparation is key. When you have all this information ready, you can go online and register for your permit at the Rhode Island Business Registration site

 

 

How much does it cost to register for a Rhode Island sales tax permit?

Businesses must pay $10 per location to register a new tax permit in the state of Rhode Island. There is also a $10/year renewal fee.

 

 

Do I need a Federal Tax ID Number or EIN to register for a Rhode Island sales tax permit?

Quite right! You will most assuredly need one, but if you don’t already have one and need to get a new EIN, it’s a painless process. You can register for a Federal EIN right here :). 

 

 

Which agencies in Rhode Island do I need to additionally register with?

You may need to check with some of the following agencies or resources: 

You’ll want to give this some thought and do a little research or investigating; since every business is unique, and there are such different rules, regulations, and laws that may apply. 

We suggest contacting the Rhode Island Division of Taxation to verify which additional government agencies you may be required to register with. 

 

*****

 

Huzzah!!!

You are now prepared to register for your Rhode Island sales tax permit in Rhode Island. 

Let’s summarize what we have covered:  

  • Have all the required information easily accessible before registering online.
  • Acquire a tax ID or EIN before registering for a Rhode Island sales tax permit.
  • Register online at the Rhode Island Business Registration site.
  • Look into what other agencies you may have to additionally register with.

Registering for your Rhode Island sales tax permit will be stress free as long as you are prepared. We recommend organizing all the essential information in a folder, preferably using a system like Box.com or Dropbox (something we’re happy to handle for our customers). 

 

 


Rhode Island Sales Tax FAQ

Rhode Island Sales Tax FAQ 

 

By now, you may have already contacted the Rhode Island Division of Taxation and applied for a Rhode Island sales tax permit. 

Once you have a license to collect and remit sales taxes in Rhode Island, you will probably be asking yourself two questions: 

  • When do I charge a sales tax in Rhode Island?
  • What goods and services are subject to sales taxes in Rhode Island? 

We are going to go over some common questions that our clients have asked. We believe these questions will help you appreciate the nuances of taxable goods so you can be confident in fulfilling your tax obligations. 

Let’s start with the first question…

 

 

What goods and services are considered taxable in Rhode Island?

The following items are all taxable in the state of Rhode Island: 

  • Sales of tangible goods at retail.
  • Repairs or alterations of tangible personal property.
  • Property rentals, leases, or licenses [e.g. commercial, mini-warehouse]
  • Selling service warranty contracts.
  • Short-term rentals for living accommodations (e.g. motel/hotel, beach houses, condos, timeshares, vacation homes, or RV homes).
  • Rental/lease of personal goods (e.g.: machinery, vehicles, equipment, or other property).
  • Charges for admission to any place of amusement, sport, or recreation.
  • Manufacturing or producing goods for retail sales.
  • Operating vending machines or amusement rides.
  • Services are mostly exempted (janitorial services are taxed)

 

 

The bottom line is …

Your business must pay taxes on sales of any non-exempt goods, and some taxable services.

 

*****

 

 

Let’s now review some of our clients’ frequently asked questions:

  • Is Rhode Island an Origin or Destination sales tax State?
  • What creates a sales tax nexus in Rhode Island?
  • What is the economic threshold in Rhode Island?
  • Does Amazon have fulfillment centers in Rhode Island?
  • Does Rhode Island have a Click-Through Nexus?

To best understand your tax obligations, new businesses need to consider how they are doing business and the type of relationships they have with buyers and any third parties to their transactions. 

 Let’s discuss some questions that will help you understand the nature of your small business and the subsequent tax implications.   

 

 

Is Rhode Island an origin or destination-based sales tax state?

Rhode Island is a destination-based sales tax state, which simply means you charge sales tax based on the location of the purchaser rather than that of the seller. In Rhode Island, this is simple since the sales tax is one rate for the entire state.



 Protip: Charge sales tax based on your buyer’s location rather than your business location

 

 

What creates sales tax nexus with the State of Rhode Island?  

Having nexus, also known as "sufficient business presence,” with Rhode Island means your business has established a taxing connection with a state. When this happens, you are required to collect and remit sales tax in Rhode Island because you created a sales tax Nexus.

Even if your business maintains its main headquarters in another state, you may still have to charge and pay sales tax to the Rhode Island Division of Taxation even if you never step foot in Rhode Island.   

So, how do you create a sales tax Nexus in Rhode Island?

 

A business establishes a nexus in Rhode Island by:

  • having a business location in Rhode Island;
  • having property stored in Rhode Island;
  • employing any person in Rhode Island;
  • contracting with a salesperson or other agent in Rhode Island;
  • leasing equipment used in Rhode Island;
  • performing services in Rhode Island;
  • licensing the use of intangible property in Rhode Island, or transporting property in Rhode Island using the taxpayer’s vehicles.

Let’s talk a bit more specifically about where your goods are stored, such as in the instance of an Amazon warehouse. 

 

 

Does Amazon have fulfillment centers in Rhode Island?

No, Rhode Island has no Amazon distribution centers at this time.

This information is relevant for our customers who sell products on Amazon or are recognized as Amazon FBA (Fulfillment by Amazon) sellers. When Amazon stores products in one of its fulfillment centers in any state including, it triggers a sales tax requirement. 

 

 

Does Rhode Island have economic nexus?

Yes, Rhode Island does now have an economic nexus law. As of July 1st, 2019, remote sellers are liable to pay sales tax beyond a certain threshold. This means that even businesses without a physical presence or traditional nexus can be required to register for, collect, and pay sales taxes.

The threshold for registering is having a cumulative gross revenue of over $100,000 or 200 transactions in a year to Rhode Island purchasers.

For  more information see the Rhode Island DOT’s remote sellers page here.

 

 

Does Rhode Island have click-through nexus?

Yes! This means if you’re an affiliate sales or third party marketer, you may have a tax liability even if you don’t meet nexus another way. If revenue exceeds $5,000/quarter four quarters in a row, affiliate marketers will need to register for and pay sales tax. For more information, check out this page about click-through nexus.

 

 

Is Rhode Island a streamlined sales tax state?

Yep! Since January, 2007 Rhode Island has been a full member of Streamlined Sales Tax.

If you are planning on taking advantage of the Streamlined Sales Tax as a business, it is recommended that you use a Certified Service Provider though businesses may opt to register themselves without a CSP. Ultimately the aim of streamlined sales tax is to simplify payment to multiple different states of sales and use tax. It isn’t required that you utilize them, but it can significantly reduce complexity to do so, especially if your business sells in multiple states.

 

 

More effectively manage your tax needs by keeping this guide handy. 

You and your business can be better equipped to avoid situations like paying fines, paying back taxes that you did know you had to pay in the first place, or facing an audit by the tax authorities in Rhode Island.

 

 


Collecting Sales Tax in Rhode Island

Collecting Sales Tax in Rhode Island

 

By now you know if you are a business that has established a nexus with Rhode Island. So you have an understanding about whether, or when, you are required to collect sales tax. Knowing this is just half the battle! Now, we are going to help you with the next half of the battle: how to navigate the process of collecting taxes.

Let’s review some common questions our clients have asked regarding their Rhode Island Sales Tax obligations. 

  • How do I collect Rhode Island Sales Tax?
  • Who is eligible for Rhode Island Sales Tax exemptions?
  • What should I do if my customer is exempt from sales tax in Rhode Island?
  • What happens if I lose a Rhode Island nontaxable transaction certificate? 

After reading this, you will be better equipped to determine when --and when not-- to collect sales tax in Rhode Island.

 

 

How do I collect Rhode Island sales tax?

Because Rhode Island is a destination-based sales tax state, your business should charge sales tax at the time of the transaction based on the buyer’s location rather than that of the business. 

 

 

What are the current Rhode Island sales tax rates?   

Rhode Island’s state-wide sales tax rate is 7% at the time of this article’s writing, with no additional local surtaxes adding to that amount. Since sales tax rates may change, we advise you to check out the Rhode Island Division of Taxation FAQ which has the current rate. Any change will be reflected on that page.

It always helps to be accurate and up to date with this type of information! :) 

 

 

What is exempt from Rhode Island Sales Tax?

What is exempt from sales tax in Rhode Island?

 

Here is a sample list of exemptions: 

  • Purchases for resale
  • Everyday clothing items
  • Medical supplies
  • Groceries 

Rhode Island has many more specific regulations, which they list on their website.

 

 

Who are eligible for Rhode Island sales tax exemptions?

At this point, you should know what products are exempt from sales tax in Rhode Island. You also want to know who may be exempt. 

Under Rhode Island law, the type of buyer or the way the goods will be used can qualify can buyer for a sales tax exemption. A good example of this is a merchant purchasing goods for resale, aka a wholesaler.

Other common examples of an exempt buyer may include:

  • Government agencies
  • Non-profit organizations
  • Religious groups
  • Out-of-state buyers (should their business not have nexus in their home state).

Note that a non-profit status doesn’t instantly confer tax exemption.

 

 

What should I do if my customer is exempt from sales tax in Rhode Island?

Purchasers who are tax exempt must have completed resale certificate (PDF) and must present their completed exemption certificate at the time of purchase. It is then incumbent upon the seller to hold on to this exemption certificate. Failure to do so may leave you unable to justify tax exempt sales.

Remember, you always want to collect and file a copy of the exempt certificate. Such certificates must be produced upon request in the event of an audit to justify tax-exempt sales.

 

 

What happens if I lose a Rhode Island sales tax exemption certificate?

Hmm... Obviously this issue is best to be avoided! Imagine finding out you’ll be audited and discovering you cannot produce an exemption certificate for a buyer! That nightmare scenario would mean you could be held liable to pay all taxes on behalf of the buyer. This is a bad scene and can be avoided by taking proper care with your paperwork… which happens to be one of our specialties! :)

 

 

Does Rhode Island have a sales tax holiday?

Nope, no break from the taxman’s vigilant watch :| 

 

***** 

 

We have now covered who you need to collect sales taxes from, how to determine whether goods for sale are deemed taxable, what goods and services fall under tax exemptions, who is eligible for tax exemption certificates, and, finally, the process of collecting sales tax in Rhode Island state. 

Now that we’re this far down the rabbit hole there’s only one thing we need to learn about next… how to pay the piper! 

 

 


Filing and Paying Sales Tax in Rhode Island

Filing and Paying Sales Tax in Rhode Island

 

It is time to talk about filing and paying your sales taxes in Rhode Island. In this section, We are going to cover the following frequently asked questions from our clients:

  • When is Rhode Island Sales Tax due?
  • What are the Rhode Island Sales Tax thresholds?
  • What if a Rhode Island Sales Tax filing date falls on a weekend or holiday?
  • How do I file a Rhode Island Sales Tax Return?
  • How do I correct a Rhode Island Sales Tax return?
  • What happens if I don’t collect sales tax?
  • What happens if I file or pay my sales tax return late?
  • Do I need to file a return if I don’t collect any sales tax in Rhode Island?
  • If I close my business, do I need to file a final sales tax return?
  • Does the Rhode Island Division of Taxation offer a discount for filing on time?

By the time you finish reading this, you will feel confident enough to file and pay your Rhode Island Sales Tax.

 

 

When is Rhode Island sales tax due?

Rhode Island sales tax payments are due based on the filing interval. Filing intervals are based on the company’s tax liability [detailed ahead, be patient! :p] 

The state of Rhode Island requires payment by no later than the 20th day of the month following the reporting period

 

 

What are the Rhode Island sales tax filing interval thresholds?

The thresholds for filing intervals are based on the expected or actual tax liability owed:

 

Average Tax Liability Owed Monthly*

Filing interval

From $0 to 200

Quarterly

More than $200.01

Monthly

 

Additionally, filers of either threshold are required to file an annual reconciliation (PDF)

 

*anticipated if new business, actual if existing company

 

Not sure how to determine your tax filing frequency?

You can review your eCommerce or Point-of-Sale Software to see the volume of sales you have generated. 

Don't worry though! The state will let you know when your due dates change. :) 

Keep an eye out for notices in your mail from the State of Rhode Island so that you don't miss any shift in deadlines.

 

 

What if a Rhode Island sales tax filing date falls on a weekend or holiday?

The deadline is moved to the next business day, typically the Monday following the weekend or the day after the holiday. Where possible, we always suggest filing well before the holiday, of course ;). 

 

 

How do I file a Rhode Island sales tax return?

Paper: File a Streamlined Return (PDF) and mail to the address on the form. 

Electronic: File online via RI Business Tax Filing site and submit payment via EFT.

  

 

How do I correct a Rhode Island sales tax return?

Paper: Use a copy of the original, and mark amended clearly on the form.

Electronic: Amend the return within the RI Business Tax Filing portal.

 

 

What happens if I don’t collect sales tax?

If you were required to collect sales taxes and failed to do so for whatever reason, that’s a big no-no! Ultimately the business will be held liable for the due tax. Always be sure to collect sales tax at the point of sale. Attempting to collect after the fact will be time consuming and most likely unsuccessful. 

 

 

Protip: You are still responsible for remitting sales taxes even if you failed to collect them. 

 

 

What happens if I file or pay my sales tax return late?

Rhode Island's Department of Taxation charges a penalty of 10% with interest no less than 12%.

 

 

Do I need to file a return if I don’t collect any sales tax in Rhode Island?

Yep! Rhode Island requires businesses file a “Zero-Tax” return even when they have no sales during a taxing period.

 

 

If I close my business, do I need to file a final sales tax return?

Absolutely, Rhode Island requires businesses to file a “Final sales tax” return when closing their doors.

 

 

Does the Rhode Island Division of Taxation offer a discount for filing on time?

Negative, no discounts for early filing in Rhode Island. For dessert you get more broccoli! 🥦

 

*****

 

Now that we have covered all our bases for filing and paying sales taxes in the state of Rhode Island, you should feel more at ease about the process.

 

Some things to remember:

  • Due dates are important. If anything, file and pay your taxes early.
  • There are three payment plans for filing and paying your sales taxes depending on how much you collect in sales tax on average in a month.
  • You can file and pay your taxes electronically or by mail
  • If you need to amend a return, you may do so electronically or by paper.
  • If you don’t collect sales tax and you were supposed to, you (not the buyer) is liable to pay the sales tax to the state of Rhode Island.
  • You will have to pay late fees if you fail to file your tax return on time and/or if you fail to make your tax payment on time.
  • Even if you collect no sales tax, you still need to file a return.
  • You need to file a “Final sales tax report” when you close your business.

 

Now, you are ready to file and pay your sales tax in Rhode Island. If you have any more questions, feel free to contact us.

  

 

Click here if you think sales tax is boring. Book a meeting.

 

 


 

Please note: This blog is for informational purposes only and the information is accurate as of 9/27/2019. If you want legal advice on sales tax law for your business, please contact a Sales Tax professional. Keep in mind that sales tax regulations and laws are subject to change at any time. While we strive to keep our blog current, this blog possibly may be out of date by the time you review it.