Stay up to date with sales tax: Join our mailing list!


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)

(08/14/2017)

The Multistate Tax Commission (MTC) has announced a sales/use tax and income/franchise tax amnesty program for online sellers that will run from August 17 to November 1, 2017 (previously October 17, 2017). Qualified online sellers with potential tax liability may be able to use the MTC's voluntary disclosure agreement (VDA) to negotiate a settlement during the amnesty period if they meet certain eligibility requirements. Taxpayers that have not been contacted by any of the states participating in the amnesty program will be able to apply to start remitting sales tax on future sales without penalty or liability for unpaid, prior accumulated sales tax in the participating states. 25 MTC member states have agreed to participate in the amnesty program. The participating states include: 

 

  • Alabama
  • Arkansas
  • Colorado (sales/use tax only)
  • Connecticut
  • District of Columbia (may not waive all prior periods)
  • Florida
  • Idaho
  • Iowa
  • Kansas
  • Kentucky
  • Louisiana
  • Massachusetts (special provisions apply)
  • Minnesota (special provisions apply)
  • Missouri
  • Nebraska (may not waive all prior periods)
  • New Jersey
  • North Carolina
  • Oklahoma
  • Rhode Island
  • South Dakota
  • Tennessee
  • Texas 
  • Utah
  • Vermont
  • Wisconsin (will require payment of back tax and interest for a lookback period commencing January 1, 2015 for sales/use tax, and including the prior tax years of 2015 and 2016 for income/franchise tax)

 

Some of the additional states may require a limited look-back period for prior tax liabilities. Sellers who wish to participate in the program will need to file the voluntary disclosure program paperwork during the program dates. The MTC will route the paperwork for each participating state for which the seller is seeking amnesty protection. For more details visit the MTC website.

 

UPDATE: The Multistate Tax Commission's online seller amnesty program is now over. If you didn't take advantage of this program but realize you need to evaluate your activities, you can contact us here.

(11/07/2017)

On June 12, 2017, Rep. Jim Sensenbrenner (R-WI) and House Judiciary Chairman Bob Goodlatte (R-VA) introduced the No Regulation Without Representation Act of 2017. A previous version of this bill had been introduced in 2016 and failed to pass. Under the proposed bill, a State may tax or regulate a person’s activity in interstate commerce only when such person is physically present in the State during the period in which the tax or regulation is imposed. Under the proposed bill, the physical presencerequirement would apply to sales and use taxand net income and other business activities taxes, as well as the states’ ability to regulateinterstate commerce. “Physical presence” in a state includes:

 

  • maintaining a commercial or legal domicile in the state;
  • owning, holding a leasehold interest in, or maintaining real property such as an office, retail store, warehouse, distribution center, manufacturing operation, or assembly facility in the state;
  • leasing or owning tangible personal property (other than computer software) of more than de minimis value in the state;
  • having one or more employees, agents or independent contractors present in the state who provide on-site design, installation, or repair services on behalf of the remote seller;
  • having one or more employees, exclusive agents or exclusive independent contractors present in the state who engage in activities that substantially assist the person to establish or maintain a market in the state; or
  • regularly employing in the state three or more employees for any purpose.

 

“Physical presence” in a state would not include:

 

  • entering into an agreement under which a person, for a commission or other consideration, directly or indirectly refers potential purchasers to a person outside the state, whether by an Internet-based link or platform, Internet Web site or otherwise;
  • any presence in a state for less than 15 days in a taxable year (or a greater number of days if provided by state law);
  • product placement, setup or other services offered in connection with delivery of products by an interstate or in-state carrier or other service provider;
  • Internet advertising services provided by in-state residents which are not exclusively directed towards, or do not solicit exclusively, in-state customers;
  • ownership by a person outside the state of an interest in a limited liability company or similar entity organized or with a physical presence in the state;
  • the furnishing of information to customers or affiliates in such state, or the coverage of events or other gathering of information in such state by such person, or his representative, which information is used or disseminated from a point outside the state; or
  • business activities directly relating to such person's potential or actual purchase of goods or services within the State if the final decision to purchase is made outside the state.

 

In addition, the bill prohibits the imposition or assessment of a sales, use or other similar tax or a reporting requirement unless the purchaser or seller has physical presence in the state.  This would prohibit all the remote seller legislation (click through, affiliate, economic, marketplace and reporting/notification). If enacted, the legislation would apply with respect to calendar quarters beginning on or after January 1, 2018. (No Regulation Without Representation Act of 2017)

(07/12/2017)

On April 27, 2017, a bipartisan group of senators introduced the Marketplace Fairness Act of 2017 (MFA). Similar legislation was introduced in both 2013 and 2015 and failed to be enacted both times. If enacted, the legislation would authorize states meeting certain requirements to require remote sellers that do not meet a "small seller exception" to collect their state and local sales and use taxes. The small seller exception is set again at $1 million of remote sales annually. The only other significant change from the 2015 version is a prohibition of making the effective date during the 4th quarter of the calendar year. For information on the previous versions of the bill, visit Senate Introduces Marketplace Fairness Act of 2015.  

 

On April 27, 2017, a bipartisan group of lawmakers introduced the Remote Transactions Parity Act (RTPA) of 2017. Similar legislation was introduced in 2015 but failed to be enacted. Like the MFA, the legislation would also create sales and use tax collection obligations for remote sellers, but has some differences and additional provisions. Some key differences from the Marketplace Fairness Act include a different definition of a small seller.  The RTPA has a phased in threshold starting at $10million in year one, then $5million, then $1million.  In year 4, there is no threshold.  In addition to the monetary thresholds, any seller that sells on an electronic marketplace is considered a small seller.  A difference from the 2015 version of the bill is an inclusion of a definition of remote seller which specifies when a company is NOT a remote seller which includes physical presences for more than 15 days in a state, leasing or owning real property and using an agent to establish or maintain the market in a state if the agent does not perform business services in the state for any other person during the taxable year.  For more information on the Remote Transaction Parity Act of 2015, visit House Introduces Remote Transactions Parity Act of 2015. (Marketplace Fairness Act of 2017, Remote Transactions Parity Act of 2017)

(05/04/2017)

On August 25, 2016, House Judiciary Committee Chairman Robert Goodlatte released a discussion draft of the Online Sales Simplification Act of 2016. The legislation would implement a “hybrid origin” approach for remote sales. Under the legislation, states could impose sales tax on remote sales if the origin state participates in a clearinghouse.In this case, the tax is based on the origin state’s baseand taxability rules. The rate would be the origin state rate, unless the destination state participates. In that case, the rate used would be a single state-wide rate determined by each participating destination state. A remote seller would only remit sales tax to its origin state for all remote sales. Only the origin state would be able to audit a seller for remote sales. Non-participating states would not be able to receive distributions from the clearinghouse. Sellers would be required to provide reporting for remotes sales into participating states to the Clearinghouse so it can distribute the tax to the destination state. We will continue to monitor activity and update when the official bill is introduced.  (Discussion draft of Online Sales Simplification Act of 2016)

(09/08/2016)

Pages

Scroll to Top