Rhode Island Sales Tax Rates

Total Range for 2024

7%

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Why do you need to collect sales tax in Rhode Island?

If you’re selling goods and services in Rhode Island then sales tax might apply! To determine your obligation, you need to understand “nexus,” which ties businesses to states for tax purposes.

Two types of nexus exist:

  1. Physical Nexus: Having a physical presence, like an office, warehouse, or employees in Rhode Island, triggers this type. If you do, you likely need to collect sales tax.
  2. Economic Nexus: This kicks in when your sales within Rhode Island exceed a certain economic threshold. Even without a physical presence, surpassing this threshold requires collecting sales tax.

In Rhode Island, there is also a transaction threshold of 200, which means that even if your sales aren’t over $100,000 if you’ve sold more than 200 items then you still need to pay sales tax.

Is what you’re selling taxable in Rhode Island?

Now that you understand the basics of Rhode Island’s sales tax and nexus thresholds, let’s delve into whether your specific products or services are taxable.

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How to register for sales tax in Rhode Island

You have two options to register for a sales tax permit in Rhode Island:

  1. Online: This is the faster and recommended method. Visit the Rhode Island Division of Taxation’s Business Application and Registration (BAR) system
    1. Click “Create a new user” and follow the instructions
  2. Mail: Download and complete the “Business Application and Registration Form” from the RI Division of Taxation website. Mail the completed form along with a $10 fee.

Here’s what you’ll generally need to have on hand to register online:

  • Personal identification info (SSN, address, etc.)
  • Business identification info (EIN, address, etc.)
  • Business entity type (sole-proprietor, LLC, etc.)
  • Date you began doing business in Rhode Island
  • Description of your business activity

How to collect sales tax in Rhode Island

Here’s how to collect sales tax in Rhode Island:

  1. Collect the Tax:
    • Once you’ve identified a taxable item and determined the rate based on the customer’s location, you need to collect the sales tax at the point of sale.
    • Most point-of-sale systems can automatically calculate and collect the tax.
    • If you don’t have a system, you’ll need to manually add the tax to the customer’s total.
  2. Keep Records:
    • It’s crucial to maintain accurate records of all your sales transactions. This includes the total sales amount, the sales tax collected for each transaction, and the customer’s location. 
    • These records will be vital when you file your sales tax return.
Example:

Let’s say you run a clothing store in Providence, Rhode Island (sales tax rate of 7%). A customer purchases a new jacket for $50.

  • Here’s the sales tax calculation:
    • Sales price: $50
    • Sales tax rate: 7% (as a decimal: 7/100 = 0.07)
    • Sales tax amount: Sales price x Sales tax rate = $50 x 0.07 = $3.50
    • Total price for the customer: $50 (sales price) + $3.50 (sales tax) = $53.50

FAQs

Do you have a physical nexus in Rhode Island?

In Rhode Island, having a physical nexus generally means you have a physical presence in the state that creates a connection strong enough to require you to collect and remit sales tax. Here’s what qualifies as a physical nexus in Rhode Island:

  • Physical Presence:
    • An office or place of business in Rhode Island.
    • Employees, representatives, contractors, agents, or salespeople physically present in the state.
    • Inventory stored in a warehouse, sample room, storage room, or fulfillment center located in Rhode Island (including inventory in Amazon FBA warehouses).
    • Delivery of merchandise to customers in Rhode Island using your own vehicles.
    • Attendance at a trade show or craft show within Rhode Island.
Do you have an economic nexus in Rhode Island?

Rhode Island establishes economic nexus based on sales volume or transaction count within the state. If your business makes more than $100,000 in sales or conducts more than 200 separate transactions in Rhode Island within a calendar year, you likely have economic nexus.

What is use tax in Rhode Island?

Use tax in Rhode Island applies to purchases you make where you didn’t pay sales tax at the time of purchase, but the items will be used or stored in Rhode Island.

Here’s a breakdown of use tax in Rhode Island:

  • Rate: The use tax rate in Rhode Island is the same as the state’s sales tax rate, which is currently 7%.
  • Who Pays It: You, the consumer, are responsible for paying use tax on taxable purchases not subject to sales tax at the time of purchase.
Do you need a seller/reseller permit?

In Rhode Island, a seller’s permit (also known as a sales tax permit or resale certificate) is not mandatory for all businesses. It depends on your sales activity in the state. Here’s a breakdown:

  • Need a Sales Tax Permit: If you sell taxable items in Rhode Island (including with economic nexus).
  • Resale Certificate is Optional: If you buy taxable goods for resale, a resale certificate can help you avoid paying sales tax on your purchases.
How to get a sales tax permit/license in Rhode Island?

You have two options to register for a sales tax permit (also called a seller’s permit) in Rhode Island:

  1. Online: This is the faster and recommended method. Here’s what you need to do:
  • Visit the Rhode Island Division of Taxation’s Business Application and Registration (BAR) system and complete the online application.
  1. Mail:
  • Download and complete the “Business Application and Registration Form” from the RI Division of Taxation website. Mail the completed form along with a $10 fee.
When are Rhode Island's Returns Due?

Rhode Island’s sales tax returns are due on the 20th day of the month following the reporting period.

If the due date falls on a weekend or holiday, the filing is then due on the next business day.

How to file sales tax in Rhode Island

In Rhode Island, there are generally no exemptions for people themselves. The sales tax applies to most taxable goods and services purchased by anyone, regardless of their profession or background.

However, there are exemptions for certain types of sales and organizations:

  • Exempt Sales:
    • Goods: Clothing and footwear, prepared food for human consumption, prescription drugs and medical equipment.
    • Services: Most services are not taxable, except for telecommunications and cable TV.
    • Goods for Resale: Businesses with a resale certificate can purchase taxable goods for resale exempt from sales tax.
  • Exempt Organizations:
    • Non-profit organizations like charities and religious institutions may be exempt from sales tax on purchases made to support their exempt activities.
    • Government agencies and schools are also generally exempt from sales tax.
Is anyone exempt from sales tax in Rhode Island?

In Rhode Island, there are certain categories of purchases and customers that are exempt from paying sales tax. Here’s a breakdown:

Exempt Purchases:

  • Groceries (exceptions): Most non-prepared food items like fruits, vegetables, and grains are exempt. However, prepared foods, restaurant meals, and alcoholic beverages are taxable.
  • Prescription drugs and medical supplies: These are generally exempt, but some durable medical equipment might be taxable.
  • Farm equipment: This includes machinery and tools used for agricultural production.
  • Certain services: Generally, services aren’t taxable in Rhode Island. Exceptions include installation or repair services related to tangible personal property (e.g., installing flooring).

Exempt Customers:

  • Government agencies: Federal, state, and local government purchases are typically exempt.
  • Certain non-profit organizations: Qualified non-profits may be exempt if the purchase is used for their exempt purpose and they have a sales tax exemption certificate.
  • Merchants purchasing for resale: Businesses with a valid resale certificate can purchase goods without paying sales tax, as they will collect it when they sell the item.

Contact Yonda Tax Today

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