Sales Tax Fundamentals
Get up to speed on the basics of sales tax
Do you need to collect sales tax in Rhode Island?
You’ll need to collect sales tax in Rhode Island if you have nexus there. There are two ways that sellers can be tied to a state when it comes to nexus: physical or economic. Physical nexus means having enough tangible presence or activity in a state to merit paying sales tax in that state. Economic nexus means passing a states’ economic threshold for total revenue or the number of transactions in that state.
Do you have physical nexus in Rhode Island?
Rhode Island considers a seller to have physical nexus if you have any of the following in the state:
- An office or place of business
- An employee, representative, contractor, agent, salesperson, etc. present in the state
- Goods in a warehouse, sample room, storage room, etc. present in the state
- Delivery of merchandise to customers in the state in the merchant’s own vehicle(s)
- Attendance at a tradeshow or craft show
- Advertising in the state (see more here, p. 2-3)
- A 3rd party affiliate in the state (due to “ click-through nexus”)
You can click here to read exactly what the Rhode Island Division of Taxation has to say about what constitutes sales tax nexus in Rhode Island (starting on p. 2).
Do you have economic nexus in Rhode Island?
Effective July 15, 2017, Rhode Island considers vendors who make more than $100,000 in sales annually in the state or more than 200 transactions in the state to have economic nexus. This means the state considers these vendors obligated to collect sales tax from buyers in the state. You can read Rhode Island’s economic nexus guidance for sellers here.
A note on Rhode Island’s “notice and report” sales tax law
In 2017, Rhode Island implemented a “notice and report” sales tax law. Under this law, sellers with no nexus in the state are known as “non-collecting retailers,” and non-collecting retailers are required to take several actions if they are not sales tax compliant. This law applies to sellers who meet these requirements:
- Makes more than $100,000 in gross sales from Rhode Island buyers in a calendar year OR
- Makes more than 200 individual sales to buyers in Rhode Island in a calendar year
Sellers that meet this criteria are required to either a) register for a Rhode Island sales tax permit and collect sales tax from Rhode Island buyers or b) comply with Rhode Island’s rigorous reporting requirements, which can be found at the Rhode Island Department of Revenue website.
For more information on Rhode Island’s notice and report laws, see the Rhode Island Non-Collecting Retailer FAQ.
Is what you’re selling even taxable?
Services in Rhode Island are generally not taxable, though some are. Also, the furnishing of telecommunications service and cable television services is taxable in Rhode Island. And be mindful if the service you provide includes creating or manufacturing a product. In that case you may have to deal with the sales tax on products.
Tangible personal property is taxable in Rhode Island, with a few sales tax exemptions. These exceptions include certain clothing and prescription drugs, among other items.
Is SaaS taxable in Rhode Island?
SaaS is taxable in Rhode Island. (Source)
How to get a sales tax permit in Rhode Island
You can register online, or by mailing a “Business Application and Registration Form” to Division of Taxation, One Capitol Hill, Providence, RI 02908 along with the $10 fee.
You need this information to register for a sales tax permit in Rhode Island:
- 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
It costs $10 to obtain a Rhode Island sales tax permit. Other business registration fees may apply.
Collecting Sales Tax
Rhode Island is a destination-based sales tax state. So no matter if you live and run your business in Rhode Island or live outside Rhode Island but have nexus there, you would charge sales tax at the rate of your buyer’s ship-to location.
Fortunately, Rhode Island is one of the few states with no local sales tax rates. That means that you charge the 7% Rhode Island sales tax rate to every buyer in Rhode Island. This goes for sellers who call Rhode Island their home state and sellers who live and operate their businesses in another state, but have Rhode Island sales tax nexus for some reason.
You can look up your sales tax rate with TaxJar’s Sales Tax Calculator.
Note: If you operate an eating and/or drinking establishment in Rhode Island, you must collect the 1% Rhode Island meals and beverage tax.
Should you collect sales tax on shipping charges in Rhode Island?
As an online seller, you will most likely need to charge sales tax on shipping charges in Rhode Island.
Read a full explanation of sales tax on shipping in Rhode Island here.
When are Returns Due?
When you file and pay Rhode Island sales tax depends on two things: your assigned filing frequency and your state’s due dates.
How often will you file sales tax returns in Rhode Island?
States assign you a filing frequency when you register for your sales tax permit. In most states, how often you file sales tax is based on the amount of sales tax you collect from buyers in the state.
In Rhode Island, you will generally be required to file and remit sales tax either monthly or quarterly.
Important to note: All Rhode Island sales tax filers are also required to file an annual sales tax reconciliation in January.
Rhode Island sales tax returns are generally due the 20th or the final day of the month following the reporting period. If the Rhode Island filing due date falls on a weekend or holiday, sales tax is due the next business day.
Filing Sales Tax
When it comes time to file sales tax in Rhode Island you must do three things:
- Calculate how much sales tax you owe
- File a sales tax return
- Make a payment
How to Calculate How Much Sales Tax You Owe in Rhode Island
Calculating how much sales tax you should remit to the state of Rhode Island is easy with TaxJar’s Rhode Island sales tax report.
All you do is connect the channels through which you sell – including Amazon, eBay, Shopify, Square and more – and we’ll calculate exactly how much sales tax you collected. All the information you need to file your Rhode Island sales tax return will be waiting for you in TaxJar. Start by logging in to TaxJar.
How to File and Pay Sales Tax in Rhode Island
You have three options for filing and paying your Rhode Island sales tax:
- File online – File online at the Rhode Island Division of Taxation. You can remit your state sales tax payment through their online system.
- File by mail – You can use the Rhode Island Streamlined Sales Tax Return and file and pay through the mail, though you must file and pay online if your tax liability in the previous year was $200 or more.
- AutoFile – Let TaxJar file your sales tax for you. We take care of the payments, too. You’ll never have to worry about spreadsheets, calculations or filling out complex sales tax returns.