As you know, the online sales tax debate continues across the country as states look for ways to collect fees from internet shoppers to increase their revenue. Rhode Island’s reporting law similar to Colorado’s, which makes customers responsible for paying the taxes, is now in effect.
About Rhode Island’s Online Sales Tax Law
Non-collecting retailers making in excess of $100,000 in sales or more than 200 sales (number of transactions) within the immediately preceding calendar year, are responsible for registering, collecting and remitting sales tax, or must do all of the following:
- Post a website notice that lets in-state customers know their sales tax or use tax is due on certain purchases made from them, and that the state requires the customer to file a sales or use tax return.
- Notify the customer during checkout of the same information on the website notice.
- Notify the customer of the website notice, in writing, within 2 days of purchase.
- By January 31 of each year, send a written notice to all in-state customers with cumulative annual taxable purchases of $100 or more for the prior calendar year. The notification needs to include:
- The name of the retailer
- The total amount paid by the customer within the calendar year
- Date(s) of purchase(s)
- Dollar amount of each purchase
- Category or type of purchase
- Whether the purchase is exempt or not exempt from the state’s taxation code
- File an attestation with the Rhode Island Division of Taxation by February 15, stating that the above requirements were fulfilled.
The Rhode Island Department of Revenue also created a 10-page document of frequently asked questions for in-state consumers. In addition to answering questions about when the notices will go out, what they’ll look like and what to do, it also includes examples and a list of items eligible for sales tax or use tax.
In our opinion, the reporting requirements and related penalties ($10 per each failure to report) are egregious and particularly onerous. We suspect that most companies will simply register to collect and remit sales tax rather than engage in the reporting, which is likely to be more burdensome. And that is really what states like this are after; they’d much rather pass the collection duty on to companies than have to collect from the consumer.
Do you have questions about Rhode Island’s latest approach to online sales tax, or how this issue may affect your business in states across the country? Contact us for helpful insight! We’re happy to provide expertise regarding other multi-state tax issues your business may be facing as well.
Miles Consulting Group, Inc. is a professional service firm in San Jose, California specializing in multi-state tax solutions. Our firm addresses state and local tax issues for our clients, including general state tax consulting, nexus reviews, tax credit and tax incentive maximization, income tax and sales/use tax planning and other special projects. To learn more, contact us today at www.MilesConsultingGroup.com.
