Rhode Island — Sales & Use Tax

Rhode Island imposes a 7% sales tax on sales at retail in the state, including rentals of living quarters in hotels, rooming houses, or tourist camps (for periods not exceeding 30 consecutive days). The tax is calculated on the gross receipts of the retailer. A complementary 7% use tax applies to the storage, use, or other consumption in Rhode Island of tangible personal property, prewritten computer software delivered electronically or by load and leave, vendor-hosted prewritten computer software, specified digital products, and services as defined in R.I. Gen. Laws § 44-18-7.3. The use tax generally applies when sales tax was not collected, such as on out-of-state purchases.

Source: R.I. Gen. Laws § 44-18-18, R.I. Gen. Laws § 44-18-20

Rhode Island requires remote sellers and marketplace facilitators with no physical presence in the state to register and collect sales tax if, in the immediately preceding calendar year, they had gross revenue from sales into Rhode Island of $100,000 or more, or had sales into Rhode Island in 200 or more separate transactions. The requirement applies effective July 1, 2019.

Source: Rhode Island Division of Taxation – Remote Sellers

Rhode Island sales and use tax returns are due on or before the 20th day of the month following the reporting period. Sellers generally file on a monthly basis. However, sellers whose average monthly Rhode Island sales and use tax liability is less than $200 may apply to the Tax Administrator for quarterly filing. The Tax Administrator may approve quarterly filing in their discretion, and any approval is valid for no more than two years. Sellers approved for quarterly filing must reapply for renewal.

Source: R.I. Gen. Laws § 44-19-10

Rhode Island exempts from sales and use tax the first $250 of the sales price per item of clothing and footwear intended to be worn or carried on or about the human body. Any amount above $250 per item is taxable. The exemption does not apply to clothing accessories, equipment, special clothing or footwear primarily designed for athletic activity, or protective use as defined in statute.

Source: R.I. Gen. Laws § 44-18-30(7)

Rhode Island requires marketplace facilitators to collect and remit sales and use tax on all sales made through their marketplace to purchasers in the state, regardless of whether the marketplace seller has a permit or would otherwise be required to collect tax. This obligation applies when the marketplace facilitator meets the economic nexus threshold: gross revenue from sales into Rhode Island of $100,000 or more, or 200 or more separate transactions, in the immediately preceding calendar year. The requirement became effective July 1, 2019.

Statutory definition and scope

A "marketplace facilitator" is defined in R.I. Gen. Laws § 44-18.2-2(5) as any person that contracts with a marketplace seller to facilitate for consideration the sale of the seller's products through a physical or electronic marketplace. A "marketplace" includes a store, booth, internet website, catalog, television or radio broadcast, or dedicated sales software application where tangible personal property, prewritten computer software delivered electronically or by load and leave, vendor-hosted prewritten computer software, specified digital products, and/or taxable services are sold or offered for sale for delivery in Rhode Island.

Collection duties and retailer obligations

Under R.I. Gen. Laws § 44-18.2-3(i)(iii), a marketplace facilitator has all the obligations and rights of a retailer under chapters 18 and 19 of title 44 and any regulations adopted pursuant thereto. This includes the duty to obtain a certificate of authority, collect tax, file returns, and remit tax. The marketplace facilitator also has the right to accept certificates or other documentation from customers substantiating an exemption or exclusion from tax, and the right to receive refunds or credits allowed by law.

The statute requires a marketplace facilitator to keep records and information and cooperate with the tax administrator to ensure proper collection and remittance of tax imposed, collected, or required to be collected under chapters 18 and 19 of title 44.

Certification to marketplace sellers

Pursuant to R.I. Gen. Laws § 44-18.2-3(i)(ii), a marketplace facilitator must certify to its marketplace sellers that it will collect and remit sales and use tax on sales of taxable items made through the marketplace. A marketplace seller that accepts a marketplace facilitator's collection certificate in good faith may exclude sales made through the marketplace from the marketplace seller's own returns under chapters 18 and 19 of title 44.

Liability relief for incorrect seller information

R.I. Gen. Laws § 44-18.2-3(i)(v) provides limited liability relief: if the marketplace facilitator demonstrates to the tax administrator's satisfaction that it made a reasonable effort to obtain accurate information from the marketplace seller about a retail sale and that the failure to collect and pay the correct amount of tax was due to incorrect information provided by the marketplace seller, then the marketplace facilitator is relieved of liability for that retail sale. This relief does not apply when the marketplace facilitator is the seller or when the marketplace facilitator and seller are affiliates. When the marketplace facilitator is relieved under this provision, the seller becomes liable for the tax.

Audit and class-action protections

Under R.I. Gen. Laws § 44-18.2-3(i)(iv), a marketplace facilitator is subject to audit by the tax administrator with respect to all retail sales for which it is required to collect and pay tax. When the tax administrator audits the marketplace facilitator, the tax administrator is prohibited from auditing the marketplace seller for the same retail sales unless the marketplace facilitator seeks relief under the liability-relief provision described above.

R.I. Gen. Laws § 44-18.2-3(i)(vi) bars class actions against a marketplace facilitator on behalf of purchasers arising from or in any way related to an overpayment of sales or use tax collected by the marketplace facilitator, regardless of whether such action is characterized as a tax refund claim. This prohibition does not affect a purchaser's right to seek a refund as otherwise allowed by law.

Source: R.I. Gen. Laws § 44-18.2-2, R.I. Gen. Laws § 44-18.2-3, Rhode Island Division of Taxation – Remote Sellers

Rhode Island is one of a minority of states that impose sales and use tax on enumerated services. Unlike the majority of states that tax only tangible personal property and a narrow set of services, Rhode Island subjects specific service categories to the 7% sales tax under R.I. Gen. Laws § 44-18-7.3, enacted in 2012 and effective October 1, 2012.

Statutory framework and registration requirement

R.I. Gen. Laws § 44-18-7.3 defines "services" by reference to the 2007 North American Industrial Classification System (NAICS) codes. Service providers performing taxable services in Rhode Island are required to file a business application and registration form, obtain a permit to make sales at retail with the Tax Administrator, and charge, collect, and remit sales and use tax on the gross receipts from those services. The statute expressly states that all services as defined are required to obtain a permit and collect tax.

Enumerated taxable service categories

The statute imposes tax on the following categories of services performed in Rhode Island, identified by their NAICS codes:

Transportation services — Taxicab services, including taxi dispatchers (NAICS 485310), are taxable. The statute also defines and taxes "transportation network companies" (TNCs) as entities that use a digital network to connect riders to transportation network operators who provide prearranged rides. Any TNC operating in Rhode Island is a retailer under R.I. Gen. Laws § 44-18-15 and must register, obtain a permit, and collect sales tax. All other transit and ground passenger transportation (NAICS 485999) is also taxable.

Investigation, guard, and armored car services — Services classified under NAICS codes 561611 (investigation services), 561612 (security guard and patrol services), and 561613 (armored car services) are subject to sales tax.

Pet care services — Pet care services (NAICS 812910) are taxable, but veterinary services and testing laboratory services are excluded from the tax base.

Parking services — R.I. Gen. Laws § 44-18-7.3(b)(6) defines "parking services" (NAICS 812930) as the act of offering a parking space in or on a parking facility for purposes of occupancy by a patron in exchange for a parking fee for a duration of less than one month. Short-term parking (less than one month) is taxable; parking for one month or longer is not within the taxable definition.

Hotel and room reseller services — The statute includes detailed provisions for hotels, room resellers, and resellers who arrange the transfer of occupancy of hotel accommodations. No person may operate a hotel in Rhode Island, or act as a room reseller or reseller for any hotel in the state, without a permit issued by the Tax Administrator pursuant to R.I. Gen. Laws § 44-19-1. The statute defines "travel package" as a room or rooms bundled with one or more other separate components of travel (such as air transportation or car rental) charged to the customer for a single retail price. When room occupancy is bundled with other property, services, or amusement charges for a single consideration, the entire consideration is treated as taxable rental or fees for room occupancy, unless the rental or other fees for room occupancy are stated separately on the sales slip or invoice.

Additional taxable services under related statutes

R.I. Gen. Laws § 44-18-7.1, which contains additional definitions under the Streamlined Sales and Use Tax Agreement, includes in the tax base radio and television audio and video programming services, regardless of the medium, including the furnishing of transmission, conveyance, and routing of such services by the programming service provider. This category expressly includes cable service as defined in 47 U.S.C. § 522(6) and audio and video programming services delivered by commercial mobile radio service providers as defined in 47 C.F.R. § 20.3. Digital products delivered electronically — including software, music, video, reading materials, or ring tones — are also subject to sales and use tax.

Distinguishing taxable services from nontaxable services

Rhode Island's service taxation is based on positive enumeration. Services not expressly listed in § 44-18-7.3 or related statutes are not subject to sales tax. The burden of proving that a receipt is not subject to tax falls on the seller and the purchaser, per R.I. Gen. Laws § 44-18-25, which presumes that all gross receipts are subject to sales tax and that services as defined in § 44-18-7.3 are subject to use tax until the contrary is established to the Tax Administrator's satisfaction.

Professional services (legal, accounting, engineering, consulting) are generally not taxable in Rhode Island because they are not enumerated in § 44-18-7.3. Similarly, most personal services (hair salons, dry cleaning, repair services for tangible personal property) are not taxable unless they fall within one of the enumerated NAICS codes.

Classification issues and practitioner caution

Classification disputes frequently arise when a transaction involves both taxable and nontaxable elements, or when a service category borders an enumerated taxable service. For example, a business providing both pet grooming (taxable under NAICS 812910) and veterinary services (excluded) must allocate receipts correctly. Similarly, parking services are taxable only when the duration is less than one month; monthly or longer-term parking contracts fall outside the statutory definition.

The statute was enacted by P.L. 2012, ch. 241, art. 21, § 4, and has been amended by P.L. 2015, ch. 141, art. 11, § 4; P.L. 2016, ch. 142, art. 13, § 14; P.L. 2017, ch. 451, § 20; P.L. 2018, ch. 47, art. 4, § 10; and P.L. 2019, ch. 88, art. 5, § 9. Practitioners should consult the current version of § 44-18-7.3 for the complete list of taxable services and any subsequent amendments.

Source: R.I. Gen. Laws § 44-18-7.3, R.I. Gen. Laws § 44-18-7.1, R.I. Gen. Laws § 44-18-25