US Sales Tax Guide/Rhode Island Tax Guide
State-Based Sales Tax Rate
7%
Transactions Threshold
200
Local Tax Rate
Nil
Filing Due Date
20th of the following month
Economic Nexus Threshold
$100,000
Tax Authority
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Sales tax is levied when you earn revenues on goods or services your customers provide. However, you will collect the sales tax if you determine the nexus in Rhode Island. A nexus is a presence that may come physically or economically.
A physical nexus is typically created when your business has a Rhode Island store, warehouse, or office location. An economic nexus is intertwined when you cross paths with threshold limits as already stipulated by the state. These thresholds can be on a revenue or some other transactional basis.
A physical nexus is integrated when your business is engaged in the following in Rhode Island:
You may also refer to the Rhode Island Taxation Department advisory to know more about business activities that may create a physical nexus within the state.
You must comply and register under sales tax rules if your retail business sales in Rhode Island exceed $100,000 or you made more than 200 sales during the current or previous fiscal year.
For more detailed guidance on economic nexus, please read the guidance issued by the Department of Taxation of Rhode Island.
To apply for tax registration and obtain a tax account number in Rhode Island, you must use the Division’s Taxpayer Portal.
Additionally, before applying for a new tax account number, make sure you have the following information handy:
Tangible Property: Sales tax in Rhode Island is imposed on the retail sale of tangible personal property by businesses with an economic or physical nexus. The seller collects the tax and remits it to the state directly.
Digital Product: Rhode Island charge sales tax on digital products . So, if you sell digital products such as software, streaming services, e-books, etc., you need to collect the sales tax. Please see the Rhode Island Taxation Department advisory on digital transactions.
SAAS: SAAS is software that allows users to connect to the cloud and use it over an internet connection. It is taxable in Rhode Island. Click here for the guidance issued by the state.
Services: Albeit the services are generally not subject to sales tax in Rhode Island, a few exceptions include service or labor costs leading to the creation of tangible personal property, telecommunication, cable TV, etc. For more information, click here.
The state provides certain exemptions from the sales tax levy, such as food for home consumption, prescription drugs, manufacturing equipment, etc. To see what exemptions are covered, please click here.
Collecting and computing accurate sales tax to be remitted to the state may involve stratospheric efforts, especially when you are not Rhode Island-based. The sales tax is destination-based in Rhode Island, which means you must collect taxes on tangible property sold to buyers based in Rhode Island.
However, complexities are involved when you have a business nexus, even outside the state. Any default may lead to severe concerns, penalties, or fines by the state. That is what TaxDo is here for you! Our specialized sales tax calculator and professional services will simplify your job and lighten your compliance burden.
Rhode Island has a base sales tax rate of 7%. The state doesn’t have any local taxes, though renting rooms in hotels, motels or lodging houses would charge an additional 6% hotel tax.
Below is the simple formula you can use to calculate your sales tax collection on each merchandise sold:
Sales Tax collectable = Sale value * (7%)
If non-taxable items are sold, shipping charges associated with such a sale are not subject to sales tax. However, when the sale includes taxable and non-taxable items, shipping charges need to be apportioned relatively between the taxable and non-taxable parts of the sale. Accordingly, sales tax applies to the taxable portion of the sale. This link will take you to the official guidance issued by the state on delivery charges.
Sales taxes will be filed electronically through the Rhode Island Department’s online portal. You must pay the sales tax along with filing the return to avoid penalties and interest. Multiple modes of payment are available, including EFT, debit card, credit card, etc.
Please note that you shouldn’t default when filing the return, even if you have zero sales tax.
Based on your reported sales tax or estimated taxable sales, the Rhode Island Department of Taxation assigns you a Monthly or Quarterly filing frequency. You can file quarterly when your sales and use tax liability for six consecutive months has averaged less than $200 monthly.
According to your filing frequency, you must file the return within 20 days from the end of the relevant reporting period.
Individuals who are liable for Use Tax on non-business purchases have the option to make an annual payment by noting the amount on the use tax line of their Rhode Island personal income tax return, which is due by April 15th of the following year.
Note: If the due date is a holiday or weekend, the next business day would be considered the final due date. This link will take you to the official Rhode Island website, where you can see what the state says about sales tax filing due dates.
The state levies a penalty of 10% of sales tax due for late filing. Along with the penalty, interest at the rate of 12% p.a. will be charged for underpayment or nonpayment of sales tax. The penalties and interest cannot exceed 25% of the tax due.
Please visit the sales tax department website to know more.
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