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Most businesses starting in Rhode Island that are selling a product or offering certain services will need to register for a sales tax permit. This is commonly referred to as a seller’s permit, sales tax license, sales tax number or sales tax registration.
The sales tax permit is obtained through the Rhode Island Division of Taxation as a part of applying for the Rhode Island Business Application and Registration. In addition to sales tax registration, this form is used for hiring employees.
Check out the rest of this guide to find out who needs a sales tax permit, what products and services are taxable, how to register for a permit and reporting requirements.
Who needs a sales tax permit in Rhode Island?
A business must register for a sales tax permit in Rhode Island when:
- A business has “nexus” (significant presence in the state) such as a retail store, office or warehouse where products are produced, stored and/or delivered
- Selling products and taxable services in Rhode Island (includes occasionally selling items at craft shows, fairs, seminars, shows, etc.)
- Employees (including sales representatives or agents) are working in Rhode Island
- An online business located in Rhode Island is selling taxable products to Rhode Island residents
- An out-of-state business selling to Rhode Island residents and one of
- Total annual sales of tangible personal property to Rhode Island residents is $100,000 or more; or
- Having 200 or more transactions with Rhode Island residents annually.
What products and services are taxable in Rhode Island?
There are a few exceptions, but almost all physical products are taxable when sold at retail in Rhode Island. Common examples include:
- General merchandise like furniture, appliances, and clothing
- Titled or registered items like vehicles
Certain clothing, non-prepared food and prescriptions are tax-exempt. A full list of Rhode Island tax exemptions are available from the Division of Taxation.
Labor in most cases isn’t taxable in Rhode Island. For instance, let’s say you broke the screen to your cell phone and take it to a cell phone repair shop to have it fixed. Sales tax would be added to the selling price of the new screen and any additional parts to fix the phone. The labor to replace the screen isn’t taxable. However, a business that makes furniture will indirectly have sales tax on labor. In this instance, let’s say this business is building a dining room table for a customer. Through labor, the pieces of wood are shaped, sanded and painted to build this piece of furniture. While the labor isn’t directly taxable, sales tax is charged to the final selling price of the table.
Digital products are tax exempt in Rhode Island..
Most services aren’t taxable in Rhode Island, however there are a few exceptions, some of which include:
- Short-term lodging
- Pet grooming and boarding
How to register for a sales tax permit in Rhode Island
Information needed to register includes:
- Type of business entity (Sole Proprietorship, Partnership, Corporation, LLC)
- Business name
- Federal Employer Identification Number (FEIN), or SSN if a sole proprietorship with no employees
- Mailing address
- Name, SSN, Title and addresses of owners/officers/members
- Description of what products or services are being sold
How much does a sales tax permit cost in Rhode Island?
There is a $10 fee to register for a sales tax permit in Rhode Island. Each location will register for a permit.
How long does it take to get an Rhode Island sales tax permit?
Expect 2-3 business days to receive a sales tax permit when registering online or 2-3 weeks when applying by mail.
Do you have to renew your Rhode Island sales tax permit?
The sales tax permit needs to be renewed each year for $10.
Sales tax reporting
How is sales tax collected?
When a business makes a sale of a taxable product or service, the business charges the appropriate sales tax rate to the customer. This tax is collected by the business who then sends it to the Rhode Island Division of Taxation.
How much sales tax is charged?
The sales tax rate is 7%. There are no additional local taxes. In addition to the sales tax, there is also a 6% hotel tax on the rental of rooms in hotels, motels or lodging houses.
When are Rhode Island sales tax returns due?
The Division of Taxation will determine a filing frequency based on the expected volume of sales, which will be monthly, quarterly or annually. Generally, a business collecting over $200 in sales taxes each month will file monthly.
Filings are due the 20th day of the month following the reporting period, unless the 20th falls on a weekend or federal holiday, in which case would move to the next business day.
Even if the business had no sales during the reporting period, a filing is still required indicating no sales occurred.
Sales tax on purchases for resale
A business is able to purchase items to resell without paying state sales tax. The tax liability is passed from the wholesaler or distributor to the retailer who will then charge sales tax to the end user of the item.
Wholesalers and distributors will require a sales tax number and a completed Rhode Island Resale Certificate to document the items being purchased are for resale.
If you have questions about the sales tax permit, the Rhode Island Division of Taxation has a helpful FAQ page on Rhode Island Sales and Use taxes or they can be contacted by calling 401-574-8700.