United States

Rhode Island provides consolidated website on new remote seller law

TAX ALERT  | 

In early Aug., Rhode Island Gov. Gina Raimondo signed House Bill 5175, the state’s yearly budget bill, providing for a number of new and amended tax provisions. Included in those changes were provisions related to remote retailer sales tax collection. A number of states have enacted provisions related to “economic sales and use tax nexus,” choosing to directly challenge the physical presence requirement established through the 1992 U.S. Supreme Court decision in Quill v. North Dakota in order to capture sales tax revenues lost through online and internet sales. Rhode Island’s provisions essentially provide an election for remote retailers to collect the sales tax, or comply with the state’s use tax notice and reporting requirements, in order to avoid noncompliance penalties.

Accordingly, if a remote retailer is deemed to be a “non-collecting retailer, referrer, or retail sale facilitator” – each of which is specifically defined by statute – the retailer must collect sales tax if the following sales threshold are achieved in the current or previous calendar year:

  1. 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 the state equal to or exceeding $100,000, or
  2. Has sold tangible personal property, prewritten computer software delivered electronically or by load and leave, and/or taxable services for delivery into the state in 200 or more separate transactions.

However, a non-collecting retailer is relieved of the obligation to collect the sales tax if the retailer instead chooses to comply with a series of use tax notice and reporting requirements. Those requirements include the following:

  1. Posting a conspicuous notice on the retailer’s website informing Rhode Island customers that a use tax is due and that the customer must file a sales or use tax return;
  2. Notify customers that sales or use tax is due at the time of purchase;
  3. Within 48 hours after the purchase, notify customers in writing that a use tax is due on taxable purchases;
  4. Provide yearly statements to customers who have annual purchases totaling $100 or more in the prior calendar year
  5. Provide yearly statements to the Rhode Island Division of Tax.

Pursuant to the new law, a “non-collecting retailer” is generally defined as a party that engages in at least one of the following activities:

  • Uses in-state software to make sales at retail of taxable goods/services;
  • Sells, leases, delivers, or participates in any activity relating to the sale, lease, or delivery of taxable goods/services, including:
  • Using a referrer, retail sale facilitator, or other third party for direct response marketing or referral;
  • Uses a sales process including listing, branding, selling, soliciting, processing, fulfilling, or exchanging;
  • Offers taxable goods/services for sale through retail sale facilitators; or
  • Is related to a person with physical presence in Rhode Island.

There are separate requirements for statutorily defined “referrers” or “retail sale facilitators.” Both referrers and retail sales facilitators who achieve the $100,000 or 200 transaction thresholds stated above have additional obligations and thresholds related to their individual activities. However, the use tax notice and reporting provisions applicable to non-collecting retailers do not apply to referrers or retail sale facilitators. Further, while the effective date of the new requirements for non-collecting retailers and referrers began Aug. 17, 2017, the new requirements for retail sale facilitators generally apply beginning Jan. 15, 2018.

In order to provide additional information and explanation of the new provisions, the division has created a website consolidating the legislation, relevant forms, and required notices for non-collecting retailers, referrers, or retail sale facilitators. A summary of the fiscal year 2018 budget bill is also available on the site.

Takeaways

The consolidated website provides remote retailers well-defined guidance on the new provisions. Taxpayers should read the provisions carefully and review the differences between a non-collecting retailer, referrer, or retail sales facilitator as the obligations related to each are distinct. Additionally, taxpayers should consult with their tax advisors on the new provisions as the effective date of remote retailer provisions began Aug. 17, 2017.

For additional information on remote and economic sales and use taxes, please see RSM’s Online and Remote Seller Sales Tax Resource Center

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