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Rhode Island And State Tax Credits And Incentives



Business Climate

Today, much of the economy of Rhode Island is based in services, particularly healthcare and education, and still manufacturing to some extent. The state’s nautical history continues into the 21st century in the form of nuclear submarine construction.

The headquarters of Citizens Financial Group, the 14th largest bank in the U.S., is located in Providence. The fortune 500 companies CVS Caremark and Textron are based in Woonsocket and Providence, respectively. FM Global, GTECH Corporation, Hasbro, American Power Conversion, Nortek, and Amica Mutual Insurance are all Fortune 1000 companies that are based in Rhode Island.

Health Services are Rhode Island’s largest industry. Second is tourism, supporting 39,000 jobs. The third-largest industry is manufacturing. Its industrial outputs are submarine construction, shipbuilding, costume jewelry, fabricated metal products, electrical equipment, machinery, and boatbuilding. Rhode Island’s agricultural outputs are nursery stock, vegetables, dairy products and eggs.

Tax Climate  

The individual income tax rates range from 3.75% to 5.99%, and the top corporate income tax rate is 7%.

The state sales tax rate is 7%, which ranks 2nd in the nation. The combined state and average local sales tax rate is also 7%, which ranks 22nd in the nation.

Other taxes that are of interest to consumers are the gasoline tax and cigarette tax. The state levies a gasoline tax of 34 cents per gallon, which ranks 12th in the nation, and a state cigarette tax of $3.75 per 20-pack, which ranks 3rd in the country.

Rhode Island is one of the latest states to enact a law regarding economic nexus. On August 3, 2017, Rhode Island enacted this piece of legislation. A remote seller who satisfies the economic activity threshold has the option to collect tax or comply with the reporting requirement. The economic threshold activities are defined as:

  • A company has gross revenue from the sale of tangible personal property, prewritten computer software delivered electronically or by load and leave, and/or has taxable services delivered into Rhode Island equal to or exceeding $100,000; or
  • A company has sold tangible personal property, prewritten computer software delivered electronically or by load and leave, and/or taxable series for delivery into Rhode Island in 200 or more separate transactions.

Rhode Island is moderate in its approach to taxation of technology products for sales tax purposes. All digital products are exempt from taxation. Prewritten computer software that is electronically downloaded is taxable, while custom computer software that is electronically downloaded is exempt from taxation. Lastly, all cloud services are exempt from taxation. How products are produced, sold and delivered is critical to determining its tax status.

Tax Incentives and Credits

The state of Rhode Island offers a number of programs providing tax credits or other incentives, which can reduce taxable obligations and help increase your company’s bottom line. Some of these include:

Jobs Training Tax Credit- The purpose of this credit is to grant a tax credit against the corporate income tax equal to 50% of actual training expenses for new and current employees, up to $5,000 per employee, over three years. For more information on this credit, click here.  (http://www.dlt.ri.gov/bwc/taxcredits.htm#JTTC)

New Employment Tax Incentive- This incentive allows for a deduction or modification of 40% of the employee’s first year wages up to $2,400 per employee. For more information regarding this tax credit, click here. (http://www.dlt.ri.gov/bwc/taxcredits.htm#NewTax)

Random Facts

  • Rhode Island is the smallest state in size in the United States. It covers an area of 1,214 square miles. Its distances North to South are 48 miles and East to West 37 miles.
  • On May 4, 1776, the Colony of Rhode Island became the first of the Thirteen Colonies to renounce its allegiance to the British Crown.
  • Rhode Island never ratified the 18th Amendment of prohibition.
  • The era known as the Industrial Revolution started in Rhode Island with the development and construction in 1790 of Samuel Slater’s water-powered cotton mill in Pawtucket.
  • Rhode Island has no county governments. It is divided into 39 municipalities each having its own form of local government.
  • The first circus in the United States was in Newport in 1774.
  • Settled in 1642, Pawtuxet Village in Warwick lays claim to being New England’s oldest village.

Have a tax question? Contact Monika Miles.

 

 

Monika Miles

Monika founded Miles Consulting Group in 2002. The firm focuses on multi-state tax consulting—helping their clients navigate state tax issues such as sales tax and income tax in interstate commerce, including e-commerce.

Prior to forming the firm, Monika worked for over 11 years in Big 4 Public Accounting and 1 year in industry. Monika has provided such services as federal and state income/franchise tax compliance and consulting, sales/use tax consulting, audit support, and credits and incentives reviews. She has served clients in a variety of industries including manufacturing, technology, telecommunications, construction, utility, retail and financial institutions.

Monika graduated from the University of Texas at El Paso (UTEP) with a BBA in Accounting/Finance and has a Masters in Taxation from San Jose State University.

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