WHICH GOODS AND SERVICES ARE TAXABLE?
Determining whether or not the products or services your company sells are taxable in Rhode Island is the first step in sales tax compliance.
Traditional Goods or Services
Goods that are subject to sales tax in Rhode Island include physical property, like furniture, home appliances, and motor vehicles.
The purchase of prescription medicine, groceries, gasoline, and clothing are tax-exempt.
Some services in Rhode Island are subject to sales tax. For a detailed list of taxable services view this table from the Rhode Island Department of Revenue website.
Digital Goods or Services
A digital good or service is anything electronically delivered, such as an album downloaded from iTunes or a film purchased from Amazon.
Rhode Island does not require businesses to collect sales tax on the sale of digital goods or services.
However, Rhode Island has one exception to this policy. Businesses must collect sales tax on pre-written computer software that is sold online.
HOW TO REGISTER FOR RHODE ISLAND SALES TAX
If you determined that you need to charge sales tax on some or all of the goods and services your business sells, your next step is to register for a seller's permit. This allows your business to collect sales tax on behalf of your local and state governments.
In order to register, you will need the following information:
- Personal identification info (SSN, address, etc.)
- Business identification info (EIN, address, etc.)
- Business entity type
- Date began doing business in Rhode Island
- Description of business activity
Save Money with a Resale Certificate
With a resale certificate, also known as a reseller's permit, your business does not have to pay sales tax when purchasing goods for resale.
COLLECTING SALES TAX
After getting your seller's permit and launching your business, you will need to determine how much sales tax you need to charge different customers. To avoid fines and the risk of costly audits, it's important for business owners to collect the correct rate of sales tax.
When calculating sales tax, you'll need to consider the following kinds of sales:
- Store Sales
- Shipping In-State
- Out-of-State Sales
Calculating sales tax on goods sold in Rhode Island is easy. Simply charge the 7.000% flat sales tax rate on all items whether selling in-store or shipping across the state.
Rhode Island businesses only need to pay sales tax on out-of-state sales if they have nexus in other states. Nexus means that the business has a physical presence in another state.
Common types of nexus include:
- A physical location, such as an office, store, or warehouse
- An employee who works remotely or who is a traveling sales representative
- A marketing affiliate
- Drop-shipping from a third party seller.
- A temporary physical location, including festival and fair booths.
FILE YOUR SALES TAX RETURN
Now that you’ve registered for your Rhode Island seller's permit and know how to charge the right amount of sales tax to all of your customers, you are all set to file your sales tax return. Just be sure to keep up with all filing deadlines to avoid penalties and fines.
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How to File
Rhode Island requires businesses to file sales tax returns and submit sales tax payments online.
How Often Should You File?
How often you need to file depends upon the total amount of sales tax your business collects.
- All Businesses that collect sales tax will file on a monthly basis. If, however, for six consecutive months your business has an average sales tax liability of less than $200.00, you may request to file quarterly instead.
Note: Rhode Island requires you to file a sales tax return even if you have no sales tax to report.
All Rhode Island sales tax return deadlines fall on the 20th day of the month, unless it is a weekend or federal holiday, in which case the deadline is moved back to the next business day. Below is a list of this year’s filing deadlines:
- Q1 (Jan. - Mar.): Due April 30
- Q2 (April - June): Due July 31
- Q3 (July - Sept.): Due October 31
- Q4 (Oct. - Dec.): Due January 31
Monthly filing: The 20th of the following month, or the next business day, e.g. April 20 for the month of March, or May 22 for the month of April.
Penalties for Late Filing
Rhode Island charges a late filing penalty of 10% of the tax that is reported on the tax return.
The state assesses the unpaid tax with an interest rate of at least 12% per year.
Rhode Island Helpful Resources
Rhode Island Business Taxes Help Number: