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On June 30, 2006, Governor Donald Carcieri signed an agreement that allowed Rhode Island to file its petition to be a member of the Streamlined Sales Tax (SST) Governing Board. Effective January 1, 2007, the state will conform to the requirements of the SST Agreement. The SST conformity provisions were included in the Rhode Island budget bill (H.B. 7120), which also contained income tax and property tax provisions that are reported separately. (Tax Day #S.30, July 6, 2006)


Article 17, relating to Rhode Island omnibus tax, has been amended to allow additional time for state compliance with the Streamlined Sales and Use Tax Agreement. Originally scheduled to be completed by June 30, 2004, the statutory amendments necessary to bring the state into compliance with the Agreement are now due to be enacted by June 30, 2005. (R.I. Laws 2004, H.B. 8219; Article 17 Substitute as Amended, Section 5)


A taxpayer in the business of repairing fishing vessels was denied a refund for sales tax paid on marine paint after the issue was raised as a result of a 1999 audit. The taxpayer asserted that he was entitled to a refund because the paint was for certain jobs being used on vessels with a 50-ton carrying capacity, and those jobs could be identified, and those fishing vessels were being used for interstate commerce. However, the Hearing Officer agreed with the Division of Taxation, stating that, though the vessels were carrying cargo through interstate or international waters, they were leaving from and returning to the same port, and the fish caught were only being sold for the benefit of the owners. In addition, the paint had been held in inventory before being used, and storage is a taxable use of tangible personal property. As of June, 2002 paint was included in the list exempt supplies used on fishing vessels, but the change in law was not retroactive and the refund request period was from November 1, 1999 through June 30, 2002. (Administrative Hearing No. 2004-05, March 16, 2004)


In a recent Rhode Island hearing it was ruled that software support services are taxable under the circumstances presented in the case. The state found that the services being sold were an integral part of the overall sale of computer software. The services included maintenance and support agreements in addition to training and consulting services for the software being sold. The taxpayer argued that the contracts were optional and sold separately from the software. However, the court found the services to be taxable due to the definition of a sale which includes ‘any services that are a part of the sale.’ This determination was made in part due to the fact that these services included updates for the software. Furthermore, the real object of these purchases was for the functioning of the software programs. The court found that the services would be pointless without the software. (State of Rhode Island and Providence Plantations Division of Taxation, Administrative Hearing No. 2004-07, April 22, 2004.)


CT kits that were purchased by a for-profit laboratory did not fall within the range of tax exempt medicines, drugs, and devices because they were not prescribed to patients for their own use. Instead, the supplies were used in the daily operation of the laboratory. (Division of Taxation, Administrative Hearing Decision No. 2003-13, December 18, 2003)



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