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Rhode Island Tax Update

It continues to be a chaotic week on many legislative fronts. While the New York Senate is the scene of an unbelievable series of events that are more typically seen on a playground, Rhode Island seems to be on the fast track to pass the budget. Included in the Rhode Island budget is their version of an Internet tax. Whether we choose to call it Internet tax, Advertising tax or Amazon tax, the result is the same; some out of state merchants would be required to collect and remit sales tax to Rhode Island. The budget bill passed in the House of Representatives with a vote of  69-5. The Budget has been sent to the Senate where it is believed it will easily and quickly pass. Senate is holding a hearing on the Budget today.

The wording of Rhode Island’s version of the Internet tax is similar to New York except the threshold in Rhode island is $5,000 in sales from RI affiliates to RI residents in the previous four quarters. Once that threshold is met, nexus is established and sales are taxable just as if there were a brick and mortar store. Included in the law, is the ability to rebut the presumption of nexus. The wording on this aspect is again similar to the NY version.

For your reference, here is the text of the proposed legislation as it appears in Article 16 of the Rhode Island budget. Rhode Island Budget Article 16

SECTION 8. Section 44-18-15 of the General Laws in Chapter 44-18 entitled “Sales and
Use Taxes – Liability and Computation” is hereby amended to read as follows:
44-18-15. “Retailer” defined. — (a) “Retailer” includes:
(1) Every person engaged in the business of making sales at retail, including sales at auction of tangible personal property owned by the person or others.
(2) Every person making sales of tangible personal property through an independent contractor or other representative, if the retailer enters into an agreement with a resident of this state, under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an Internet website or otherwise, to the retailer, provided the cumulative gross receipts from sales by the retailer to customers in the state who are referred to the retailer by all residents with this type of an agreement with the retailer, is in excess of five thousand dollars ($5,000) during the preceding four (4) quarterly periods ending on the last day of March, June, September and December. Such retailer shall be presumed to be soliciting business through such independent contractor or other representative, which presumption may be rebutted by proof that the resident with whom the retailer has an agreement did not engage in any solicitation in the state on behalf of the retailer that would satisfy the nexus requirement of the United States Constitution during such four (4) quarterly periods.

Affiliates, merchants, program managers and networks should continue to contact the legislators in Rhode Island. In addition contact the Governor to express your opinion.  Visit Rhode Island Legislature for contact information.

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