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Tax And Business Climate In Rhode Island

Monika Miles ; Tax And Business Climate In Rhode Island

This month we travel across the country to The Ocean State of Rhode Island. The state is one of the most densely populated and heavy industrialized for its size. For a state that is only 37 miles wide and 48 miles long, it is notable that its shoreline on Narragansett Bay in the Atlantic Ocean runs for 400 miles.

Rhode Island has two distinct natural regions. Eastern Rhode Island contains the lowlands of the Narragansett Bay, while Western Rhode Island forms part of the New England Upland. The state’s forests are part of the Northeastern coastal forests ecoregion.

Narragansett Bay is a major feature of the state’s topography. There are more than 30 islands within the bay. The largest is Aquidneck Island, shared by the municipalities of Newport, Middletown, and Portsmouth. The second largest island is Conanicut; the third largest is Prudence. Block island lies about 12 miles off the southern coast of the mainland and separates Block Island Sound from the Atlantic Ocean proper.

A rare type of rock called Cumberlandite is found only in Rhode Island (specifically in the town of Cumberland) and is the state rock. There were initially two known deposits of the mineral: one of iron ore and one of the deposits was extensively mined for its ferrous content.

Business Climate Done

The Rhode Island economy had a colonial base in fishing. The Blackstone River Valley was a major contributor to the American Industrial Revolution. It was in Pawtucket that Samuel Slater set up Slater Mill in 1793, using waterpower of the Blackstone River to power his cotton mill. For a while, Rhode Island was one of the leaders in textiles. However, with the Great Depression, most textile factories relocated to the southern U.S. The textile industry still constitutes part of the Rhode Island economy, but does not have the same power it once had.

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.

Health Services are Rhode Island’s largest industry. Second is tourism and the third 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 top individual income tax rate is 5.99%, and the top corporate income tax rate is 7%.

Apportionment: Rhode Island taxpayers apportion income using a single sales factor formula.

In Rhode Island, receipts from services are sourced based on the location of the taxpayer’s market for the service. This is also known as market-based sourcing.

Sales Tax Structure

The state sales tax rate is 7%.

Sellers who lack physical presence nexus in Rhode Island and have sales into the state that exceed $100,000 or who have more than 200 transactions in the preceding calendar year must register and remit sales tax to the state. It is important to note that this threshold includes gross revenue from sales of tangible personal property, prewritten computer software delivered electronically or by load and leave, vendor-hosted prewritten computer software, specified digital products, and/or taxable services delivered into the state. Exempt sales are included in the threshold, but exempt services are not included in the threshold. This legislation went into effect on July 1, 2019.

Marketplace facilitators that meet the economic nexus threshold of more than $100,000 in gross revenue or 200 or more transactions are required to collect and remit sales tax on behalf of all sellers making sales in Rhode Island through the marketplace (third-party or marketplace sellers), even those whose sales into the state are below the economic nexus threshold. This law went into effect on January 1, 2019.

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

Many states have annual sales tax holidays, during which certain items the state wants to promote the purchase of (like school supplies emergency preparedness supplies, or energy efficient appliances) can be purchased sales tax free. Rhode Island, however, does not currently have any scheduled sales tax holidays.

Our team at Miles Consulting Group is always available to discuss the specifics of your situation, whether in Rhode Island or other U.S. States, and help you navigate the complex tax structures arising from multistate operations. Call us to help you achieve the best tax efficiencies.

Random Facts

  • The state was formerly named the State of Rhode Island and Providence Plantations. It has the longest state name in the United States.
  • 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.
  • Rhode Island was the last of the original thirteen colonies to become a state.

Have a question? Contact Monika Miles And Team.

Monika founded Miles Consulting Group which focuses on multi-state tax consulting, helping 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 12 years combined in Big 4 Public Accounting and private 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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