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Rhode Island’s Fiscal Year 2018 budget bill contains a provision requiring the Tax Administrator to establish a tax amnesty program open to all taxpayers who are delinquent on any Rhode Island state taxes. The amnesty program will take place from December 1, 2017 to February 15, 2018. The amnesty program applies to any taxable period ending on or before December 31, 2016. For qualified taxpayers, the Tax Administrator generally will not seek civil or criminal prosecution, will waive penalties, and will reduce the applicable interest rate by 25% (e.g. the 2016 interest rate of 18% would be reduced to 13.5%). The amnesty program will be open to any taxpayer who pays the tax and interest due upon filing the amnesty tax return, or who enters into a short-term installment payment agreement for reasons of financial hardship. The Rhode Island Division of Taxation will post the application form for the amnesty program. Amnesty will not be granted to taxpayers who are under any criminal investigation or are a party to any civil or criminal proceeding, pending in any court of the United States or the state of Rhode Island, for fraud in relation to any state tax imposed by the law of the state and collected by the tax administrator. (H.B. 5175, Laws 2017)

(09/28/2017)

On August 3, 2017, Rhode Island enacted affiliate and economic nexus with an alternative reporting requirement structure for those remote sellers that do not collect Rhode Island tax. Per the enacted legislation, the existence and/or presence of a non-collecting retailer's, referrer's, or retail sale facilitator's in-state software on the devices of in-state customers constitutes physical presence in Rhode Island under Quill. Other activities that will constitute nexus in the state include:

 

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

 

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:

 

  • 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
  • Has sold tangible personal property, prewritten computer software delivered electronically or by load and leave, and/or taxable services for delivery into Rhode Island in 200 or more separate transactions.

 

“In-state software” is defined as “software used by in-state customers on their computers, smartphones, and other electronic and/or communication devices, including information or  software such as cached files, cached software, or 'cookies', or other data tracking tools, that are stored on property in this state or distributed within this state, for the purpose of purchasing tangible personal property, prewritten computer software delivered electronically or by load and leave, and/or taxable services.”

 

Beginning on August 17, 2017, and for each tax year thereafter, a non-collecting retailer shall either register to make sales at retail and collect and remit sales and use tax on all taxable sales into the state or:

 

  • Post a conspicuous notice on its website that informs in-state customers that sales or use tax is due on certain purchases made from the non-collecting retailer and that Rhode Island requires the in-state customer to file a sales or use tax return;
  • At the time of purchase, notify in-state customers that sales or use tax is due on taxable purchases made from the non-collecting retailer and that Rhode Island requires the in-state customer to file a sales or use tax return;
  • Within 48 hours of the time of purchase, notify in-state customers in writing that sales or use tax is due on taxable purchases made from the non-collecting retailer and that Rhode Island requires the in-state customer to file a sales or use tax return reflecting said purchase;
  • On or before January 31 of each year, including January 31, 2018, for purchases made in calendar year 2017, send a written notice to all in-state customers who have cumulative annual taxable purchases from the non-collecting retailer totaling $100 or more for the prior calendar year. The notification shall show the name of the non-collecting retailer, the total amount paid by the in-state customer to the non-collecting retailer in the previous calendar year, and, if available, the dates of purchases, the dollar amount of each purchase, and the category or type of the purchase, including, whether the purchase is exempt or not exempt from taxation in Rhode Island; and
  • Beginning on February 15, 2018, and not later than each February 15 thereafter, a non-collecting retailer that has not registered in Rhode Island for a permit to make sales at retail and collect and remit sales and use tax on all taxable sales into the state for any portion of the prior calendar year, shall file with the division on such form and/or in such format as the division prescribes an attestation that the non-collecting retailer has complied with the above requirements

 

At such time during any calendar year, or any portion thereof, that a referrer receives more than $10,000 from fees, commissions, and/or other compensation paid to it by retailers with whom it has a contract or agreement to list and/or advertise  for sale tangible personal property, prewritten computer software delivered electronically or by  load and leave, and/or taxable services, the referrer shall within 30 days provide written notice to all such retailers that the retailers' sales may be subject to this state's sales and use tax.

 

Beginning January 15, 2018, and each year thereafter, a retail sale facilitator shall provide the division of taxation with:

 

  • A list of names and addresses of the retailers for whom during the prior calendar year the retail sale facilitator collected Rhode Island sales and use tax; and
  • A list of names and addresses of the retailers who during the prior calendar year used the retail sale facilitator to serve in-state customers but for whom the retail sale facilitator did not collect Rhode Island sales and use tax.

 

There are exemptions for referrers and retail sale facilitators that have been provided within 90 days of the date of sale either a copy of the retailer's Rhode Island sales tax permit or its resale certificate, or evidence of a fully completed Rhode Island or Streamlined agreement sales and use tax exemption certificate.

 

Any non-collecting retailer, referrer, or retail sale facilitator that fails to comply with any of the above requirements shall be subject to a penalty of $10 for each such failure, but not less than a total penalty of $10,000 per calendar year. Each instance of failing to comply with the requirements shall constitute a separate violation for purposes of calculating the penalty. (Ch. 302 (H.B. 5175), Laws 2017)

 

UPDATE: The Rhode Island Division of Taxation has issued helpful information regarding the notice and reporting requirements obligations for remote sellers created under this legislation. For more information, visit the Rhode Island Division of Taxation webpage

(01/19/2018)

The Multistate Tax Commission opened a sales/use tax and income/franchise tax amnesty program for online marketplace sellers during the fall of 2017. Online marketplace sellers responded and a total of 852 of them applied to participate, overwhelming the MTC office that only deals with about 100 taxpayers per year.

Originally, the MTC received all the taxpayer’s necessary documentation before forwarding it to the state. Given the volume of applicants, the committee agreed to expedite the process by allowing taxpayers to send final voluntary disclosure agreements, tax registration forms, and other documents directly to the states. This procedural change only applies to sellers who are still waiting to receive state-signed voluntary disclosure agreements. The MTC will inform sellers if they have the option to send documents directly to the states.

For the previous four-year period, thirty applicants reported more than $1 million in back tax liability. Around a quarter of all applicants reported at least $100,000 in back tax liability.

Although the MTC program is closed, taxpayers who believe they have a liability should consider state offered amnesty programs or a voluntary disclosure.  Some states may be willing to negotiate with online sellers.  We are working with some states to negotiate more favorable terms. If you are interested, contact us.
 

(01/29/2018)

Rhode Island issued a reminder about the state’s sales and use tax notice and reporting requirements for retail sale facilitators and non-collecting retailers that were contained in legislation enacted in August 2017.

A retail sale facilitator that had $100,000 or more in gross revenue from the sale of taxable goods/services in 2017 delivered in Rhode Island or 200 or more transactions of taxable goods/services delivered in Rhode Island, must provide a list to the Rhode Island Division of Taxation of names and addresses of retailers for whom the retail sale facilitator collected Rhode Island sales tax. This must happen on or before January 16, 2018. Retail sale facilitators must also provide contact information of retailers for whom they did not collect Rhode Island sales tax but still utilized the retail sale facilitator’s services in 2017.

A non-collecting retailer, on or before January 31 of each year, must send a written notice to all Rhode Island customers who have cumulative annual taxable purchases from the non-collecting retailer totaling $100 or more for the prior calendar year. Thus, a non-collecting retailer must send notice to each in-state customer who met or surpassed the $100 cumulative annual purchase threshold for the 2017 calendar year by January 31, 2018. Purchases made during the entire 2017 calendar year must be present in the report.

By February 15 of each year, a non-collecting retailer must also provide the Rhode Island Division of Taxation with a certain annual attestation that its notice requirements were fulfilled (Advisory for Tax Professionals, ADV 2018-03, Rhode Island Division of Taxation, January 11, 2018).
 

(01/29/2018)

Effective July 1, 2017, Rhode Island sales and use tax exemption certificates are valid for four years from the date of issue, after which point they expire. Previously, Rhode Island sales and use tax exemption certificates did not expire. Exemption certificates issued before July 1, 2017 will expire in June 2021. The application fee for an exemption certificate will stay the same at $25. This applies to exemption certificates for charitable, educational and religious organizations. (H.B. 5175, Laws 2017)

(11/20/2017)

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