280-RICR — Department of Revenue

Chapter 10 Director's Office

Subchapter 00 General Administration

280-RICR-10-00-1 Access to Public Records

280-RICR-10-00-1 § 1.1 Purposes

A.The Purposes of this Regulation are:

1.To establish a Regulation to implement R.I. Gen. Laws §§ 38-2-1, et seq. and 42-35-2(a) relating to access to public records maintained by the Department;

2.To provide the public and Department personnel with a Regulation which sets forth the rules and procedures applicable to access to public records maintained by the Department.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-11-04 to 01/04/2022

280-RICR-10-00-1 § 1.2 Authority

This Regulation is promulgated pursuant to R.I. Gen. Laws §§ 38-2-1, et seq. (“Access to Public Records”) and 42-35-2(a).

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-11-04 to 01/04/2022

280-RICR-10-00-1 § 1.3 Application

These rules and regulations shall be liberally construed to permit the Department of Revenue to effectuate the purposes of R.I. Gen. Laws §§ 38-2-1 et seq. and 42-35-2(a).

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-11-04 to 01/04/2022

280-RICR-10-00-1 § 1.4 Severability

If any provision of these rules and regulation, or the application thereof to any person or circumstance, is held invalid by a court of competent jurisdiction, the validity of the remainder of the rules and regulations shall not be affected thereby.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-11-04 to 01/04/2022

280-RICR-10-00-1 § 1.5 Policy

The Department recognizes both the public’s right to access public records and the individual’s right to dignity and privacy. It is the Department’s policy to facilitate public access to all public records that may be disclosed in accordance with R.I. Gen. Laws § 38-2-1, et seq. It is also the policy of the Department to make all public records in the Department’s possession be available for public inspection and copying consistent with applicable state or federal law, unless otherwise prohibited by a court of competent jurisdiction.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-11-04 to 01/04/2022

280-RICR-10-00-1 § 1.6 Procedure for Requesting Public Records

A.Except as provided in § 1.7 of this Part below, a written request to inspect or copy public records should be sent to the Division within the Department that maintains the records requested or, in the alternative, to the Division of Legal Services at the Department of Revenue. Written requests may be mailed, hand delivered, e-mailed or sent via facsimile. Hand delivered requests may be made during the Department’s regular business hours. It is suggested, but not required, that requests be submitted on the form provided by the Department, which is available at the Department or online at http://www.dor.ri.gov/apra/. To assure that the Department can respond to the request as efficiently and as completely as possible, the request should identify and describe the records being requested with as much specificity as possible. A written record of all requests will be maintained within each Division of the Department.

B.If the description of records being requested is not sufficient to allow the Department to identify and locate the requested records, the Department will notify the person requesting such records that additional information is needed to properly respond to the request.

C.Upon receipt of a request for records, the Department will mark on the face of a written request the date the request was received. The Department will permit the inspection or copying of the requested records within ten (10) business days after receiving the written request.

D.If the inspection or copying is not permitted within ten (10) business days of receipt, the Department shall forthwith explain in writing the need for additional time to comply with the request. In such cases the Department may have up to an additional twenty (20) business days to comply with the request if it can demonstrate that the voluminous nature of the request, the number of requests for records pending, or the difficulty in searching for and retrieving or copying the requested records, is such that additional time is necessary to avoid imposing an undue burden on the Department.

E.A written request is not required to be submitted for public information available under R.I. Gen. Laws § 42-35-2 or for other documents prepared for or readily available to the public such as:

1.rules and written statements of policy or interpretations formulated, adopted, or used by the agency; or

2.final orders, decisions, and opinions;

3.Non-written request for public records are subject to the same timelines as written requests. Reasonable time must be given to locate, copy and send the requested records.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-11-04 to 01/04/2022

280-RICR-10-00-1 § 1.7 Hours of Inspections

When a request is made to inspect public records (as opposed to obtain copies), the requester will be advised when the records are available and he/she can then make an appointment to inspect those documents at the Department between the hours of 8:30 a.m. and 3:30 p.m. Monday through Friday. The time frame for the Department to respond to requests to inspect public records is the same as the time frame applicable to responding to requests for copies of public records as set forth above in § 1.6(D) of this Part above.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-11-04 to 01/04/2022

280-RICR-10-00-1 § 1.8 Fees

A.Official publications which the Department prepares in the discharge of its duties to inform the public on matters of public interest will be furnished free of charge when available.

B.The Department will supply one (1) copy of any of its Rules and Regulations to an individual requesting them free of charge. Rules and Regulations of the Department are on file at the Office of the Secretary of State and certified copies thereof may be obtained from that office. Rules and Regulations of the Department are also available online from the Secretary of State’s website as well as the Department of Revenue's website.

C.The Department charges a fee, as provided in R.I. Gen. Laws § 38-2-4, for copying and/or search and retrieval of requested documents consistent with applicable state law. The Department charges $0.15 per copied page; provided however, if the response to the request consists of twenty (20) or fewer copied pages, no fee will be charged. The Department reserves the right to require a deposit of the estimated costs if the estimated costs are $50.00 or more.

D.The cost of copying and search and retrieval as provided in § 1.8(C) of this Part above must be paid in advance of or at the time of delivery or inspection of the requested documents.

E.Department personnel or, where applicable, an outside copy service, will make copies of requested records. The Department does not have a copy machine available for use by the public to make copies.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-11-04 to 01/04/2022

280-RICR-10-00-1 § 1.9 Supervision of Inspections

A.The inspection of public records must be accomplished in a manner which will provide for general supervision by authorized Departmental staff. This is necessary to prevent the misplacement or unauthorized removal of records or any other action which may impair the integrity of the public record.

B.Personnel in charge of the Division having possession of the public record requested shall have overall responsibility for the security of the public record. However, the individual in charge of that Division may designate a staff member(s) to coordinate the functions and responsibilities related to the copying and inspection of public records.

C.All personnel responsible for responding to requests for access to public records shall be made aware, by their supervisors, of the provisions of this regulation and the procedures to be followed when an access to public records request is made. Department personnel having any questions regarding the procedures to be followed should direct inquiries to:

1.The person in charge of the Division or unit within the Department responsible for the activity/function to which the public record being requested relates; or

2.In the event that the public record cannot be readily categorized as falling under the responsibility of a specific Division or unit within the Department, the request should be directed to the Division of Legal Services which will serve as a resource in matters relating to the public's access to public records.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-11-04 to 01/04/2022

Chapter 20 Division of Taxation

Subchapter 00 General Administration

280-RICR-20-00-1 Equal Access to Justice for Small Business and Individuals

280-RICR-20-00-1 § 1.1 Purpose

These rules and regulations implement R.I. Gen. Laws Chapter 42-92. They govern the application and award of reasonable litigation expenses to the prevailing parties in adjudicatory proceedings conducted by the Division of Taxation.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-1 § 1.2 Authority

The rules and regulations herein contained are promulgated pursuant to R.I. Gen. Laws § 42-92-4.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-1 § 1.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation to effectuate the purpose of R.I. Gen. Laws Chapter 42-92 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-1 § 1.4 Severability

If any provision of these rules and regulations, or the application thereof to any person or circumstance, is held invalid by a court of competent jurisdiction, the validity of the remainder of the rules and regulations shall not be affected thereby.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-1 § 1.5 Definitions

A. "Adjudicative officer" means the deciding official, without regard to whether the official is designated as an administrative law judge, a hearing officer or examiner, or otherwise, who presided at the adversary adjudication.

B. "Adjudicatory proceedings" means any proceeding conducted by, or on behalf of, the State of Rhode Island administratively or quasi-judicially which may result in the loss of benefits; the imposition of a fine, the adjustment of a tax assessment; the denial, the suspension or revocation of a license or permit; or which may result in the compulsion or restriction of the activities of a party. Any agency charged by statute with investigating complaints shall be deemed to have substantial justification for said investigation and for the proceedings subsequent to said investigation.

C. "Agency" means Rhode Island Division of Taxation (“Division of Taxation”).

D."Party" means any individual whose net worth is less than five hundred thousand dollars ($500,000) at the time the adversary adjudication was initiated; and, any individual, partnership, corporation, association, or private organization doing business and located in the state, which is independently owned and operated, not dominant in its field, and which employs one hundred (100) or fewer persons at the time the adversary adjudication was initiated.

E. "Reasonable litigation expenses" means those expenses which were reasonably incurred by a party in adjudicatory proceedings, including, but not limited to, attorney's fees, witness fees of all necessary witnesses, and other such costs and expenses as were reasonably incurred, except that:

The award of attorney's fees may not exceed one hundred and fifty dollars ($150) per hour; unless the court determines that special factors justify a higher fee;
No expert witness may be compensated at a rate in excess of the highest rate of compensation for experts paid by this state.

3.Legal, professional, and all other reasonable expenses incurred prior to the commencement of the adjudicatory proceedings are not subject to claim or award under R.I. Gen. Laws Chapter 42-92.

4.Adjudicatory proceedings are commenced when a taxpayer requests a hearing to the Tax Administrator within the time prescribed by statute.

F. "Substantial justification" means that the initial position of the Division of Taxation, as well as the Division of Taxation's position in the proceedings, has a reasonable basis in law and fact.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-1 § 1.6 Procedures Governing Applications for Awards or Litigation Expenses

A. All claims for an award of reasonable litigation expenses shall be made on an application form to be supplied by the Division of Taxation, and shall be filed within thirty (30) days of the mailing of a final decision by the Division of Taxation. In the event a party requests a rehearing after issuance of a final decision and the request for rehearing is denied, the claim shall be filed within thirty (30) days of issuing the denial of rehearing.

B. All claims filed pursuant to these regulations shall be filed in duplicate and shall contain:

A statement that the claimant requesting the litigation expenses qualifies as a "party" pursuant to R.I. Gen. Laws § 42-92-2;
A summary of the legal and factual basis for filing the claim;

3.A detailed breakdown of the reasonable litigation expenses incurred by the party in the adjudicatory proceeding, including copies of invoices, bills, affidavits, and other documents requested by the hearing officer subsequent to the initial filing of the claim;

A notarized statement swearing to the accuracy and truthfulness of the statements and information contained in the claim, and/or filed in support thereof.

C. Upon receipt of a properly filed claim, the Tax Administrator shall forward the claim to the adjudicative officer who presided over the adversary adjudication and shall also forward a copy of the claim to the representative of the Tax Division who litigated the matter before the adjudicative officer.

D. The representative of the Tax Division may file an objection to the claim for award setting forth his/her reasons therefore. Such objection must be filed with the adjudicative officer within thirty (30) days of receipt of the claim by the adjudicative officer, but the period for filing such objection may be extended for good cause.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-1 § 1.7 Allowance of Awards

A.Whenever a party which has provided the Division of Taxation with timely notice of its claim of litigation expenses as provided in these rules and prevails in the contested agency action, and the adjudicative officer finds that the agency was not substantially justified in the actions leading to the proceedings and in the proceedings itself, an award shall be made of reasonable litigation expenses.

B. The decision of the adjudicative officer to make an award shall be made a part of the record and shall include written findings and conclusions with respect to the award, including a determination as to whether the claimant seeking the award, qualifies as a party under R.I. Gen. Laws § 42-92-2 and as to the reasonableness of the amount of the award. A copy of said fee determination shall be sent to the claimant. No other agency official may review the award.

C. The adjudicative officer may recalculate the amount to be awarded to the prevailing party, without regard to the amount claimed to be due on the application for an award.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-1 § 1.8 Disallowance of Awards

A. No award of fees or expenses may be made if the adjudicative officer finds that the Division of Taxation was substantially justified in the actions leading to the proceeding and in the proceeding itself.

B.The adjudicative officer may, at his/her discretion, deny fees or expenses if special circumstances make an award unjust.

C.Notice of the decision disallowing an application for an award of fees and expenses shall include written findings and conclusions with respect to the denial of the award and shall be sent to the party by the Division of Taxation via regular mail.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-1 § 1.9 Appeals

Any party dissatisfied with the fee determination by the adjudicatory officer may appeal to the Sixth Division District Court for a de novo review of the record.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-2 Administrative Hearing Procedures

280-RICR-20-00-2 § 2.1 Definitions

A.The words "Tax Administrator" means the Tax Administrator and his or her duly authorized agents.

B.The words “Tax Division” means the Division of Taxation in the Department of Revenue.

C.The words “Hearing Officer” means the individual(s) authorized by law and duly appointed by the Tax Administrator to conduct hearings on contested matters and make written recommendations thereon to the Tax Administrator for his or her final decision and order.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-2 § 2.2 Purpose

This regulation implements various provisions of R.I. Gen. Laws Title 44 that provide for administrative hearings before the Tax Administrator regarding contested tax matters. These rules and regulations shall be construed liberally to further the fair, prompt and orderly administration of hearings regarding contested tax matters in a manner consistent with due process and the provisions of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-2 § 2.3 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws § 44-1-4. These rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws §§ 42-35-1 et seq.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-2 § 2.4 Application

These rules and regulations shall apply to all contested tax matters involving the Tax Division. A tax matter, for purposes of these rules and regulations, involves any tax, fee, penalty or surcharge that the Tax Administrator or the Tax Division are statutorily authorized to administer, collect or enforce. Such tax matters include, but are not limited to, assessments, notices of deficiency determination, refund denials, tax credit denials, suspensions or revocations of licenses or permits, and the denial of exemption certificates.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-2 § 2.5 Severability

If any provision of these rules and regulations, or the application thereof to any person or circumstances, is held invalid by a court of competent jurisdiction, the validity of the remainder of the rules and regulations shall not be affected thereby.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-2 § 2.6 Coordination with Other Rules of Practice and Procedure

The hearing officer may conduct formal administrative hearings on contested tax matters pursuant to Rules of Practice and Procedure promulgated by another agency board or office. In the event, that the Tax Division’s Rules of Practice and Procedure conflict with such other Rules, or such other Rules fail to address an issue set forth in the Tax Division Rules of Practice and Procedure, the hearing officer shall utilize these Rules. In the event that such other Rules of Practice and Procedure address an issue not set forth herein, the hearing officer shall utilize these Rules of Practice and Procedure.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-2 § 2.7 Rules of Practice and Procedure

A.Appearance and Practice before the Tax Administrator.

1.Any attorney-at-law or any person authorized by law to practice accountancy or person who is actively enrolled to practice before the Internal Revenue Service, may represent any taxpayer in any hearings or other proceedings before the Tax Administrator. Attorneys who are not licensed to practice in Rhode Island must first obtain admission pro hac vice in accordance with Rule 9(a) of Article II of Rhode Island Supreme Court Rules. See, In re Ferrey, 774 A.2d 62 (RI 2001). Such person must officially enter his or her appearance with the Tax Administrator and, if not accompanied by the taxpayer, must have a properly executed power of attorney from the taxpayer.

2.Any person may appear and act for himself or herself; or

a.for a partnership of which he or she is a partner; or

b.for a limited liability company of which he or she is a managing member; or

c.for a limited partnership of which he or she is a general partner or an officer of a corporate general partner; or

d.for a corporation of which he or she is an officer; or

e.for an association or other organization of which he or she is a member or official, and being duly authorized by such association or organization to represent it, in any hearings or other proceedings before the Tax Administrator.

3.A family member may appear and act for another family member in any hearings provided that the person appearing before the Tax Administrator has a properly executed power of attorney. For purposes of this regulation, family member means a husband, wife, child (including foster child) mother, father, brother, sister, grandparent, or grandchild.

4.Notice of any change of attorney, accountant, or other duly authorized representative, shall be given promptly to the Tax Administrator. Said notice of change or withdrawal must be consented to by the taxpayer in writing.

B.Form and Style of Papers.--All papers filed with the Tax Administrator shall be either printed or typewritten, and if typewritten shall be on white paper of the usual legal size (8 1/2" x 14") or the usual letter size (8 1/2" x 11") and shall be clearly legible.

C.Request for Hearing Procedure.— Taxpayer must request a hearing in writing. The request for hearing shall contain in substance the following:

1.A clear and concise statement of the nature of the tax or other material which is disputed, objected to, or otherwise sought to be contested and of the facts on which the taxpayer relies.

2.A clear and concise statement of the taxpayer's objection to the assessment or determination with which he or she is aggrieved, and of contentions of law, if any, which the taxpayer desires to raise, including the application of any rule or regulation which may be involved;

3.A prayer setting forth the relief sought; and

4.The name and address of the taxpayer, any identifying number assigned to such taxpayer with reference to the particular tax in question, as well as the name and address of his or her attorney or accountant, if any.

D.Filing of Request for Hearing.--The request for hearing shall be filed in writing with the Tax Administrator and be signed by the taxpayer or by his or her attorney or accountant. Such filing shall be made within the statutory time limit either by making delivery by hand, or by regular mail, postage prepaid, addressed to the Tax Administrator at One Capitol Hill, Providence, Rhode Island, 02908-5800. Failure to conform to the requirements of § 2.7(D) of this Part or of the preceding § 2.7(C) of this Part, shall be grounds, at the discretion of the Tax Administrator, for dismissal of the request for hearing.

E.Any person aggrieved by any assessment or determination and who has requested a hearing thereon pursuant to the provisions of law, shall first be afforded an opportunity to have a preliminary conference before the Tax Administrator’s designee (a/k/a a preliminary conferee) concerning said assessment or determination prior to the holding of such hearing, and for such purpose, the Tax Administrator shall designate the time and place for such conference. If there is no factual dispute, but only a question of law, such preliminary conference may be waived by either party.

1.A preliminary conference is in the nature of a settlement discussion and any evidence presented before the preliminary conferee must be resubmitted to the hearing officer if the matter goes forward to hearing.

2.Recording by electronic equipment at any preliminary conference, pre-hearing or hearing will not be permitted.

3.If a party to fails to appear at a preliminary conference or otherwise fails to prosecute or defend a matter as provided by these Rules, the preliminary conferee, acting on his or her own initiative, may petition, in writing, the Tax Administrator for a default. The party being defaulted shall be given prior written notice of the petition and thirty (30) days therefrom to respond in writing. If default enters, the hearing request may be deemed to have been withdrawn without the issuance of a final decision and order. A defaulted party may request reinstatement of their matter pursuant to a Motion for Rehearing as set forth in § 2.7(V) of this Part.

F.Substitution of Parties.--In the event of the death of the taxpayer, or in the event of insolvency or other proceedings, or for other cause, the Tax Administrator may order the substitution of the proper parties. In the case of the death of the taxpayer, his or her executor or administrator may appear to prosecute the request for hearing.

G.Continuances of Hearings and Default of Hearing Proceedings.

1.When notice of hearing has been sent to a taxpayer and his or her representative, if known, the date assigned may be postponed to an agreed upon date. Further continuances will only be granted for valid reasons, (for example, illness of an important party or witness, court appearance of an attorney with no other attorney available for the hearing, etc.)

2.If the tax has been paid, continuances as requested will be freely made. Otherwise, inordinate delays will be cause for refusal of continuances, and the hearing will proceed as scheduled, with or without the presence of the taxpayer or his or her representative.

3.If a party fails to appear at a hearing or a pre-hearing conference or otherwise fails to prosecute or defend a matter as provided by these Rules, the opposing party or the hearing officer, acting on his or her own initiative, may move for a default and the hearing request may be deemed to have been withdrawn without the issuance of a final decision and order. Notation of their default and the grounds therefor shall be noted in the record. The defaulted party shall be given notice by mail and may request reinstatement of the matter pursuant to a Motion for Rehearing as set forth in Section V of this Sub-part.

H.Scope of Hearing.--The Tax Administrator will not consider, unless equity and good conscience so require, any issue of fact or contention of law not specifically set out in the request for hearing.

I.Hearing Officers to Hear Case.--Hearings shall be conducted by a hearing officer appointed by the Tax Administrator who shall have authority to examine witnesses, to rule on motions, and to rule upon the admissibility of evidence. He or she shall have the authority to continue or recess any hearing, to keep the record open for the submission of additional evidence, and to make recommendations to the Tax Administrator. If for any reason a hearing officer cannot continue on a contested case, another hearing officer will become familiar with the record and perform any function remaining to be performed without the necessity of repeating any previous proceedings in the case.

J.Conduct of Hearing.--The hearing shall be convened by the hearing officer, appearances shall be noted, any motions or preliminary matters shall be taken up, and then each party shall have opportunity to present its case generally on an issue by issue basis, by calling and examining witnesses and introducing documentary evidence. The Division of Taxation shall first present its case followed by presentation of the taxpayer's case. Each party shall also have opportunity to cross-examine opposing witnesses on any matter relevant to the issue. Any objection to testimony or evidentiary offers should be made, and the basis of the objection stated. The hearing officer may question any party or witness for the purpose of clarifying his or her understanding or to clarify the record. Proceedings are not open to the public.

K.Rules of Evidence.--The rules of evidence set forth in R.I. Gen. Laws Chapter 42-35, entitled "Administrative Procedures" shall apply in all contested cases. Section 10 of that Act provides, as follows:

1.Rules of evidence. Official notice.--In contested cases:

a.Irrelevant, immaterial, or unduly repetitious evidence shall be excluded. The rules of evidence as applied in civil cases in the Superior Courts of this State shall be followed; but, when necessary to ascertain facts not reasonably susceptible of proof under those rules, evidence not admissible under those rules may be submitted (except where precluded by statute) if it is of a type commonly relied upon by reasonably prudent men in the conduct of their affairs. Agencies shall give effect to the rules of privilege recognized by law. Objections to evidentiary offers may be made and shall be noted in the record. Subject to these requirements, when a hearing will be expedited and the interests of the parties will not be prejudiced substantially, any part of the evidence may be received in written form;

b.Documentary evidence may be received in the form of copies or excerpts, if the original is not readily available. Upon request, parties shall be given an opportunity to compare the copy with the original;

c.A party may conduct cross examinations required for a full and true disclosure of the facts;

d.Notice may be taken of judicially cognizable facts. In addition, notice may be taken of generally recognized technical or scientific facts within the agency's specialized knowledge; but parties shall be notified either before or during the hearing, or by reference in preliminary reports or otherwise, of the material noticed, including any staff memoranda or data, and they shall be afforded an opportunity to contest the material so noticed. The agency's experience, technical competence, and specialized knowledge may be utilized in the evaluation of the evidence.

L.Oral Evidence, Witnesses, and Penalty for False Statements. A hearing officer may require the parties in a case to indicate the persons they expect to call as witnesses. The testimony of witnesses shall be made under oath or affirmation and the making of false statements may subject a person to criminal prosecution under R.I. Gen. Laws Chapter 11-33, as amended.

M.Requests for Subpoena Duces Tecum. Any party may request a hearing officer to issue a subpoena duces tecum or the hearing officer may do so on his or her own motion. Said request shall set forth, in detail, the information sought, the relevance thereof, and the reasonableness of the scope of the subpoena. The party requesting the issuance of said subpoena shall have the burden of showing the relevance and reasonableness of the scope of the subpoena. A subpoena duces tecum may be quashed after its issuance if it is subsequently determined that the matters sought to be adduced are not relevant or the subpoena is not reasonable in scope.

N.Documentary Evidence.--Documentary evidence of exhibits will be marked for identification. Copies or excerpts of documents are permissible.

O.Consolidated Hearings.--A party may file a written motion to have two or more cases consolidated for purposes of hearing, whether on written submission or oral; or the hearing officer may, on his or her own motion, consolidate two or more cases. The motion should state the basis for consolidation.

P.Severance.--Where two or more cases have been consolidated for purposes of hearing, a party may move to sever his or her case for cause. Severance will lie within the discretion of the hearing officer.

Q.Ex Parte Communications.--There shall be no verbal communications with the hearing officer regarding any issue of fact or law in a case, without notice and opportunity for all parties to participate. And there shall be no written communications that are not transmitted at the same time to all parties, except that an individual involved in rendering the decision in a case may communicate ex parte with employees of the agency who have not participated in any hearing in the case for the purpose of utilizing their special skills or knowledge in evaluating the evidence.

R.Agreed Statement of Facts.--The parties may, by stipulation in writing, filed with the Tax Administrator, agree upon any facts involved in any request for hearing. Where an agreed statement of facts is contemplated, a proposed statement shall be submitted on behalf of the taxpayer well in advance of the hearing date. To the extent that all the facts are not agreed upon, testimony or exhibits may be presented at the oral proceedings. If for any reason the parties are unable to reach agreement on the facts prior to the scheduled date of the hearing, the oral proceedings shall go forward as scheduled without further notice to the parties unless postponed in accordance with § 2.7 (G) of this Part heretofore stated.

S.Transcript of Oral Proceedings. Proceedings in a pending hearing may be recorded by one of two ways:

1.The proceedings may be recorded transcribed by a stenographer at the discretion of the hearing officer or at the initiative of any party.

a.If stenographic recording is ordered by the hearing officer, the costs of such recording shall be charged to the Tax Division. The stenographic notes of hearings taken and transcripts thereof shall be for the information reference and use of the hearing officer. Copies of said transcripts may be obtained only by the taxpayer and/or his representative from the Tax Administrator at his reproduction costs or from the stenographer upon the terms and conditions fixed by the stenographer.

b.If a stenographic is ordered by a party, the costs of the recording shall be borne by the requesting party or upon the terms and conditions agreed upon between the parties. The hearing officer shall be provided an original copy of the transcript at no cost for his or her own reference and use.

2.The proceedings may be recorded by audiotape, digital recorder or similar electronic device by the hearing officer. Any party may request a copy of such recordings from the hearing officer and they may convert such recordings into a written transcript at their own cost. The hearing officer may request a copy of such transcripts at no cost for his or her reference and use.

T.Findings of Fact.--Requests for proposed findings of fact (R.I. Gen. Laws § 42-35-12) must be submitted in a separate document and be so headlined. A statement of facts included in a brief or memorandum of law will be considered only to represent the proponent's version of the facts.

U.Briefs.--Briefs may be filed either before or at the time of the hearing, or after the hearing within a time to be fixed by the hearing officer.

V.Requests for Rehearing.

1.A request for rehearing which is submitted prior to the issuance of the final decision of the hearing officer and/or the Tax Administrator, should be made in writing, setting forth the substance of the additional evidence to be offered, and the reason for failure of the party to offer it at the prior proceedings.

2.A request for rehearing which is submitted after the issuance of the final decision must be made within thirty (30) days, after such issurance, and must state the grounds for the request, setting forth the substance of the evidence to be offered, and the reason for failure of the party to offer it at the prior proceeding.

3.Rehearing will be denied if the proffered evidence does not bear on any issue in contest in the original proceedings, or if the request appears to be merely for delay. A second request for rehearing after the granting or denial of a prior request for rehearing will not be permitted.

4.Stays Pending Appeal---Judicial review of final decisions of the Tax Administrator are by trial de novo before the Sixth Division District Court pursuant to RI Gen. Laws §§ 8-8-24 et. seq. Accordingly, a motion for a stay of a license or permit revocation or suspension pending appeal is made as a preliminary motion accompanying the complaint filed with the reviewing court.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-3 Access to Public Records Regulation

280-RICR-20-00-3 § 3.1 Purposes

A.The Purposes of this Regulation are:

1.To establish a Regulation to implement R.I. Gen. Laws § 38-2-1, et seq. and § 42-35-2(a) relating to access to public records maintained by the Department;

2.To provide the public and Department personnel with a Regulation which sets forth the rules and procedures applicable to access to public records maintained by the Department.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2017-11-30 to 01/04/2022
Adoption — effective from 2010-06-21 to 11/30/2017

280-RICR-20-00-3 § 3.2 Authority

This Regulation is promulgated pursuant to R.I. Gen. Laws § 38-2-1, et seq. (“Access to Public Records”) and § 42-35-2(a).

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2017-11-30 to 01/04/2022
Adoption — effective from 2010-06-21 to 11/30/2017

280-RICR-20-00-3 § 3.3 Application

These rules and regulations shall be liberally construed to permit the Department of Revenue to effectuate the purposes of R.I. Gen Laws §§ 38-2-1, et seq. and 42-35-2(a).

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2017-11-30 to 01/04/2022
Adoption — effective from 2010-06-21 to 11/30/2017

280-RICR-20-00-3 § 3.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2017-11-30 to 01/04/2022
Adoption — effective from 2010-06-21 to 11/30/2017

280-RICR-20-00-3 § 3.5 Policy

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2017-11-30 to 01/04/2022
Adoption — effective from 2010-06-21 to 11/30/2017

280-RICR-20-00-3 § 3.6 Procedure for Requesting Public Records

A.Except as provided in § 3.7 of this Part below, a written request to inspect or copy public records should be sent to the Division within the Department that maintains the records requested or, in the alternative, to the Division of Legal Services at the Department of Revenue. Written requests may be mailed, hand delivered, e-mailed or sent via facsimile. Hand delivered requests may be made during the Department’s regular business hours. It is suggested, but not required, that requests be submitted on the form provided by the Department, which is available at the Department or online at http://www.dor.ri.gov/apra/. To assure that the Department can respond to the request as efficiently and as completely as possible, the request should identify and describe the records being requested with as much specificity as possible. A written record of all requests will be maintained within each Division of the Department.

E.A written request is not required to be submitted for public information available under R.I. Gen. Laws § 42-35-2 or for other documents prepared for or readily available to the public such as:

1.rules and written statements of policy or interpretations formulated, adopted, or used by the agency; or

2.final orders, decisions, and opinions;

3.Non-written request for public records are subject to the same timelines as written requests. Reasonable time must be given to locate, copy and send the requested records.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2017-11-30 to 01/04/2022
Adoption — effective from 2010-06-21 to 11/30/2017

280-RICR-20-00-3 § 3.7 Hours of Inspections

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2017-11-30 to 01/04/2022
Adoption — effective from 2010-06-21 to 11/30/2017

280-RICR-20-00-3 § 3.8 Fees

A.Official publications which the Department prepares in the discharge of its duties to inform the public on matters of public interest will be furnished free of charge when available.

D.The cost of copying and search and retrieval as provided in § 3.8(C.) of this Part above must be paid in advance of or at the time of delivery or inspection of the requested documents.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2017-11-30 to 01/04/2022
Adoption — effective from 2010-06-21 to 11/30/2017

280-RICR-20-00-3 § 3.9 Supervision of Inspections

1.The person in charge of the Division or unit within the Department responsible for the activity/function to which the public record being requested relates; or

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2017-11-30 to 01/04/2022
Adoption — effective from 2010-06-21 to 11/30/2017

280-RICR-20-00-4 Taxpayer Rights and Responsibilities

280-RICR-20-00-4 § 4.1 General Statement of Rhode Island Taxpayers’ Rights and Responsibilities

Taxpayers have certain rights and responsibilities in the administration of Rhode Island tax law. To ensure consistent application of the tax law and to guarantee that the rights, privacy, and property of Rhode Island taxpayers are adequately protected during tax assessment, collection and enforcement processes, the following rights and responsibilities of taxpayers are set forth.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2017-11-30 to 01/04/2022
Periodic Refile — effective from 2001-12-27 to 11/30/2017
Periodic Refile — effective from 2001-12-20 to 12/27/2001

280-RICR-20-00-4 § 4.2 The Taxpayers of the State of Rhode Island have a right to:

A.Receive fair and courteous treatment from all the Division of Taxation’s employees;

B.Receive tax forms and information written in plain language;

C.Receive prompt and accurate responses to all questions and requests for tax assistance;

D.Be assured that the department will keep confidential the financial information you give it;

E.Receive tax notices that provide an explanation of the amount being billed;

F.Know that the department's employees are not paid or promoted as a result of money billed to or collected from taxpayers;

G.Timely processing of refund claims;

H.Pay outstanding tax liabilities in installments in cases of proven hardship;

I.Have the department begin and complete its audits in a timely and expeditious manner after notification of intent to audit;

J.Receive notice of any impending collection actions which require sale or seizure of property, or freezing of assets;

K.Designate which tax liability a payment is to be applied to;

L.Have an offer of compromise on a delinquent tax liability considered by the Tax Administrator pursuant to his/her authority under R.I. Gen. Laws § 44-1-10 and any regulation pertaining thereto;

M.Be provided with information regarding tax law and new developments in tax law through publications such as newsletters and synopsis booklets on Rhode Island tax law;

N.Be provided with information, upon request, regarding collection efforts being made against a joint obligor of the taxpayer;

O.Be represented or advised by counsel or other qualified representatives at any time in administrative interactions with the Division;

P.Request that penalties be abated where there was no negligence or intentional disregard of the law;

Q.A full explanation of all actions by a Revenue Agent or other Examiner during an audit or a Revenue Officer during collection activities;

R.Copies of an auditor's workpapers and to have a closing conference with the auditor;

S.Reimbursement for reasonable litigation expenses pursuant to R.I. Gen. Laws Chapter 42-92 if the taxpayer prevails in a contested matter and the actions of the Division of Taxation are without substantial justification;

T.Reimbursement of bank charges resulting from an erroneous levy on a bank account;

U.Abatement of penalty and/or interest where the penalty and/or interest is attributable to erroneous written advice of the Division of Taxation. The advice must have been provided in response to specific written request to the tax administration by the taxpayer and must have been reasonably relied upon.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2017-11-30 to 01/04/2022
Periodic Refile — effective from 2001-12-27 to 11/30/2017
Periodic Refile — effective from 2001-12-20 to 12/27/2001

280-RICR-20-00-4 § 4.3 Rhode Island Taxpayers’ Responsibilities

A.It is the responsibility of all Rhode Island Taxpayer to comply with the provisions of R.I. Gen. Laws Title 44. These Responsibilities include, but are not limited, the following.

1.Business Taxpayers must register with the Division of Taxation and apply for applicable tax permits and licenses required for operation;

2.Business taxpayers must keep accurate and complete records for a three (3) year period;

3.All taxpayers must file returns and pay taxes in a timely manner;

4.All taxpayers must ensure that the information declared on their tax return is complete and accurate;

5.All taxpayers must know their tax reporting obligations and seek instructions when they are uncertain;

6.All taxpayers must have documentation to substantiate timely claims for refund;

7.Business taxpayers must notify the Division of Taxation and pay taxes promptly when closing or transferring a business.

B.This regulation shall be made available to taxpayers Upon request at the Division of Taxation or at the Rhode Island Secretary of State’s Office. This regulation will also be available online at the Division of Taxation’s website and on the Rhode Island Secretary of State’s website.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2017-11-30 to 01/04/2022
Periodic Refile — effective from 2001-12-27 to 11/30/2017
Periodic Refile — effective from 2001-12-20 to 12/27/2001

280-RICR-20-00-5 Procedures in Handling Requests for Issuance of Declaratory Orders

280-RICR-20-00-5 § 5.1 Purpose

This regulation describes the procedures with which a taxpayer or authorized representative must comply in requesting the issuance of a Declaratory Order.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Amendment — effective from 2003-01-01 to 10/03/2017
Periodic Refile — effective from 2002-01-09 to 01/01/2003

280-RICR-20-00-5 § 5.2 Authority

This Regulation is promulgated pursuant to R.I. Gen. Laws §§ 42-35-8 and 44-1-4.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Amendment — effective from 2003-01-01 to 10/03/2017
Periodic Refile — effective from 2002-01-09 to 01/01/2003

280-RICR-20-00-5 § 5.3 Declaratory Orders

A.Based upon a taxpayer’s petition filed pursuant to R.I. Gen. Laws § 42-35-8, the Tax Administrator interprets Rhode Island tax law and regulations and applies them to a specific set of facts set forth in the request. The Order issued by the Tax Administrator has precedential value and may be generally relied on by all persons with respect to subsequent like transactions.

B.General Information Letters –A General Information Letter (commonly referred to as a “Letter Ruling”) is unlike a Declaratory Order in that it generally seeks an interpretation of tax law or regulation without applying it to a specific set of facts. A General Information Letter may be issued where it appears that general information only is requested, or where a request for a Declaratory Order does not comply with all the requirements for a Declaratory Order. General Information Letters may not be relied upon by any taxpayer other than the taxpayer who requested the information. General Information Letters are not binding on the Tax Division if there has been a misstatement or omission of material facts or, on a prospective basis, if there has been a change in law or applicable regulations or a decision on point is issued by the Rhode Island or Federal Courts.

C.Requirements – Each request for a Declaratory Order must contain:

1.the name, address, and registration/identification number of the taxpayer requesting the Declaratory Order. If the taxpayer is a corporation, the state of incorporation;

2.a carefully detailed statement of all relevant facts relating to the transaction. Conferences with a taxpayer requesting an order shall not be allowed;

3.a true copy of all relevant documents bearing on the issue or issues. Relevant facts reflected in documents submitted must be included in the taxpayer’s statement and not merely incorporated by reference, and must be accompanied by an analysis of their bearing on the issue(s), specifying the pertinent provisions;

4.a statement whether, to the best of the knowledge of the taxpayer or his/her representative, the identical issue is being considered by the Division of Taxation in connection with an active examination or audit of a tax return already filed;

5.a statement disclosing whether or not an order request on the same or similar issue has been or is being submitted to the Internal Revenue Service or to the taxing jurisdiction of another state;

6.a statement of the Declaratory Order requested by the taxpayer and the taxpayer’s argument in support of its request, including relevant authority for such request.

D.A Declaratory Order will not be issued:

1.if the same or a similar issue is before the Tax Division in connection with an audit examination of the same taxpayer for the same or any other prior tax period;

2.in response to inquiries concerning alternative plans of proposed transactions or concerning hypothetical situations;

3.on only part of an integrated transaction.

E.After receiving a request for a Declaratory Order, the Tax Division must:

No later than sixty (60) days after receiving a petition, issue a Declaratory Order in response to the petition, decline to issue the Order, or schedule the matter for further consideration.

2.If the Tax Division declines to issue a Declaratory Order, it shall promptly notify the petitioner of its decision. The decision must be in a record and must include a brief statement of the reasons for declining. An agency decision to decline to issue a declaratory order is subject to judicial review for abuse of discretion. An agency failure to act within the applicable time is subject to judicial action under § 42-35-15.

3.If the Tax Division issues a Declaratory Order, the Order must contain the names of all parties to the proceeding, the facts on which it is based, and the reasons for the agency's conclusion. Declaratory Orders are effective only if filed with the Secretary of State. The order has the same status and binding effect as an order issued in a contested case and is subject to judicial review under § 42-35-15.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Amendment — effective from 2003-01-01 to 10/03/2017
Periodic Refile — effective from 2002-01-09 to 01/01/2003

280-RICR-20-00-5 § 5.4 Binding Effect of Declaratory Orders

A.A Declaratory Order represents the position of, and is binding on, the Tax Division with respect to

1.a particular transaction (and subsequent like transactions) involving the persons identified as interested parties in the request for issuance of the Declaratory Order and

2.other transactions involving persons other than those identified as interested parties in the request for issuance of the Declaratory Order, but such other persons have the burden of establishing that the facts and circumstances involved in their transactions are substantially the same and are not materially different from the facts and circumstances involved in the transaction on which the Declaratory Order is based.

B.With respect to the taxpayer to which a Declaratory Order was originally issued or a person identified as an interested party in the request therefor, a Declaratory Ruling is not binding on the Tax Division if:

1.there has been a misstatement or omission of material facts;

2.the facts subsequently developed are materially different from the facts on the Declaratory Order was based.

C.With respect to any other person, a Declaratory Order is not binding on the Tax Division if:

1.the facts and circumstances involved in such other person’s transactions are not substantially the same or are materially different from the facts and circumstances involved in the transaction on which the Declaratory Order is based.

D.A Declaratory Order is not binding on the Tax Division (on a prospective basis) if:

1.there has been a change in the applicable law or regulations;

2.a decision on point is issued by the Rhode Island or Federal courts.

E.A Declaratory Order found to be in error or not in accord with the current view of the Division of Taxation may be modified or revoked. The revocation or modification of an order will not be applied retroactively with respect to the taxpayer to whom the order was originally issued or to a taxpayer with respect to subsequent like transactions relying on such order in good faith.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Amendment — effective from 2003-01-01 to 10/03/2017
Periodic Refile — effective from 2002-01-09 to 01/01/2003

280-RICR-20-00-5 § 5.5 Effect of Declaratory Orders

Declaratory Orders disposing of petitions have the same status as agency orders in contested cases. In the event that a Declaratory Order is contested, the tax administrator’s prior acceptance of a factual presentation for purposes of rendering said order is not a waiver of his/her rights to cross-examine, supplement or rebut the taxpayer’s factual recitals set forth in the request for the Declaratory Order.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Amendment — effective from 2003-01-01 to 10/03/2017
Periodic Refile — effective from 2002-01-09 to 01/01/2003

280-RICR-20-00-5 § 5.6 Withdrawal of Requests

A.A taxpayer may withdraw a request for issuance of a Declaratory Order at any time prior to the issuance thereof. The Tax Division will retain all correspondence and documents and may consider them in any subsequent audit examination of such taxpayer.

B.Taxpayers requesting the issuance of Declaratory Orders must do so on the basis that the text thereof will be open to public inspection, subject to the deletions set forth herein. Taxpayers requesting the issuance of Declaratory Orders waive all copyrights, rights to privacy and similar rights to prevent disclosure of the text thereof, except such rights as are provided herein.

C.Before making any Declaratory Order available for public inspection, the Tax Division shall exercise care to ensure the deletion of the names, addresses, tax registration numbers or any other means of identifying the taxpayer to whom the Declaratory Order applies.

D.A request by or for a taxpayer must be signed by the taxpayer or his/her authorized representative. A Power of Attorney (Form RI 2848) may be used with regard to Declaratory Orders requested under this regulation.

1.Requests must be directed to:

TAX ADMINISTRATOR‎One Capitol Hill‎Providence, RI 02908-5800

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Amendment — effective from 2003-01-01 to 10/03/2017
Periodic Refile — effective from 2002-01-09 to 01/01/2003

280-RICR-20-00-6 Offers in Compromise

280-RICR-20-00-6 § 6.1 Purpose

The purpose of this regulation is to allow the Tax Administrator to, pursuant to R. I. Gen. Laws § 44-1-10, with the approval of the Director of Revenue, compromise, abate, or cancel any tax, excise, fee, penalty, interest or other charge payable to the Tax Administrator if he/she determines that said charge is uncollectible, illegal or excessive in whole or in part.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-6 § 6.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws §§ 4-1-4 and 44-1-10. These rules have been prepared in accordance with the requirements of R.I. Gen. Laws §§ 42-35-1 et seq.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-6 § 6.3 Application

The terms and provisions of these rules and regulations shall be liberally construed to permit the Department of Revenue to effectuate the purpose of R.I. Gen. Laws § 44-1-10 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-6 § 6.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-6 § 6.5 Form RI 656

A.A taxpayer may propose an offer in compromise by filing Form RI 656 with the Tax Administrator. The offer, in addition to taxpayer identification, shall set forth:

1.type(s) of tax;

2.the amount of offer in compromise;

3.reasons for the offer in compromise and

4.any information relating to offers in compromise submitted to the Internal Revenue Service.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-6 § 6.6 Form RI 433

When making such offer, or within ten (10) days from the date of application, the taxpayer shall submit a completed Rhode Island Form 433.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-6 § 6.7 Withdrawal, Rejection or Acceptance of Offer

The offer may be withdrawn by the taxpayer at any time prior to its acceptance. If the offer is rejected, the taxpayer will be notified by the Tax Administrator in writing, and if payment of the compromise offer was made at the time of application, the payment remitted with the proposed compromise will be returned to the taxpayer without interest. An offer is considered accepted only when the taxpayer is notified in writing of its acceptance. Full payment must be made within thirty (30) days from date of notification that the offer is accepted. Accepting or rejecting an offer in compromise is a discretionary determination that does not give rise to a cause of action.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-6 § 6.8 Additional Information

The Tax Administrator may request additional financial or other information as he/she deems necessary in considering the offer.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-6 § 6.9 Failure to Comply

If the taxpayer fails to comply with all provisions of state law relating to the filing of returns and paying required taxes for five (5) years from the date the offer was accepted, the Tax Administrator may treat the offer as defaulted and reinstate the unpaid balance. Interest shall accrue from the date of default.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-00-7 Filing Deadlines: Weekends, Holidays and Mailings

280-RICR-20-00-7 § 7.1 Purpose

The purpose of this regulation is to provide for additional time to file and pay Rhode Island tax when a due date falls on a weekend or legal holiday.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Adoption — effective from 2017-10-03 to 10/03/2017

280-RICR-20-00-7 § 7.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws § 44-1-4. This regulation has been prepared in accordance with the requirements of R.I. Gen. Laws §§ 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Adoption — effective from 2017-10-03 to 10/03/2017

280-RICR-20-00-7 § 7.3 Application

This regulation shall be liberally construed so as to permit the Division of Taxation the authority to effectuate the purpose of R.I. Gen. Laws Title 44.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Adoption — effective from 2017-10-03 to 10/03/2017

280-RICR-20-00-7 § 7.4 Severability

If any provision of this regulation, or the application thereof to any person or circumstances, is held invalid by a court of competent jurisdiction, the validity of the remainder of this regulation shall not be affected thereby.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Adoption — effective from 2017-10-03 to 10/03/2017

280-RICR-20-00-7 § 7.5 General

When the due date for filing any Rhode Island tax return or making a payment falls on a Saturday, Sunday or Rhode Island legal holiday, the filing or payment is considered timely if it is made on the next business day which is not a Saturday, Sunday or Rhode Island legal holiday.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Adoption — effective from 2017-10-03 to 10/03/2017

280-RICR-20-00-7 § 7.6 Special Federal Due Date – April 15th

A.When the due date for filing any Rhode Island return for which there is a corresponding Federal filing falls on a day not covered by the general provision above and when that is a day for which the Internal Revenue Service has issued a special extension for the filing of Federal returns, the Rhode Island due date is likewise extended. This may occur when the Emancipation Day holiday in Washington, D. C. and the April 15th deadline coincide.

B.This section does not apply to payments required on notices of tax due under Title 44 of the Rhode Island General Laws (including any interest and/or penalties), to the limitation on claims for refund, or to the time within which the taxpayer must file a request for hearing.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Adoption — effective from 2017-10-03 to 10/03/2017

280-RICR-20-00-7 § 7.7 Mailing

A. Proof of Timely Mailing: If a document is sent by United States mail and is received by the Tax Administrator after the due date for filing, the date on which the document was dated by the post office is deemed to be the date of receipt. It is timely filed only if both of the following are true:

1.The date falls within the time set for filing or the date falls on or before the due date (including any extension); AND

The document was deposited in the United States mail with postage prepaid and properly addressed.

B.If a document is delivered by a private delivery service whose services have been deemed the equivalent of certified or registered mail by the Internal Revenue Service and is received by the Tax Administrator after the due date for filing, the date on which the document was dated by the private delivery service is deemed to be the date of receipt.

C.Registration or Certification as Proof

If a document is sent by United States mail, either registered or certified, or by a private delivery service whose services have been deemed the equivalent of certified or registered mail by the Internal Revenue Service, the registration or certification is prima facie evidence that the document was delivered to the Division of Taxation or person to whom the document was addressed.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Adoption — effective from 2017-10-03 to 10/03/2017

280-RICR-20-00-8 Conduct of Public Hearings

280-RICR-20-00-8 § 8.1 Purpose

To establish a defined set of procedures for the Rhode Island Department of Revenue, Division of Taxation for the conduct of Public Hearings regarding Proposed Rulemaking.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-23 to 01/04/2022

280-RICR-20-00-8 § 8.2 Authority

This regulation is promulgated pursuant to the authority granted in R.I. Gen. Laws § 42-35-2(a)(4).

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-23 to 01/04/2022

280-RICR-20-00-8 § 8.3 Definitions

A.For the Purpose of this regulation:

1."Department" means Rhode Island Department of Revenue, Division of Taxation.

2.“Member of the public” means any individual, firm, business, corporation, association, partnership or other group.

3.“Presiding department official” means the Division of Taxation employee conducting the Public Hearing.

4."Public hearing" means the convening of Members of the Public and agency personnel for the purpose of obtaining public comment on a Proposed Rulemaking.

5.“Proposed rulemaking” means a proposed new rule, proposed amendment to a rule or proposed repeal of a rule as noticed pursuant to R.I. Gen. Laws § 42-35-2.7.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-23 to 01/04/2022

280-RICR-20-00-8 § 8.4 Procedure for Conduct of Public Hearings

A.Convening of Public Hearing

1.Public Hearings may be held at the election of the agency or as required pursuant to R.I. Gen. Laws § 42-35-2.8(c).

2.Notice of Public Hearings shall be issued in accordance with the provisions of R.I. Gen. Laws §§ 42-35-2.8 and 42-46-6, when applicable.

3.The Public Hearing shall be held at a time and place designated by the Department.

B.Transcription

1.The Public Hearing shall be transcribed by a stenographer or audio recorded.

2.For Public Hearings, any official transcript, recording, or memorandum summarizing presentations prepared by an agency official shall be made part of the rulemaking record in accordance with R.I. Gen. Laws § 42-35-2.3(b)(5).

C.Testimony

1.Oral Testimony

a.Members of the public may make oral testimony during the meeting.

b.Members of the public who wish to make oral testimony during the meeting must put their name on the speaker list.

c.Members of the public will be called to testify in the order which their names appear on the speaker list.

2.Written Testimony

a.Written testimony must be submitted via e-mail, fax, hand delivery or regular mail to: Rhode Island Division of Taxation, One Capitol Hill, Providence, RI 02908.

D.Disruptive Conduct

1.Members of the Public attending the Public Hearing shall not cause disruptions, including but not limited to: screaming, loud noises, and disorderly gesticulations, which interrupt or distract from the testimony of other Members of the Public or from the ability of the Presiding Department Official to conduct the Public Hearing.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-23 to 01/04/2022

Subchapter 05 Banks

280-RICR-20-05-1 Bank Deposits Tax

280-RICR-20-05-1 § 1.1 Purpose

The purpose of these rules and regulations is to implement R.I. Gen. Laws Chapter 44-15 regarding the tax filing and payment requirements for credit unions.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-05-1 § 1.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws §§ 44-15-17 and 44-1-4. The rules and regulations have been prepared in accordance with the requirements of R.I. Gen Laws §§ 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-05-1 § 1.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation to effectuate the purpose of R.I. Gen. Laws Chapter 44-15 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-05-1 § 1.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-05-1 § 1.5 Incorporated Materials

A.These regulations hereby adopt and incorporate 12 C.F.R. § 204.8(1) (1996) by reference, not including any further editions or amendments thereof and only to the extent that the provisions therein are not inconsistent with these regulations.

B.These regulations hereby adopt and incorporate 12 C.F.R. § 700.2 (2013) by reference, not including any further editions or amendments thereof and only to the extent that the provisions therein are not inconsistent with these regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-05-1 § 1.6 Definitions

A. "Deposits" for institutions other than credit unions means:

1.In the case of a national banking association, state bank, trust company, or savings bank: savings deposits, participation deposits, or time deposits of any kind which bear interest or which are entitled to dividends.

2.In the case of a building and loan association or a savings and loan association: outstanding shares of stock of every class and howsoever designated plus dividend earnings applicable to such stock, or time deposits of any kind, but shall not include shares of stock and the dividend earnings applicable thereto, or time deposits of any kind pledged as collateral to secure mortgage loans on real estate.

3.In the case of a loan and investment company: deposits or time deposits of any kind, which bear interest; also fully paid or partly paid certificates of investment not including, however, payments made on investment certificates hypothecated as collateral against loans.

4.The terms "deposits" and "time deposits" as used in §§ 1.6(A)(1) through (3) of this Part mean and include deposits or savings made under any type of deposits or savings plan represented by certificates of deposit, savings bonds, or income certificates issued by any banking institution, or howsoever such or similar time deposits or savings plan may otherwise be designated.

B."Deposits" for credit unions means shares of stock, either fully or partly paid, plus deposits, or time deposits of any kind which bear interest or which are entitled to dividends and also mean deposits or savings made under any type of deposits or savings plan represented by certificates of deposit, savings bonds, or income certificates issued by any institution, or howsoever such or similar time deposits or savings plan may otherwise be designated, provided however that deposits in Federally chartered credit unions are not included.

C."International banking facility" means a facility, as defined in Regulation D, Reserve Requirements of Depository Institutions incorporated above at § 1.5(A), of the taxpayer-institution filing the report/return.

D. "International credit union facility" means a facility, as defined in regulations of the National Credit Union Administration incorporated above at § 1.5(B), of the taxpayer-credit union filing the report/return.

E."Daily average" means a simple, unweighted average calculated each business day.

F."Business day" shall mean a day in which the institution's deposits are available for withdrawal from a facility that is owned and maintained by the institution as part of its overall business practice, which would include an automatic teller machine.

G"Book value of investments in exempt obligations" means only such investments as are owned by the taxpayer-institution or credit union and includes the amortization or accretion for such investments as are reflected on the taxpayer's books, records and statements of condition for the same periods. Exemption for Federal obligations are only valid for instruments which are fully backed by an obligation of the United States.

H."Book value of total assets" means only such assets which are owned by the taxpayer-institution or credit union and includes such valuation accounts as are reflected on the taxpayer's books, records and statements of condition for the same periods.

IThe terms "deposits" or "time deposits" shown in §§ 1.6(A) and (B) of this Part (above) do not include any deposits of a branch or office of any banking institution or credit union located outside of this state, whether it is established de novo or acquired pursuant to an interstate merger, consolidation or acquisition, provided that such deposits are made at a branch or office outside of this state, or an international banking facility or an international credit union facility, or which are payable only at an office located outside of the United States.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-05-1 § 1.7 Specific Exclusions

A.Banking institutions and credit unions may exclude from taxation a percentage of deposits equal to the percentage of the daily average of book value of total assets of the taxpayer for the calendar year as are invested in the book value of obligations of the United States, its territories and possessions and of any authority, commission or instrumentality of the United States exempt from state taxation under the laws of the United States.

B.The formula for this exclusion may be stated as follows:

EXCLUSION =

Daily Average Book Value of Exempt Obligations DAILY AVERAGE

----------------------------------------------------------------- X OF

Daily Average Book Value of Total Assets DEPOSITS

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-05-1 § 1.8 Reporting

A.Banking Institution or credit union are required to file proper returns/reports twice each year. On or before January 15 following the close of the taxable year, banking institutions or credit unions shall file a report containing the information the Tax Administrator shall prescribe. No payment is required with the January 15 report. The June 15 filing is not an estimate and the amount reflected on it and those shown on the report filed on January 15 should be identical. In the case of mathematical and/or other errors and/or omissions which are discovered after the filing of the January report and prior to the filing of the June return, full and complete disclosure of the differences must be submitted with the June return and payment.

B.Each banking institution or credit union, on or before June 15 in each year, shall file a return with the tax administrator I the form and containing the information as he or she shall prescribe, and shall at the same time pay the tax imposed under R.I. Gen. Laws Chapter 44-15.

C.Institutions and credit unions reducing deposits for amounts shown in §§ 1.6(H) or 1.7(A) of this Part must attach schedules to reports/returns filed showing the nature, extent of loans to numbers, deposits in other Rhode Island credit unions and the relationship and location of each branch, facility or office.

D.Calculations of daily averages of deposits, book values of investments and assets, and other data used in the preparation of reports/returns required by this Chapter should be easily traceable to the institution or credit union's books, records and statements of condition. Reports to the Federal Deposit Insurance Corporation of the branch or branches within the State of Rhode Island may be used to verify such books, records and statements of condition.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

280-RICR-20-05-1 § 1.9 Rate of Tax

A.Credit Unions – An annual tax is imposed on every credit union with total deposits in excess of one hundred fifty million dollars ($150,000,000) at a rate of six and ninety-five one hundredths cents ($.0695) on each one hundred dollars ($100) of the daily average of the deposits with the credit union during the calendar year. For those credit unions with total deposits of one hundred fifty million dollars ($150,000,000) or less the rate shall be six and one-quarter cents ($.0625) on each one hundred dollars ($100) of the daily average of deposits with the credit union during the calendar year.

B.Banking Institutions – For the period beginning January 1, 1998, and thereafter the tax rate shall be zero for all deposits.

C.Estimated Payments – Estimated payments are required in accordance the requirements of R.I. Gen. Laws Chapter 44-26.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-10-03 to 01/04/2022
Amendment — effective from 2017-10-03 to 10/03/2017
Periodic Refile — effective from 2001-12-20 to 10/03/2017

Subchapter 10 Withholding Tax

280-RICR-20-10-1 Withholding Tax on the Sale of Real Property by Nonresidents

280-RICR-20-10-1 § 1.1 Purpose

The purpose of this Part is to implement R.I. Gen. Laws § 44-30-71.3 which provides for withholding of income tax on the sale of real estate by nonresidents.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws §§ 44-1-4 and 44-30-95. The rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws §§ 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.3 Application

These rules and regulation shall be liberally construed so as to permit the Division of Taxation the authority to effectuate the purpose of R.I. Gen. Title 44 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.5 Definitions

A.“Nonresident corporation” means, for purposes of this regulation, a corporation that is neither incorporated in this state nor authorized by the Secretary of State, Board of Bank Incorporation or Insurance Division of the Department of Business Regulation to do business in this state.

B.“Nonresident individual” means an individual who does not meet the definition of "resident individual" under R.I. Gen. Laws § 44-30-5. That section defines "resident individual" as one who is domiciled in this state or as one who is not domiciled in this state but maintains a permanent place of abode in this state and is in this state for an aggregate of more than one hundred eighty three (183) days of the taxable year, unless the individual is in the Armed Forces of the United States. If up to and including the closing date of sale an individual is a resident of this state but intends to move to another state immediately after the closing, that individual shall be deemed a resident individual for purposes of R.I. Gen. Laws § 44-30-71.3 only.

C.“Nonresident partnership” means a partnership in which any one of its partners is a nonresident individual, estate, trust or corporation.

D.“Nonresident estate or trust” shall be determined in accordance with the provisions of R.I. Gen. Laws § 44-30-5.

E.“Total amount paid” means the net proceeds of the sale actually paid to the nonresident seller including the fair market value of any property transferred to the seller.

F.“Net proceeds” means the amount actually paid to the seller at the closing, i.e., the total sales price less mortgages, liens and selling expenses such as real estate commissions, attorney's fees, real estate conveyance tax stamps and termite, heating, radon, or other inspection fees required of the seller. Only mortgages and liens on the property being sold may be deducted from the sales price.

G.“Gain” means, in general, the excess of sales price over the seller's cost or other basis as determined in accordance with the Internal Revenue Code sections and applicable Rhode Island tax law and pertaining to the seller and to the seller's tax year in which the sale occurs.

H.“Gain method” means that special method by which withholding is made for a nonresident seller when the nonresident seller has not only filed an election with the Division of Taxation (Form RI 71.3 Election) to have withholding based on gain but also has received a Certificate of Withholding Due (Form RI 71.3 Certificate) from the Division of Taxation for presentation at the closing. Refer to the Compliance provisions below.

I.“Tax-exempt organization” means the seller is exempt from taxation by Rhode Island charter or by specific authorization as a tax-exempt organization under Internal Revenue Code section 501(c). Nonresident organizations holding IRC 501(c) status but which have unrelated business income tax due for this transaction, are subject to the provisions of R.I. Gen. Laws § 44-30-71.3.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.6 GENERAL

A.Effective January 1, 1992, when Rhode Island realty and associated tangible personality is sold by a nonresident, the buyer must deduct and withhold six percent (6%) of the total amount paid or gain to the seller if the seller is a nonresident individual, estate, partnership or trust and seven percent (7%) of the total amount paid or gain if the seller is a nonresident corporation. The buyer then must pay the amount withheld to the Division of Taxation within three (3) banking days after the date closing.

B.Every buyer subject to these provisions is liable for the amount withheld or required to be withheld and the amount shall, until paid, constitute a lien on the property. Said lien shall be subordinate to any mortgage of any lender other than the seller granted in connection with the purchase of the property. Filing and paying the amount of withholding due will automatically discharge the lien under R.I. Gen. Laws § 44-30-71.3.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.7 Compliance

A.Residency affidavit: The buyer may rely on the seller's determination of residency only if the seller furnishes the buyer with a notarized seller's residency affidavit under penalties of perjury. A recitation of the seller's residency may be contained on the deed. If a deed contains a recitation of residency by the seller, the recording of such deed shall in all instances discharge the lien imposed by R.I. Gen. Laws § 44-30-71.3(c).

1.If a buyer has actual knowledge that a seller's residency affidavit is false and the buyer fails to withhold the prescribed amount, the buyer is liable for an amount equal to the amount which should have been withheld, together with penalty and interest and a lien shall arise upon the recording of a notice of lien by the Division of Taxation. Provided, however, notice of lien may only be filed if title to said property remains in the name of the buyer.

2.If, upon examination of title during a subsequent sale of the property, a recital of residency is not found in the deed and the affidavit of residency cannot be obtained from the prior seller, the prospective buyer or examining attorney may petition the tax administrator for a discharge of the lien based upon other indicia of residency or no tax due.

B.Nonresident corporation: If the seller is a nonresident corporation, the buyer is deemed to be in compliance with remittance requirements if the seller provides the buyer with a letter of good standing issued by the Tax Administrator for the purposes of the sale. If a letter of good standing was provided the buyer should complete the remittance form, indicate the appropriate information on the form and return the form to the Division of Taxation even though no tax is withheld.

C.Pass-through entity: In the case of a pass-through entity-seller, the buyer may rely on each seller member's determination of residency only if each seller-member furnishes the buyer with a notarized seller's residency affidavit under penalties of perjury. For each nonresident member, the buyer must withhold and remit for each such member based on the member's share. It is assumed that the members share equally unless otherwise specifically provided. The nonresident pass-through entity-seller must furnish the buyer with the names, addresses and Social Security or Federal employer identification numbers for each nonresident member. In the event that all the members are residents, a single seller's residency affidavit may be filed using the special area provided on that form.

D.Compliance using "gain" method: The buyer must withhold for the nonresident seller using the net proceeds unless, at the closing, the seller provides a Certificate of Withholding Due (Form RI 71.3 Certificate) at the closing. This certificate allows the buyer to withhold based on the nonresident seller's election of the gain method.

1.In order to use the gain method, the nonresident seller must first make the election by completing RI Form 71.3 Election and submit the completed form to the Division of Taxation for review at least twenty (20) days prior to the closing date. An approved Certificate of Withholding Due shall be sent to the seller or designee.

2.Election of gain method is binding upon seller. Failure to make the election at least twenty (20) days prior to the closing will result in withholding based on net proceeds. In the event of multiple sellers, all sellers must agree and elect the gain method or the net proceeds will be used for remittance.

3.Election of gain method allows the seller to recognize all the gain in the year of the sale or to allow the seller to recognize the gain on the installment method. Recognition of gain under either method may only be elected by the seller if, for the same transaction and tax year, the seller will be recognizing the gain by the same method for Federal tax purposes.

E.Remittance limited to net proceeds: If the withholding due under the gain method approved by the Division of Taxation on the Certificate of Withholding Due is more than the net proceeds payable to the seller, the buyer need only remit the net proceeds to the Division of Taxation.

F.Information to be submitted for installment sales method of gain election: If the seller elects the installment sale method for R.I. Gen. Laws § 44-71.3 withholding, the installment sale method must also be the method used by the seller for gain recognition for Federal tax purposes. The information which must be supplied as part of the form RI 71-3 Election for the installment sales method must be supplied under penalties of perjury by the seller, the seller's certified public accountant, licensed public accountant or attorney and must include the following:

1.Name, address and number (FEI # or SS#) of each seller; and

2.Description of the property involved (including street address, city/town and plat and lot numbers); and

3.Calculation of gain for the property including the gross sales price of the real estate and related personal property, expenses of sale, the net sales price, the seller's cost or other basis and the resultant gain; and

4.A statement that the seller will be recognizing the gain from the sale of the stated property on the installment method for Federal tax purposes; and

5.An amortization schedule for the term of the installment sale itemizing the amount and timing of each installment payment (monthly, quarterly, etc.), the interest rate (if financed), the term of the installment sale, and the amount of each payment which represents interest (if any), return of basis and gain; and

6.A calculation of the amount of gain which will not be recognized by the seller for the year of the sale to be entered on Line 6 of the RI 71.3 Election form.

7.Withholding using the installment method must be calculated to include the gain portions of all installments payments to be received for the year of the sale as well as the gain portion of the payment received at the closing.

8.By election of the installment method the seller agrees to make such estimated payments and to file all appropriate Rhode Island tax returns for years following the year of sale during which any installment payments from this transaction are received.

G.Compliance for special cases: In the event that the sale of the property by a nonresident will not be subject to tax under Sections 121 (Sale of Principal Residence); 721 (Tax Free Exchanges - Partnership Interest); 1031 (Like Kind Exchanges); 1033 (Involuntary Conversions), or 408 (Individual Retirement Account) of the Internal Revenue Code, the nonresident seller must make the gain election and file the RI Form 71.3 Election even though no withholding need be made. If the seller later fails to comply with the above sections of the Internal Revenue Code, the seller acknowledges obligation to file an original or amended Rhode Island tax return for the year of the sale.

H.Zero withholding: A nonresident real estate withholding remittance form (RI 71.3 Remittance) must be completed for the nonresident and sent to the Division even though the results of the withholding calculation are that no withholding is to be made for the nonresident seller.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.8 Multiple Sellers

A.No matter how the sellers hold their interests in the property, if there is more than one name on the deed, there are multiple sellers. Thus, forms of ownership such as tenancy by the entirety; tenancy in common and joint tenancy all indicate multiple sellers.

B.The buyer must either obtain seller's residency affidavits from each of the multiple sellers, or for each nonresident seller, withhold and remit for each nonresident seller separately. If sellers are married and will file a joint RI income tax return, they should so indicate on Form RI 71.3 Remittance and Form RI 71.3 Election.

C.Unless otherwise provided, it is assumed that each of the multiple sellers share equally in the net proceeds for the purposes of calculating amounts to be withheld.

D.A pass-through entity must comply and either obtain seller's residency affidavits from each member or, for each nonresident member, withhold and remit for such nonresident member based on the member's share. It is assumed that the members share equally unless otherwise specifically provided.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.9 Computation

A.General: In accordance with the above, the buyer must deduct and withhold six percent (6%) of the net proceeds or gain to the seller if the seller is a nonresident individual, estate, partnership or trust and seven percent (7%) of the net proceeds or gain if the seller is a nonresident corporation. If there are multiple sellers, the buyer must compute and withhold for each seller separately.

B.EXAMPLES:

1.Net Proceeds Method:

a. Joseph Smith and Andrew David (both nonresidents) are selling a summer house in Rhode Island for $175,000, the proceeds to be shared equally, and they have not elected withholding based on gain. At the closing, cash at settlement to the nonresident sellers is $170,000 and the buyer withholds six percent (6%) or $10,200. The buyer then remits to the Division of Taxation using form RI-71.3 Remittance. Since there are multiple sellers, the buyer attaches a schedule listing both nonresidents' names, addresses and social security numbers so that the nonresidents may take proper credit for the amounts withheld when they file their Rhode Island personal income tax returns for the year of the sale.

b. In the example above, if Joseph was a resident and gave a residency affidavit to the buyer at the closing, the buyer would only withhold and remit $5,100 to the Division of Taxation calculated as 1/2 x $170,000 or $85,000 @ 6% = $5,100.

2.Gain Method:

a.Martha Martinez (a nonresident) is selling property in Rhode Island and, 20 days before the closing, elects the gain method of withholding by computing the RI 71.3 Election form and sending it to the Division of Taxation. The form, when reviewed by the Division of Taxation lists the following:

Sales Price

$ 200,000

Less Expenses of Sale

$ 21,000

Net Sales Price

$ 179,000

Less Cost/Basis

$ 71,000

GAIN

$ 108,000

b.Since all of the gain is being taxed in the year of the sale for Federal purposes, the withholding indicated was 6% x $108,000 = $6,480. The Division reviewed the Election, indicated the $6,480 as the amount to be withheld on the RI 71.3 Certificate and returned the certificate to Martha. At the closing, the certificate was presented, $6,480 was withheld and remitted by the buyer using the form RI 71.3 Remittance. The original copy of the approved certificate of withholding due (RI 71.3 certificate) should be attached to the form RI 71.3 Remittance when filed.

c.If the property Martha was selling was her residence and if she otherwise qualified and intends to treat the sale under Section 121 of the Internal Revenue Code, she would still have to file the election form 20 days before the closing but would complete the election form and use the special types of transactions area on the back. The Division would review the election and, when approved, would send a certificate of withholding due (RI 71.3 certificate) indicating $0 to be withheld at the closing.

3.Installment sales method:

a.High Ridge Properties is a nonresident partnership selling property In Rhode Island. More than twenty (20) days prior to the closing the partnership elects to have the withholding based on gain by completing the RI 71.3 Election form. Additionally, the partnership will be treating the gain from the sale on the installment method for Federal purposes and, therefore, the partnership prepared and furnished a complete installment sale schedule with the Election form. The installment sale schedule showed total gain of $42,000 that 12% of each principal payment in Rhode Island received from the buyer was the gain to be recognized that High Ridge expects to receive $20,000 at the closing and that two (2) payments are to be received in the year of sale. In these two (2) payments, the principal portions total $1,000. The installment sale schedule's calculation then indicated the amount of gain to be recognized in the year of sale to be:

(1)Gain Percentage = 12%

Principal Payment Received during year of sale = $21,000.

Gain to be recognized during year of sale = $21,000 x 12%=$2,520.

The amount of non-recognized gain to be entered on Line 6 = $42,000 - $2,520 = $39,480

Thus, the amount to be withheld is 6% x $2,520 = $151.20.

(2)High Ridge also sends a calculation of how much withholding is to be made for each nonresident partner. After review, the Division of Taxation returns an approved certificate of withholding due (RI 71.3 Certificate) to the seller for use at the closing. The buyer uses the certificate to complete the remittance form (RI 71.3 Remittance) and sends the remittance, the approved original of the Certificate of Withholding Due, the check and, since High Ridge is a partnership, a list of High Ridge's nonresident partners' names, addresses, social security or Federal employer identification numbers and withholding so that the partners may take appropriate credit when they file their Rhode Island tax returns.

b.If all the partners/members/shareholder of an entity do not agree to the election of the gain method, the net proceeds method would be used.

c.If the amount to be withheld under the gain/installment sale method is more than the cash settlement at the closing, the remittance is limited to the cash settlement at the closing.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.10 Payment

A.The buyer must remit amounts withheld from the seller or sellers within three (3) banking days after the date closing.

B.The buyer must remit to the Rhode Island Division of Taxation using the RI 71.3 Remittance Form.

C.In the event of nonpayment or late payment, interest will be computed in accordance with R.I. Gen. Laws § 44-1-7 and added to the amount due.

D.Filing and paying the amount of withholding due will automatically discharge the lien under R.I. Gen. Laws § 44-30-71.3. For an acknowledgement of the lien discharge, the buyer should complete the reverse side of the remittance form and provide a pre-addressed envelope. The Division of Taxation will acknowledge the lien discharge and send it to the buyer or designee.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.11 Liability

A.Every buyer subject to withholding is liable for the amounts withheld or required to be withheld. If there is more than one buyer's name on the deed, the buyers are jointly and severally liable for compliance and remittance.

B.If a seller gives the buyer a fraudulent residency affidavit taken in good faith by the buyer the seller remains liable for any tax due resulting from the sale of the property.

C.The closing attorney, lending institution, and real estate agent/broker in a transaction governed by R.I. Gen. Laws § 44-30-71.3 and these regulations is not subject to the withholding and payment provisions.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.12 Document submission and Retention

A.Seller's residency affidavit: The buyer should retain the original affidavit with the other records pertaining to the closing and must produce it for the Division of Taxation, if requested. One copy of the affidavit should be given to the seller. The buyer should not send the affidavit to the Division of Taxation. If there are multiple sellers, there should be one affidavit and copies for each nonresident seller.

B.Election to have withholding based on gain: The seller makes this election by completing one RI Form 71-3 Election and submitting the completed form (and any attachments) to the Division of Taxation at least twenty (20) days prior to the closing date. The seller should retain a copy of the election for matching with Certificate of Withholding Due which will be returned by the Division of Taxation.

C.Installment sale schedule: The information which must be supplied as part of the Form RI 71.3 Election for the installment sale method must be supplied under penalties of perjury by the seller, the seller's certified public accountant, licensed public accountant or attorney and must include all the information contained in § 1.7 (F) of this Part

D.Certificate of withholding due: The Division of Taxation shall review the election (Form RI 71.3 Election) and send the approved Certificate of Withholding Due (Form RI 71.3 Certificate) to the seller or designee. The seller must present the certificate to the buyer at the closing and the buyer, using the certificate, completes the remittance form and attaches the original certificate for submission to the Division of Taxation. The buyer and seller should each retain one copy of the certificate with the documents of the sale.

E.Real estate withholding remittance: The buyer should retain one copy of the remittance form with the other records pertaining to the closing, one copy of the remittance form should be given to the seller and the original is sent to the Rhode Island Division of Taxation with the payment indicated. If the remittance is being made for multiple nonresident sellers, a schedule must be attached giving the names, addresses, Federal employer identification numbers (FEI #) or social security numbers (SS#) and the amount being withheld attributable to each nonresident seller. Copies of the remittance form and supplemental schedule should be provided for each nonresident seller in order that appropriate credit can be taken on the nonresident seller's tax return.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.13 Sales/Transfers of Property by Exempt Organizations

A.Sales/transfers of property by organizations which are exempt from taxation under provisions of the Internal Revenue Code, or by their charter, are exempt from the withholding provisions of R.I. Gen. Laws § 44-30-71.3. The buyer may rely on the seller's determination of exempt status only if seller furnishes the buyer with a notarized Affidavit of Exempt Seller (NRWXMPT) signed under penalties of perjury. If a deed contains a recitation of exempt status by the seller, the recording of such deed shall in all instances discharge the lien imposed by R.I. Gen. Laws § 44-30-71.3(c).

B.Provided, however, that when property is sold/transferred by the following named organizations only, no Affidavit of Exempt Seller need be executed nor is a recital of exempt status required in the deed so long as said exempted entities are fully identified in the granting clause of the deed in question. Such entities include:

1.The Federal Deposit Insurance Corporation

2.The Resolution Trust Corporation

3.Rhode Island Housing and Mortgage Finance Corporation

4.Board of Governors of the Federal Reserve System

5.Federal Reserve Bank

6.Federal Home Loan Bank

7.Comptroller of the Currency

8.The Office of Thrift Supervision

9.The National Credit Union Administration Board

10.The Farm Credit Administration

11.The Farm Credit System Insurance Corporation

12.The Small Business Administration

13.The Federal National Mortgage Association

14.The Federal Home Loan Mortgage Corporation

15.The Government National Mortgage Association

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.14 Gifts

A.Bona fide gifts of property (e.g. transfers where there is no consideration and no gain attributed to the transferor) do not fall within the purview of R.I. Gen. Laws § 44-30-71.3 and therefore no withholding is required. In transfers by way of gifts the transferor may combine language in the deed stating that no documentary stamps are required with language stating that this transfer is by way of gift and no withholding is required under R.I. Gen. Laws § 44-30-71.3.

1.EXAMPLE: Transfer is by gift so that no documentary stamps are required and no withholding is required under R.I. Gen. Laws § 44-30-71.3. If a deed contains a recitation of gift by the seller, the recording of such deed shall in all instances discharge the lien imposed by R.I. Gen. Laws § 44-30-71.3(c).

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.15 Intercompany Transfers/Transfers among Affiliated Companies

Intercompany transfers or transfers among affiliated companies which do not entail consideration and in which no gain is recognized by the transferor or transferee are not sales and as such do not fall within the purview of R.I. Gen. Laws § 44-30-71.3. In such transfers the transferor may combine language in the deed stating that no documentary stamps are required with language that this intercompany transfer or transfer among affiliated companies is such that no withholding is required under R.I. Gen. Laws § 44-30-71.3. If a deed contains such a recital, the recording of such deed shall in all instances discharge the lien imposed by R.I. Gen. Laws § 44-30-71.3(c).

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.16 Sales/Transfers by Banks and Insurance Companies

A.State banks, mutual savings banks, federal savings banks, trust companies, national banking associations, building and loan associations and credit unions, whether or not such entities are chartered in, or have a place of business in Rhode Island and loan and investment companies organized under R.I. Gen. Laws Chapter 19-20 are not subject to the tax imposed on corporations under R.I. Gen. Laws Chapter 44-11. Insurance companies are likewise exempt from tax imposed on corporations under R.I. Gen. Laws Chapter 44-11. Therefore, those specific types of lending institutions and insurance companies are not subject to the withholding provisions of R.I. Gen. Laws § 44-30-71.3 when they sell real estate that they own. Any description in the granting clause of the deed which sufficiently identifies those entities as one of the entities mentioned herein is sufficient to discharge any lien imposed pursuant to R.I. Gen. Laws § 44-30-71.3.

B.Exception – Bank Foreclosure/deeds in Lieu of Foreclosure

1.The purchaser at a foreclosure sale under power of sale takes, not as grantee of the mortgagee, but as a grantee of the mortgagor. Therefore, when a bank forecloses on a defaulting nonresident mortgagor and a third party purchases at the foreclosure sale for an amount in excess of the sums legally due on the mortgage, the purchaser must withhold six (6) percent (or seven (7) percent if the mortgagor is a corporation) of the net proceeds resulting from the sale. (Where there are net proceeds and junior lienholders, see § 1.7 of this Part.) Provided, however, no withholding is required if there are no net proceeds disbursed to the mortgagor as a result of the foreclosure or deed given in lieu of foreclosure. In those instances the foreclosure deed or deed in lieu of foreclosure may contain a recital that the transfer of the property was the subject of foreclosure and there were no net proceeds subject to the withholding provisions of R.I. Gen. Laws § 44-30-71.3. The recording of such deed shall in all instances discharge the lien imposed by R.I. Gen. Laws § 44-30- 71.3(c).

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.17 Receivership/Bankruptcy

In a sale by a court appointed receiver or trustee in bankruptcy where all the proceeds of the sale are placed in the receivership estate or bankruptcy estate and where no proceeds are given to the nonresident debtor, no withholding is required. A recital in the deed that the sale is by a receiver or trustee in bankruptcy shall be sufficient to discharge any lien under R.I. Gen. Laws § 44-30-71.3(c).

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.18 Bills of Interpleader

Where there is a foreclosure sale on property of a defaulting nonresident mortgagor and the mortgagee has proceeds in excess of its mortgage and there are junior lienholders, the buyer is not required to withhold on the net proceeds if the mortgagee intends to file a bill of interpleader naming the Division of Taxation as a party thereto. Receipt of the Bill of Interpleader complaint naming the Division of Taxation as a party therein shall be sufficient to grant the buyer a discharge of the lien imposed under R.I. Gen. Laws § 44-30-71.3(c). Provided however, where the net proceeds accruing to the junior lienholders are of such a nominal amount that the filing of a bill of interpleader is not practicable and the mortgagee turns over said nominal sum to the second mortgagee and obtains a release and indemnification agreement from the second mortgagee, no withholding is required. In that instance the foreclosure deed or deed in lieu of foreclosure may contain a recital that the transfer of the property was subject to foreclosure and there were no net proceeds subject to withholding under R.I. Gen. Laws § 44-30-71.3. The recording of such deed shall in all instances discharge the lien imposed by R.I. Gen. Laws § 44-30-71.3(c).

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.19 Name on Deed for Convenience Purpose

Where an individual claims that his/her name is on a deed merely for convenience and will not share in any way with the proceeds from a sale, that person may file an affidavit to that fact under penalties of perjury. That affidavit must contain a statement as to who is the true owner of the property in question; why the affiant's name appears on the deed; and the name and social security number of the person(s) who will be responsible for claiming any gain from the sale of the property. A copy of said affidavit must be filed with the Division of Taxation and a copy should be given to the buyer. A recital in the deed that the Grantor "_________'s" name was on the deed for convenience purposes only and that an affidavit to that effect has been filed with the Division of Taxation shall in all instances discharge the lien imposed by R.I. Gen. Laws § 44-30-71.3(c).

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.20 Transfers of Property Incident to Divorce

Generally, no gain or loss is recognized on a transfer of property from an individual to (or in a trust for the benefit of) a spouse, or a former spouse if incident to a divorce. Any transfer of property to a spouse or former spouse on which gain or loss is not recognized is treated by the transferee as acquired by gift and is not considered as a sale or exchange. In that instance, no withholding is required. See § 1.14 of this Part "Gifts." A recital in the deed that the property was transferred incident to divorce or by way of gift shall in all instances discharge the lien imposed by R.I. Gen. Laws § 44-30-71.3(c). A transfer of property is incident to a divorce if the transfer occurs within one year after the date on which the marriage ends, or if the transfer is related to the ending of the marriage.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.21 Relocation Company Sales

A.In the ordinary course a relocation company does not take legal title to real property but merely acts as a conduit to transfer title pursuant to a contract with the employer of the seller of the property. This regulation pertains to situations in which the relocation company does not take legal title. If a relocation company takes title from the grantor the general rules for nonresident withholding apply.

B.If the sales price on real and associated tangible property is paid or advanced to an employee by a relocation company, withholding will be required as follows:

1.If the employee(s)/grantor(s) is a resident of this state at the time he/she signs the deed in blank, the relocation company may take a residency affidavit from the employee(s) and no withholding is required from that transaction. A recitation of residency of the grantor(s) may be inserted in the deed stating that no withholding is required under R.I. Gen. Laws § 44-30-71.3, since the grantor(s) was a resident of the state at the time he/she signed the deed.

2.The buyer(s) of the property who receives the deed through the relocation company must receive before or simultaneously with the delivery of the deed an affidavit from the relocation company of its intention to file a Notice of Sale with the Division of Taxation. Said buyer(s) of the property who receive the deed through the relocation company and all subsequent buyers may rely upon the recitation of residency in the deed by the employee(s)/grantor(s) and the recording of the deed containing such recital, shall in all instances, discharge the lien imposed by R.I. Gen. Laws § 44-30-71.3 (c).

3.In every transaction in which a relocation company holds a deed executed by the grantor(s) in blank, the relocation company shall file a notice of sale with the division of taxation within five (5) working days of the transfer of title to the buyer. That notice shall include the name and FEIN of the relocation company; the name and FEI Number of the company which contracted its services; the names and addresses of the buyer(s) and seller(s) and location of the property sold; the sales price paid to the grantor(s) by the relocation company or employer and the sales price of the property at the time title passes. The relocation company must present the buyer with an affidavit of intent to file a notice of sale with the Division of Taxation.

C.If the employee/grantor is not a resident of this state at the time the deed is executed in blank, the relocation company must follow the withholding rules relating to nonresidents. Upon the filing of Form 71.3 Remittance with the remittance of the proper amount due thereunder and submitting a completed acknowledgement of discharge form with the grantee(s) name left blank, the acknowledgement of discharge will be issued to the relocation company with the grantee's name left blank. Upon the subsequent transfer of title the relocation company may insert the name of the grantee on the discharge and give the acknowledgement of discharge to the grantee for recording.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.22 Sales/Transfers of Property from the U.S. Government, Agencies of the U.S. Government, the State of Rhode Island, its Agencies, or Political Subdivisions

Transfers/sales of property by the above-mentioned instrumentalities are exempt from the withholding provisions of R.I. Gen. Laws § 44-30-71.3. A deed may contain a recital that the sale/transfer is not subject to withholding under R.I. Gen. Laws § 44-30-71.3 since the transfer is made by the U.S. Government, an agency of the U.S. Government, the State of Rhode Island, or an agency or political subdivision thereof, whichever is applicable.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.23 Tax Sales

The redemption of real property pursuant to R.I. Gen. Laws Chapter 44-9 shall not be subject to the withholding provisions of R.I. Gen. Laws § 44-30-71.3. In the event real property is redeemed pursuant to R.I. Gen. Laws Chapter 44- 9, the deed may contain a recital that no withholding under R.I. Gen. Laws § 44-30-71.3 is required because title is transferred pursuant to statutory redemption. Said recital shall in all instances discharge the lien imposed by R.I. Gen. Laws § sub 44-30-71.3(c).

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.24 Remittance Limited to Cash Paid at Closing

In no event shall the buyer be required to remit any amount in excess of the amount of the cash settlement received by the seller.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

280-RICR-20-10-1 § 1.25 Limited Liability Companies

A.A limited liability company is required by law to declare in its articles of organization whether it is to be treated as a corporation or as a partnership for purposes of taxation.

1.Taxed as Corporation: If a limited liability company has declared to be taxed as a corporation, and either

a.the limited liability company is formed pursuant to R.I. Gen. Laws Chapter 7-16; or

b.the limited liability company is registered with this state as a foreign limited liability company pursuant to R.I. Gen. Laws § 7-16-49, the limited liability is considered a resident limited liability company and no withholding is required and a buyer may accept a residency affidavit from the limited liability company.

c.If a limited liability company is deemed to be a nonresident the buyer must withhold at seven percent (7%) unless the nonresident limited liability company produces a letter of good standing issued by the Division of Taxation for purposes of the sale. See § 1.7 (B) of this Part.

2.Taxed as Partnership: If a limited liability company has declared to be taxed as a partnership, the provisions of § 1.7(C) of this Part applies whether or not the limited liability company is formed pursuant to R.I. Gen. Laws Chapter 7-16 Laws or is registered with this state pursuant to R.I. Gen. Laws § 7-16-49.

3.Single Member Limited Liability Company (SMLLC) is a disregarded entity and the withholding requirements apply to the single member of such an entity.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-11-30 to 01/04/2022
Technical Revision — effective from 2017-11-30 to 11/30/2017
Adoption — effective from 2017-11-30 to 11/30/2017

Subchapter 15 Cigarette Tax

280-RICR-20-15-1 Cigarette Tax

280-RICR-20-15-1 § 1.1 Purpose

The purpose of this regulation is to implement R.I. Gen. Laws Chapters 44-20 and 44-20.2 which provides for Tax on Cigarettes and Little Cigars sold, held for sale, or stored in the State of Rhode Island.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws §§ 44-1-4 and 44-20-50. The rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws § 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation the authority to effectuate the purpose of R.I. Gen. Laws Chapter 44-20 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.5 Definitions

A.“Administrator” or “Tax Administrator” means the Tax Administrator of the State of Rhode Island, and head of the Rhode Island Division of Taxation.

B.“Base Cost of Cigarettes” means the invoice cost of the cigarettes to the licensee or the replacement cost of the cigarettes to the licensee within thirty (30) days prior to the date of sale in the quantity last purchased whichever is lower, less all trade discounts except customary discounts for cash. The cigarette excise tax imposed by R.I. Gen. Laws Chapter 44- 20 shall be added to the invoice cost of the cigarettes to the licensee.

C.“Cartage Cost to the Retail Outlet” means three-fourths of one percent (0.75%) of the base cost of the cigarettes to the licensee or a lower cost as claimed and proved by the licensee.

D."Cigarettes" means and includes any cigarettes suitable for smoking in cigarette form, and each sheet of cigarette rolling paper, including but not limited to paper made into a hollow cylinder with or without a filter for use in making cigarettes.

E.“Dealer” means any person whether located within or outside of this state, who sells or distributes cigarettes to a consumer in this state.

F.“Distributor” means any person:

1.Whether located within or outside of this state, other than a dealer, who sells or distributes cigarettes within or into this state. Such term shall not include any cigarette manufacturer, export warehouse proprietor, or importer with a valid permit under 26 U.S.C. § 5712, if such person sells or distributes cigarettes in this state only to licensed distributors, or to an export warehouse proprietor or another manufacturer with a valid permit under 26 U.S.C. § 5712;

2.Selling cigarettes directly to consumers in this state by means of at least twenty-five (25) cigarette vending machines;

3.Engaged in this state in the business of manufacturing cigarettes or any person engaged in the business of selling cigarettes to dealers, or to other persons, for the purpose of resale only; provided, that seventy-five percent (75%) of all cigarettes sold by that person in this state are sold to dealers or other persons for resale and selling cigarettes directly to at least forty (40) dealers or other persons for resale; or

4.Maintaining one or more regular places of business in this state for that purpose; provided, that seventy-five percent (75%) of the sold cigarettes are purchased directly from the manufacturer and selling cigarettes directly to at least forty (40) dealers or other persons for resale;

5.Selling little cigars directly to consumers in this state by means of at least twenty-five (25) little cigar vending machines.

G.“Importer” means any person who imports into the United States, either directly or indirectly, a finished cigarette and/or other tobacco products for sale or distribution.

H.“Licensed,” when used with reference to a Manufacturer, Importer, Distributor or Dealer, means only those persons who hold a valid and current license from the State of Rhode Island issued under R.I. Gen. Laws § 44-20-2 for the type of business being engaged in. When the term “Licensed” is used before a list of entities, such as “Licensed Manufacturer, Importer, wholesale Dealer, or retailer Dealer,” such term shall be deemed to apply to each entity in such list.

I."Little cigars" means and includes any roll, made wholly or in part of tobacco, irrespective of size or shape and irrespective of whether the tobacco is flavored, adulterated or mixed with any other ingredient, where such roll has a wrapper or cover made of tobacco wrapped in leaf tobacco or any substance containing tobacco paper or any other material and where such roll has an integrated filter, except where such wrapper is wholly or in greater part made of tobacco and where such roll has an integrated filter and weighs over four (4)) per thousand (1,000).

J.“Manufacturer” means any person who manufactures, fabricates, assembles, processes, or labels a finished cigarette, little cigar and/or other tobacco products;

K.“Notice of Deficiency Determination” means a written statement of a tentative determination of tax liability, including any interest and penalties due, which does not become due, final, and payable until thirty (30) days have transpired from the date the notice was issued without a request for hearing.

L.“Person” means any individual, including an employee or agent, firm, fiduciary, partnership, corporation, trust, or association, however formed;

M.“Place of Business” means and includes any location where cigarettes and/or other tobacco products are sold, stored or kept, including but not limited to any storage room, attic, basement, garage, or other facility immediately adjacent to the location. It also includes any receptacle, hide, vessel, airplane, train, or vending machine; locked storage safe and/or containers.

N.“Retailer/Dealer” means every person, co-partnership, corporation or association engaged in the business of making sales of cigarettes at retail within this state; provided, that in the case of a retailer/dealer making sales both at retail and at wholesale, such term shall be applied only to the retail portion of such business.

O.“Retail Sale” means any transfer of title to cigarettes for a valuable consideration made, in the ordinary course of trade, or in the usual prosecution of the seller's business, to the purchaser for consumption or use other than resale of further processing or manufacturing. This term includes any such transfer of cigarettes where title is retained by the seller as security for the payment of the purchase price.

P.“Retailer/Dealer's Actual Cost of Selling Cigarettes” means the base cost of the cigarettes to the retailer/dealer plus the retailer/dealer's overhead costs and expenses.

Q.“Retailer/Dealer's Overhead Costs and Expenses” means the amounts attributable to the sale of cigarettes, as evidenced by the standards and methods of accounting regularly employed by the retailer/dealer in the allocation of overhead costs and expenses, paid or incurred, including, without limitation, labor, salaries of executives and officers, rent, depreciation, selling costs, maintenance of equipment, delivery costs, all types of license fees, taxes, insurance and advertising.

R.“Retailer/Dealer's Presumptive Cost of Selling Cigarettes” means one hundred and six percent (106%) of the base cost of the cigarettes to the retailer plus freight charges not otherwise included in the base cost of the cigarettes plus cartage cost to the retail outlet if performed or paid for by the retailer/dealer.

S.“Sale” or “Sell” includes and applies to gifts, exchanges, and barter of cigarettes and/or other tobacco products. The act of holding, storing, or keeping cigarettes and/or other tobacco products at a place of business for any purpose shall be presumed to be holding the cigarettes and/or other tobacco products for sale.

T.“Sales by Wholesalers/Distributors to Other Wholesalers/Distributors” means when one wholesaler/distributor sells cigarettes to any wholesaler/distributor, the former shall not be required to include in his selling price to the latter, wholesaler/distributor presumptive cost of selling cigarettes except that no such sale shall be made at a price less than the "base cost of cigarettes," but the latter wholesaler/distributor upon resale to a retailer/dealer or for consumption or use, shall be deemed to be the wholesaler/distributor governed by the definitions of this regulation. In the case of sales at retail by a wholesaler, the cost to the wholesaler with respect to such sales shall be presumed to be the same as the cost to the retailer.

U."Stamp" means the impression, device, stamp, label, or print manufactured, printed, or made as prescribed by the administrator to be affixed to packages of cigarettes, as evidence of the payment of the tax provided by R.I. Gen. Laws Chapter 44-20 or to indicate that the cigarettes are intended for a sale or distribution in this state that is exempt from state tax under the provisions of state law; and also includes impressions made by metering machines authorized to be used under the provisions of R.I. Gen. Laws Chapter 44-20.

V.“Wholesaler/Distributor” means every person, co-partnership, corporation or association engaged in the business of making sales of cigarettes at wholesale within this state; provided, that in the case of a wholesaler engaged in the business of making sales both at wholesale and at retail, such term shall be applied only to the wholesale portion of such business.

W.“Wholesaler/Distributor's Actual Cost of Selling Cigarettes” means the base cost of the cigarettes to the wholesaler/distributor plus the wholesaler/distributor's overhead costs and expenses.

X.“Wholesaler/Distributor's Overhead Costs and Expenses” means the amounts attributable to the sale of cigarettes as evidenced by the standards and methods of accounting regularly employed by the wholesaler/distributor in the allocation of overhead costs and expenses paid or incurred, including, without limitation, labor, salaries of executives and officers, rent, depreciation, selling costs, maintenance of equipment, delivery costs, all types of license fees, taxes, insurance and advertising.

Y.“Wholesaler/Distributor's Presumptive Cost of Selling Cigarettes” means one hundred and two percent (102%) of the base cost of the cigarettes to the wholesaler/distributor plus freight charges not otherwise included in the cost of the cigarettes plus cartage cost to the retail outlet if performed or paid for by the wholesaler/distributor.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.6 Dealers’ and Distributors’ Reports and Records

A.Reports:

1.Distributors: on or before the tenth day of each month, distributors must file a report with the Division of Taxation. The report covers the prior month and should also contain any information on cigarette transactions that the Division of Taxation may require. Distributor report forms are available at the Division of Taxation’s website - www.tax.ri.gov.

2.Dealers: monthly reports are required from persons who have received unstamped cigarettes or from dealers who have purchased tax indicia during that month. However, if the Tax Administrator determines that additional information is necessary for proper enforcement, he/she may require any dealer to file a special or regular monthly report. All regular monthly reports must be filed and received by the Division of Taxation on or before the tenth (10th) of the month for which the report is being made.

B.Records: Every distributor and dealer must keep complete and accurate records of all cigarettes purchased and sold. These records must be in the form and of the kind the Tax Administrator may require and must be kept safely for three (3) years in a manner to insure permanency and accessibility for inspection by the Tax Administrator or his agents. The books, papers and records of any distributor or dealer in the State may be examined to determine whether the cigarette tax has been paid in full. The Division of Taxation may also investigate and examine the cigarette stock in or on any premises where cigarettes are possessed, stored or sold to determine whether the provisions of R.I. Gen. Laws Chapter 44-20 are being met and/or whether the minimum prices established under the R.I. Gen. Laws Chapter 6-13 (Unfair Practices Act) are being complied with.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.7 Licenses

A.Licensing requirements:

Each person engaging in the business of selling cigarette and/or other tobacco products in this state, including any distributor or dealer, shall secure a license from the Tax Administrator before engaging in that business or continuing to engage therein. A separate application and license is required for each place of business operated by a distributor or dealer; provided, that an operator of vending machines for cigarette products is not required to obtain a distributor's license for each machine. If the applicant for a license does not have a place of business in this state, the license shall be issued for such applicant's principal place of business, wherever located. A licensee shall notify the administrator within thirty (30) days in the event that it changes its principal place of business. A separate license is required for each class of business if the applicant is engaged in more than one of the activities required to be licensed by R.I. Gen. Laws § 44-20-2. No person shall maintain or operate or cause to be operated a vending machine for cigarette products without procuring a dealer's license for each machine.

2.The Tax Administrator may grant a distributor's license to any person located outside Rhode Island who ships cigarettes into Rhode Island if the Tax Administrator determines that the collection of the cigarette tax will be facilitated. The nonresident must qualify under R.I. Gen. Laws § 44-20-1 as a distributor.

3.All licenses are issued by the Tax Administrator on application setting forth in forms prescribed by the Tax Administrator such information as he/she may require for the proper administration of R.I. Gen. Laws Chapter 44-20.

4.No exception is made in the law for persons operating temporary stands or other places where cigarettes are sold only for a limited time. Persons operating such places must first obtain a license from the Tax Administrator before selling cigarettes therein. A license used for the regular place of business cannot cover a temporary stand located at a place apart from the regular place of business.

B.Suspension or Revocation of Licenses: The Tax Administrator may suspend or revoke any cigarette license if the licensee fails to comply with any law or ordinance concerning cigarette and/or other tobacco products sales. The Tax Administrator may also suspend or revoke a license if the licensee does not comply with R.I. Gen. Laws Chapter 6-13 ("Unfair Sales Practices"). The Tax Administrator and Division of Taxation agents are empowered to examine the books, records and papers of any licensee to determine proper compliance.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.8 License Availability

A.No license may be granted, maintained or renewed if the applicant, or any combination of persons owning directly or indirectly any interests in the applicant:

1.Owes five hundred dollars ($500) or more in delinquent cigarette taxes;

2.Is delinquent in any tax filings for one month or more;

3.Had a license under R.I. Gen. Laws Chapter 44-20 revoked by the Tax Administrator within the past two (2) years;

4.Has been convicted of a crime relating to cigarettes stolen or counterfeit cigarettes;

5.Is a cigarette manufacturer or importer that is neither:

a.a participating manufacturer as defined in § 1.2 of this Part.

b.of the "Master Settlement Agreement" as defined in R.I. Gen. Laws § 23-71-2; nor

c.in full compliance with R.I. Gen. Laws Chapter 44-20.2 and R.I. Gen. Laws § 23-71-3;

6.Has imported, or caused to be imported, into the United States any cigarette in violation of 19 U.S.C. § 1681a; or

7.Has imported, or caused to be imported into the United States, or manufactured for sale or distribution in the United States any cigarette that does not fully comply with the Federal Cigarette Labeling and Advertising Act (15 U.S.C. § 1331, et seq.)

B.No person shall apply for a new license or permit (as defined in R.I. Gen. Laws § 44-19-1) or renewal of a license or permit, and no license or permit shall be issued or renewed for any person, unless:

1.All outstanding fines, fees or other charges relating to any license or permit held by that person have been paid.

2.No license or permit shall be issued relating to a business at any specific location until all prior licenses or permits relating to that location have been officially terminated and all fines, fees or charges relating to the prior licenses have been paid or otherwise resolved or the Tax Administrator has found that the person applying for the new license or permit is not acting as an agent for the prior licensee or permit holder who is subject to any such related fines, fees or charges that are still due. Evidence of such agency status includes, but is not limited to, a direct familial relationship and/or an employment, contractual or other formal financial or business relationship with the prior licensee or permit holder.

3.No person shall apply for a new license or permit pertaining to a specific location in order to evade payment of any fines, fees or other charges relating to a prior license or permit for that location.

4.No new license or permit shall be issued for a business at a specific location for which a license or permit already has been issued unless there is a bona fide, good faith change in ownership of the business at that location.

5.No license or permit shall be issued, renewed or maintained for any person, including the owners of the business being licensed or having applied and received a permit, that has been convicted of violating any criminal law relating to tobacco products, the payment of taxes or fraud or has been ordered to pay civil fines of more than twenty-five thousand dollars ($25,000) dollars for violations of any civil law relating to tobacco products, the payment of taxes or fraud.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.9 Suspension or Revocation of License

The Tax Administrator may suspend or revoke any license under R.I. Gen. Laws Chapter 44-20 or with any provision of any other law or ordinance relative to the sale of cigarettes and/or other tobacco products; and the Tax Administrator may also suspend or revoke any license for failure of the licensee to comply with any provision of R.I. Gen. Laws Chapter 6-13, and, for the purpose of determining whether the licensee is complying with any provision of R.I. Gen. Laws Chapter 6-13, the Tax Administrator and his or her authorized agents are empowered, in addition to authority conferred by R.I. Gen. Laws § 44-20-40, to examine the books, papers, and records of any licensee. The Tax Administrator shall revoke the license of any person who would be ineligible to obtain a new or renew a license by reason of any of the conditions for licensure provided in R.I. Gen. Laws § 44-20-4.1. Any person aggrieved by the suspension or revocation may apply to the Administrator for a hearing as provided in R.I. Gen. Laws § 44-20-47, and may further appeal to the district court as provided in R.I. Gen. Laws § 44-20-48.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.10 Purchasing and Applying Indicia

A.By Licensed Distributors or Dealers: Payment for indicia must be made at the time of purchase. However, if the purchaser wishes to use the provision for thirty (30) days’ credit as provided by law, he or she must file a satisfactory surety bond with the Division of Taxation. The bond must be in an amount not less than the sale price of the indicia averaged over six (6) months’ purchases and the bond must be written by a surety company authorized to do business in Rhode Island. A bond form will be supplied on request.

B. By a Nonresident:

1.The licensed nonresident cigarette distributor is required to affix all indicia to the individual packages of cigarettes at the location for which the license is issued. The indicia must be affixed before the packages of cigarettes are shipped into Rhode Island. The licensed nonresident must also agree to comply with all other parts of the Rhode Island cigarette tax law. The nonresident distributors must also file a bond in the amount of one thousand dollars ($1,000) to the Tax Administrator in accordance with all provisions of the law and regulations. The bond must be issued by a surety company licensed to do business in Rhode Island and must be in full force and effect for a period of one year and a day after the expiration of the bond unless a certificate is issued by the Tax Administrator to the effect that all taxes due the State have been paid. Cash will be accepted in lieu of a surety bond.

2.The licensed nonresident distributor must also agree in writing to submit his or her books, accounts and records to examination during reasonable business hours as well as appointing, in writing, the Secretary of State of the State of Rhode Island as his or her agent upon whom service of process may be made in any proceeding involving the administration of the cigarette tax law.

C.Returned Checks: In the event of returned check payments, or electronic payment reversals, the Tax Administrator reserves the right to revoke the license of the distributor or dealer or to require that future payments must be made by certified check or money order.

D.Affixing Indicia: Each distributor must affix, or cause to be affixed, indicia to each individual package of cigarettes in the proper denomination. This process shall be in the manner the Tax Administrator may specify in accordance with the provisions of R.I. Gen. Laws 44-20. The indicia must be applied to each package of cigarettes sold or distributed and the indicia may be applied by the distributor at any time before the cigarettes are transferred out of the distributor's possession.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.11 Redemptions and Refunds

A.Redemption of Unused Cigarette Tax: No person shall sell or transfer any stamps under the provisions of this regulation. The Tax Administrator will redeem any unused or un-cancelled indicia presented in unbroken sheets or packages by any licensed distributor within six (6) months of the date of purchase, at a price equal to ninety-eight percent (98%) of their face value.

B.Reimbursement for Torn, Mutilated and Other Stamps: The law also provides for the reimbursement at ninety-eight and three-quarter percent (98.75%) of their face value of indicia affixed to packages which have become unfit for use and consumption or unsalable.

C.Filing Claims for Refund: Claims for refunds of cigarette tax must be made on Form T-29 (Application for Refund of Cigarette Tax). This application must be supported by an affidavit of destruction (Form T-22) executed by authorized agents of the Division of Taxation or, in the case of cigarettes returned to the manufacturer, an affidavit from the cigarette manufacturer receiving the stamped cigarettes.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.12 Physical Inventories of Cigarettes and Indicia

A. Authorized representatives of the Division of Taxation may at unannounced times, secure inventories of cigarettes, and of indicia as the first step to conducting a complete audit to the dealer’s or distributor's cigarette transactions and compliance with the cigarette tax laws by all licensees.

B.A representative of the dealer or distributor must be present with the Division of Taxation representative during the physical inventory, and upon completion of the inventory, the representative of the dealer or distributor must sign the inventory sheets and the report form attesting to their accuracy.

C.Loans and Transfers of Cigarette Tax Indicia: All licensed distributors purchasing indicia must maintain custody of the indicia. Indicia cannot be loaned, sold, or transferred to another licensee under any conditions whatsoever.

D.Loans and Transfers of Unstamped Cigarettes: Loans and transfers of unstamped cigarettes must be supported by invoices and must be made on an in-out basis. The recipient must show the cigarettes received on Schedule A of the distributor's monthly report and the transferring licensee must show the transaction on Schedule D of its distributor's monthly report. This procedure is mandatory even though the entire transaction is completed in one day.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.13 Reports and Records of Carriers, Bailers and Warehousemen

The Tax Administrator may require reports from any common or contract carrier who transports cigarettes to any point or points in Rhode Island and from any bonded warehouseman or bailee who has any cigarette in his or her possession. These reports are to contain information about shipments of cigarettes or other data the Division of Taxation may require. All common and contract carriers, bailers and warehousemen shall allow agents of the Division of Taxation to examine any records relating to the shipment or receipt of cigarettes.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.14 Distribution of Sample Packages of Cigarettes

A.All sample packages of cigarettes are subject to the provisions of the law and regulations pertaining thereto.

B.Distribution by Licensed Distributors:

1.Licensed distributors in this state may receive and distribute sample packages under the following procedures:

a.The sample cigarettes must be delivered by the manufacturer directly to the distributor and an invoice rendered to the distributor showing the number of cigarettes shipped. The distributor will retain such invoice for inspection by the Tax Administrator.

b.The distributor will see that stamps of the proper denominations are affixed as hereinafter provided before the cigarettes leave his or her possession.

c.Stamps of the proper denomination shall be affixed to packages containing twenty (20) or more cigarettes. Stamps of the proper denomination shall be affixed to the carton containing packs of less than twenty (20) cigarettes. These packs shall be kept in the original stamped carton until distributed and the carton shall then be destroyed.

2.The distributor will be held strictly liable for any sample packages of cigarettes charged to the distributor's account either by themselves or their agents.

C.Distribution by Manufacturers:

1.Representatives of manufacturers may, when permission has been specifically granted by the Tax Administrator, distribute sample packs of cigarettes containing more than one, but not more than five cigarettes per pack without affixing Rhode Island tax stamps. All packages of cigarettes must bear an inscription to the effect that all applicable state taxes have been paid and cigarettes so distributed are not for sale.

2.Packages containing twenty (20) cigarettes may be distributed to stockholders of the cigarette manufacturer or brought into this state for testing purposes provided the Tax Administrator is notified of the names and addresses of the recipients.

3.Each manufacturer who has been granted such special permission to distribute unstamped cigarettes must certify each month the number of sample cigarettes imported into Rhode Island and pay the tax due at the time of filing such certification.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.15 Tax Exempt Cigarette Sales

A.Cigarettes sold to the following instrumentalities of the United States are not required to be stamped:

1.Post Exchanges, Ships' Service Stores and Commissaries of the U.S. Army, Navy, Marine Corps and Coast Guard;

2.Officers, noncommissioned and warrant officers' clubs;

3.Bristol Soldiers' Home;

4.The American Red Cross;

5.Canteens of the United States Veterans Administration.

B.Untaxed sales by licensed distributors shall be made only to the above organizations and not to individual military or civilian personnel.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.16 Minimum Pricing of Cigarettes

A.Pursuant to R.I. Gen. Laws § 44-20-8, the Tax Administrator may suspend or revoke any license under R.I. Gen. Laws Chapter 44-20 for failure of the licensee to comply with any provision of R.I. Gen. Laws Chapter 6-13 entitled "Unfair Sales Practices."

B.No licensee shall advertise, offer to sell, or sell cigarettes at a price that is less than the applicable presumptive cost without obtaining the Tax Administrator's prior written approval. The Tax Administrator may periodically announce the retailers' and wholesalers' presumptive cost. The Tax Administrator may suspend or revoke any license if the licensee advertises, offers to sell, or sells cigarettes at less than the applicable presumptive cost without the Tax Administrator's prior written approval.

C.Example:

The cost of a carton of cigarettes to a licensed cigarette distributor is $100.00. This includes the cost from the manufacturer, and cigarette tax paid per R.I. Gen. Laws § 44-20-12, for the carton of cigarettes. The wholesaler/distributor's presumptive cost of selling cigarettes, or the minimum price from a distributor to a dealer, without a delivery cost, is $102.00 ($100102%). The cartage cost to the retail outlet, or the minimum price including delivery cost, from a distributor to a dealer, is $102.77 ($102100.75%). The retailer/dealer's presumptive cost of selling cigarettes, or the dealer’s minimum price to the consumer, is $108.96 ($102.77*106%) per carton.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.17 Vending Machines Operators

A.Licensing:

1.Each vending machine is considered a retail outlet. Each vending machine owner must file an application with the Division of Taxation and shall pay the fee for each machine. A numbered license will be furnished for each individual machine.

2.No person shall cause or allow a cigarette vending machine to be operated unless a Division of Taxation marker tab is attached showing that the machine has been licensed by the Division of Taxation. The fee for each license is twenty-five dollars ($25.00). Any licensed machine may be moved from one place to another. Any person who operates machines in violation of these provisions is subject to the same penalties in R.I. Gen. Laws § 44-20-3 for the sale of cigarettes without a license. When a machine is in use or service (i.e., on location, accessible to cigarette purchasers and containing or ready to contain cigarettes) it must have a vending machine tab affixed.

3.In addition to affixing a Division of Taxation tab to each machine owned and operated, each operator must have his or her name and address plainly marked on each vending machine in use.

4.Vending machine dealer’s licenses and pre-numbered decal tabs (indicating proper licensing of cigarette vending machines) are furnished by the Division of Taxation to each licensed operator. Licenses must be kept in the operator's files and the decal tabs must be affixed to the inner panel of the vending machine (inside the glass) or any other place on the machine where the tax is visible for inspection by agents of the Division of Taxation.

5.If the machine is sold or otherwise disposed of, the license must be returned to the Division of Taxation and the tab must be removed from the machine. Licenses and tabs are not transferable.

6.As of May 31 of each year, enough pre-numbered decal tabs for the current year will be issued to vending machine operators to indicate proper licensing of cigarette vending machines controlled as of that date. Prior year tabs must be removed from the vending machines and current year tabs must be affixed by July 15 of the current year.

B.Reports:

1.Periodic reports on the number of vending machines in operation, their location and other pertinent information shall be required from operators of vending machines.

2.Monthly Report of Vending Machine Operators: On or before the tenth of the month, each vending machine operator must file a report (Form T-302). The report covers the prior month and indicates the following:

a.the number of machines controlled by the operator at the end of the prior month;

b.the number of machines acquired during the month including the model number(s) of machines, manufacturer's name and address and from whom the machine was purchased;

c.the number of machines sold or disposed of including the model number(s), manufacturer's name and address and to whom the machine was sold, and;

d.the inventory of machines controlled at the end of the month.

3.If an operator has vending machines purchased outside Rhode Island, he or she must prove that the use tax has been paid as a condition of getting vending machine licenses.

4.Vending Machine Operators Annual Inventory & Report: Each May 31, operators of five or more cigarette vending machines must report the following information to the Division of Taxation on Form T-5A:

a.location of each machine by street and number;

b.name of each location;

c.city or town where vending machines are located;

d.number of the license affixed to each machine, and;

e.any machines not on location but in inventory.

5.Inventories of vending machines listed on Form T-5A will be audited against the license files at the Division of Taxation and the information and forms are subject to field verification.

6.Vending machine tabs are issued in accordance with the list of locations reported to the Division of Taxation prior to June 1 of the current year. A Form T-5A must be prepared and filed with each new application for any additional vending machine licenses.

C.Physical Requirements for Cigarettes Sold

1.Sealed Packages: Cigarettes, if sold in vending machines, must be in sealed packages which bear the Rhode Island tax indicia in the proper denomination. The sale of individual cigarettes is prohibited.

2.Visibility of Indicia: In all machines constructed with windows in front or top of the case, cigarettes must be loaded so that the Rhode Island tax indicia are clearly visible from the outside. The use of paper or other materials to blank out windows in cigarette vending machines is prohibited.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.18 Tax Rate on Cigarettes and Little Cigars

Under R.I. Gen. Laws § 44-20-12 a tax is imposed on all cigarettes and little cigars sold or held for sale in the state. The payment of the tax is to be evidenced by stamps, which may be affixed only by licensed distributors to the packages containing such cigarettes and/or little cigars. Any cigarettes and/or little cigars on which the proper amount of tax has been paid, payment being evidenced by the stamp, is not subject to a further tax.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.19 Inspections

A.The Tax Administrator and his or her agents is authorized under R.I. Gen. Laws § 44-20-40.1 to conduct unannounced inspections to insure compliance with all provisions of R.I. Gen. Laws Chapter 44-20. Accordingly, the Tax Administrator and his or her agents shall be permitted to inspect the Place of Business of any person selling any and all tobacco products within the State. Inspections of Licensed Distributors or Dealers shall be conducted during normal business hours without a warrant and without prior notice.

B.The Tax Administrator and his or her duly authorized agents shall be permitted to inspect he books, papers, reports and records of any Manufacturer, Importer, Distributor, or Dealer in this state for the purpose of determining whether taxes imposed by R.I. Gen. Laws Chapter 44-20 have been fully paid, and may investigate the stock of cigarettes and other tobacco products in or upon the Place of Business for the purpose of determining whether the provisions of R.I. Gen. Laws Chapter 44-20 are being obeyed.

C.Failure to allow such inspection(s) of the Place of Business and/or records may result in civil penalties and/or suspension or revocation of a Cigarette Dealer’s or Distributor’s License.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.20 Seizures

All cigarettes and/or other tobacco products which are possessed, stored, retained, or otherwise brought into the state in contradiction to R.I. Gen. Laws § 44-20-13.2 and these Regulations shall be considered untaxed contraband by the Tax Administrator and his or her agents. The cigarettes and/or other tobacco products may be seized by the Tax Administrator or his or her agents or employees or by any sheriff or his or her deputy or any police officer when directed by the Tax Administrator to do so, without a warrant.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.21 Billings and Penalties

A.Whoever omits, neglects, or refuses to comply with any duty imposed upon him/her by R.I. Gen. Laws Chapter 44-20, or does, or cause to be done, any of the things required by R.I. Gen. Laws Chapter 44-20, or does anything prohibited R.I. Gen. Laws Chapter 44-20, shall, in addition to any other penalty provided in R.I. Gen. Laws Chapter 44-20, be liable as follows:

1.For a first offense in a twenty-four month (24) period, a penalty of not more than one thousand dollars ($1,000), or not more than five (5) times the retail value of the cigarettes involved, whichever is greater, to be recovered, with costs of suit, in a civil action;

2.For a second or subsequent offense in a twenty-four-month (24) period, a penalty of not more than five thousand dollars ($5,000), or not more than twenty-five (25) times the retail value of the cigarettes involved, whichever is greater, to be recovered, with costs of suit, in a civil action.

B.Whoever fails to pay any tax imposed by R.I. Gen. Laws Chapter 44-20 at the time prescribed by law or regulations, shall, in addition to any other penalty provided in R.I. Gen. Laws Chapter 44-20, be liable for a penalty of not more than five (5) times the tax due but unpaid.

C.When determining the amount of a penalty sought or imposed under R.I. Gen. Laws § 44-20-51.1, evidence of mitigating or aggravating factors, including history, severity, and intent, shall be considered.

D.In addition to the civil penalties listed above, the Tax Administrator, in his or her sole discretion, may suspend or revoke a cigarette Dealer’s or Distributor’s license for any violation of these Regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.22 Seizure and Destruction of Unstamped Cigarettes

Any cigarettes found at any place in this state without stamps affixed as required R.I. Gen. Laws Chapter 44-20 are declared to be contraband goods and may be seized by the Tax Administrator, his or her agents, or employees, or by any deputy sheriff, or police officer when directed by the Tax Administrator to do so, without a warrant. Any cigarettes seized under the provisions of R.I. Gen. Laws Chapter 44-20 shall be destroyed. The seizure and/or destruction of any cigarettes under the provisions of this R.I. Gen. Laws § 44-20-37 does not relieve any person from a fine or other penalty for violation of R.I. Gen. Laws Chapter 44-20.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.23 Appeals

A.Any person aggrieved by a Notice of Deficiency issued by the Tax Administrator is entitled to an administrative hearing. In order to request this hearing, the taxpayer must notify the Tax Administrator in writing within thirty (30) days from the date of the Notice of Deficiency. The Tax Administrator shall, as soon as is practicable, set a time and place for hearing, and shall render a final decision. The administrative hearing is the taxpayer’s opportunity to present valid records/invoices, as detailed above in Sub-part 8 of this regulation, evidencing tax paid on the seized items.

B.Appeals from a final decision of the Tax Administrator shall be to the Rhode Island Sixth (6th) Division District Court pursuant to R.I. Gen. Laws § 8-8-1 et seq. The taxpayer’s right to appeal to the district court is expressly made conditional upon prepayment of all taxes, interest, and penalties, unless the taxpayer files a timely motion for exemption from prepayment with the district court in accordance with the requirements imposed pursuant to R.I. Gen. Laws § 8-8-26.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 § 1.24 Effective Date

A.This regulation is identified by ERLID# 8517 and shall take effect May 15, 2017.

B.Neena S. Savage, Tax Administrator

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-1 Cigarette Tax

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-05-15 to 01/04/2022
Technical Revision — effective from 2017-05-15 to 05/15/2017
Adoption — effective from 2017-05-15 to 05/15/2017

280-RICR-20-15-2 Other Tobacco Products

280-RICR-20-15-2 § 2.1 Purpose

A.The purpose of this regulation is to implement R.I. Gen. Laws § 44-20-13.2 which provides for tax on smokeless tobacco, cigars, and pipe tobacco products sold or held for sale in the state by any person.

B.Any dealer having in his or her possession any tobacco, cigars, and pipe tobacco products with respect to the storage or use of which a tax is imposed by R.I. Gen. Laws Chapter 44-20 shall, within five (5) days after coming into possession of the tobacco, cigars, and pipe tobacco in this state, file a return with the Tax Administrator in a form prescribed by the Tax Administrator. The return shall be accompanied by a payment of the amount of tax shown on the form to be due.

C.Records required under R.I. Gen. Laws Chapter 44-20 shall be preserved on the premises described in the relevant license in such a manner as to ensure permanency and accessibility for the inspection at reasonable hours by authorized personnel of the Administrator.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2014-08-01 to 01/04/2022
Technical Revision — effective from 2014-08-01 to 08/01/2014
Adoption — effective from 2014-08-01 to 08/01/2014

280-RICR-20-15-2 § 2.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws §§ 44-1-4 and 44-20-50. This regulation has been prepared in accordance with the requirements of R.I. Gen. Laws §§ 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2014-08-01 to 01/04/2022
Technical Revision — effective from 2014-08-01 to 08/01/2014
Adoption — effective from 2014-08-01 to 08/01/2014

280-RICR-20-15-2 § 2.3 Application

This regulation shall be liberally construed so as to permit the Division of Taxation the authority to effectuate the purpose of R.I. Gen. Laws § 44-20-13.2 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2014-08-01 to 01/04/2022
Technical Revision — effective from 2014-08-01 to 08/01/2014
Adoption — effective from 2014-08-01 to 08/01/2014

280-RICR-20-15-2 § 2.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2014-08-01 to 01/04/2022
Technical Revision — effective from 2014-08-01 to 08/01/2014
Adoption — effective from 2014-08-01 to 08/01/2014

280-RICR-20-15-2 § 2.5 Definitions

A.“Administrator” or “Tax Administrator” means the tax administrator of the State of Rhode Island, and head of the Rhode Island Division of Taxation;

B.“Dealer” means any Person whether located within or outside of this state, who sells or distributes cigarettes and/or Other Tobacco Products to a consumer in this state;

C.“Distributor” means any Person:

1.Whether located within or outside of this state, other than a Dealer, who sells or distributes cigarettes and/or Other Tobacco Products within or into this state. Such term shall not include any cigarette and/or Other Tobacco Product Manufacturer, export warehouse proprietor, or Importer with a valid permit under 26 U.S.C., § 5712, if such Person sells or distributes cigarettes and/or Other Tobacco Products in this state only to licensed Distributors, or to an export warehouse proprietor or another Manufacturer with a valid permit under 26 U.S.C., § 5712;

2.Selling cigarettes and/or Other Tobacco Products directly to consumers in this state by means of at least twenty-five (25) vending machines;

3.Engaged in this state in the business of manufacturing cigarettes and/or Other Tobacco Products, or any Person engaged in the business of selling cigarettes and/or Other Tobacco Products to Dealers, or to other Persons, for the purpose of resale only, provided, that seventy-five percent (75%) of all cigarettes and/or Other Tobacco Products sold by that Person in this state are sold to Dealers or other Person for resale and selling cigarettes and/or Other Tobacco Products directly to at least forty (40) Dealers or other Persons for resale; or

4.Maintaining one or more regular Places of Business in this state for that purpose; provided, that seventy-five percent (75%) of the sold cigarettes and/or Other Tobacco Products are purchased directly from the Manufacturer and selling cigarettes and/or Other Tobacco Products directly to at least forty (40) Dealers or other Persons for resale;

D.“Importer” means any Person who imports into the United States, either directly or indirectly, a finished cigarette and/or Other Tobacco Products for sale or Distribution;

E.“Licensed,” when used with reference to a Manufacturer, Importer, Distributor or Dealer, means only those persons who hold a valid and current license from the State of Rhode Island issued under § 44-20-2 for the type of business being engaged in. When the term “licensed” is used before a list of entities, such as “licensed Manufacturer, Imported, wholesale Dealer, or retailer Dealer,” such term shall be deemed to apply to each entity in such list;

F.“Manufacturer” means any Person who manufactures, fabricates, assembles, processes, or labels a finished cigarette and/or Other Tobacco Products;

G.“Notice of Deficiency Determination” means a written statement of a tentative determination of tax liability, including any interest and penalties due, that does not become due, final, and payable until thirty (30) days have transpired from the date the notice issued without a request for hearing;

H.“Other Tobacco Product/s” (OTP) means any cigars (excluding Little Cigars which are subject to cigarette tax), cheroots, stogies, smoking tobacco (including granulated, plug cut, crimp cut, ready rubbed and any other kinds and forms of tobacco suitable for smoking in a pipe or otherwise), chewing tobacco (including Cavendish, twist, plug, scrap and any other kinds and forms of tobacco suitable for chewing), any and all forms of hookah and shisha tobacco, snuff, and shall include any other articles or products made of tobacco or any substitute therefore, excepts cigarettes;

I.“Person” means any individual, including an employee or agent, firm, fiduciary, partnership, corporation, trust, or association, however formed;

J“Place of Business” means and includes any place where cigarettes and/or Other Tobacco Products are sold, or where cigarettes and/or Other Tobacco Products are or could be stored or kept for the purpose of sale or consumption, including any locked storage safe and/or container, any vessel, vehicle, airplane, train, or vending machine;

K.“Sale” or “Sell” includes and applies to gifts, exchanges, and barter;

L.“Snuff” means any finely cut, ground, or powdered tobacco that is not intended to be smoked;

M.“Wholesale Cost” means:

1.In the case of a Manufacturer of Other Tobacco Products, the price set for such products or, if no price had been set, the wholesale value of such products;

2.In the case of a Distributor, the price at which the Distributor purchases Other Tobacco Products before the allowance of any discounts, trade allowances, rebate or other reduction;

3.In the case of a Dealer of Other Tobacco Products, the invoice price to the Dealer.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2014-08-01 to 01/04/2022
Technical Revision — effective from 2014-08-01 to 08/01/2014
Adoption — effective from 2014-08-01 to 08/01/2014

280-RICR-20-15-2 § 2.6 Mandatory Filing of Tax for Other Tobacco Products

A.Dealer filing requirements. Pursuant to R.I. Gen. Laws § 44-20-13.2(b), any Dealer who purchases Other Tobacco Products from a Distributor who does not possess a valid Rhode Island Distributor’s license shall, within five (5) days after coming into possession of the Other Tobacco Products, file a return with the Tax Administrator and pay the appropriate tax.

1.The dealer or retailer shall file the return by completing Form OTP-4, which is available on the Division of Taxation’s website: www.tax.ri.gov. The return shall be accompanied by a payment of the amount of the tax due, as calculated on the return.

2.The Dealer shall keep a copy of the OTP-4 return remitted to the Division as well as proof of payment for the return. These documents shall be kept in accordance with §§ 2.8 and 2.9 of this Part.

3.Any Dealer who purchases Other Tobacco Products from a Distributor who possesses a valid Rhode Island Distributor’s license is not required to file an OTP-4 return; however, the dealer must keep records/invoices of all purchases in accordance with §§ 2.8 and 2.9 of this Part.

B.Distributor licensing and filing requirements. Any Distributor of Other Tobacco Products shall file an “Application For Tobacco Products Distributor’s License” (Form TOB-APP) with the Division of Taxation. As a Distributor of Other Tobacco Products, the licensee shall file a monthly Report of Tobacco Products Tax Return with the Division of Taxation (Form OTP-1). The “Application For Tobacco Products Distributor’s License” (Form TOB-APP) and the Distributor’s Other Tobacco Products Return” (Form OTP-1) are both available on the Tax Division’s website at: www.tax.ri.gov/taxforms/sales_excise/tobacco.php. The Distributor’s Return (Form OTP-1) shall be filed on or before the tenth day of each month accompanied by a payment of the amount of the tax due as shown on the return.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2014-08-01 to 01/04/2022
Technical Revision — effective from 2014-08-01 to 08/01/2014
Adoption — effective from 2014-08-01 to 08/01/2014

280-RICR-20-15-2 § 2.7 Tax Rate

A.General Rate. The tax rate for Other Tobacco Products, excluding cigars and snuff, is eighty percent (80%) of the wholesale cost of the products. For purposes of this tax rate, Other Tobacco Products includes, but is not limited to, any and all forms of hookah and shisha tobacco, chew, heavy weight cigars, and other forms of tobacco products.

B.Cigar Tax Rate. The tax rate for cigars is eighty percent (80%) of the wholesale cost, with a maximum tax of no more than fifty cents ($0.50) per cigar. If the wholesale value of the cigar is $0.63 or more, then the maximum tax due on that cigar is fifty cents ($0.50).

C.Snuff Tax Rate. The tax on snuff shall be calculated by net weight. The tax rate is one dollar ($1.00) per ounce, and a proportionate tax on all fractional parts thereof. However, any product with a net weight of less than 1.2 ounces shall be taxed as if the product has a net weight of 1.2 ounces.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2014-08-01 to 01/04/2022
Technical Revision — effective from 2014-08-01 to 08/01/2014
Adoption — effective from 2014-08-01 to 08/01/2014

280-RICR-20-15-2 § 2.8 Record Requirements

A.Every Distributor of Other Tobacco Products must keep complete and accurate records of all tobacco products sold to a Dealer. Distributor’s records must contain an accurate date, the name, address, phone number, and OTP Distributor’s license number of the Distributor, the identity of the Dealer purchasing the tobacco product/s including name, address, phone number, and Dealer’s cigarette license number, as well as the quantity, wholesale cost of the item/s and the actual amount of tax paid for the specific items.

B.Every Dealer of Other Tobacco Products must keep complete and accurate records of all tobacco products purchased from either a licensed or non-licensed Distributor. These purchase records must contain an accurate date, the identity of the person selling the tobacco product/s including name, address, phone number, and OTP Distributor’s license number, the identity of the Dealer including the name, address, phone number, and Dealer’s cigarette license number, as well as the quantity, wholesale cost of the item/s, and the actual amount of tax paid for specific items.

C.Both Distributors and Dealers must keep documentation of any returns filed with the Division, as well as proof of payment of Other Tobacco Products Tax.

D.For a period of at least six (6) months after purchase, the records shall be kept at the Place of Business in accordance with R.I. Gen. Laws § 44-20-13.2(b). After six (6) months, the records may be kept off site; however, they must be produced upon demand to the Division of Taxation within twenty-four (24) hours.

E.Distributors and Dealers may keep records electronically as long as they are immediately accessible for inspection at the Place of Business.

F.All records shall be kept safely for a period of three (3) years in a manner to insure permanency and accessibility for inspection by the Tax Administrator or his or her agents.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2014-08-01 to 01/04/2022
Technical Revision — effective from 2014-08-01 to 08/01/2014
Adoption — effective from 2014-08-01 to 08/01/2014

280-RICR-20-15-2 § 2.9 Inspections

A. The Tax Administrator and his or her agents are authorized under R.I. Gen. Laws § 44-20-40.1 to conduct unannounced inspections to insure compliance with all provisions of R.I. Gen. Laws Chapter 44-20. Accordingly, the Tax Administrator and his or her agents shall be permitted to inspect the Place of Business of any Person selling any tobacco products within the State. Inspections of licensed Distributors or Dealers shall be conducted during normal business hours without a warrant and without prior notice.

B.The Tax Administrator and his or her duly authorize agents shall be permitted to inspect the books, papers, reports, and records of any Manufacturer, Importer, Distributor, or Dealer in this state for the purpose of determining whether taxes imposed by R.I. Gen. Laws Chapter 44-20 have been fully paid, and may investigate the stock of cigarettes and Other Tobacco Products in or upon the Place of Business for the purpose of determining whether the provisions of R.I. Gen. Laws Chapter 44-20 are being obeyed.

C.Failure to allow such inspection(s) of the Place of Business and/or records may result in civil penalties and/or suspension or revocation of a Cigarette Dealer’s or Distributor’s License.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2014-08-01 to 01/04/2022
Technical Revision — effective from 2014-08-01 to 08/01/2014
Adoption — effective from 2014-08-01 to 08/01/2014

280-RICR-20-15-2 § 2.10 Seizures

Other Tobacco Products which are possessed, stored, retained, or otherwise brought into the State in contradiction to R.I. Gen. Laws § 44-20-13.2 and this Regulation shall be considered untaxed contraband by the Tax Administrator and his or her agents. The Other Tobacco Products may be seized by the Tax Administrator or his or her agents or employees or by any sheriff or his or her deputy or any police officer when directed by the Tax Administrator to do so, without a warrant.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2014-08-01 to 01/04/2022
Technical Revision — effective from 2014-08-01 to 08/01/2014
Adoption — effective from 2014-08-01 to 08/01/2014

280-RICR-20-15-2 § 2.11 Billings and Penalties

A.In the event that contraband Other Tobacco Products are seized, the Tax Administrator shall issue a Notice of Deficiency Determination for the amount of tax due but unpaid on the seized items. The Tax Administrator may impose civil penalties for failure to pay tax on any Notice of Deficiency that results from a seizure of contraband Other Tobacco Products. The civil penalty shall be in the amount of five (5) times the tax due but unpaid, as calculated by the Tax Administrator and his or her agents.

B.In addition to the civil penalties listed above, the Tax Administrator, in his or her sole discretion, may suspend or revoke a cigarette Dealer’s or Distributor’s license for any violation of these Regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2014-08-01 to 01/04/2022
Technical Revision — effective from 2014-08-01 to 08/01/2014
Adoption — effective from 2014-08-01 to 08/01/2014

280-RICR-20-15-2 § 2.12 Destruction of Other Tobacco Products

In the event that the taxpayer is unable or unwilling to provide valid records/invoices to evidence tax paid on the seized contraband, the contraband shall be destroyed in any manner deemed appropriate by the Tax Administrator pursuant to R.I. Gen. Laws § 44-20-15(b). If a Dealer contests a Notice of Deficiency Determination within thirty (30) days, no seized Other Tobacco Products will be destroyed while the matter is pending hearing. All seized contraband may be stored at any facility or location the Tax Administrator deems appropriate.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2014-08-01 to 01/04/2022
Technical Revision — effective from 2014-08-01 to 08/01/2014
Adoption — effective from 2014-08-01 to 08/01/2014

280-RICR-20-15-2 § 2.13 Appeals

A.Any Person aggrieved by a Notice of Deficiency Determination issued by the Tax Administrator is entitled to an administrative hearing. In order to request this hearing, the taxpayer must notify the Tax Administrator in writing within thirty (30) days from the date of the Notice of Deficiency Determination. The Tax Administrator shall, as soon as practicable, set a time and place for hearing, and shall render a final decision. The administrative hearing is the taxpayer’s opportunity to present valid records/invoices, as detailed above in § 2.8 of this Part, evidencing tax paid on the seized items.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2014-08-01 to 01/04/2022
Technical Revision — effective from 2014-08-01 to 08/01/2014
Adoption — effective from 2014-08-01 to 08/01/2014

280-RICR-20-15-2 § 2.14 Effective Date

A.This regulation shall take effect August 1, 2014

B.Filed: April 24, 2017

C.Neena S. Savage, Tax Administrator

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2014-08-01 to 01/04/2022
Technical Revision — effective from 2014-08-01 to 08/01/2014
Adoption — effective from 2014-08-01 to 08/01/2014

Subchapter 20 Tax Credits/Deductions

280-RICR-20-20-1 Investment Tax Credit

280-RICR-20-20-1 § 1.1 Authority and Purpose

A.Effective January 1, 1998 the investment tax credit statute (R.I. Gen. Laws Chapter 44-31) was extended to provide a ten percent (10%) tax credit to manufacturers and certain non-manufacturers ("qualified taxpayers") which meet statutorily defined criteria. The investment tax credit was further extended on June 30, 1999 to provide the ten percent (10%) tax credit to property having a situs in Rhode Island however acquired by "qualified taxpayers" which are property and casualty insurance companies.

B.The investment tax credit was increased from four percent (4%) to ten percent (10%) with respect to buildings and structural components which are acquired, constructed, reconstructed or erected after July 1, 2001 for "high performance manufacturers".

C.This regulation is set out in two (2) parts. The first part of the regulation deals with manufacturers that meet the criteria for the four percent (4%) tax credit. The second part of the regulation deals with manufacturers and non-manufacturers which meet the statutory criteria for the ten percent (10%) tax credit.

D.In general, provisions applicable to manufacturers in § 1.2 of this Part are deemed applicable to "qualified taxpayers" in § 1.3 of this Part unless law or regulations in § 1.2 of this Part mandate otherwise.

E.Documentation and Information Required

1.Taxpayers seeking credit as "manufacturers or qualified taxpayers" must complete the Form RI-3468 and must attach copies of calculations and documents evidencing satisfaction of the special criteria required for "qualified taxpayers" including but not limited to letters documenting training expenses from the Human Resource Investment Council, documenting wage information from the Rhode Island Department of Labor and Training, and calculations pertaining to wages or gross revenues.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2003-01-01 to 01/04/2022
Amendment — effective from 2003-01-01 to 01/01/2003
Amendment — effective from 2002-01-07 to 01/01/2003
Periodic Refile — effective from 2001-12-20 to 01/07/2002

280-RICR-20-20-1 § 1.2 Manufacturers

A.A taxpayer shall be allowed an investment tax credit computed in accordance with R.I. Gen. Laws § 44-31-1 against the business corporation tax or the personal income tax as imposed by R. I. Gen. Laws Chapters 44-11 and 44-30, respectively, on tangible personal property and other tangible property, including buildings and structural components of buildings acquired, constructed, reconstructed or erected for use principally by the taxpayer in the production of goods by manufacturing, processing or assembling. The investment tax credit shall be allowed against the business corporation tax computed on the basis of net income or net worth apportioned to Rhode Island, provided, however, that an investment tax credit will be allowed against the tax of only that corporation, included in a consolidated state tax return, that qualifies for the credit and will not be allowed against the tax of other corporations that may join in the filing of a consolidated state tax return with such corporation.

B.The investment tax credit shall be allowed on qualifying property acquired, constructed, reconstructed or erected after December 31, 1973 and first placed in service in this state during a taxable year beginning on or after July 1, 1974. A taxpayer placing otherwise qualifying property in service during a taxable year beginning prior to July 1, 1974 shall not be allowed a credit in the year placed in service nor shall the taxpayer be allowed a carryforward to any subsequent year.

C.In order to qualify for this credit, the property must:

1.Be depreciable pursuant to Internal Revenue Code, 26 U.S.C. § 167;

2.Have a useful life of 4 years or more;

3.Be acquired by purchase as defined in to Internal Revenue Code, 26 U.S.C. § 179(d);

4.Have a situs in this state at the date first placed in service by the taxpayer; and

5.Be principally used by the taxpayer in the production of goods by manufacturing, processing or assembling, as hereinafter described.

D.For the purpose of this regulation, the business of manufacturing, processing or assembling, shall be divided into three parts as follows:

1.Administration, meaning all administrative work such as general office operations, accounting, purchasing, collection, sales promotion, clerical work in production such as preparation of work records, production records and time records, and the transporting of raw materials to the plant.

2.Production, meaning all operations performed in producing or processing room, shop or plant, including the production line starting with the handling and storage of raw materials at the plant and continuing through the last step of production where the product is finished, packaged for sale and stored. Production shall also include machinery, equipment or other tangible property which is principally used in the repair and service of other machinery, equipment or other tangible property used principally in the production of goods.

3.Distribution, meaning all operations subsequent to production such as selling, displaying, loading and transporting the manufactured products.

E.The investment tax credit does apply to property used in the producing or processing room, shop, or plant if such property is principally used in production as defined above. The investment tax credit does not apply to property principally used in administration and distribution as defined above.

F. Section R.I. Gen. Laws § 44-31-1(b) states:

1.“… manufacturing shall mean the process of working raw materials into wares suitable for use or which gives new shapes, new quality or new combinations to matter which already has gone through some artificial process by the use of machinery, tools, appliances, and other similar equipment. Property used in the production of goods shall include machinery, equipment or other tangible property which is principally used in the repair and service of other machinery, equipment or other tangible property used principally in the production of goods and shall include all facilities used in the production operation, including storage of materials to be used in production and of the products that are produced."

2.Within the meaning of the preceding paragraph a taxpayer is deemed to be a manufacturer within a city or town within this state if it uses any premises, room or place therein primarily for the purpose of transforming raw materials into a finished product for trade through any or all of the following operations: adapting, altering, finishing, making and ornamenting; provided, however, that public utilities, building and construction contractors, warehousing operations, including distribution bases or outlets of out-of-state manufacturers, fabricating processes incidental to warehousing or distribution of raw materials such as alteration of stock for the convenience of a customer, shall be excluded from this definition.

3.A manufacturer is a taxpayer whose principal business in this state consists of transforming raw materials into a finished product for trade through any or all of the operations described in the preceding paragraph. A taxpayer will be deemed to be thus principally engaged if the gross receipts derived from such manufacturing operations in this state during the taxable year amounted to more than fifty percent (50%) of the total gross receipts derived from all the taxpayer's business activities in this state during the same taxable year. For the purpose of computing this percentage, gross receipts derived by a manufacturer from the sale, lease or rental of finished products manufactured by the taxpayer in Rhode Island should be deemed to have been from manufacturing even though the taxpayer's store or other sales place in Rhode Island may be at a different Rhode Island location from the Rhode Island manufacturing plant.

4.The term "manufacturer" shall also include taxpayers who are principally engaged in any of the general activities respectively coded and listed as establishments engaged in manufacturing in the Standard Industrial Classification Manual prepared by the Technical Committee on Industrial Classification, Office of Statistical Standards, Executive Office of the President, United States Bureau of the Budget, as revised from time to time, but eliminating as manufacturers those taxpayers, who, because of their limited type of manufacturing activities, are classified in the manual as falling within a trade rather than an industrial classification of manufacturers. Among those thus eliminated (and accordingly also excluded as manufacturers within the meaning of this subsection), are taxpayers primarily engaged in selling, to the general public products produced on the same premises from which they are sold, such as neighborhood bakeries, candy stores, ice cream parlors, shade shops and custom tailors. However, a person who manufactures bakery products for sale primarily for home delivery, or through one or more non-baking retail outlets (whether or not the retail outlets are operated by the taxpayer) shall be a manufacturer.

G.The credit is 2% of the cost or other basis for federal tax purposes and is only allowable in the year the property is first placed in service by the taxpayer for the production of goods by manufacturing, processing or assembling provided, however, that only the portion of expenditures that is properly attributable to acquisition, construction, reconstruction or erection after December 31, 1973 is taken into account, provided however the amount of credit shall be 4% of the cost or other basis for federal tax purposes for expenditures after December 31, 1993. If property is principally used in manufacturing, processing or assembling and is partially rented or leased, etc., the basis of the property must be adjusted for that proportionate share of nonqualifying use. Property is considered first placed in service by the taxpayer in the tax year in which under the taxpayer's depreciation practice, the period for depreciation for the property begins or the year in which the property is placed in a condition or state of readiness and availability for a specifically assigned function, whichever is earlier. If, for the federal tax purposes of the taxpayer, qualifying property has a useful life of a range of three to five years, such property will be considered to have a useful life of four years. The credit may not reduce the tax for any year to less than the minimum tax. Any unused investment tax credit may be carried forward for seven years.

H."Principally used" means used more than 50%. A building or addition is principally used in production where more than 50% of its useable business floor space is used in storage and production. Floor space used for bathrooms, cafeterias and lounges is not useable business floor space. Floor space used for administration and distribution is not used in production. Machinery is principally used in production when it is used in production more than 50% of its normal operating time.

1.EXAMPLE: ABC Corp., a calendar year corporation, acquires a five story building, including structural components, (each story of equal square footage) on 1/1/75, the basis of which is $100,000.

a.A Taxpayer rents or leases out three floors and uses the remaining two floors in the production of goods by manufacturing, processing or assembling. Since less than 50% of the building is used in production, there is no investment tax credit allowed on any portion of the building.

b.Taxpayer rents or leases out two floors and uses the remaining three floors in the production of goods by manufacturing, processing or assembling. Since more than 50% of the building is used in production, there will be allowed an investment tax credit on that portion of the building not leased.

c.Taxpayer uses three floors for production and two floors for administration and distribution. Since more than 50% of the building is used in production and none of the building is leased out, there will be allowed an investment credit on the whole building.

I.A taxpayer shall not be allowed a credit with respect to tangible personal property and other tangible property, including buildings and structural components of buildings, which it leases to any other person or corporation or leases from any other person or corporation. For purposes of the preceding sentence, any contract or agreement to lease or rent or for a license to use such property shall be considered a lease, unless such contract or agreement is treated for federal income tax purposes as an installment purchase rather than a lease. In order to be considered the owner of the production property, a taxpayer must be allowed federal depreciation on such property. Since property rented to others does not qualify for credit, the credit shall not be allowed where the purchaser is not the user of production property, even where the purchaser and the user may be included in a consolidated federal and/or a consolidated state tax return.

J.At the election of the taxpayer, an investment credit may be allowed on otherwise qualifying property in lieu of elective deductions on facilities qualifying as:

1.Air and water pollution control facilities (R.I. Gen. Laws §§ 44-11-11(a) and 44-30-7);

2.Research and development facilities (R.I. Gen. Laws § 44-32-1).

3.The election may be made even though the qualifying property is not depreciable under the Internal Revenue Code, 26 U.S.C. § 167 and is amortized under the Internal Revenue Code. 26 U.S.C. §§ 169 or 174.

4.Where amortization of air and water pollution control facilities was deducted from apportioned net income or where expenditures for research and development facilities were deducted from allocated entire net income, an investment tax credit will not be allowed on the same facilities.

K.A recapture of a portion of the investment tax credit is required where property on which a credit has been allowed is disposed or ceases to be in qualified use except:

1.Where property was in qualified use for its entire useful life, or

2.Where property was in qualified use for more than twelve consecutive years.

L.Computation of the recapture.

1.Recapture = Tax credit taken on property ceasing to qualify x‎(useful life of property in months - qualified use in months) ÷‎(useful life of property in months)

2 EXAMPLE: XYZ Corp., a calendar year corporation, acquires a five story building, including structural components, (each story of equal square footage) on January 1, 1975, and the building's basis is $100,000. The building has a 20 year life. Taxpayer rents or leases out one floor and uses the remaining four floors as three in production and one in administration and distribution. Investment Tax Credit = 2% x ($100,000 - $20,000) = $1,600.

a.On January 1, 1976 taxpayer rents another floor that it had previously been using in administration and distribution. At that point taxpayer is renting two floors and using the remaining three floors in production. Computation of the recapture would be as follows:

R = $1,600 x 1/4 (240 months - 12 months)‎ 240 months

R = $400 x 95%

‎R = $380

bOn January 1, 1976 taxpayer rents two more floor used in production before. At that point the taxpayer is renting three floors and using the remaining two floors as one in production and one in administration and distribution. Since the entire building is not used more than 50% in production, there is a recapture of the entire remaining investment credit computed as follows:

R = $1,600 x 4/4 (240 months - 12 months)‎ 240 months

R = $1,600 x 95%

R = $1,510

c.On February 1, 1987 taxpayer converts the entire building to leased property. Since the building was held more than twelve years, there is no recapture of investment tax credit.

M.Where property is disposed of or ceased to be in qualified use during the initial taxable year, the tax credit on that property should be reduced by the recapture on that property.

N.Where property is disposed of or ceases to be in qualified use during other than the initial taxable year, the taxpayer may not reduce the amount of tax liability created by a recapture of investment tax credits by investment tax credits allowed for the year in which the asset is disposed of, nor can that liability be reduced by any carryovers of investment tax credits to that year. The amount of recapture shall be added to the taxpayer's tax in that year. The amount of recapture required to be added to the tax in that year may not be offset or reduced by application of any other credit otherwise available to the taxpayer for the same tax year. For example, a taxpayer may not offset a recapture of investment credit by applying daycare credits.

O. The following rules apply to transactions between taxpayers:

1.A recapture of investment tax credit is required unless all of the following elements are present in the transaction:

a.The property is transferred from one taxpayer to another by a transaction in which the basis of the property in the hands of the transferee is determined in whole or in part by reference to the basis in the hands of the transferor, or a mere change in the form of the taxpayer's business, and

b.the acquiring taxpayer is taxable under R.I. Gen. Laws Chapters 44-11 or 44-30, and

c.the property continues to be in qualified use.

2.If all of the preceding elements are present in the transaction, the transfer will not require a recapture of investment tax credit and any unused investment tax credit on the transferred property may be passed through to and carried forward by the acquiring taxpayer.

3.If the property in the hands of the acquiring taxpayer is not in qualified use for its entire life or for more than twelve years, a recapture by the acquiring taxpayer is required. In measuring the period of qualified use, the period during which the property was held by the transferor taxpayer and the acquiring taxpayer shall be taken into account.

4.The above rules do not strictly conform to federal treatment. For example, a recapture is required where a transfer is made other than to an acquiring taxpayer taxable under R.I. Gen. Laws Chapters 44-11 or 44-30 (on the theory that the property is no longer in qualified use).

P.The following are examples of incidents which require recapture:

1.A legal dissolution;

2.A trade-in;

3.Foreclosure of a security interest;

4.Retirement before expiration of its useful life.

5.Destruction or damage by fire, storm or other casualty or by reason of its theft or other involuntary conversion;

6.Where property is leased to others;

7.Removal of property from the state;

8.Cease to own property;

9.Cease to otherwise be in qualified use.

Q.In order to qualify as property used in the production of goods, inventoriable goods must be produced and the property must be used principally in the production of such goods. Since the law includes property and equipment used to store raw materials and finished goods in the definition of manufacturing, property and equipment at the raw material warehouse and at the finished goods warehouse would qualify provided that the property and equipment are principally used in handling or storing the raw materials or finished goods. Property used to transport raw materials to the raw materials warehouse or finished goods to customers would not qualify. Property used for in-plant handling of materials during the manufacturing process would qualify. Property used for transporting materials between plants over public roads would not qualify.

R.The investment tax credit shall apply only in the taxable year in which the property is first placed in service by the taxpayer. Acquisitions in a taxable year do not affect similar property previously qualifying. For example, a manufacturer builds an addition to a previously qualifying building for use as office space. The investment in the addition will not qualify for the credit since it is not used in production, but it will not trigger a recapture of the credit taken on the previously existing plant. If the addition was built for use principally in production, the credit would apply.

S.The term "taxpayer" as used in the regulation shall mean and include, as appropriate, an individual, a partnership, a corporation, or other taxable entity.

T."Structural components" means such separately attached parts of a building, as walls and built-in partitions, permanent paneling and tiling, doors, stairways, the entire central heating, plumbing, electrical, and air conditioning systems. Sink and toilet facilities, sprinkler systems, fire escapes, elevators and escalators do not qualify. For the purpose of this regulation, the building and all of its structural components are treated as a whole when the building is acquired, constructed, reconstructed or erected and first placed in service. The repairs, alterations, improvements or replacement of a structural component subsequent to the acquisition, construction, reconstruction or erection of the building will not be allowed the credit.

U.For the purpose of determining the basis of qualifying property, the carryover of investment tax credit and of the recapture of the investment tax credit, pertinent portions of the Internal Revenue Code and regulations thereunder, including provisions applicable to corporations, Subchapter S corporations, estates and trusts, and partnerships are deemed adopted to the extent not inconsistent with this regulation and Rhode Island law.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2003-01-01 to 01/04/2022
Amendment — effective from 2003-01-01 to 01/01/2003
Amendment — effective from 2002-01-07 to 01/01/2003
Periodic Refile — effective from 2001-12-20 to 01/07/2002

280-RICR-20-20-1 § 1.3 Qualified Taxpayer(s)

A. Generally

1.A "qualified taxpayer" shall be allowed a credit computed in accordance with R.I. Gen. Laws § 44-31-1 against the tax imposed by R.I. Gen. Laws Chapters 44-11, 44-14, 44-17 and 44-30. The amount of the credit shall be ten percent (10%) of the cost or other basis for Federal income tax purposes, and the qualified amounts for leased assets of tangible personal property and other tangible property acquired, constructed, reconstructed or erected on or after January 1, 1998.

2.A "qualified taxpayer" means a taxpayer in any of the businesses described in the major groups 20 through 39, 50 and 51, 60 through 67, 73, 76, 80 through 82, 87 and 89 of the SIC Code (or the corresponding industry sectors of the North American Industry Classification System ["NAICS"]) and/or any of the businesses described in the three (3) digit SIC Code 781 (or the corresponding industry sector of the NAICS) which meet certain wage criteria and with respect to the major groups set forth in R.I. Gen. Laws § 44-31-1(b)(3)(d)(2) the additional requirement relating to gross revenues.

3.A credit is allowed with respect to buildings and structural components that are acquired, constructed, reconstructed, or erected after July 1, 2001, which are depreciable pursuant to 26 U.S.C. § 167, have a useful life of four (4) years or more, are acquired by purchase as defined in 26 U.S.C. § 179(d) or acquired by lease after July 1, 2001 for a term of twenty (20) years or more, excluding renewal periods, have a situs in this state and to the extent the property is used by a high performance manufacturer. The term "high performance manufacturer" means a taxpayer engaged in any of the businesses described in the major groups 28, 30, 34 to 36, and 38 of the SIC codes, that pays its full-time equivalent employees a median annual wage above the average annual wage paid by all taxpayers in the state which share the same two-digit SIC Code, unless the high performance manufacturer is the only high performance manufacturer in the state conducting business in that two-digit SIC Code, in which case this requirement does not apply and whose expenses for training or retraining its employees exceeds two percent (2%) of its total payroll costs, or that pays its full-time equivalent employees a median annual wage equal to or greater than one hundred twenty-five percent (125%) of the average annual wage paid in this state by employers to employees, or that pays its full-time equivalent employees classified as production workers by the Rhode Island Department of Labor and Training an average annual wage above the average annual wage paid to the production workers of all taxpayers in the state which share the same two-digit SIC Code.

B.Leased Property

1.Property leased to the "qualified taxpayer"

2.To the extent otherwise allowable, the credit shall be allowed for computers, software and telecommunications hardware used by a "qualified taxpayer" even if the property has a useful life of less than four (4) years.

3.The credit for property acquired by lease shall be based on the fair market value of the property at the inception of the lease times the portion of the depreciable life of the property represented by the term of the lease excluding renewal options.

a.Example: Taxpayer X leased a computer from a lessor for a two (2) year period with a useful life of four (4) years. The resulting qualified cost would be a fraction which represents the two (2) year lease divided by the four (4) year life resulting in a fifty percent (50%) qualified cost.

Lease Period = 2 years = 50% x $20,000 = $10,000‎Life of Asset 4 years (Cost) (Basis)

Property leased from the "qualified taxpayer" by others

a.Property leased (subleased or rented) from the "qualified taxpayer" to others does not qualify for the credit.

Property leased to a "high performance manufacturer"

a.The credit for high performance manufacturers that are lessees of buildings and their structural components for a term of twenty (20) years or more, excluding renewal periods, shall be calculated in the same manner as for property acquired by purchase.

C.Limitation of Credit

1.The credit allowed under this subdivision of any taxable year shall not reduce the tax for the year by more than fifty percent (50%) of the tax liability that would otherwise be payable, and further cannot reduce the tax to less than the minimum tax as applicable; provided, however, that in the case of the credit allowed to high performance manufacturers, the fifty percent (50%) limitation shall not apply. However, if the amount of credit allowable under this subdivision of any taxable year is less than the amount of credit available to the taxpayer any amount of credit not deductible in the taxable year may be carried over to the following year or years (not to exceed seven (7) years) and may be deducted from the taxpayer's tax for the year or years.

2.The "tax liability that would otherwise be payable" is defined as tax after any other credits are applied unless such credits' laws or regulations mandate otherwise.

3.An example depicting the limitation of fifty percent (50%) of the tax liability is shown below:

a.A "qualified taxpayer", XYZ Corporation purchases equipment with qualifying costs of $100,000 on February 1, 1998; has investment tax credit of $10,000 (10% of $100,000); and a normal tax year of December 31, 1998. The tax before credits as reported on Form RI-1120C is $30,000. The taxpayer has other credits for enterprise zone wages of $25,000 and a credit for daycare assistance of $3,000.

b.What is the maximum amount of credit that can be taken for ITC?

Tax

$30,000

Enterprise Zone Wage Credit

(25,000)

Daycare Assistance Credit

(3,000)

Tax “Otherwise Payable”

$2,000

Maximum Investment Credit

50% Tax “Otherwise Payable”

50% x $2,000

$1,000

Tax Due

$1,000

c.The amount of ITC carryforward is $100,000 x 10% = $10,000 less the amount used of $1,000, leaving a balance of $9,000 to be carried forward to 1999.

4.Only the investment credit allowed and claimed at the ten percent (10%) rate (effective on or after January 1, 1998) is limited to fifty percent (50%) of the tax liability.

5.Taxpayers are allowed to use one hundred percent (100%) of the credit carried forward from years prior to January 1, 1998 and one hundred percent (100%) of the credit claimed at the four percent (4%) rate on or after January 1, 1998 to the extent of the tax or minimum filing fee.

6.Example 1: ABC Jewelry is a "C Corporation"; files and pays business corporation tax (R.I. Gen. Laws § 44-11); and, for calendar year 1998, has a tax of $2,750. ABC Jewelry also has an investment credit carry forward of $4,000 from 1996. Because ABC's investment credit is carried forward from a year prior to January 1, 1998, it can use $2,500 of the credit to reduce its tax to the minimum filing fee. This is calculated as:

Tax

Minimum Fee

Credit used

$2,750

$250

$2,500

a.ABC Jewelry then has a carry forward available for 1999 of $1,500 and may use one hundred percent (100%) of that credit because it was carried forward from a year prior to January 1, 1998.

7.Example 2: Sam and Joanne Taxpayer have a Rhode Island personal income tax of $1,000 for 1998 and an investment credit carryforward from 1997 of $700. Because the credit has been carried forward from a year before January 1, 1998, the taxpayers can reduce their tax by all of the $700 leaving a balance due of $300 as follows:

Tax

$1,000

Investment Credit

700

Credit used

$300

8.Example 3: Gina's Pearl Company added qualifying assets during the calendar year 1998 which generated an investment credit of $13,000 at the four percent (4%) rate and for 1998 the corporation (a "C" corporation) has a tax of $11,000. Because the investment credit is at the four percent (4%) rate on or after January 1, 1998 the company will use $10,750 of the credit to reduce its tax to the minimum filing fee calculated as follows:

Tax

$11,000

Investment Credit

250

Credit used

$10,750

a.The company will have investment credit carried forward to 1999 of $2,250 and, depending upon its 1999 tax, the company can use one hundred percent (100%) of the credit in 1999 because, although it came from 1998, it was calculated at the four percent (4%) rate.

9.Example 4: Steven and Jennifer Smith are shareholders in a subchapter "S" corporation which claimed investment credit for the calendar year 1998 using the four percent (4%) rate and Steven and Jennifer received $500 of investment credit. Since the investment credit passed through to them was calculated at the four percent (4%) rate they can use their $500 investment credit to reduce their 1998 personal income tax to zero (0) but not below.

D.Property and Casualty Insurance Company

1.Effective June 30, 1999 and to the extent otherwise allowable, the credit shall also apply to property having a situs in Rhode Island and used by a property and casualty insurance company, however acquired. The term "however acquired" shall include acquisition by merger so long as the property had a situs in this state at the time of merger.

E.Recapture of Investment Tax Credit by a Qualified Taxpayer

1.The rules for recapture on qualified taxpayer acquisitions are the same as those cited in the law as it pertains to manufacturing companies based upon acquisitions prior to the enactment of this legislation and also set out in § 1.2 of this Part. In addition to those requirements, comparable rules shall be used in the case of property acquired by lease to determine the amount of credit, if any, that will be recaptured if the lease terminates prematurely or if the property covered by the lease otherwise fails to be in qualified use.

2.Recapture does not occur when the taxpayer subsequently fails to meet the classification as a "qualified taxpayer".

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2003-01-01 to 01/04/2022
Amendment — effective from 2003-01-01 to 01/01/2003
Amendment — effective from 2002-01-07 to 01/01/2003
Periodic Refile — effective from 2001-12-20 to 01/07/2002

280-RICR-20-20-2 Research and Development Expenses Credit

280-RICR-20-20-2 § 2.1 General

A credit is available to corporations, sole proprietors, or passed through from partnerships, joint ventures or subchapter S corporations for qualified research expenses. The credit is 5% of the excess (if any) of the qualifying research expenses in the taxable year over the base period expenses. The expenses must have been incurred in Rhode Island after July 1, 1994. For periods January 1, 1998 and thereafter, the credit is 22.5% for expenses up to $111,111 and 16.9% for the remaining expenses over $111,111.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2003-01-01 to 01/04/2022
Amendment — effective from 2003-01-01 to 01/01/2003
Periodic Refile — effective from 2001-12-20 to 01/01/2003

280-RICR-20-20-2 § 2.2 Definitions

The terms "qualified research expenses" and "base period research expenses" shall have the same meaning as defined in section 41 of the Internal Revenue Code (26 U.S.C. § 41), provided, however, that such expenses shall have been incurred in this state after July 1, 1994.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2003-01-01 to 01/04/2022
Amendment — effective from 2003-01-01 to 01/01/2003
Periodic Refile — effective from 2001-12-20 to 01/01/2003

280-RICR-20-20-2 § 2.3 Calculation of the Credit

A.The credit is based on the amount of the taxpayer's Federal excess expenses and is calculated by first determining what of the taxpayer's Federal excess expenses were incurred in Rhode Island after July 1, 1994 and then multiplying that amount by the 5% rate to yield the Rhode Island credit. For periods January 1, 1998 and thereafter, the credit is 22.5% on the expenses up to $111,111 and 16.9% for the remaining expenses over $111,111.

B.EXAMPLES

2.Taxpayer A has completed and claimed its Federal Section 41 credit and has qualified research expenses for its Federal credit of $100,000; its Federal Section 41 base amount is $75,000; all expenses were incurred in Rhode Island and were incurred evenly throughout 1995 and A has a calendar year end. Taxpayer A's 1995 RI R & D expense credit is calculated as:

Federal Qualified Research Expenses

$100,000

Federal Base Amount

75,000

Federal Excess Expenses

25,000

Amount of Federal Excess Expenses in RI

25,000

Amount of Expenses in RI after 7/1/94

25,000

Credit @ 5%

$1,250

2.Taxpayer B has a similar fact pattern to Taxpayer A above, except that Taxpayer B has a March 31 year end. Taxpayer B's FYE 3/31/95 RI R & D expense credit is calculated as:

Federal Excess Expenses

$25,000

Amount of Federal Excess Expenses in RI

25,000

Amount of Expenses in RI after 7/1/94 (9 mos.)

18,750

Credit @ 5%

$938

3.Taxpayer C has a similar fact pattern to Taxpayer A above except that the excess federal expenses were specifically identified as $9,000 in August in Connecticut and $16,000 in October in Rhode Island. Taxpayer C's calendar year 1995 RI R & D expense credit is calculated as:

Federal Excess Expenses

$25,000

Amount of Federal Excess Expenses in RI

16,000

Amount of Expenses in RI after 7/1/94 (Specific)

16,000

Credit @ 5%

$800

4.Taxpayer D has a similar fact pattern to Taxpayer B above except that the excess federal expenses were specifically identified as $9,000 in August in Connecticut, $7,000 in May 1994 and $9,000 in October in Rhode Island. Taxpayer C's f/y/e 3/31/95 RI R & D expense credit is calculated as:

Federal Excess Expenses

$25,000

Amount of Federal Excess Expenses in RI

16,000

Amount of Expenses in RI after 7/1/94 Specific

9,000

Credit @ 5%

$450

5.Taxpayer E has $135,000 of qualified expenses in tax year 2000. The credit is calculated at 22.5% of the first $111,111 and 16.9% of the remaining expenses over $111,111. The credit is $29,037 [$111,111 @ .225% or $25,000] plus $4,037 [16.9% of the remaining $23,889].

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2003-01-01 to 01/04/2022
Amendment — effective from 2003-01-01 to 01/01/2003
Periodic Refile — effective from 2001-12-20 to 01/01/2003

280-RICR-20-20-2 § 2.4 Minimum Tax and Carryover

In the case of corporations, the credit allowed shall not reduce the tax due to less than the minimum fixed by R.I. Gen. Laws § 44-11-2(e); however, if the amount of credit allowable reduces the tax to the minimum fixed by R.I. Gen. Laws § 44-11-2(e), any amount of credit not used may be carried over to a maximum of seven (7) years. For purposes of R.I. Gen. Laws Chapter 44-30 (Personal Income Tax), if the credit allowed exceeds the taxpayer's tax, the amount of credit not used may be carried over to a maximum of seven (7) years.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2003-01-01 to 01/04/2022
Amendment — effective from 2003-01-01 to 01/01/2003
Periodic Refile — effective from 2001-12-20 to 01/01/2003

280-RICR-20-20-2 § 2.5 Limitation and Order of Credits

A.For purposes of determining the order in which carry-overs shall be taken into consideration, the credit allowed by R.I. Gen. Laws § 44-32-2 (credit for research and development property) shall be used before the credit described in this regulation. The investment tax credit allowed by R.I. Gen. Laws § 44-31-1 shall be used before the credit described in this regulation.

B.The credit is limited to one-half the tax otherwise payable after all other credits available to the taxpayer have been used.

1.Taxpayer F has RI tax of $50,000, Enterprise Zone Business Credit of $15,000, Investment credit [10% type] of $20,000 and R & D credit of $10,000. The 10% type investment credit also carries the one-half tax limit [see R.I. Gen. Laws § 44-30-31-1(d)] but the R & D expense credit law specifically provides that, in the ordering of the credits, any investment credit will be used before this credit. In the ordering of credit, Taxpayer F calculates:

Tax

$50,000

Enterprise Zone Credit

15,000

Tax Payable

35,000

10% Investment Credit Limit (1/2 Tax Payable)

17,500

R & D Expense Credit Limit (1/2 Tax Payable

8,750

Tax

$8,750

a.Both the remaining $2,500 of 10% investment credit and $1,250 of R & D Expense Credit can be carried forward but continue to be subject to the same order and one-half limitation

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2003-01-01 to 01/04/2022
Amendment — effective from 2003-01-01 to 01/01/2003
Periodic Refile — effective from 2001-12-20 to 01/01/2003

280-RICR-20-20-2 § 2.6 Consolidated Returns

The credit allowed shall only be allowed against the tax of that corporation included in a consolidated return that qualifies for the credit and not against the tax of other corporations that may join in the filing of a consolidated return.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2003-01-01 to 01/04/2022
Amendment — effective from 2003-01-01 to 01/01/2003
Periodic Refile — effective from 2001-12-20 to 01/01/2003

280-RICR-20-20-2 § 2.7 Division of the Credit

In the event the taxpayer is a partnership, joint venture or small business corporation, the credit shall be divided in the same manner as income.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2003-01-01 to 01/04/2022
Amendment — effective from 2003-01-01 to 01/01/2003
Periodic Refile — effective from 2001-12-20 to 01/01/2003

280-RICR-20-20-3 Historic Structures Tax Credit

280-RICR-20-20-3 § 3.1 Authority

In accordance with R.I. Gen. Laws § 44-33.2-4, as amended by the General Assembly, the Tax Administrator of the Division of Taxation, Department of Revenue and the Executive Director of Historical Preservation and Heritage Commission (the Commission), hereby promulgate the following regulation, on a joint basis, to implement the provisions of State law.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2008-11-09 to 07/31/2018
EMERGENCY RULE Adoption — effective from 2008-04-15 to 11/09/2008

280-RICR-20-20-3 § 3.2 General Overview of Changes

A.R.I. Gen. Laws Chapter 44-33.2 divides projects into three (3) groups and afford them different treatment depending upon what stage the project has reached as of January 1, 2008.

1.All projects placed in service prior to January 1, 2008 will receive the current 30% tax credit provided that processing fees are paid to the Division of Taxation (Tax Division) on or before May 15, 2008. Projects that fail to make payment by May 15, 2008 will not be eligible to receive tax credits.

2.Most projects that are already in progress may continue but with a reduced credit amount and higher fee. Projects which have submitted Part 1 of their application to the Commission prior to January 1, 2008 will have the option of continuing under the new rules.

a.Projects that wish to continue in the program must pay a processing fee ranging from 3% to 5% of Qualified Rehabilitation Expenditures, with 2.25% of Qualified Rehabilitation Expenditures due on or before May 15, 2008, and the balance due on or before March 5, 2009.

b.Projects may opt for one of the following combinations of processing fees and tax credits:

(1)27% credit with a 5% processing fee

(2)26% credit with a 4% processing fee

(3)25% credit with a 3% processing fee

c.All projects continuing in the program will enter into a contract with the Tax Division stating the estimated amount of Qualified Rehabilitation Expenditures for the project, the tax credit percentage, and the amount of fees. The contract will constitute a State guaranty that the stated amount of tax credits will be available when earned. Projects will not be allowed to claim additional tax credits based on an increase in the Qualified Rehabilitation Expenditures. If final Qualified Rehabilitation Expenditures should be less than the amount stated in the contract, overpayment of fees will be refunded by the Tax Division. If a project is abandoned prior to its placement in service as provided in § 3.5(D)(1)(f) of this Part, the entire fees paid will be refunded upon compliance with the procedures provided in § 3.5(D)(1)(f)((2)) of this Part.

d.Upon completion of the project, Part 3 of the application must be submitted to Commission for certification that the rehabilitation is consistent with specified standards and a detailed statement of costs, which must be certified by a certified public accountant licensed in Rhode Island, must be filed with the Tax Division.

3.Projects that submitted a Part 1 application to the Commission after December 31, 2007 will not be eligible for tax credits.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2008-11-09 to 07/31/2018
EMERGENCY RULE Adoption — effective from 2008-04-15 to 11/09/2008

280-RICR-20-20-3 § 3.3 Definitions

A."Accountant's certification" means the certification of a certified public accountant licensed in the State of Rhode Island containing the information required in the Application for an Assignable Historic Preservation Investment Tax Credit Certificate. The Accountant's Certification includes but is not limited to certification of the Adjusted Basis at the beginning of the Rehabilitation, the Rehabilitation costs properly capitalized to the building, project costs incurred but not eligible for the Historic Preservation Investment Tax Credit such as costs for new construction and other costs not chargeable to capital account. The Accountant's Certification shall be completed in the form of the Tax Division's Form HTC-8016 and shall be accompanied by an opinion of the Accountant regarding the accuracy of the required information. The cost certification should include, but not limited to:

A Schedule of Development Costs (separating costs eligible for tax credit from costs not eligible for tax credit) and Calculation of Historic Tax Credit Basis based on documentation from the project.

2.Verification of the existence of Development costs by examination of invoices, canceled checks, settlements sheet and related documents.

3.Review of the respective development cost to determine whether the cost were eligible to be included in historic tax credit basis in accordance with R.I. Gen. Laws Chapter 44-33.2.

4.Calculation of the Substantial Rehabilitation Test in accordance with R.I. Gen. Laws § 44-33.2-2(8).

5.Computation of tax credits to be realized by the project based upon the determination of historic tax credit basis.

B."Act" means R.I. Gen. Laws Chapter 44-33.2.

C."Adjusted basis" means the Owner's basis in a building, adjusted by depreciation and other adjustments that impact basis, computed in accordance with federal income tax law. In general, adjusted basis is determined with reference to the cost of the building (excluding land) in the hands of the Owner at the time of acquisition, decreased by depreciation and other deductions that reduce basis, and increased by costs incurred in connection with the building and capitalized to the building, such as the cost of improvements to the building.

D."Affiliate" means any entity controlling, controlled by or under common control with such person, firm, partnership, trust, estate, limited liability company, corporation (whether profit or non-profit) or other business entity that incurs Qualified Rehabilitation Expenditures for the substantial rehabilitation of a certified historic structure or some identifiable portion thereof.

E."Allocation agreement" means an executed agreement among all Participants of a Pass-Through Entity, or among all Owners of a building having multiple owners, setting forth the method for allocation of the Historic Preservation Investment Tax Credit agreed upon among the Participants or Co-owners. An Allocation Agreement may include, without limitation, a partnership agreement, an operating agreement of a limited liability company, a shareholders agreement, or any other instrument executed by all Participants or Co-owner.

F."Applicant" means a Person submitting an application for a Commission determination under § 3.5 of this Part.

G."Assignable historic preservation investment tax credit certificate" means a certificate issued by the Tax Division to the Owner of a Certified Historic Structure or an identifiable portion thereof who has incurred Qualified Rehabilitation Expenditures that have been approved by the Commission as consistent with the Standards for Rehabilitation, and which Qualified Rehabilitation Expenditures have been Placed-in-Service. If the Owner of the Certified Historic Structure is a Pass-Through Entity, an Assignable Historic Preservation Investment Tax Credit Certificate may be issued to each Participant in the Pass-Through Entity. The Certificate shall specify the amount of the Historic Preservation Investment Tax Credit allocable to such Participant, determined pursuant to this Regulation.

H."Assignee" means a Person to whom the Historic Preservation Investment Tax Credit Certificate is assigned pursuant to this Regulation.

I."Assignor" means a holder of an Assignable Historic Preservation Investment Tax Credit Certificate pursuant to § 3.8(A) of this Part who assigns such Assignable Historic Preservation Investment Tax Credit Certificate to an Assignee pursuant to § 3.8(C) of this Part.

J."Certified historic structure" means a building which is located in the State of Rhode Island and is:

1.listed individually on the National Register of Historic Places;

2.listed individually in the State Register of Historic Places; or

3.located in a Registered Historic District and certified by either the Commission or Secretary of the Interior as being of historic significance to the district.

K."Certified rehabilitation" means any Rehabilitation of a Certified Historic Structure consistent with the historic character of such building or the district in which such building is located as determined by the Commission in accordance with the Standards for Rehabilitation.

L."Certificate of completed work" means the written approval issued by the Commission that the Rehabilitation is consistent with the Standards for Rehabilitation.

M."Certification of proposed rehabilitation" means the Certification issued by the Commission that the proposed Rehabilitation is consistent with the Standards for Rehabilitation.

N."Commission" means the Rhode Island Historical Preservation and Heritage Commission created pursuant to R.I. Gen. Laws § 42-45-2.

O."Contract" means a contract entered between Persons and the Tax Division, on behalf of the State, which guarantees that the stated estimated tax credits will be available when earned and may be claimed in full, to the extent of the taxpayer's tax liability, in the year earned subject in the case of Phased Projects to the provisions of § 3.5 of this Part.

P."Estimated qualified rehabilitation expenditures" means the estimated amount of Qualified Rehabilitation Expenditures set forth in a Contract for a planned Rehabilitation.

Q."Executive Director" means the Executive Director of the Commission.

R."Exempt from real property tax" means, with respect to any Certified Historic Structure, that the building is exempt from taxation pursuant to R.I. Gen. Laws § 44-3-3.

S."Historic preservation certification application" means Parts 1, 2 and 3 of the Commission's application forms for each stage of the certification process, as more fully set forth herein.

T."Holding period" means twenty-four (24) months after the Commission issues a Certificate of Completed Work to the Owner. In the case of a Rehabilitation reasonably expected to be completed in phases as described in R.I. Gen. Laws § 44-33.2-2(8), "Holding Period" shall be extended to include a period of time beginning on the date of issuance of a Certificate of Completed Work for the first phase or phases for which a Certificate is issued and continuing until the expiration of twenty-four (24) months after the Certificate of Completed Work issued for the last phase.

U."Initial certificate holder" means an Owner or Participant named by the Owner to receive the Historic Tax Credit Certificate.

V."Inspection" means a visit by an authorized representative of the Commission to a property for the purposes of reviewing and evaluating the significance of the building and the proposed, ongoing or completed Rehabilitation work and by an authorized representative of the Tax Division to verify expenses and costs reported.

W."Measuring period" means the 24-month period selected by the Owner ending within the taxable year in which a Certified Historic Structure is Placed-in-Service. In the case of a Rehabilitation which may reasonably be expected to be completed in phases set forth in architectural plans and specifications completed before the Rehabilitation begins, this definition shall be applied by substituting "sixty (60) month period" for "twenty-four (24) month period."

X."Notification of assignment" means the notification filed with the Division of Taxation of the assignment of all or a portion the State Historic Preservation Investment Tax Credit.

Y."Owner" means a Person or Persons who hold legal fee or leasehold title to the historic building or an identifiable portion thereof.

Z."Participant" means a partner in a partnership, member of a limited liability company, shareholder of an S-corporation, beneficial owner of a trust, or any other Person having an interest in a Pass-through Entity.

AA."Pass-Through entity" means a partnership, limited liability company, Subchapter S-corporation, association, nominee trust, or any other entity, the tax attributes of which are passed through to the Participants in such entity.

BB."Percentage interest" means the Percentage Interest in the Historic Preservation Investment Tax Credit allocated to an Owner, a Participant, a co-Owner of a multiple-Owner building or identifiable portion thereof, or another Person pursuant to the terms of the applicable Allocation Agreement.

CC."Person" means any person, partnership, firm, corporation, (including both business and non-profit corporations), limited liability company, trust, estate, association, or other business entity.

DD."Phased project" means a project with identifiable portions of the building(s) to be completed in phases set forth in architectural plans and specifications prepared before the physical work on the Rehabilitation begins, as reported in the Part 2 of the application filed with the Commission. Credit will be allowed for phased projects pursuant to the addendum filed as part of the Contract entered between the developer and the Tax Division.

EE."Placed in service" means that Substantial Rehabilitation work has been completed which would allow for occupancy of the entire building or some identifiable portion of the building, or the Owner has commenced depreciation of the Qualified Rehabilitation Expenditures, whichever occurs first. Issuance of a certificate of occupancy or similar permit authorizing occupancy of the entire building or some identifiable portion by the municipal authority having jurisdiction shall constitute sufficient evidence for purposes of the Act that the building or the identifiable portion thereof that is the subject of the certificate of occupancy has been placed in service. However, a building or identifiable portion thereof may be treated as Placed in Service without a certificate of occupancy if the building or identifiable portion thereof is placed in a condition or state of readiness and availability for a specifically defined function, or upon the commencement of the period for depreciation with respect to the building under the Owner's depreciation practice, whichever occurs earlier.

FF."Principal residence" means the principal residence of the Owner within the meaning of 26 U.S.C. § 121 or any successor provision.

GG."Processing fees" means any of the fees set forth, defined and imposed in R.I. Gen. Laws §§ 44-33.2-3(b) or 44-3.2-4(d).

HH."Qualified rehabilitation expenditures" means any amounts expended in the Rehabilitation of a Certified Historic Structure properly capitalized to the building and either depreciable under the Internal Revenue Code, or made with respect to property (other than the principal residence of the Owner) held for sale by the Owner. Processing fees paid to the Division of Taxation are not Qualified Rehabilitation Expenses. Notwithstanding the foregoing, except in the case of a nonprofit corporation, there will be deducted from Qualified Rehabilitation Expenditures for the purposes of calculating the Historic Preservation Investment Tax Credit any funds made available to the Person incurring the Qualified Rehabilitation Expenditures in the form of a direct grant from a federal, state or local governmental entity or agency or instrumentality thereof.

II."Registered historic district" means any district listed in the National Register of Historic Places or the State Register of Historic Places.

JJ.“Rehabilitation" means the preservation of a historic building, its component elements, and its structural system by means of repairs and/or selective replacement of worn out materials and alterations to the building generally which are consistent with the building's documented historic appearance without destroying historically significant later additions.

KK."Standards for rehabilitation" or "Standards" means the United States Secretary of the Interior's Standards for Rehabilitation.

LL."State register of historic places" means the state register of historical, architectural, and cultural sites, buildings, places, landmarks, or areas compiled by the Commission pursuant to R.I. Gen. Laws § 42-45-5. Properties are listed on the State Register in accordance with the Commission's Procedures for Registration and Protection of Historic Properties.

MM."Substantial construction" means that the owner of a Certified Historic Structure has entered into a Contract with the Tax Division and paid the Processing Fee; Commission has certified that the Certified Historic Structure's Rehabilitation will be consistent with the standards as set forth in R.I. Gen. Laws § 44-33.2-4 and the Owner has expended ten percent (10%) of its Qualified Rehabilitation Expenditures estimated in the Contract entered into with the Tax Division for the project or its first phase of a Phased Project on or before May 15, 2013.

NN."Substantial rehabilitation" means, with respect to a Certified Historic Structure, that the Qualified Rehabilitation Expenditures incurred with respect to the Certified Historic Structure during the twenty-four (24) month period selected by the Owner ending within the taxable year in which the Certified Historic Structure is Placed in Service exceed fifty percent (50%) of the Adjusted Basis in such building and its structural components as of the beginning of such period. In the case of any Rehabilitation which may reasonably be expected to be completed in phases set forth in architectural plans and specifications completed before the Rehabilitation begins, the above definition shall be applied by substituting "sixty (60) month period" for "twenty-four (24) month period".

OO."Tax Division" means the Rhode Island Division of Taxation.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2008-11-09 to 07/31/2018
EMERGENCY RULE Adoption — effective from 2008-04-15 to 11/09/2008

280-RICR-20-20-3 § 3.4 Tax Credit

A.General. A Person that incurs Qualified Rehabilitation Expenditures for the Substantial Rehabilitation of a Certified Historic Structure certified in accordance with these Regulations is entitled to a credit against the tax imposed on such Person pursuant to R.I. Gen. Laws Chapter 44-11, 44-13 (other than the tax imposed under R.I. Gen. Laws § 44-13-13), 44-14, 44-17 or 44-30. The Initial Certificate Holder or the Assignee of such Person may also claim the Credit in accordance with these Regulations.

B.Amount of Credit.

1.For Certified Historic Structures or some identifiable portion thereof that are Placed in Service prior to January 1, 2008, the Historic Preservation Investment Tax Credit is equal to thirty percent (30%) of the Qualified Rehabilitation Expenditures.

2.For Certified Historic Structures or some identifiable portion thereof that are Placed in Service after December 31, 2007 for which a Part 1 Application was recorded as received by the Commission before January 1, 2008, the Historic Preservation Investment Tax Credit can range between twenty five percent (25%) and twenty seven percent (27%) of the Qualified Rehabilitation Expenditures set forth in the Contract.

C.When Allowed. The Historic Preservation Investment Tax Credit shall be allowed for the year in which the Certified Historic Structure or an identifiable portion thereof is Placed-in-Service.

D.Minimum Expenditure. In order to qualify for the Historic Preservation Investment Tax Credit, an Owner must meet the Substantial Rehabilitation test.

E.Phased Projects.

1.In the case of a Phased Project, the credit allowed shall be limited to the Estimated Qualified Rehabilitation Expenditures as reported on the addendum to Contract for Historic Preservation Investment Tax Credit for each phase. Any Qualified Rehabilitation Expenditures in excess of the estimated amount for any phase shall be carried over to the next subsequent phase and added to the Qualified Rehabilitation Expenditures for that phase. The credit allowed for that subsequent phase shall still be limited to the Estimated Qualified Rehabilitation Expenditures for that phase as reported on the addendum.

a.Examples

(1)A four phase project with a total Qualified Rehabilitation Expenditures of 16 million dollars in equal phases of 4 million dollars each with a total credit amount of 25% or 4 million dollars was reported on the addendum. In the first phase, the Qualified Rehabilitation Expenditures were 6 million dollars. The credit will be limited to 25% of the first 4 million dollars of Qualified Rehabilitation Expenditures or 1 million dollars. The excess 2 million dollars of Qualified Rehabilitation Expenditures will be carried forward to the next subsequent phase. In the next phase, the actual Qualified Rehabilitation Expenditures were 3 million dollars plus the 2 million dollar carried forward amount for a total allowable Qualified Rehabilitation Expenditures of 5 million dollars. The credit will be limited to 25% of the first 4 million dollars of Qualified Rehabilitation Expenditures or 1 million dollars. The excess 1 million dollars of Qualified Rehabilitation Expenditures will be carried forward to the next subsequent phase. This procedure will be continued until the project has reached the total Qualified Rehabilitation Expenditures or the total credit amount has been reached, whichever is less.

(2)A two phase project with a total Qualified Rehabilitation Expenditures of 8 million in equal phases of 4 million dollars each with a total credit of 25% or 2 million dollars was reported on the addendum with completion dates of December 31, 2008 for the first phase and December 31, 2010 for the second phase. The first phase was completed on December 31, 2008 and all required filings were submitted timely. The Assignable Historic Preservation Investment Tax Credit Certificate will be issued in the amount of 1 million dollars. The second phase was completed on December 31, 2009. Since phase two was completed one year earlier than the time reported on the addendum to the Contract, the Assignable Historic Preservation Investment Tax Credit Certificate will not be issued until December 31, 2010.

2.If the actual Qualified Rehabilitation Expenditures for a phase are less than the estimated amount as reported on the addendum, the credit shall be limited to the applicable percentage of the actual Qualified Rehabilitation Expenditures incurred for that phase. Any unused credit amount of a phase may be carried forward to the next subsequent phase. That subsequent phase shall be allowed a credit calculation as if the carried forward credit amount has been reported on the addendum.

a.Example

(1)A four phase project with a total Qualified Rehabilitation Expenditures of 16 million dollars in equal phases of 4 million dollars each with a total credit amount of 25% or 4 million dollars was reported on the addendum. In the first phase the Qualified Rehabilitation Expenditures were 2 million dollars. The credit will be limited to 25% of the actual 2 million dollars of Qualified Rehabilitation Expenditures or 1/2 million dollars ($500,000). The unused credit of 1/2 million dollars ($500,000) will be allowed as a carry forward the next subsequent phase. In the next phase, the actual Qualified Rehabilitation Expenditures were 5 million dollars. The allowed credit will be limited to 25% of the 5 million dollars or 1.25 million dollars ($1,250,000.) The unused credit will be carried forward to the next subsequent phase. This procedure will be continued until the project has reached the total Qualified Rehabilitation Expenditures or the total credit amount has been reached, whichever is less.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2008-11-09 to 07/31/2018
EMERGENCY RULE Adoption — effective from 2008-04-15 to 11/09/2008

280-RICR-20-20-3 § 3.5 Application Guidelines

A.Certifications of Significance and Rehabilitation - General.

1.Application Request for designation of a building as a Certified Historic Structure and of a proposed Rehabilitation shall be made on the Historic Preservation Certification Application forms.

a.Part 1 of the application, Evaluation of Significance, is used to request certification of historic significance and is filed with the Commission and shall contain such information as is required in § 3.5(B)(2) of this Part.

b.Part 2 of the application, Description of Rehabilitation, is used to request certification of a proposed Rehabilitation as meeting the Standards for Rehabilitation. Part 2 of the application must be filed with the Commission prior to the Certified Historic Structure being Placed-in-Service and shall contain such information as is required in § 3.5(D)(1) of this Part.

c.Part 3 of the application, Request for Certification of a Completed Work, is used to request certification of completed Rehabilitation project by the Commission.

d.The Part 1, Part 2 and Part 3 application are reviewed by the Commission.

e.In order to obtain an Assignable Historic Preservation Investment Tax Credit Certificate upon issuance by the Commission of the Certificates of Completed Work, the Owner shall file with the Tax Division a copy of the Accountant's Certification and the Certificate of Completed Work. The Owner shall also file with the Tax Division a complete adequately documented RI Form HTC - 8016.

f.The Owner must also enter into a Contract with the Tax Division and pay the Processing Fee described in § 3.2(A)(2)(b) of this Part in order to qualify for tax credits.

2.Application forms are available from the Commission at the Old State House, 150 Benefit Street, Providence, RI 02903; Tel: (401) 222-2678; website www.preservation.ri.gov. and from the Tax Division at One Capitol Hill, Providence, RI 02908; Tel. (401) 574-8729; website www.tax.ri.gov.

3.Coordination with Federal Filings. If the applicant also seeks to claim the federal Historic Rehabilitation Tax Credit, application may be made on Parts 1, 2 and 3 of the Historic Preservation Certification application used by the National Park Service, with such additional forms and certifications as may be requested by the Commission.

4.Commission and Tax Division Review. The Commission and the Tax Division generally completes reviews of certification requests within thirty (30) business days of receiving a complete, adequately documented application. Where adequate information is not provided, the Commission and/or the Tax Division will notify the Applicant of the additional information needed to complete the review. The Commission and the Tax Division will adhere to this time period as closely as possible, but failure to complete a review within the designated period does not waive or alter any certification requirement or imply approval. Notwithstanding the foregoing,

a.within ninety (90) days after receipt of a complete, adequately documented application for a Certificate of Completed Work, the Commission, must issue a written determination either granting or denying a Certificate of Completed Work and

b.Within 90 days after receipt of a complete, adequately documented RI Form 8016 and an Accountant's Certification, the Tax Division will issue a written determination as to the amount of Historic Preservation Investment Tax Credit for which a Substantial Rehabilitation qualifies; conditioned on the Commission issuing a Certificate of Completed Work.

5.Commission Decisions; Reliance on Application. Certifications of Part 1, 2, & 3 are only given in writing by the Executive Director or other duly authorized representative of the Commission. Certifications of the amount of the historic tax credit for which the Rehabilitation qualifies are only given in writing by the Tax Division. Decisions with respect to certifications are made on the basis of the information contained in the application form and other available information. The Applicant's signature on any application form is a representation to the Commission and the Tax Division that the facts contained therein are true and correct, and the Commission and the Tax Division are entitled to rely thereon. If information comes to the attention of the Commission or the Tax Division at any time up to and including the last day of the applicable Holding Period, that is materially inconsistent with representations made in an application, the Commission may deny the requested certification or revoke a certification previously given or the Tax Division may terminate the Contract and any Processing Fees paid thereunder will be forfeited. Such denial or revocation may be appealed pursuant to the procedures set forth in § 3.5(F) of this Part.

B.Certification of Historic Significance.

1.Consultation. Any Owner may consult with the Commission to determine whether a property is a Certified Historic Structure.

2.Part 1-Application for Certification of Historic Structure. The Applicant shall prepare Part 1 of the Historic Preservation Certification Application and such form shall be recorded as received at the Commission prior to January 1, 2008. Such application form shall be filed according to the instructions accompanying the application, including:

a.Name and mailing address of the Owner and, if the Owner holds leasehold title to the building or an identifiable portion thereof, the name and mailing address of the holder of the fee interest;

b.Name and address of the property;

c.Name of the historic district (if located in a historic district);

d.Current color photographs of the building and its site, showing exterior and interior features and spaces adequate to document the property's significance;

e.Brief description of the appearance of the property, including alterations, characteristic features, and estimated date(s) of construction;

f.Brief statement of significance, including a summary of how the property reflects the recognized historic values of any historic district in which it is located;

g.Map showing the location of the property; and

h.Signature of the Applicant.

3.Review of Application for Certification of Historic Structure.

a.Scope of Review. The Commission will determine if the property is:

(1)listed individually on the National Register of Historic Places; or

(2)listed individually on the State Register; or

(3)located in a registered historic district and is of historic significance to the district.

b.Physical Integrity. The Commission will determine if the property possesses sufficient physical integrity to convey its historical significance.

c.Multiple Buildings or Complex. For purposes of a determination of historic significance, properties containing more than one building, where the Commission determines that the buildings have been functionally related historically to serve an overall purpose, such as a mill complex or a residence and carriage house, will be treated as a single certified historic building, whether the property is individually listed in the National Register of Historic Places or the State Register of Historic Places or is located within a registered historic district. Buildings that are functionally related historically are those which have functioned together to serve an overall purpose during the property's period of significance.

d.Determination of Significance to District. Properties within Registered Historic Districts will be evaluated to determine if they contribute to the historic significance of the district by application of the standards set forth in § 3.4(C) of this Part.

e.Preliminary Determination of Eligibility for Listing a Structure. Owners of properties that are not listed on the National Register of Historic Places or the State Register of Historic Places may request a written opinion from the Commission as to whether the property meets the criteria for listing on the Register. Owners of properties that the Commission considers to be eligible for listing may apply for preliminary certification of their properties, pursuant to § 3.4(C) of this Part. Preliminary certifications will become final, and the properties will become Certified Historic Structures, as of the date of listing on the National Register of Historic Places or the State Register. Issuance of preliminary certification does not obligate the Commission to nominate the property. Applicants proceed with Rehabilitation projects at their own risk; if the historic property is not listed prior to completion of the project, the preliminary certification will not become final.

f.Preliminary Determination of Eligibility for Registering a District. Owners of properties that are located in potential historic district may request a written opinion from the Commission as to whether the potential historic district meets the criteria for being listed as a Registered Historic District. Owners of properties located in districts that the Commission considers to be eligible for listing may apply for preliminary certification of their properties, pursuant § 3.4(C) of this Part. Applications for preliminary certification of buildings within eligible historic districts must show how the district meets the criteria for being listed as a historic district, and how the property contributes to the significance of that district, pursuant to § 3.4(C) of this Part. Preliminary certifications will become final, and the properties will become Certified Historic Structures, as of the date of listing the district as a Registered Historic District. Issuance of preliminary certification does not obligate the Commission to nominate the potential district. Applicants proceed with Rehabilitation projects at their own risk; if the historic district is not listed as a Registered Historic District prior to completion of the project, the preliminary certification will not become final.

4.Application for Certification of Rehabilitation of Buildings in Districts with Preliminary Historic Certification. Owners of properties that have received preliminary certifications may apply for certification of a proposed Rehabilitation, pursuant to § 3.5(D) of this Part. Final certifications of Rehabilitations will be issued only for Certified Historic Structures.

C.Standards for Evaluating Significance within Registered Historic Districts

1.Evaluations of Significance. Some historic districts are resources whose concentration or continuity possesses greater historical significance than many of their individual component buildings and buildings. These usually are documented as a group rather than individually. Accordingly, this type of documentation is not conclusive for the purposes of an evaluation of the significance of an individual component. The applicant shall supplement this documentation using Part 1 of the Historic Preservation Certification Application, providing information on the significance of the specific property, as set forth in § 3.5(B)(2) of this Part.

2.Standards for Evaluation. The Commission evaluates properties located within Registered Historic Districts to determine if they contribute to the historic significance of the district by applying the following standards:

a.A property contributing to the historic significance of a district is one which by location, design, setting, materials, workmanship, feeling, and association adds to the district's sense of time and place and historical development.

b.A property not contributing to the historic significance of a district is one which does not add to the district's sense of time and place and historical development; or one where the location, design, setting, materials, workmanship, feeling and association have been so altered or have so deteriorated that the overall integrity of the building has been irretrievably lost.

c.Ordinarily buildings that have been built within the past fifty (50) years shall not be considered to contribute to the significance of a district unless a strong justification concerning their historical or architectural merit is given or the historical attributes of the district are considered to be less than fifty (50) years old.

3.If a non-historic surface material obscures a building's facade, it may be necessary for the Owner to remove a portion of the surface material before requesting certification so that a determination of significance can be made. After the material has been removed, if the obscured facade has retained substantial historic integrity and the property otherwise contributes to the significance of the historic district, it may be determined to be a Certified Historic Structure.

D.Certifications of Rehabilitation.

1.Certification of Proposed Rehabilitation or of Completed Work. Applicants requesting certification of a proposed Rehabilitation shall comply with the procedures listed in § 3.5(D)(1)(a) of this Part; Applicants requesting a Certificate of Completed Work shall comply with the procedures listed in § 3.5(D)(1)(b) of this Part. Processing Fees, described in § 3.9 of this Part, are charged by the Commission or the Tax Division for reviewing all proposed, ongoing, and completed Rehabilitation work. No certification decisions shall be issued to any Applicant until the applicable fees are received.

a.Part 2 - Application for Certification of Proposed Rehabilitation. An application for certification of a proposed Rehabilitation shall be submitted to the Commission prior to the Certified Historic Structure being placed in service. Applicants are strongly encouraged to request the Commission review before beginning a Rehabilitation project. To request review of a proposed Rehabilitation, the Applicant shall submit Part 2 of the Historic Preservation Certification Application form according to the instructions accompanying the application. This documentation includes but is not limited to:

(1)Name and mailing address of the Owner and, if the Owner holds leasehold title to the Certified Historic Structure or an identifiable portion thereof, the name and mailing address of the holder of the fee interest;

(2)Name and address of the property;

(3)Color photographs of the property adequate to document the appearance of the building, both on the interior and the exterior, and its site and environment before Rehabilitation;

(4)The Applicant's estimate of projected Qualified Rehabilitation Expenditures and of Adjusted Basis in the Certified Historic Structure as of the date of application;

(5)Signature of the Applicant and, if the Applicant is not the holder of the fee interest in the Certified Historic Structure, the signature of the fee owner as to the Adjusted Basis in the Certified Historic Structure as of the date of application.

(6)Other documentation, including but not limited to plans, specifications, surveys and/or structural reports may be required to evaluate rehabilitation projects. Where necessary documentation is not provided, review and evaluation will be delayed and a denial of certification may be issued on the basis of lack of information. Because the circumstances of each Rehabilitation are unique, certifications that may have been granted to other Rehabilitations are not specifically applicable and may not be relied on by Applicants as applicable to other projects.

b.Part 3 - Request for Certification of Completed Work. To request certification of a completed Rehabilitation, the Applicant shall submit Part 3 of the Historic Preservation Certification Application, "Request for Certification of Completed Work," to the Commission according to the instructions accompanying the application, and provide documentation to the Commission that the completed project is consistent with the work described in Part 2. This documentation includes but is not limited to:

(2)Name and address of the property;

(3)Color photographs of the property showing the completed Rehabilitation work, including exterior and interior features and spaces, sufficient to demonstrate that the completed work is consistent with the Standards for Rehabilitation. Photographic views after Rehabilitation should correspond with photographic views submitted in Part 2;

(4)Final costs attributed to the Rehabilitation;

(5)The Placed in Service date; and

(6)Signature of the Applicant.

c.Certification by Commission of Proposed Rehabilitation. The Commission shall issue to the Applicant a written determination either denying or certifying the Proposed Rehabilitation within the timeframe described in § 3.5(A)(4) of this Part.

d.Certification of Completed Work. Within ninety (90) days after the Commission's and the Tax Division's receipt of an application for Certification of Completed Work, the Commission and/or the Tax Division shall issue to the Applicant

(1)a written determination either denying or certifying the Rehabilitation (a "Certificate of Completed Work"), and

(2)a certification of the amount of Historic Preservation Investment Tax Credit for which the Rehabilitation qualifies (an "Assignable Historic Preservation Investment Tax Credit Certificate" pursuant to the procedures of § 3.8 of this Part.

e.Assignable Historic Preservation Investment Tax Credit Certificate.

(1)To request one or more Assignable Historic Preservation Investment Tax Credit Certificates, the Applicant shall submit to the Tax Division;

(2)Accountant's Certification of the actual Qualified Rehabilitation Expenditures attributed solely to the Rehabilitation of the Certified Historic Building and the satisfaction of the Substantial Rehabilitation test;

(3)The Placed in Service Date.

(4)A complete, adequately documented RI Form HTC -8016

(5)Within 90 days after the Tax Division's receipt of the Accountant's Certification, the RI Form 8016 and the Placed in Service Date, the Tax Division shall issue to the Applicant a certification of the amount of Historic Preservation Investment Tax Credit for which the Rehabilitation qualifies and shall issue an "Assignable Historic Preservation Investment Tax Credit Certificate" pursuant to the procedures of § 3.8 of this Part; both of which are conditioned on the Commission issuing a Certificate of Completed Work.

f.Abandonment of Project.

(1)For these structures where a Part 1 application was submitted before January 1, 2008 and five (5) years has elapsed from the payment of the Processing Fee on May 15, 2008, the Commission and the Tax Division may require that the Owner submit evidence that Substantial Construction has occurred which shall include the certification of an accountant licensed in the State of Rhode Island that at least ten percent of the Estimated Qualified Rehabilitation Expenditures have been incurred. If the project has not meet the criteria of Substantial Construction the project shall be considered abandoned and the Processing Fee shall be refunded, without interest.

(2)At any time after payment of the Processing Fee and execution of a Contract, the Applicant may inform the Commission and the Tax Division in writing that it intends to abandon the project or to complete it without compliance with the Standards for Rehabilitation and that it relinquishes all claims to the Tax Credits. Upon receipt of such notice, the Tax Division shall refund all Processing Fees, without interest.

2.Scope of Rehabilitation; Qualified Rehabilitation Expenditures. For purposes of Commission reviews and certification, a Rehabilitation project encompasses all work on the interior and exterior of the certified historic building(s) and its site and environment, as well as related demolition, new construction or rehabilitation work that may affect the historic qualities, integrity, site, landscape features, and environment of the property. The Commission will determine if such work is consistent with the standards for Rehabilitation whether or not a Credit is claimed for those costs. However, only those costs that constitute Qualified Rehabilitation Expenditures may be included in the calculation of the Historic Preservation Investment Tax Credit. The Commission and the Tax Division are entitled to rely on the Accountant's Certification regarding the Qualified Rehabilitation Expenditures actually incurred included with the Application without independent investigation. However, the Tax Division reserves the right to request additional documentation and supporting detail to verify Qualified Rehabilitation Expenditures, including but not limited to, the original documents of entry, vendor lists, payroll record, accounts, and other records.

a.All elements of the Rehabilitation project shall be consistent with the Standards for Rehabilitation. Portions of a project that are not in conformance with the Standards may not be exempted from review. In general, an Applicant undertaking a Rehabilitation will not be held responsible for rehabilitation work not part of the current project that occurred more than five (5) years before the current project began, or Rehabilitation work not part of the current project that was undertaken by previous owners.

b.Consistency with the Standards for Rehabilitation will be determined on the basis of the application documentation and other available information by evaluating the property, as it existed before the beginning of the Rehabilitation.

3.Determination of Consistency with Standards for Rehabilitation. The Commission, on receipt of the complete application describing the Rehabilitation project, shall determine if the project is consistent with the Standards for Rehabilitation. If the project does not meet the Standards for Rehabilitation, the Commission shall advise the Applicant of that fact in writing. Where possible, the Commission will advise the Applicant of necessary revisions to meet the Standards for Rehabilitation.

4.Determination of Qualified Rehabilitation Expenditures. The Tax Division, upon receipt of the complete application describing the Rehabilitation Project, shall determine if the costs attributed to the Rehabilitation meet the criteria of Qualified Rehabilitation Expenditures. If any costs of a project are denied as Qualified Rehabilitation Expenditures, the Tax Division shall advise the Applicant of that fact in writing briefly setting forth the grounds for said denial.

5.Changes after Determination. Once a proposed or ongoing project has been approved, substantive changes in the work as described in the application shall be brought promptly to the attention of the Commission and the Tax Division by written amendment to the application to ensure continued consistency to the Standards for Rehabilitation.

6.Standards for Rehabilitation. The Standards for Rehabilitation are the criteria used to determine if a Rehabilitation qualifies as a Certified Rehabilitation. The intent of the Standards for Rehabilitation is to return a historic property to a state of utility through repairs or alterations which make possible the efficient contemporary use while preserving those portions and features of the property which are significant to its historic, architectural, and cultural values. The Standards for Rehabilitation pertain to historic buildings of all materials, construction types, sizes, and occupancy and encompass the exterior and the interior of historic buildings. The Standards also encompass related landscape features and the building's site and environment, as well as attached, adjacent, or related new construction. To be certified, a Rehabilitation shall be determined by the Commission in its reasonable discretion to be consistent with the historic character of the building(s) and, where applicable, the district in which it is located.

7.Application of Standards for Rehabilitation. The Standards for Rehabilitation shall be applied to specific Rehabilitation projects in a reasonable manner taking into consideration economic and technical feasibility.

a.A property shall be used for its historic purpose or be placed in a new use that requires minimal change to the defining characteristics of the building and its site and environment.

b.The historic character of a property shall be retained and preserved. The removal of historic materials or alteration of features and spaces that characterize a property shall be avoided.

c.Each property shall be recognized as a physical record of its time, place, and use. Changes that create a false sense of historical development, such as adding conjectural features or architectural elements from other buildings, shall not be undertaken.

d.Most properties change over time; those changes that have acquired historic significance in their own right shall be retained and preserved.

e.Distinctive features, finishes and construction techniques or examples of craftsmanship that characterize a historic property shall be preserved.

f.Deteriorated architectural features shall be repaired rather than replaced. Where the severity of deterioration requires replacement of a distinctive feature, the new feature should match the old in design, color, texture, and other visual qualities and, where possible, materials. Replacement of missing architectural features must be substantiated by documentary, physical, or pictorial evidence.

g.Chemical or physical treatments, such as sandblasting, that cause damage to historic materials shall not be used. The surface cleaning of buildings, if appropriate shall be undertaken using the gentlest means possible.

h.Significant archeological resources affected by a project shall be protected and preserved. If these resources must be disturbed, mitigation measures shall be undertaken.

i.New additions, exterior alterations, or related new construction shall not destroy historic materials that characterize the property. The new work shall be differentiated from the old and shall be compatible with the massing, size, scale, and architectural features to protect the historic integrity of the property and its environment.

j.New additions and adjacent or related new construction shall be undertaken in such a manner that if removed in the future, the essential form and integrity of the historic property and its environment would be unimpaired.

8.Quality of Materials and Work. The quality of materials, craftsmanship, and related new construction in a Rehabilitation project should be commensurate with the quality of materials, craftsmanship, and design of the Certified Historic Structure in question. This standard will be applied in a reasonable manner taking into account economic and technical feasibility. Certain treatments, if improperly applied, or certain materials by their physical properties, may cause or accelerate physical deterioration of historic buildings. Inappropriate Rehabilitation measures include, but are not limited to: excessively abrasive paint removal; improper masonry repointing techniques; improper exterior masonry cleaning methods; improper introduction of insulation where damage to historic fabric would result; and incompatible additions and new construction on historic properties. In almost all situations, these measures and treatments will result in denial of certification.

9.Structural Matters. In certain limited cases, it may be necessary to dismantle and rebuild portions of a Certified Historic Structure to stabilize and repair weakened structural members and systems. In these cases, the Commission will consider this extreme intervention as part of a Certified Rehabilitation if:

a.The necessity for dismantling is justified in supporting documentation;

b.Significant architectural features and overall design are retained; and

c.Adequate historic materials are retained to maintain the architectural and historic integrity of the overall structure. These standards will be applied in a reasonable manner taking into account economic and technical feasibility.

E.All Available Information Used in Determination. The qualities of a property and its environment which qualify it as a Certified Historic Structure are determined taking into account all available information, including information derived from the physical and architectural attributes of the building; these determinations are not limited to information contained in the State Register of Historic Places nomination reports.

F.Appeals.

1.Appeal Procedures. An Applicant may appeal any denial or revocation of certification. A request for an appeal shall be made in writing to the Commission, within sixty (60) days of receipt of the decision which is the subject of the appeal. It is not necessary for the Applicant to present arguments for overturning a decision within this 60-day period. The Applicant may request an opportunity to meet with the Commission or a Sub-Committee thereof, but all information that the Applicant wishes the Commission to consider shall be in writing. If the appeal disputes a determination of Qualified Rehabilitation Expenditures or other accounting or tax related issues, agents or employees of the Tax Division may be joined in the appeal to present written evidence and testimony on the issues. The Commission shall consider the record of the decision in question, and further written submissions by the Applicant, and other available information, and shall provide the Applicant a written decision as promptly as circumstances permit. The appeal process is an administrative review of decisions made by an authorized representative of the Commission.

2.Decisions. In considering appeals, the Commission may take into account new information not previously available or submitted; alleged errors in professional judgment; or alleged prejudicial procedural errors. The Commission's decision may:

a.Reverse the appealed decision; or

b.Affirm the appealed decision; or

c.Resubmit the matter to the Commission program staff for further consideration.

3.Final Administrative Remedy. The decision of the Commission shall be the final administrative decision on the appeal. No person shall be considered to have exhausted his or her administrative remedies with respect to the certifications or decisions described in this § 3.5 of this Part until the Commission has issued a final administrative decision in response to this § 3.5 of this Part. The Commission shall notify the Tax Division in writing of any denial or revocation of a certification and of the final administrative decision on the appeal.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2008-11-09 to 07/31/2018
EMERGENCY RULE Adoption — effective from 2008-04-15 to 11/09/2008

280-RICR-20-20-3 § 3.6 Substantial Rehabilitation; Qualified Rehabilitation Expenditures

A.Substantial Rehabilitation.

1.A Rehabilitation of Certified Historic Structure shall be deemed a Substantial Rehabilitation only if the Qualified Rehabilitation Expenditures incurred in the twenty-four (24)-month period selected by the Owner ending within the taxable year in which the Rehabilitation is Placed in Service shall equal or exceed fifty percent of the Adjusted Basis of the Certified Historic Structure as of the beginning of the twenty-four (24) month period. In the case of projects involving multiple buildings (except for phased Rehabilitations addressed in § 3.6(A)(2) of this Part), the Substantial Rehabilitation Test must be met with respect to each building separately based on the Adjusted Basis attributable to each such building and the Qualified Rehabilitation Expenditures attributable to each such building. The twenty-four (24) month period is a measuring period for testing whether the Rehabilitation is a Substantial Rehabilitation. Qualified Rehabilitation Expenditures incurred in connection with the Rehabilitation either before the beginning of the twenty-four (24) month period or after the Rehabilitation is Placed in Service but prior to the end of the taxable year in which the Rehabilitation is Placed in Service may be included in the calculation of the Credit provided the Substantial Rehabilitation Test is met.

2.In the case of any Rehabilitation that may reasonably be expected to be completed in phases set forth in architectural plans and specifications prepared before the physical work on the Rehabilitation begins, at the election of the Owner, § 3.6(A)(1) of this Part may be applied by substituting "60 month period" for "24-month period." A Rehabilitation may reasonably be expected to be completed in phases if it consists of two or more distinct stages of development. The Commission may review each phase of a Phased Project as it is presented, and may issue a Certificate for Completed Work upon completion of each Phase. However, an Assignable Historic Preservation Investment Tax Credit Certificate may be issued only upon satisfaction of the Substantial Rehabilitation test for the entire Phased Project. Thereafter, Assignable Historic Preservation Investment Tax Credit Certificates may be issued upon issuance of a Certificate of Completed Work for later phases without again having to meet the Substantial Rehabilitation test. The Applicant may elect to claim the Credit allowable for each completed phase of a Phased Project, upon receipt from the Tax Division of an Assignable Historic Preservation Investment Tax Credit Certificate. Any Credit claimed prior to final certification of the completed Rehabilitation will be contingent upon final certification of the completed Rehabilitation.

B.Qualified Rehabilitation Expenditures.

1.Qualified Rehabilitation Expenditures are those expenses incurred in connection with a Substantial Rehabilitation of a Certified Historic Structure that are properly capitalized to the building and either depreciable under the Internal Revenue Code or made with respect to property (other than the Principal Residence of the Owner) held for sale by the Owner.

2.Amounts are properly capitalized to the building if they are properly includible in computing the depreciable basis of real property under federal income tax law. Amounts treated as an expense and deducted in the year paid or incurred or amounts that are otherwise not added to the basis of real property do not qualify. Amounts incurred for soft costs, including without limitation architectural and engineering fees, survey fees, legal expenses, insurance premiums, development fees and other construction related costs that are added to the depreciable basis of real property satisfy this requirement.

3.Expenses that do not qualify as Qualified Rehabilitation Expenditures include, without limitation:

a.The cost of acquiring a building, an interest in a building (including a leasehold interest) or land. For this purpose, interest incurred on a construction loan, the proceeds of which are used for Qualified Rehabilitation Expenditures (and which is added to the basis of the Certified Historic Building) is not treated as a cost of acquisition.

b.Any expense attributable to an enlargement of a building. A building is enlarged to the extent that the total volume of the building is increased. An increase in floor space resulting from interior remodeling is not considered an enlargement. If expenditures only partially qualify as Qualified Rehabilitation Expenditures because some of the expenditures are attributable to the enlargement of the building, the expenditures must be apportioned between the original portion of the building and the enlargement. The expenditures must be specifically allocated between the original portion of the building and the enlargement to the extent possible. If it is not possible to make a specific allocation of the expenditures, the expenditures must be allocated to each portion on a reasonable basis. The determination of a reasonable basis for an allocation depends on factors such as the type of improvement and how the improvement relates functionally to the building. Example: Historic Rehabilitation project includes a new rear wing. A new air-conditioning system and a new roof are installed on the building. A reasonable basis for allocating the expenditures between the historic building and the new rear wing generally would be the volume of the historic building (excluding the new wing), served by the air-conditioning system on the roof, relative to the volume of the new wing that is served by the air-conditioning system and the roof.

c.Any expense attributable to the rehabilitation of a Certified Historic Structure, or a building located in a Registered Historic District, which is not a Certified Rehabilitation.

d.Any site work expenses.

e.Any costs of demolition of adjacent structures.

f.Processing Fees imposed under R.I. Gen. Laws §§ 44-32.2-3(b) and 44-33.2-4(d).

4.Public Grants. Except in the case of nonprofit corporations, there shall be deducted for purposes of calculating the Historic Preservation Investment Tax Credit any funds made available to the Person incurring the Qualified Rehabilitation Expenditures in the form of a direct grant from a federal, state or local governmental entity or agency or instrumentally thereof.

C.Step in the Shoes. The Owner may take into account Qualified Rehabilitation Expenditures incurred in connection with the same plan of Rehabilitation by any other Person who has or had an interest in the building. Where Qualified Rehabilitation Expenditures are incurred with respect to a building by a Person (or Persons) other than the Owner, and the Owner acquires the building or a portion of the building (including a leasehold interest in the building or a portion thereof) to which the expenditures were allocable, the Owner acquiring such property will be treated as having incurred the Qualified Rehabilitation Expenditures actually incurred by the transferor, provided that the Rehabilitation was not Placed in Service by the transferor, and no Credit with respect to such Qualified Rehabilitation Expenditures is claimed by anyone other than the Owner acquiring the property or that Owner's Assignee(s). In such instances, the Measuring Period during which the Substantial Rehabilitation Test must be met shall include the transferor's period of ownership, and the Adjusted Basis against which Qualified Rehabilitation Expenditures are tested shall be the Adjusted Basis of the transferor as of the beginning of the Measuring Period.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2008-11-09 to 07/31/2018
EMERGENCY RULE Adoption — effective from 2008-04-15 to 11/09/2008

280-RICR-20-20-3 § 3.7 Determination of Credit

A.The amount of the Credit shall be determined by multiplying the total amount of Qualified Rehabilitation Expenditures incurred in connection with the plan of Rehabilitation times the appropriate percentage as elected in the Contact. Qualified Rehabilitation Expenditures may include expenses in connection with the Rehabilitation which were incurred prior to the start of Rehabilitation or of the Measuring Period. Further, Qualified Rehabilitation Expenditures may include expenses incurred prior to completion of a formal plan of Rehabilitation provided the expenses were incurred in connection with the Rehabilitation which was completed.

B.The Tax Division shall certify the amount of Qualified Rehabilitation Expenditures. In the case of multiple Phased Projects, the Tax Division shall certify the amount of Qualified Rehabilitation Expenditures for each phase.

C.The Tax Division shall also issue an Assignable Historic Preservation Investment Tax Credit Certificate, which shall certify as to the amount of Historic Preservation Investment Tax Credit for which the Substantial Rehabilitation qualifies as more fully provided in § 3.8 of this Part.

D.The Tax Division may rely without independent investigation on the Accountant's Certification as to the amount of Qualified Rehabilitation Expenditures actually incurred and the satisfaction of Substantial Rehabilitation test. However, the Tax Division reserves the right to review such Certifications and to audit the original documents of entry, vendor lists, payroll records, accounts or other records supporting such Accountant's Certifications.

E.If the amount of the Credit exceeds the taxpayer's tax liability for the taxable year in which the Credit may be claimed, the amount that exceeds the tax liability may be carried over for credit against the income taxes of such taxpayer for the next ten taxable years or until the full Credit is used, whichever occurs first.

F.In the case of a corporation, the Historic Preservation Investment Tax Credit is only allowed against the tax of a corporation included in a consolidated return that qualifies for the Credit and not against the tax of other corporations that may join in the filing of a consolidated tax return.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2008-11-09 to 07/31/2018
EMERGENCY RULE Adoption — effective from 2008-04-15 to 11/09/2008

280-RICR-20-20-3 § 3.8 Assignment of Historic Preservation Investment Tax Credit

A.Issuance of Assignable Historic Preservation Investment Tax Credit Certificate to Owner, Initial Assignee, or Participant. Upon approval by the Commission and the Tax Division of the Substantial Rehabilitation of a Certified Historic Structure pursuant to this Regulation, the Tax Division shall issue an Assignable Historic Preservation Investment Tax Credit Certificate to the Owner or any eligible Initial Certificates' holder. If the Owner or the Participant is a Pass-Through Entity, or if there are multiple Owners, the Tax Division may issue an Assignable Historic Preservation Investment Tax Credit Certificate to each Participant in such Pass-Through Entity or each Owner, indicating on the face of such Certificate(s) the amount of the Historic Preservation Investment Tax Credit allocable to such Participant. The amount assigned to each Participant will be the amount represented by the Applicant in the application for issuance of tax credit certification.

B.Determination of Amount of Credit allocated to Participants in Pass-Through Entities. The amount allocated to each Participant on the Assignable Historic Preservation Investment Tax Credit Certificate issued to such Participant must be either in proportion to the number of Participants in the Owner or determined in accordance with any allocation method set forth in an executed agreement among all Participants, which may be without regarding to their sharing of other tax or economic attributes of such entity (the Allocation Agreement). The Tax Division shall have no obligation to confirm the amount stated for each Participant in the Application for Completed Work or to review the Allocation Agreement.

C.Assignment of Certificate. An Assignable Historic Preservation Investment Tax Credit Certificate may be assigned to any Person, whether or not such Person has an ownership interest in the Certified Historic Structure, provided that no Credit has been claimed based on the Assignable Historic Preservation Investment Tax Credit Certificate being assigned. The Certificate may be assigned by endorsing the assignment clause set forth on the Certificate and delivery of the original certificate to the Assignee.

D.Assignee Recognition of Credit. The Assignee may use the Historic Preservation Investment Tax Credit only to offset the tax imposed for the taxable year in which the Certified Structure or an identifiable portion thereof is Placed in Service, or for taxable years to which the Credit is carried forward. The Assignee may apply the Historic Preservation Investment Tax Credit against taxes imposed on the Assignee until the end of the tenth (10th) calendar year after the year in which the Substantial Rehabilitation is Placed-in Service or until the full Credit assigned is used, whichever occurs first. Fiscal year Assignees may claim the Credit until the expiration of the fiscal year that ends within the tenth (10th) year after the year in which the Substantial Rehabilitation is Placed-in-Service.

E.Filing with Tax Return. An original executed copy of the Assignable Historic Preservation Investment Tax Credit Certificate shall be attached to the tax return of the Owner, Participant or Assignee who desires to claim the Credit. A Participant of a Pass-Through Entity who transfers its interest in the entity must also endorse and deliver the Assignable Historic Preservation Tax Credit Certificate to the transferee if the transferee desires to claim the Historic Preservation Investment Tax Credit.

F.Notification of Assignment to Tax Division. An Assignor of all or any portion of the Historic Preservation Investment Tax Credit, shall notify the Tax Division in writing within thirty (30) calendar days following the effective date of such assignment. Attached to such written notification (the Notification of Assignment) shall be:

1.A copy of the Assignable Historic Preservation Investment Tax Credit Certificate, endorsed to the Assignee. The original Certificate shall not be included with the Notification of Assignment, which must be retained by the Assignee and attached to the Assignee's tax return for the year with respect to which the Historic Preservation Investment Tax Credit is claimed.

2.A copy of the Certificate of Completed Work issued by the Commission.

3.The name, address and telephone number of the Assignor and of the Assignee.

4.The taxpayer identification number or social security number of the Assignor and the Assignee.

5.For non-resident corporations, partnerships, limited liability companies, or other entities, the name and address of such entity’s’ registered agent in the State of Rhode Island and evidence of qualification to do business in Rhode Island.

G.Multiple Assignees; Reissuance of Certificate. If the holder of an Assignable Historic Preservation Investment Tax Credit Certificate desires to assign its interest in the Credit to more than one Assignee, the holder must request the Tax Division to reissue the original Certificate in such number of Certificates as the holder requires. The request must be made in writing, must specify the number of new Certificates required and the amount to be specified on each Certificate, and must attach the Original Certificate for cancellation by the Tax Division.

H.Treatment of Proceeds of Assignment for State Tax Purposes. The Assignor of all or a portion of the Historic Investment Tax Credit shall not recognize any state income tax under the provisions of R.I. Gen. Laws Title 44 with respect to the proceeds of such assignment. The Assignor of any Credit shall attach a copy of the Assignable Historic Preservation Investment Tax Credit Certificate to its tax return to evidence that such proceeds are not subject to state income tax. If the Historic Preservation Investment Tax Credit is subsequently recaptured under R.I. Gen. Laws § 44-33.2-3(e) of the Act, revoked or adjusted, the Assignor's tax calculation for the year of revocation, recapture, or adjustment shall be increased by the total amount of the sales proceeds, if any, without proration, as a modification under R.I. Gen. Laws Chapter 44-30. In the event that the Assignor is not a natural person, the Assignor's tax calculation under R.I. Gen. Laws Chapters 44-11, 44-13 (other than with respect to the tax imposed under R.I. Gen. Laws § 44-13-13), 44-14, 44-17, or 44-30, for the year of revocation, recapture, or adjustment, shall be increased by

I.Administrative fees. The Commission and/or the Tax Division may assess reasonable administrative fees for issuing multiple Assignable Historic Preservation Investment Tax Credit Certificates or for reissuing Certificates.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2008-11-09 to 07/31/2018
EMERGENCY RULE Adoption — effective from 2008-04-15 to 11/09/2008

280-RICR-20-20-3 § 3.9 Processing fees and Contracts of Guaranty

A.Project Currently in Progress-Contract with the Tax Division.

1.For Certified Historic Structures or some identifiable portion thereof that are Placed-in-Service after December 31, 2007:

a.The Part 1 'Application for Certification as a Historic Structure' must have been recorded as being received by the Commission prior to January 1, 2008;

b.The Processing Fees referenced in R.I. Gen. Laws § 44-33.2-3(b) of the Act shall be paid to the Tax Division by May 15, 2008;

c.Upon the payment of those fees, the Person that will incur Qualified Rehabilitation Expenditures shall enter into a Contract with the Tax Division;

d.At the signing of the Contract, the Person that will incur Qualified Rehabilitation Expenditures shall select the percentage of tax credits and Processing Fees, as outlined in R.I. Gen. Laws § 44-33.2-3(b), for any Certified Historic Structure or identifiable part thereof that will be Placed-in-Service after December 31, 2007;

e.The Contract will guarantee the amount of tax credit as the lesser of:

(1)the amount specified in the Contract, or

(2) the actual Qualified Rehabilitation Expenditures multiplied by the tax credit percentage selected by the Person at the signing of the Contract;

f.Due dates for payment of fees:

(1)Two and one quarter percent (2.25%) of the Qualified Rehabilitation Expenses shall be paid to the Tax Division by May 15, 2008 and the remaining percentage of the Processing Fees shall be paid on or before March 5, 2009. Untimely payments shall accrue interest in accordance with R.I. Gen. Laws § 44-1-7.

(2)Payment of the Processing Fees and compliance with the requirements of this regulation shall guarantee 100 percent of the credit.

g.The Contract shall be assignable:

(1)to an Affiliate of the Person incurring the Qualified Rehabilitation Expenditures, without consent from the Tax Division, or

(2)to some other Person or business entity incurring Qualified Rehabilitation Expenditures. Such assignments are subject to the approval of the Tax Division, which approval shall not be unreasonably withheld

h.The Tax Division shall reconcile the actual amount of tax credits as part of the final project certification. If the Processing Fees paid upon Contract signing are greater than required, based on the actual Qualified Rehabilitation Expenditures, the appropriate difference shall be refunded to the Person that incurred the Qualified Rehabilitation Expenditures, without interest.

B.Projects Near Final Certification

1.For Certified Historic Structures or some identifiable portion thereof that are Placed-in-Service prior to January 1, 2008.

a.The Processing Fees of two and one quarter percent (2.25%) of Qualified Rehabilitation Expenditures as referenced in R.I. Gen. Laws § 44-33.2-4(d) shall be paid, in their entirety, to the Tax Division by May 15, 2008; and

b.The Part 3 'Request for Certification of Completed Work' must be recorded as being received by the Commission by May 15, 2008.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2008-11-09 to 07/31/2018
EMERGENCY RULE Adoption — effective from 2008-04-15 to 11/09/2008

280-RICR-20-20-3 § 3.10 Restrictive Covenant: Recapture

A.Restrictive Covenant. Upon issuance of a Certificate of Completed Work, the Owner shall cause to be recorded in the applicable land evidence records a restrictive covenant pursuant to which,

1.during the Holding Period, no alteration to the Certified Historic Structure will be made without the Commission's approval and in a manner consistent with the Standards for Rehabilitation;

2.the Certified Historic Structure may not become Exempt from Real Property Tax; and

3.the Commission and/or the Tax Division shall be granted the right to one or more Inspections during the Holding Period to confirm matters represented in the Historic Preservation Certification Application and to review any alterations. If the Owner is the holder of leasehold title, the fee owner of the Certified Historic Structure must also execute the Restrictive Covenant.

B.Recapture. No Credit may be claimed with respect to property that is Exempt from Real Property Tax. Any Credit claimed under the Act shall be recaptured in full (by increasing the taxpayer's tax for the year by the total amount of Historic Preservation Investment Tax Credit actually used against the tax) if, within twenty-four 24 months after the issuance of a Certificate of Completed Work, the property becomes Exempt from Real Property Tax. The Assignor, if any, of any recaptured Credit shall recognize income in the amount of the proceeds of the assignment upon any recapture of the Credit. Recapture of the Credit may be appealed to the Commission in accordance with § 3.5(F) of this Part. The Commission shall notify the Tax Division of any recapture of the Credit and of the final administrative decision on any appeal.

C.Liability for Recapture. In the event that tax credits that are subject to recapture have been transferred or assigned, the State will pursue its recapture remedies and rights against the Assignor or transferor of the tax credits or any other interested or responsible parties. No redress shall be sought against Assignees or transferees of such credits provided they acquired the tax credits by way of an arms-length transaction, for value, and without notice of violation, fraud or misrepresentation. It will be presumed that any transferee or Assignee who is an Affiliate or a Participant of the Assignor has notice of violation, fraud or misrepresentation and did not acquire the tax credits in an arms-length transaction.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2008-11-09 to 07/31/2018
EMERGENCY RULE Adoption — effective from 2008-04-15 to 11/09/2008

280-RICR-20-20-3 § 3.11 Miscellaneous

A.Administration and Examination of Records - Tax Division. The Tax Division and its agents, for the purpose of ascertaining the correctness of any Credit claimed under the Act, may examine any books, paper, records or memoranda bearing upon the matters required to be included in the return, report or other statement, and may require the attendance of the Person executing the return, report or other statement, or of any officer or employee of any taxpayer, or the attendance of any other Person, and may examine the Person under oath respecting any matter which the Tax Division or its agents deems pertinent or material in determining eligibility for Credits claimed, and may request information from the Commission, and the Commission shall provide such information in all cases, to the extent not otherwise prohibited by statute.

B.Commission's and Tax Division's Inspection Rights. The Commission or the Tax Division shall have the right at reasonable times to make an inspection and to enter upon any property that is the subject of an application for certification, whether the Rehabilitation is proposed, ongoing, or completed, and for the entire Holding Period following issuance of a Certificate of Completed Work, to verify that the Rehabilitation is as represented and that no unpermitted alterations or changes are made after issuance of a Certificate of Completed Work.

C.Commission's and Tax Division's Right to Deny or Revoke Credit. If information comes to the attention of the Commission at any time up to and including the last day of the Holding Period that is materially inconsistent with representations made in an application, the Commission may deny the requested certification or revoke a certification previously given. If information comes to the attention of the Tax Division at any time up to and including the last day of the Holding Period that is materially inconsistent with representations made in the Accountant's Certification or any supporting materials, the Tax Division may revoke the Assignable Historic Tax Credit Certificate and cancel a Contract for tax credits and any Processing Fees paid thereunder shall be forfeited. If any tax credits have been claimed by any taxpayer based on an Assignable Historic Preservation Tax Credit Certificate that has been revoked or a Contract that has been canceled, the Owner who filed the Accountant's Certification shall pay to the Tax Division an amount equal to the Tax Credit claimed. There shall be no adjustment to the tax credit claimed by the taxpayer if a taxpayer acquired the Assignable Historic Tax Credit Certificate, directly or indirectly, from the Owner or a Participant in the Owner without notice of the materially inconsistent information upon which the Certificate or Contract has been revoked.

D.Election among credits

1.Taxpayers who elect to claim Credits under the Act are ineligible for any tax credits that may also be available to the taxpayer for the Rehabilitation of that particular Certified Historic Structure under R.I. Gen. Laws Chapters 44-33.1, 42-64.7, and/or 44-31.

E.Severability clause.

1.If any provision of this Part, or the application thereof to any person or circumstance, is held invalid by a court of competent jurisdiction, the validity of the remainder of this Part shall not be affected thereby.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2008-11-09 to 07/31/2018
EMERGENCY RULE Adoption — effective from 2008-04-15 to 11/09/2008

280-RICR-20-20-4 Residential Lead Abatement Income Tax Credit

280-RICR-20-20-4 § 4.1 Purpose

These rules and regulations implement R.I. Gen. Laws Chapter 44-30.3. That chapter allows a refundable credit against Rhode Island personal income taxes due for residential lead paint removal or reduction.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2013-07-01 to 01/04/2022
Amendment — effective from 2013-07-01 to 07/01/2013
Periodic Refile — effective from 2001-12-20 to 07/01/2013

280-RICR-20-20-4 § 4.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws §§ 44-1-4 and 44-30.3-8. The rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 42-35 of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2013-07-01 to 01/04/2022
Amendment — effective from 2013-07-01 to 07/01/2013
Periodic Refile — effective from 2001-12-20 to 07/01/2013

280-RICR-20-20-4 § 4.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation to effectuate the purpose of R.I. Gen. Laws Chapter 44-30.3 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2013-07-01 to 01/04/2022
Amendment — effective from 2013-07-01 to 07/01/2013
Periodic Refile — effective from 2001-12-20 to 07/01/2013

280-RICR-20-20-4 § 4.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2013-07-01 to 01/04/2022
Amendment — effective from 2013-07-01 to 07/01/2013
Periodic Refile — effective from 2001-12-20 to 07/01/2013

280-RICR-20-20-4 § 4.5 Definitions

A."Claimant" means a property owner or lessee, who has filed a claim and was domiciled in this state for the entire calendar year for which he or she files a claim for relief. In the case of a claim for rented or leased residential premises, the claimant shall have rented property during the preceding year for which he or she files for relief. Claimant does not mean or include any person claimed as a dependent by any taxpayer under the Internal Revenue Code. When two (2) Individuals of a household are able to meet the qualifications for a claimant, they may determine between themselves as to who the claimant is. If they are unable to agree, the matter is referred to the tax administrator and his or her decision is final. If a property is owned by two (2) or more individuals, and more than one individual is able to qualify as a claimant and some or all of the qualified individuals are not related, the individuals may determine among themselves as to who the claimant is. If they are unable to agree, the matter is referred to the tax administrator, and his or her decision is final.

B."Dwelling unit" means a single unit providing complete independent living facilities for one or more persons, including permanent provisions for living, sleeping, eating, cooking, and sanitation.

C."Household" means one or more persons occupying a dwelling unit and living as a single nonprofit housekeeping unit; however, "Household" does not include bona fide lessees, tenants, or roomers and boarders on contract.

D."Household income" means all income received by all persons of a household in a calendar year while members of the household.

E.“Income" means the sum of federal adjusted gross income as defined in the Internal Revenue Code of the United States, 26 U.S.C. § 1 et seq., and all nontaxable income including, but not limited to, the amount of capital gains excluded from adjusted gross income, alimony, support money, nontaxable strike benefits, cash public assistance and relief (not including relief granted under this chapter), the gross amount of any pension or annuity (including Railroad Retirement Act (see 45 U.S.C. § 231 et seq.)) benefits, all payments received under the federal Social Security Act, 42 U.S.C. § 301 et seq., state unemployment insurance laws, and veterans' disability pensions (see 38 U.S.C. § 301 et seq.), nontaxable interest received from the federal government or any of its instrumentalities, workers' compensation, and the gross amount of "loss of time" insurance. It does not include gifts from nongovernmental sources, or surplus foods or other relief in kind supplied by a public or private agency.

F.“Lead hazard reduction” means any action or actions designed to reduce exposure to toxic levels of lead which impose an unacceptable risk of exposure in any dwelling or dwelling unit, where a child under the age of six (6) years, with environmental intervention blood lead level or greater resides, or on any premises and may include, but is not limited to: repair, enclosure, encapsulation, or removal of lead based paint and/or lead contaminated dust, soil or drinking water; relocation of occupants; and cleanup measures or ongoing maintenance measures, which may include activities and/or measures that do not present an undue risk to children under age six (6) and can be performed by, or on behalf of, the property owner, without the person performing such activities being licensed or certified.

G.“Residential Premises” shall include single-family homes, individual condominiums, and individual units in either apartment buildings or multi-family homes.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2013-07-01 to 01/04/2022
Amendment — effective from 2013-07-01 to 07/01/2013
Periodic Refile — effective from 2001-12-20 to 07/01/2013

280-RICR-20-20-4 § 4.6 Due Date and Extension of Time to File Claims

A.All claims shall be filed with and in the possession of Division of Taxation on or before April 15th of the year in which the credit is applied or rebate issued.

B.In cases of sickness, absence, other disability, or in the tax administrator’s judgment, good cause exists, an extension not to exceed six (6) months may be granted. Such extension shall be filed in the form of a letter to the tax administrator including documentation for the good cause. Such request shall be filed by on or before April 15th of the year in which the credit is applied or rebate issued.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2013-07-01 to 01/04/2022
Amendment — effective from 2013-07-01 to 07/01/2013
Periodic Refile — effective from 2001-12-20 to 07/01/2013

280-RICR-20-20-4 § 4.7 Residential Lead Abatement Tax Relief Limitation

A.R.I. Gen. Laws § 44-30-30.1 appropriates two hundred and fifty thousand dollars ($250,000) for the year commencing on July 1, 2004, and for each subsequent fiscal year.

B.An individual is entitled to a credit against his or her Rhode Island personal income tax liability for residential lead removal or lead hazard reduction if he or she:

1.obtains a housing resources commission regulated certificate of conformance for mitigation, pursuant to R.I. Gen. Laws Chapter 23-24.6; or

2.obtains a department of health regulated lead safe certificate for abatement pursuant to R.I. Gen. Laws Chapter 23-24; and

3.lead paint relief shall only apply to residential premises.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2013-07-01 to 01/04/2022
Amendment — effective from 2013-07-01 to 07/01/2013
Periodic Refile — effective from 2001-12-20 to 07/01/2013

280-RICR-20-20-4 § 4.8 Credit Calculation

A.The tax credit is equal to the amount actually paid for the required lead removal or lead hazard reduction up to a maximum of one thousand five hundred dollars ($1,500) per dwelling unit for mitigation and up to five thousand dollars ($5,000) for abatement.

B.In the event that multiple owners and/or renter(s)/lessee(s) of the dwelling unit have jointly incurred costs and paid for the lead abatement or lead hazard mitigation, each individual must apply for relief as a separate claimant, and must include all required proof of payment and certifications, based on their respective contributions to the cost of lead abatement or lead hazard mitigation.

C.Only one claim for relief can be filed per dwelling unit. If a mitigation claim has previously been filed for the same dwelling unit, the amount of the abatement claim will be reduced by the amount of the mitigation claim already paid for the dwelling unit, even if the dwelling unit has been transferred to another owner or lessee.

1.Example: A claimant, in year one, can perform lead mitigation and file for a credit up to $1,500 per dwelling unit. In a subsequent year a claimant may perform lead abatement work and claim an additional credit for the difference between $1,500 and $5,000, up to $3,500 per dwelling unit. The total cannot exceed $5,000 per dwelling unit.

D.Each Claimant may only claim relief for mitigation or abatement efforts for three (3) separate dwelling units.

1.Example 1: A claimant, in year one, can perform lead mitigation in three separate dwelling units in one building and file for a credit up to $1,500 per dwelling unit. In a subsequent year that claimant may perform lead abatement work in three different dwelling units in a separate building and claim an additional credit for $5,000 per dwelling unit.

2.Example 2: A claimant is the owner of multiple apartment houses. The owner files a claim in year one for the abatement work performed in year one and may claim the lead paint credit up to the maximum of three (3) dwelling units. In year two the owner continues with the lead abatement efforts in a separate apartment house. The owner may file a claim for the work performed in year two up to the maximum of three (3) additional dwelling units.

3.Example 3: A claimant is the owner of one apartment house which contains six (6) dwelling units. In year one the owner may submit a claim up to the maximum of three (3) dwelling units for work performed in year one. In year two, the owner may claim a credit for work performed in year two for three (3) additional dwelling units.

E.Credit applications (Form RI 6238) shall have copies attached of all receipts and other documents representing the total expenses claimed.

1.Example 1: Claimant had lead paint abatement performed and upon completion pays the contractor in December of year one. The claimant obtains lead paint certification in February of year two. The claim for credit is made in year one; the year in which the work was performed and payment remitted. However, the certification of conformance for mitigation or lead safe certificate for abatement must be attached to the claim for credit.

F.The lead credit is applied after any other grants, credits or reimbursements attributable to the lead mitigation or abatement.

1.Example: Claimant files for a lead abatement credit and is reimbursed through a third party for $1,000 for expenses. Total expenses are $3,000 which is reduced by the $1,000 reimbursement. The net expense of $2,000 is the amount eligible for lead paint credit.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2013-07-01 to 01/04/2022
Amendment — effective from 2013-07-01 to 07/01/2013
Periodic Refile — effective from 2001-12-20 to 07/01/2013

280-RICR-20-20-4 § 4.9 Income Eligibility

A.Claims shall be paid based on the following requirements:

1.Distributions will be provided first to claimants with a household income of thirty-five thousand two-hundred dollars ($35,200) or less during the year for which the claim was filed. The household income amount will be increased July 1st of each year by a percentage equal to the cost of living adjustment provided for social security recipients.

2.Secondly, distributions will be provided to claimants who rent or lease dwelling units to individuals whose household income was thirty-five thousand two-hundred dollars ($35,200) or less during the year for which the claim was filed. The household income amount will be increased July 1st of each year by a percentage equal to the cost of living adjustment provided for social security recipients.

3.All other claims will be paid once all applicants under §§ 4.9(A)(1) and (2) of this Part have been paid. However, if insufficient funds exist to pay the claims of this category in full, then payments will be made proportionately for the remaining claims. No payment shall exceed one hundred percent (100%) of the amount claimed.

4.The statute states that no interest is allowed on any payment made to a claimant.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2013-07-01 to 01/04/2022
Amendment — effective from 2013-07-01 to 07/01/2013
Periodic Refile — effective from 2001-12-20 to 07/01/2013

280-RICR-20-20-4 § 4.10 Claim is Personal

The right to file a claim under this chapter is personal to the claimant and shall not survive his or her death, but the right may be exercised on behalf of a claimant by his or her legal guardian or attorney-in-fact. If a claimant dies after having filed a timely claim, the amount of the claim is disbursed to another member of the household as determined by the tax administrator. If the claimant was the only member of his or her household, the claim may be paid to his or her executor or administrator, but if neither is appointed and qualified within two (2) years of the filing of the claim, the amount of the claim escheats to the state.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2013-07-01 to 01/04/2022
Amendment — effective from 2013-07-01 to 07/01/2013
Periodic Refile — effective from 2001-12-20 to 07/01/2013

280-RICR-20-20-4 § 4.11 Appeals

Any person aggrieved by the decision of the tax administrator denying, in whole or in part, relief claimed under R.I. Gen. Laws Chapter 44-30.3, except when the denial is based upon late filing of claim for relief, may appeal the decision of the tax administrator to the sixth (6th) division of the district court by filing a petition within thirty (30) days after the denial.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2013-07-01 to 01/04/2022
Amendment — effective from 2013-07-01 to 07/01/2013
Periodic Refile — effective from 2001-12-20 to 07/01/2013

280-RICR-20-20-5 Rules and Regulations for the Certification of Motion Picture Production Tax Credits

280-RICR-20-20-5 § 5.1 Purpose

These rules implement R.I. Gen. Laws Chapter 44-31. These rules govern the procedures for the application, certification, and issuance of these tax credits.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-18 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/18/2018
Amendment — effective from 2008-12-28 to 12/01/2013
Adoption — effective from 2008-06-01 to 12/28/2008

280-RICR-20-20-5 § 5.2 Authority

These rules and regulations are jointly promulgated by the Rhode Island Division of Taxation (within the Department of Revenue) and the Rhode Island Film and Television Office (within the Rhode Island State Council on the Arts) pursuant to R.I. Gen. Laws § 44-31.2-6.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-18 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/18/2018
Amendment — effective from 2008-12-28 to 12/01/2013
Adoption — effective from 2008-06-01 to 12/28/2008

280-RICR-20-20-5 § 5.3 Application

The terms and provisions of these rules and regulations shall be liberally construed to permit the Rhode Island Division of Taxation, within the Department of Revenue, and the Rhode Island Film and Television office, within the Rhode Island Council on the Arts, to effectuate the purposes of R.I. Gen. Laws Chapter 44-31.2 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-18 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/18/2018
Amendment — effective from 2008-12-28 to 12/01/2013
Adoption — effective from 2008-06-01 to 12/28/2008

280-RICR-20-20-5 § 5.4 Severability

If any provision of these Rules and Regulations, or the application thereof to any person or circumstances, is held invalid by a court of competent jurisdiction, the validity of the remainder of the Rules and Regulations shall not be affected thereby.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-18 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/18/2018
Amendment — effective from 2008-12-28 to 12/01/2013
Adoption — effective from 2008-06-01 to 12/28/2008

280-RICR-20-20-5 § 5.5 Definitions

A.“Above-the-line person” means a motion picture director, writer, producer or featured actor. Motion picture directors, writers, producers, featured actors and their fees are grouped within the “pre-production,” “production” and/or “post-production section of a typical motion picture budget, above a solid, bold line, separating these few “above-the-line” persons from the majority of the “below-the-line” crew, other production and post-production expenses.

B.“Accountant’s certification” means a certified audit by a Rhode Island certified public accountant licensed in accordance with R.I. Gen. Laws § 5-3.1-5.

C.“Act” means R.I. Gen. Laws Chapter 44-31.2, as amended.

D.“Alternative distribution method” for the purposes of the production tax credit means an executed agreement among all participants of a pass-through entity, or among all owners of a motion picture having multiple owners, setting forth the method for allocation of the motion picture production tax credit agreed upon by and among the participants or co-owners. An alternative distribution method may include, without limitation, a partnership agreement, an operating agreement of a limited liability company, a shareholders agreement, or any other instrument executed by all participants or co-owners.

E. “Amended production” means one additional separate and distinct application that is allowable for the same production for purposes such as “re-shoots”, “retakes”, added scenes or any additional production expenditures incurred and paid within the State of Rhode Island (but not previously included in the cost report) provided that the motion picture has already met the conditions required for, and has already been approved for final certification by the film office and the Division of Taxation. The amended application must individually meet the statutory requirements for a state certified production including, but not limited to, a total production budget of a minimum of one hundred thousand dollars ($100,000). The additional production expenditures shall be included in a separate cost report, require a separate accountant’s certification, and be subject to a separate review by the Division of Taxation.

F.“Applicant” means a motion picture production company domiciled in Rhode Island, which is a corporation, partnership, limited partnership, or other entity or individual, submitting an application to the film office and the Division of Taxation for initial or final certification of a production.

G.“Application year” means within the calendar year the motion picture production company files any application for the tax credit.

H.“Certificate of motion picture production tax credit” means a certificate issued by the Division of Taxation, which states the amount of the motion picture production tax credit for which the production has qualified. A motion picture production company is prohibited from using State funds, State loans or State guaranteed loans to qualify for the motion picture tax credit. The certificate shall include, but not be limited to, the following information: specific and unique certificate number, name and address of the approved applicant, name of the state certified production, name of the qualified film to which the credit applies, date on which production completed, date of final certification by the Division of Taxation, the name and taxpayer identification number of production company that incurred and paid state certified Rhode Island production expenditures, total amount of state certified Rhode Island production expenditures, name of initial holder of this certificate, taxpayer identification number of initial holder of this certificate, and amount of credit allocated to initial holder of this Certificate.

I.“Completion of a production” means the date of completion of a motion picture’s production in the State of Rhode Island as certified to the film office and the Division of Taxation as part of the production’s cost report.

J.“Costs”

1.include, but are not limited to, the following pre-production, production and post-production expenses which shall qualify when incurred within the State of Rhode Island and paid to a qualified vendor:

a.set construction, set dressing and operation – labor and materials provided by a qualified vendor where the labor and materials are actually and physically provided, supplied, consumed or used within Rhode Island;

b.wardrobes, make-up, accessories, props, expendables, supplies and related services;

c.costs associated with photography and sound synchronization, lighting, and related services and materials including animation costs - labor and materials provided by a qualified vendor where the labor and materials are actually and physically provided, supplied, consumed or used within Rhode Island;

d.editing and related services including, but not limited to, film processing, transfers of film to tape or digital format, sound mixing, computer graphics services, special effects, and animation services – provided the work is performed or procured in the state of Rhode Island;

e.salary, wages, and other compensation, including related benefits paid by the employer for health insurance, pension/retirement benefits, and life insurance of persons employed, either directly or indirectly, in the production of a film including, but not limited to, writer, actor, motion picture director, and producer (provided the work is performed in the State of Rhode Island);

f.rental of facilities, site locations, including preparation, security, clean-up and equipment located and procured in the State of Rhode Island;

g.leasing of vehicles from a qualified vendor where the vehicles are actually and physically delivered, provided, supplied, consumed or used within Rhode Island;

h.costs of food and lodging - procured or performed by a qualified vendor where the food and lodging are actually and physically provided, delivered, supplied, consumed or used within Rhode Island;

imusic, if performed, composed, or recorded by a Rhode Island musician, or released or published by a person domiciled in Rhode Island;

j.travel expenses incurred to bring persons employed, either directly or indirectly, in the production of the film to Rhode Island (but not expenses of such persons departing from Rhode Island); and

k.legal (but not expense of completion bond or insurance) and accounting fees and expenses related to the production’s activities in Rhode Island provided such services are provided by Rhode Island licensed attorneys or accountants.

2.costs that do not qualify as state certified production costs, include without limitation, the following:

a.any salaries, wages, and other compensation, including related benefits to individuals who are performing services outside the State of Rhode Island;

b.any travel expenses for persons departing from the State of Rhode Island;

c.any expense attributable to a completion bond;

d.insurance expenses, including workers’ compensation insurance and temporary disability insurance;

e.any cost associated with the promotion or marketing of the production including premier showings, special screenings and advertising;

f.costs that were not incurred in Rhode Island;

g.costs that have not been paid at the time of the application for final certification;

h.costs which have not been the subject of the Rhode Island accountant’s certification;

i.bank fees or charges;

j.federal and state withholding tax amounts;

k.payments to the Rhode Island Secretary of State’s office;

l.payments to the Rhode Island Division of Taxation, including, but not limited to, payments for tax filings, letter of good standing requests, and audits conducted under R.I. Gen. Laws Chapter 44-31.2;

m.payments to the Rhode Island film office;

n.expenses incurred for the preparation of the cost report;

o.payments made to a nonqualified vendor;

p.costs incurred prior to filing a completed initial certification application with the film office; and

q.costs that are not arms-length transactions.

3.In the case where props and other production assets, with a cost of more than two thousand five hundred dollars ($2,500), are purchased, created or acquired for a Rhode Island production and kept in inventory for future use, there must be deducted from the cost incurred in Rhode Island the fair market value of the assets remaining after initial use in Rhode Island. The fair market value shall be attested to by an independent appraiser in a manner prescribed by the director of the Rhode Island film office in conjunction with the Rhode Island Division of Taxation.

a.Example:

(1)A prop is purchased from a qualified vendor for use in a production in the State of Rhode Island at a cost of $5,000 and placed in storage at the end of production. The fair market value of the prop at the end of production is certified to be $4,000 by an independent appraiser. For purposes of the cost report, only the $1,000 value consumed during production will be allowed.

K.“Costs incurred within the state” means, in the case of tangible property, which is acquired from or through a qualified vendor will constitute a cost incurred within the State of Rhode Island where goods and materials are actually and physically provided, supplied, consumed or used within Rhode Island and, in the case of services, shall mean services performed within the State of Rhode Island.

1.Examples

a.Wardrobe purchased or rented from a qualified vendor where the labor and materials are actually and physically provided, supplied, consumed or used within Rhode Island will constitute a cost incurred within the state. However, wardrobe purchased or rented from a non-qualified vendor and shipped to Rhode Island will not constitute a cost incurred within the state.

b.Catering expenses and services provided by a qualified vendor where the labor and materials are actually and physically provided, supplied, consumed or used within Rhode Island will constitute a cost incurred within the state. However, catering services rendered outside of Rhode Island or by a non-qualified vendor will not constitute a cost incurred within the state.

c.Props purchased or rented from a qualified vendor where the labor and materials are actually and physically provided, supplied, consumed or used within Rhode Island will constitute a cost incurred within the state. However, props acquired from a non-qualified vendor or created outside of Rhode Island will not constitute a cost incurred within the state.

d.Set construction materials, such as lumber and steel, purchased or rented from a qualified vendor where the labor and materials are actually and physically provided, supplied, consumed or used within Rhode Island will constitute a cost incurred within the state. However, materials acquired from a non-qualified vendor or constructed outside of Rhode Island will not constitute a cost incurred within the state.

e.Shipping expenses incurred to send materials and supplies to Rhode Island will constitute a cost incurred within the state. However, shipping expenses for materials and supplies shipped from Rhode Island to an out of state location will not constitute a cost incurred within the state.

L.“Division of Taxation” means that office within the Department of Revenue that operates under the authority and direction of the tax administrator, pursuant to R.I. Gen. Laws § 44-1-1 et seq.

M.“Documentary production” means a non-fiction production intended for educational or commercial distribution that may require out of state principal photography.

N.“Domiciled in Rhode Island” means a corporation incorporated in Rhode Island or a partnership, limited liability company, or other business entity formed under the laws of the State of Rhode Island for the purpose of producing motion pictures, or an individual who is a domiciled resident of Rhode Island as defined in the R.I. Gen. Laws § 44-30-5. Such individual, corporation, partnership, limited liability company, or other entity, is subject to the General Laws of the State of Rhode Island including, but not limited to, R.I. Gen. Laws Chapters 44-11 and 44-30.

O.“Feature-length film” means a production intended for commercial distribution to a motion picture theater or directly to the home video market that has a running time of at least seventy-five (75) minutes in length.

P.“Film office” means an office within the Rhode Island State Council on the Arts that has been established in order to promote and encourage the locating of film and television productions within the State of Rhode Island. The office is also referred to within as the “Rhode Island film and television office.”

Q.“Film office director” means the Director of the Rhode Island Film and Television Office.

R.“Final production budget” means and includes the total pre-production, production and post-production out of pocket costs incurred and paid in connection with the making of the motion picture. The final production budget excludes costs associated with the promotion or marketing of the motion picture.

S.“Inspection” means a visit by an authorized representative of the film office and/or the Division of Taxation to a property, including a set, a soundstage, a location or a production office for services performed in Rhode Island.

T.“Loan-out company” means and includes a corporation, partnership, limited liability company, S-corporation, association, nominee trust, or any other entity through which an artist or other person is loaned out to perform services for the motion picture production company. Regardless of structure, employees or other persons of such loan-out companies and the loan out company itself shall be subject to all applicable provisions of the Rhode Island personal income tax and any applicable payroll or other tax provisions. A loan-out company shall be registered with the Rhode Island Secretary of State and the Rhode Island Division of Taxation.

U.“Motion picture” means feature-length film, documentary production, video, television series, or commercial made in Rhode Island, in whole or in part, for theatrical or television viewing or as a television pilot or for educational distribution. Motion picture shall not include the production of television coverage of news or athletic events, nor shall it apply to any film, video, television series or commercial or production for which records are required under 18 U.S.C. § 2257, to be maintained with respect to any performer in such production or reporting of books, films, etc. with respect to sexually explicit conduct.

V.“Motion picture production company” means

1.a corporation, partnership, limited liability company, or other business entity, domiciled in Rhode Island, and engaged in the business of producing one or more motion pictures. Generally, the motion picture production company controls the state certified motion picture during production and is responsible for payment of the direct production expenses (including pre- and post-production), and is a signatory to the state certified motion picture’s contracts with its payroll company and facility operators.

2.motion picture production company shall not mean or include:

a.any company owned, affiliated, or controlled, in whole or in part by any company or person which is in default:

(1) on taxes owed to the state; or

(2) on a loan made by the state in the application year; or

(3) on a loan guaranteed by the state in the application year; or

b.any company or person who has discharged an obligation to pay or repay public funds or monies by:

(1)filing a petition under any federal bankruptcy, or state receivership, or insolvency law against such company or person;

(2)having a petition filed under any federal bankruptcy, or state receivership, or insolvency law against such company or person;

(3)consenting to, acquiescing in, or joining in a petition named in §§ 5.5(V)(2)(b)((1)) or ((2)) of this Part above;

(4)consenting to, acquiescing in, joining in the appointment of a custodian, receiver, trustee, or examiner for such company’s or person’s property; or

(5)making an assignment for the benefit of creditors, or admitting in writing or in any legal proceeding its insolvency or inability to pay debts as they become due.

W.“Participant” means a partner in a partnership, member of a limited liability company, shareholder of an S-corporation, a beneficial owner of a trust, or any other person having an interest in a pass-through entity.

X.“Pass-through entity” means a partnership, limited liability company, S-corporation, association, nominee trust, or any other entity, the tax attributes of which are passed through to the participants in such entity.

Y.“Post-production” means the final stage in a state certified motion picture’s production after principal and ongoing photography is completed, including, but not limited to, editing, Foley recording, automatic dialogue replacement, sound editing, special effects, scoring and music editing, beginning and end credits, negative cutting, soundtrack production, the addition of sound/visual effects, dubbing, and subtitling. Advertising and marketing activities and expenses are not included in post-production.

Z.“Pre-production” means costs directly related to the production, which are incurred prior to the first day of principal photography for a state certified motion picture. For example, the establishment of a dedicated production office, the hiring of key crew members such as a unit production manager, line producer and location manager, and includes, but is not limited to, activities such as location scouting, hiring of crew, and execution of contracts with vendors of equipment and stage space.

AA.“Primary locations” means the locations within which

1.at least fifty-one percent (51%) of the motion picture’s total principal photography days are filmed; or

2.at least fifty-one percent (51%) of the motion picture’s final production budget is spent and at least five (5) individuals were employed by the production company during the production in this State; or

3.for documentary productions, the location of at least fifty-one percent (51%) of the total productions days, which shall include pre-production and post-production locations.

BB.“Principal photography and/or animation” means the filming and/or animation of major and significant portions of a state certified production that involves the lead actors and/or animators.

CC.“Qualified vendor” means any individual, partnership, corporation, limited liability company or other business entity that

1.provides goods and services in this state to a state certified motion picture during production;

2.maintains a place of business in Rhode Island;

3.is subject to Rhode Island taxation;

4.is registered with the Rhode Island Division of Taxation; and

5.is registered with the Rhode Island Secretary of State’s office and is qualified to do business in Rhode Island.

DD.“Rhode Island film and television office” means an office within the Rhode Island Council on the Arts that has been established in order to promote and encourage the locating of film and television productions within the State of Rhode Island. The office is also referred to within as the “film office.”

EE.“State certified production” means a motion picture production approved by the Rhode Island film and television office and produced by a motion picture production company domiciled in Rhode Island, whether or not such company owns or controls the copyright and distribution rights in the motion picture; provided that such company has either:

1.signed a viable distribution plan; or

2.is producing the motion picture; or

a.a major motion picture distributor; or

b.a major theatrical exhibitor; or

c.a television network; or

d.a cable television programmer; or

e.web-based streaming distribution.

3.Additionally, the production must be produced with the motion picture’s “primary locations” being filmed within the State of Rhode Island and with a “total production budget” of a minimum of one hundred thousand dollars ($100,000).

FF.“State certified production costs” means any pre-production, production, and post-production cost directly attributable to activity within this state that a motion picture company incurs and pays to the extent that it occurs within the State of Rhode Island. The term refers to a production certified by the State of Rhode Island under the Act and should not be taken to infer that the State of Rhode Island is certifying the production costs. State certified production costs do not include costs paid for using State funds, State loans or State guaranteed loans to qualify for the motion picture tax credit.

GG.“Television pilot” means the initial episode produced for a proposed episodic television series. This category will include shorter formats which are known as “television presentation”, a production of at least fifteen (15) minutes in length, produced for the purposes of selling a proposed television series, but not intended for broadcast.

HH.“Television series” which may also be known as “episodic television series” means a regularly occurring production, live action, animation or a combination of the two, intended in its initial run for broadcast on television, whether free or via subscription-based service, that has a running time of at least thirty (30) minutes in length (inclusive of commercial advertisement and interstitial programming).

II.“Total production budget” means and includes the motion picture production company’s pre-production, production and post-production costs incurred for the production activities of the production company in Rhode Island in connection with the making of the state certified production. The budget shall not include costs associated with the promotion or marketing of the film, video, or television product; costs not incurred within Rhode Island; costs not paid; or costs provided by nonqualified vendors.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-18 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/18/2018
Amendment — effective from 2008-12-28 to 12/01/2013
Adoption — effective from 2008-06-01 to 12/28/2008

280-RICR-20-20-5 § 5.6 Overview

A.The process of applying for and receiving motion picture production tax credit certificates consist of the following steps:

1.The production company files an application for initial certification with the film office. (For details see § 5.7 of this Part)

2.The film office prepares an impact analysis based on information provided by the production company on its initial application. The analysis is available for public inspection and is posted on the Division of Taxation’s website. (For details see § 5.8 of this Part)

3.The film office, following review and approval of the initial certification request, issues an initial certification notice to the motion picture production company and to the tax administrator. If the film office rejects an initial certification request, a written notification will be sent to the applicant. (For details see § 5.9 of this Part)

4.The production company notifies the film office in writing of the commencement of production. (For details see § 5.11 of this Part)

5.The production company, after completion of a production, files an application for final certification of the production with the film office and the Division of Taxation. (For details see §§ 5.7 and 5.9 of this Part)

6.The Division of Taxation makes a determination of the amount of tax credit based on its review of state certified production costs. (For details see § 5.13 of this Part)

7.The Division of Taxation, upon determination that the production company has complied with all necessary requirements, issues tax credit certificates to the production company. (For details see § 5.14 of this Part)

B.In addition, all recipients of motion picture production tax credits are required to file annual reports with the tax administrator, for the year they receive a tax credit, as follows:

1.Rhode Island Form TC-100 must be filed by August 15th. (For details see § 5.8 of this Part)

2.Rhode Island Form 8201A must be filed by September 1st. (For details see § 5.8 of this Part)

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-18 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/18/2018
Amendment — effective from 2008-12-28 to 12/01/2013
Adoption — effective from 2008-06-01 to 12/28/2008

280-RICR-20-20-5 § 5.7 Applications

A.Applications for designation of a motion picture production as a state certified production shall be made on State Certification Application forms. These forms are available from the film office at One Capitol Hill, Third Floor, Providence, Rhode Island 02908 or from the film office’s website at www.film.ri.gov and the Division of Taxation’s website at www.tax.ri.gov. The Initial Application is used to request initial certification of a motion picture production and shall be filed with the film office before the commencement of Rhode Island production activities. The Final Application is used after the completion of Rhode Island production activities to request final certification of the production and the issuance by the Division of Taxation of any credit documents relating to the completion of a state certified production.

B.Application for initial certification of a production.

1.The applicant shall properly prepare, sign and submit the Initial Certification Application form to the film office. This part of the application, when completed, contains information regarding both the motion picture production company and a specific Rhode Island motion picture such that the film office may make a determination pertaining to the initial certification of the production.

2.Any costs incurred prior to filing a complete initial certification application shall not be allowed for purposes of meeting the one hundred thousand dollars ($100,000) minimum Rhode Island production budget or as a cost in calculating the motion picture production tax credits.

3.The information submitted shall include the following and any other data the film office determines necessary for the proper evaluation and administration of the application:

a.identification information: name and address of applicant, name of contact person, telephone numbers and email addresses; federal employer identification number[s]; the production company’s Rhode Island address (including federal employer identification number, contact person, telephone numbers and email addresses); brief background and structure of the company, and information (including name, address and federal employer identification number) about other companies which are related, affiliated, or controlled by the motion picture production company and which are expected to be involved in the production.

b.timing information: anticipated start date; anticipated completion date; proposed schedule; and estimated number of principal photography days to be filmed in Rhode Island and outside of Rhode Island.

c.financial information: proposed total production budget, estimated motion picture budget (expenditures within the State of Rhode Island), and information for each of the “above the line” individuals as to whether they will be employees of the motion picture production company or, if not, the name, address, and federal employer identification number of the entity by which they will be employed. Additionally, the applicant will estimate the anticipated amount of Rhode Island motion picture production tax credit from this production.

d.operational information: brief description of the motion picture production, including:

(1)story synopsis and screenplay for proposed motion picture production; and;

(2)a statement as to whether the company owns or controls the copyright and distribution rights in the motion picture; and,

(3)a copy of the signed viable distribution plan or evidence that the production company is producing the motion picture for a major motion picture distributor, a major theatrical exhibitor, a television network or a cable television programmer.

e.payroll company information: name, address, and federal employer identification number of any company or other entity who will make withholding tax payments and employer tax payments on behalf of the production company. The payroll company must be a qualified vendor.

f.other information: the anticipated days each “above the line” person (i.e., producers, motion picture director, writers and featured actors) is scheduled to perform work in Rhode Island; copies of documents evidencing that the motion picture production company is formed under the laws of the State of Rhode Island; and one paragraph each regarding production plans for internship, diversity and training programs in Rhode Island.

C.Application for Final Certification of a Production.

1.When production is completed, the applicant shall submit a completed application for final certification to the film office and the Division of Taxation. Such application must contain the signature of the applicant, including title and date. This application contains information regarding both the motion picture production company and the specific Rhode Island motion picture (which has previously been granted initial certification from the film office and provides documentation that the completed state certified motion picture production is consistent with the work described in the initial certification. Such final application shall be filed within three (3) years after the date Rhode Island production activities have finished. The final application must also contain a cost report as prescribed by the tax administrator and an “accountant’s certification” to evidence the motion picture production company’s compliance with all provisions of R.I. Gen. Laws Chapter 44-31.2. The film office and the Division of Taxation may rely, without independent investigation, upon the accountant’s certification confirming the accuracy of the information included in the cost report.

2.The application for final certification information shall, in addition to the items above, include all the following information, and any other information that the Division of Taxation determines necessary for proper evaluation and administration of the application. The following information is to be submitted to both the film office and the Division of Taxation:

a.identification data: name and address of applicant (including contact person, telephone numbers and email addresses); federal employer identification number[s]; the production company’s Rhode Island address, (including federal employer identification number, contact person, telephone numbers and email addresses); and, for compliance purposes, the name, address and federal employer identification number or social security number of each company related, affiliated or controlled by the motion picture production company as of the production’s completion date, a description and amount of the relationship, affiliation or control, and a copy of the initial certification notice showing the unique identifying number assigned by the film office.

b.timing information: actual start date; actual completion date; the daily schedule of the entire production and of all employees and personnel, above the line and below the line; and actual number of principal photography days filmed in Rhode Island and outside of Rhode Island.

c.financial information: actual data for the total production budget, including final combined expenditures within the State of Rhode Island and outside the State of Rhode Island.

d.operational information: final script for the motion picture production; all travel schedules and data for “above-the-line” persons arriving and departing the State of Rhode Island including the actual number of days each performed work in Rhode Island; location of soundstage and one paragraph each regarding how the production applied internship, diversity and training programs.

e.maximum credit calculation: based on the production costs incurred and paid and other information in the application for final certification, the applicant will calculate an estimate of the total amount of production credits associated with the production and show a comparison between the estimated total credits and the total production budget.

3.In addition to the above, the following information must also be provided to the Division of Taxation in order to verify the credit amount (all lists shall include the name, address, federal employer identification number or social security number, amount paid and dates paid, and be in a manner prescribed by the tax administrator):

a.a list of the loan out companies, temporary agencies, employee leasing companies, and professional employee organizations that have provided services to the motion picture production company within the State of Rhode Island;

b.a list of qualified vendors that have sold and/or rented goods to the motion picture production company for use within the State of Rhode Island,

c.a list of all personnel involved in the production;

d.a complete general ledger as certified by a Rhode Island certified public accountant;

e.payroll records for all cast and crew working on the production;

f.copies of all invoices and receipts broken down by expense categories as prescribed by the tax administrator;

g.the production “bible;” and

hany other information the tax administrator considers necessary.

D.Disclosure of Application Information.

1.Records maintained by the Division of Taxation may not be publicly disclosed as provided in R.I. Gen. Laws § 38-2-2.

2.Access to Public Records

a.In the event a request for access to public records is made, application information submitted to the film office may be publicly disclosed under the Access to Public Records Act, R.I. Gen. Laws Chapter 38-2, as amended, unless it comes within one of the exemptions set forth R.I. Gen. Laws § 38-2-2.

b.Records that are exempt from disclosure are described in R.I. Gen. Laws § 38-2-2(4). For example, R.I. Gen. Laws § 38-2-2(4)(B) provides an exemption that “Trade secrets and commercial or financial information obtained from a person, firm, or corporation which is of a privileged or confidential nature” are not deemed public.

c.If an Applicant believes that certain information submitted as part of its applications is exempt from public disclosure, on the submitted record such information should be marked or labeled “Exempt from Public Disclosure”. This label should also set forth the applicable statutory exemption. For the example above, please reference R.I. Gen. Laws § 38-2-2(4)(B).

d.In the event that a person requests that all or part of a submitted record be publicly disclosed, the person must submit such a request to the film office. As stated in the Access to Public Records Act, the film office must respond in writing within 10 business days of receipt. If any submitted record has been described as exempt from disclosure, the film office will consider whether or not the exempted record falls within a particular exemption.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-18 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/18/2018
Amendment — effective from 2008-12-28 to 12/01/2013
Adoption — effective from 2008-06-01 to 12/28/2008

280-RICR-20-20-5 § 5.8 Impact Analysis and Periodic Reporting

A.Impact Analysis and Periodic Reporting shall be done in accordance with R.I. Gen. Laws § 44-31.2-6.1.

1.Motion Picture Production companies shall file the Rhode Island Form TC-100 when fulfilling the periodic reporting requirements set forth in R.I. Gen. Laws § 44-31.2-6.1(f).

2.Motion picture production companies shall file the Rhode Island Form 8201A when fulfilling the period reporting requirement set forth in R.I. Gen. Laws § 44-31.2-6.1(h).

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-18 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/18/2018
Amendment — effective from 2008-12-28 to 12/01/2013
Adoption — effective from 2008-06-01 to 12/28/2008

280-RICR-20-20-5 § 5.9 Certification of a Production

A.Initial Certification of a Production:

1.Where necessary documentation is not provided, review and evaluation will be delayed and initial certification may be denied on the basis of lack of information. Because the circumstances of each production are unique, initial certifications that have been granted to one production shall not be used nor relied upon by applicants for other productions.

3.The film office will complete its review for initial certification requests within thirty (30) business days of receiving a complete, adequately documented application. Where adequate information is not provided, the film office will notify the applicant of the additional information needed to complete the review. The film office will adhere to this time period as closely as possible, but failure to complete a review within the designated period does not waive or alter any certification requirement nor does it imply approval.

4.Initial Certification Notice:

a.Once the review is completed, the film office will issue initial certification of the motion picture production in the form of a notice issued to the motion picture production company and to the tax administrator. The notice states that, after appropriate review, the initial application meets the appropriate criteria for conditional eligibility. The notice of initial certification is only a statement of conditional eligibility for the production and, as such, does not grant or convey any Rhode Island tax benefits. If the film office denies initial certification, the applicant may appeal that decision under the provisions of R.I. Gen. Laws § 44-31.2-8.

b.The notice of initial certification includes, but is not limited to, the following information: name and address of the applicant, the name of the motion picture production, the effective date for the production, taxpayer identification number of the motion picture production company, and a unique identifying number assigned by the film office and required for each production. The notice also gives notice that, upon completion of the production, the application for final certification must be completed including the receipt of a Rhode Island Certificate of Good Standing for the production company to verify the production company’s compliance with all provisions of R.I. Gen. Laws § 44-31.2.

B. Final Certification of a Production:

1.Where necessary documentation is not provided, review and evaluation will be delayed and final certification may be denied on the basis of lack of information. Because the circumstances of each production are unique, final certifications that have been granted to one production shall not be used nor relied upon by applicants for other productions.

2.Within ninety (90) business days after the Division of Taxation’s receipt of the motion picture production company’s application for final certification and fully documented cost report, the Division of Taxation shall issue a certification of the amount of credit for which the motion picture production company qualifies under R.I. Gen. Laws § 44-31.2-5. When adequate information is not provided, the Division of Taxation will notify the applicant of the additional information needed to complete the review. The Division of Taxation will adhere to this time period as closely as possible, but failure to complete a review within the designated period does not waive or alter any certification requirement nor does it imply approval.

3.The Division of Taxation will determine the final certification of the production and issue a written determination to the applicant either denying or granting certification. Depending upon the determination, the Division of Taxation will calculate the amount of Rhode Island Motion Picture Production Tax Credit and issue the applicable Certificate[s]. To claim the tax credit, the tax credit certificate issued by Division of Taxation shall be attached to the state tax return on which the credit is initially claimed. If the Division of Taxation denies final certification, the applicant may appeal the Division of Taxation’s decision under the provisions of R.I. Gen. Laws § 44-31.2-8 (For details see § 5.15 of this Part).

C. Decisions, Reliance on Application:

1.Initial certifications are only issued in writing by the film office director or other duly authorized representative of the film office. Final certifications are only issued in writing by the tax administrator or other duly authorized representative of the Division of Taxation. Decisions with respect to initial and final certifications are made on the basis of the information contained in the application form and other available information. The applicant’s signature on any application form is a representation to the film office and the Division of Taxation that the facts contained therein are true and correct, and the film office and the Division of Taxation is entitled to rely thereon. If, at any time, it comes to the attention of the film office or the Division of Taxation that information is/was misstated, misrepresented or omitted or is materially inconsistent with representations made in an application, the film office or the Division of Taxation may deny the requested certification or revoke a certification previously given. Upon revocation of any certification, the production company must surrender any and all issued certificates or remit payment equal to the face value of any previously transferred certificates. In such cases, the applicant may appeal the film office’s or the Division of Taxation’s decision under the provisions of R.I. Gen. Laws § 44-31.2-8.

2.Because the circumstances of each production are unique, certifications that may have been granted to other productions that are not specifically applicable may not be relied on by applicants as applicable to other projects.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-18 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/18/2018
Amendment — effective from 2008-12-28 to 12/01/2013
Adoption — effective from 2008-06-01 to 12/28/2008

280-RICR-20-20-5 § 5.10 Priority and Allocation of Credits

A.Limitation

1.No more than fifteen million dollars ($15,000,000) in total may be issued for any calendar year beginning after December 31, 2007 for motion picture tax credits pursuant to R.I. Gen. Laws Chapter 44-31.2 and/or musical and theatrical production tax credits pursuant to R.I. Gen. Laws Chapter 44-31.3. Said credits shall be equally available to motion picture productions and musical and theatrical productions. No specific amount shall be set aside of either type of production.

2.Notwithstanding § 5.10(A)(1) of this Part, the tax credit for any motion picture production shall not exceed five million dollars ($5,000,000).

3.The tax administrator may issue a waiver of the five million dollar ($5,000,000) tax credit cap provided:

a.the production is a feature-length film or television series;

b.the requested tax credits do not exceed the remaining portion of the fifteen million dollars ($15,000,000) in total motion picture production company tax credits available for the calendar year; and

c.the production company meets all other conditions and requirements under these rules and regulations.

4.Credits shall be allocated against the cap established in § 5.10(A)(1) of this Part for the calendar year determined by film office in the initial certification notice.

B.In order to comply with the requirements of § 5.10(A)(1) of this Part the film office has developed a “queuing” process, which is an equitable process that will provide applicants some degree of certainty as to what credit amounts will be available to them at the conclusion of a production. This queuing process shall consist of the following:

1.Once a production has been initially certified, the film office will assign a number to that production. Initial numbers are assigned chronologically and are based on the date and time that a production has been initially certified. These productions will be placed in sequence on a “first come, first served” basis. This sequence is also referred to within as the “queue”;

2.Based upon the applicant’s information and availability of credit remaining for the calendar year for which application is made, the film office shall allocate the estimated credit amount to that production;

3.This estimated amount will not be allocated to any other production, except as set forth below under “loss of place in the queue”;

4.If a production

a.falls out of “good standing status” with the Secretary of State; or

b.halts production; or

c.declares in writing to the film office that the estimated state certified production costs will not be expended in Rhode Island; or

d.fails to meet the deadlines as indicated in § 5.10(B)(5) of this Part, the production will lose its place in the queue, and shall be moved to the end of the queue.

5.In order to maintain place in the queue, filming in Rhode Island shall commence before the elapse of sixty (60) days from the intended start date indicated on the initial certification notice. Upon receipt of a written request the director of the film office is allowed to extend that time for an additional thirty (30) days, for good cause shown. Furthermore, in order to continue to be certified, the production’s filming shall begin no more than one hundred and eighty (180) days from the start date indicated on the initial certification notice;

6.Upon loss of place in the queue, the estimated tax credit, which originally had been assigned to the production, shall be released and made available to other productions in sequence in the queue;

7.If, at the time of initial certification, all available tax credits for the calendar year have been claimed or otherwise assigned, a production shall be put at the end of the queue for that calendar year’s credit, in the order of the date of initial certification;

8.Remaining productions in the queue, which are not qualified for available tax credit in the calendar year in which applied, must indicate in writing to the film office their interest in renewing their applications for the next calendar year’s available tax credit. Any renewal request for the succeeding calendar year’s available tax credit must be made to the film office on or before December 1st of the calendar year of the original application.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-18 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/18/2018
Amendment — effective from 2008-12-28 to 12/01/2013
Adoption — effective from 2008-06-01 to 12/28/2008

280-RICR-20-20-5 § 5.11 Commencement of Production

A.Once production has begun, the film office shall be notified in writing by the applicant/production company that, on a specific date, the actual production, including the principal photography, has commenced. In the event that an applicant’s principal photography on a state certified motion picture does not actually begin within one hundred eighty (180) days of the start date indicated on the initial certification notice, the applicant shall be required to resubmit the application for initial certification.

B.Recurrent Productions: If a motion picture production company produces a television series, then production work on any given “season” of such series completed in any one calendar year shall be considered a separate and distinct state certified production for the purposes of certification. In the case that a motion picture production company produces a television “pilot” or “movies of the week”, then such “pilot” or “movie of the week” shall be considered a separate and distinct state certified production for the purpose of the issuance of credit certificates. Any additional “season”, “pilot” or “movie of the week” will be treated as a separate production and the applicant must repeat the application process and the production must meet all appropriate criteria.

C.Amended Productions: In the event that the production company requests the film office or the Division of Taxation to approve an amended production for a motion picture that has already obtained final certification, the applicant must repeat the application process and the amended production must meet all appropriate criteria.

D.Inspection Rights: The film office and the Division of Taxation shall have the right at reasonable times to enter upon any set, soundstage, location or production office that is the subject of an application for certification, whether the motion picture production is proposed, ongoing, or completed, to verify that the motion picture production is as represented.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-18 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/18/2018
Amendment — effective from 2008-12-28 to 12/01/2013
Adoption — effective from 2008-06-01 to 12/28/2008

280-RICR-20-20-5 § 5.12 Cost Report

A.As a part of the completed application for final certification of the production and the basis on which the credits are calculated, the production costs and Cost Report are crucial to the film office’s and the Division of Taxation’s deliberations concerning the certification of the production. As part of the final certification, the Cost Report must be accompanied by an “accountant’s certification” of the items to which it pertains. The film office and the Division of Taxation may rely, without independent investigation, upon the accountant’s certification confirming the accuracy of the information included in the Cost Report as well as the motion picture production company’s compliance with R.I. Gen. Laws § 44-31-2.2(5).

B.The cost report is a crucial part of and an attachment to the application for final certification of a production. The cost report shall be in a format as prescribed by the tax administrator, and must state:

1.the date of completion of the production in the State of Rhode Island,

2.the amount and listing of production costs incurred and actually paid within the State of Rhode Island with respect to the production as set forth in the rules herein, and

3.that the total production budget is at least $100,000.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-18 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/18/2018
Amendment — effective from 2008-12-28 to 12/01/2013
Adoption — effective from 2008-06-01 to 12/28/2008

280-RICR-20-20-5 § 5.13 Determination of Tax Credit

A.The amount of the motion picture production tax credit shall be determined by the Division of Taxation to equal twenty-five percent (25%) of the state certified production costs of a completed state certified production, verified by the Division of Taxation. The credit is considered earned in the tax year the production is completed.

B.The motion picture production tax credit shall be allowed as a credit against a tax imposed by R.I. Gen. Laws Chapters 44-11, 44-14, 44-17 and 44-30 for the tax year the credit is earned. Any unused credit may be carried forward for the next three (3) succeeding tax years.

C.The Division of Taxation shall determine if the cost included in the cost report meets the criteria of “costs” as defined in § 5.5 of this Part. If any cost is denied, the Division of Taxation shall advise the applicant of the denial in writing, citing the reasons for the denial.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-18 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/18/2018
Amendment — effective from 2008-12-28 to 12/01/2013
Adoption — effective from 2008-06-01 to 12/28/2008

280-RICR-20-20-5 § 5.14 Issuance of Tax Credit Certificates

A.Concurrent with the final certification of the production, the Division of Taxation, based upon the Certification shall also issue written, individual motion picture production tax credit certificate[s] to the motion picture production company, as allocated under its organizational documents, or to one or more transferees. The motion picture production company must provide the names, addresses and taxpayer identification numbers of such Participants or transferees. Credits allowed to a motion picture production company which is a subchapter S-corporation, partnership, or limited liability company that is taxed as a partnership, shall be passed through respectively to the Participants on a pro rata basis or pursuant to an executed agreement among such persons designated as subchapter S-corporation shareholders, partners, or members. This writing documents an alternate distribution method without regard to their sharing of other tax or economic attributes of such entity. Each certificate will bear the unique identification number that was issued to the production as part of its initial certification.

B.Right to Deny or Revoke Credit - If, at any time, it comes to the attention of the film office or the Division of Taxation that information is/was misstated, misrepresented or omitted or is materially inconsistent with representations made in an application, the film office or the Division of Taxation may deny the requested certification or revoke a certification previously given. In such cases, the applicant may appeal the film office’s or the Division of Taxation’s decision under the provisions of R.I. Gen. Laws § 44-31.2-8.

C.In relation to granting the credit, any motion picture production company applying for the credit shall be required to reimburse the Division of Taxation for its audits.

1.The reimbursement shall be at the rate of one quarter of one percent (0.25%) of the final audited certified production costs and shall not exceed the amount of $5,000.

2.Such reimbursement shall be paid to the Rhode Island Division of Taxation prior to the issuance of any tax credit certificates.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-18 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/18/2018
Amendment — effective from 2008-12-28 to 12/01/2013
Adoption — effective from 2008-06-01 to 12/28/2008

280-RICR-20-20-5 § 5.15 Hearings and Appeals

A.From an action of the film office. For matters pertaining exclusively to application, production, and certification of motion picture productions, any person aggrieved by a denial action of the film office under R.I. Gen. Laws Chapter 44-31.2 shall notify the director of the film office in writing, within thirty (30) days from the date of mailing of the notice of denial action by the film office and request a hearing relative to the denial or action. The director of the film office shall, as soon as is practicable, fix a time and place of hearing. Following the hearing the direct of the film office shall render a final decision. Appeals from a final decision of the director of the film office under R.I. Gen. Laws Chapter 44-31.2 are to the Sixth (6th) Division District Court pursuant to R.I. Gen. Laws Chapter 42-35.

B.From denial of tax credit or a portion thereof. Any person aggrieved by the tax administrator's denial of a tax credit or tax benefit under R.I. Gen. Laws Chapter 44-31.2 shall notify the tax administrator in writing within thirty (30) days from the date of mailing of the notice of denial of the tax credit and request a hearing relative to the denial of the tax credit. The tax administrator shall, as soon as is practicable, fix a time and place for a hearing. Following the hearing the tax administrator shall render a final decision. Appeals from a final decision of the tax administrator under R.I. Gen. Laws Chapter 44-31.2 are to the Sixth (6th) Division District Court pursuant to R.I. Gen. Laws Chapter 8-8. The taxpayer's right to appeal is expressly made conditional upon prepayment of all taxes, interest, and penalties, unless the taxpayer files a timely motion for exemption from prepayment with the district court in accordance with the requirements imposed pursuant to R.I. Gen Laws § 8-8-26.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-18 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/18/2018
Amendment — effective from 2008-12-28 to 12/01/2013
Adoption — effective from 2008-06-01 to 12/28/2008

280-RICR-20-20-5 § 5.16 Assignment of Tax Credit Certificates

A.Each motion picture production tax credit certificate may be assigned, with or without consideration, transferred, or sold if it has not been previously claimed, in whole or in part, against the taxes of the motion picture production company or the taxes of the owner of the certificate. A single transfer or sale may involve one or more transferees, assignees or purchasers. The transferors and sellers must submit notice of the assignment, transfer or sale within thirty (30) days of the sale of transfer to the tax administrator. The Division of Taxation shall assess and collect an administrative fee of two hundred dollars ($200) for issuing multiple tax credit certificates or for reissuing certificates. In addition, the Division of Taxation will also collect an administrative fee of two hundred dollars ($200) on behalf of the film office.

B.Assignment of Certificate: A motion picture production tax credit certificate may be assigned, transferred or sold to any person, whether or not such person has an ownership interest in the state certified production, provided that no credit has been claimed based on the certificate being assigned, transferred or sold. The certificate shall be assigned by endorsing the assignment clause on the certificate and delivery of the original certificate to the assignee, transferee or purchaser.

C.Notification of Assignment:

1.It shall be required that written notification is filed with the Division of Taxation of the assignment, transfer or sale, of all or a portion the motion picture production tax credit certificates. Notification submitted to the tax division shall be done in accordance with the rules herein. Failure to comply will result in the disallowance of the credit until the taxpayer is in full compliance.

2.Notice to the tax division shall include:

a.a copy of the credit certificate, endorsed to the assignee. The original certificate shall not be included with the notification since it must be retained by the assignee, transferee or purchaser and attached to his/her/their/its tax return for the year for which credit is claimed;

b.the name, address and telephone number of the assignor, transferor or seller and those of the assignee, transferee or purchaser;

c.the taxpayer identification number or social security number of the parties; in addition, for non-resident corporations, partnerships, limited liability companies, or other entities the name and address of such entity’s registered agent in Rhode Island and evidence of qualification to do business in Rhode Island.

D.Multiple Assignees; Re-issuance of Certificate - If the holder or assignee of a credit certificate has not used the credit certificate, in whole or in part, against its taxes and desires to assign, transfer or sell its interest in the credit to more than one party, the holder must request the Division of Taxation to reissue the original certificate in such number of certificates as the holder requires. The request must be in writing, must specify the number of new certificates required and the amount to be specified on each certificate, and must attach the original certificate for cancellation by the Division of Taxation.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-18 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/18/2018
Amendment — effective from 2008-12-28 to 12/01/2013
Adoption — effective from 2008-06-01 to 12/28/2008

280-RICR-20-20-5 § 5.17 Sunset

No Motion Production Tax Credit shall be issued after the date as prescribed in R.I. Gen. Laws § 44-31.2-11.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-18 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/18/2018
Amendment — effective from 2008-12-28 to 12/01/2013
Adoption — effective from 2008-06-01 to 12/28/2008

280-RICR-20-20-6 Historic Preservation Tax Credits 2013

280-RICR-20-20-6 § 6.1 Purpose

The purpose of this rule making is to implement R.I. Gen. Laws Chapter 44-33.6 “Historic Preservation Tax Credits 2013.” This chapter creates economic incentives for the purpose of stimulating the redevelopment and reuse of Rhode Island’s historic structures, as well as to generate positive economic and employment activities that will result from such redevelopment and reuse. This regulation requires the filing of an application form, payment of a non-refundable three percent (3%) Processing Fee and entering into a Contract with the Rhode Island Division of Taxation. Applicants are also required to file a Part 1 and a Part 2 Application for certification with the Rhode Island Historical Preservation & Heritage Commission.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.2 Authority

These rules and regulations are jointly promulgated by the Rhode Island Division of Taxation and the Rhode Island Historical Preservation and Heritage Commission pursuant to R.I. Gen. Laws §§ 44-1-4 and 44-33.6-4(i). These rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 42-35 of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation and the Historical Preservation & Heritage Commission to effectuate the purpose of R.I. Gen. Laws Chapter 44-33.6 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.4 Severability

If any provision of these rules and regulations, or the application thereof to any Person or circumstance, is held invalid by a court of competent jurisdiction, the validity of the remainder of the rules and regulations shall not be affected thereby.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.5 Definitions

A.“Accountant’s certification” means the certification of a certified public accountant licensed in the State of Rhode Island containing the information required in the application for an Assignable Historic Preservation Tax Credit Certificate. The accountant’s certification includes, but is not limited to, certification of the Adjusted Basis at the beginning of the Rehabilitation, the Rehabilitation costs properly capitalized to the building, and project costs incurred but not eligible for the historic preservation tax credit such as costs for new construction and other costs not chargeable to the capital account. The accountant’s certification shall be completed in the form of the Division of Taxation’s Form HTC-8016 and shall be accompanied by an opinion of the accountant regarding the accuracy of the required information. The cost certification should include, but is not limited to:

1.A schedule of development costs (separating costs qualified for tax credit from costs not qualified for tax credit) and calculation of historic tax credit basis based on Qualified Rehabilitation Expense (QREs) and documentation from the project.

2.Verification of the existence of development costs by examination of invoices, canceled checks, settlement sheets and related documents.

3.Review of the respective development costs to determine whether the costs were eligible to be included in historic tax credit basis QREs in accordance with R.I. Gen. Laws Chapter 44-33.6.

4.Calculation of the Substantial Rehabilitation Test in accordance with R.I. Gen. Laws § 44-33.6-2(16).

5.Computation of tax credits to be available to the project based upon the determination of QREs included in historic tax credit basis.

B.“Act” means R.I. Gen. Laws Chapter 44-33.6.

C.“Adjusted basis” means the Owner’s basis in a building on or after July 3, 2013, adjusted by depreciation and other adjustments that impact basis, computed in accordance with federal income tax law. In general, adjusted basis is determined with reference to the cost of the building (excluding land) in the hands of the Owner at the time of acquisition, decreased by depreciation and other deductions that reduce basis, and increased by costs incurred in connection with the building and capitalized to the building, such as the cost of improvements to the building.

D.“Affiliate” means any entity controlling, controlled by or under common control with such Person, firm, partnership, trust, estate, limited liability company (LLC), corporation (whether profit or non-profit) or other business entity that incurs Qualified Rehabilitation Expenditures (QREs) for the Substantial Rehabilitation of a Certified Historic Structure or some identifiable portion thereof.

E.“Allocation agreement” means an executed agreement among all participants of a pass-through entity, or among all Owners of a building having multiple owners, setting forth the method for allocation of the historic preservation tax credit agreed upon among the participants or co-owners. An allocation agreement may include, without limitation, a partnership agreement, an operating agreement of an LLC, a shareholders agreement, or any other instrument executed by all participants or co-Owners.

F“Applicant” means a Person submitting an application to the Commission and to the Division of Taxation for determination under § 6.17 of this Part.

G.“Assignable historic preservation tax credit certificate” means a certificate issued by the Division of Taxation to the Owner of a Certified Historic Structure or an Identifiable portion thereof who has incurred QREs that have been approved by the Commission as consistent with the Standards for Rehabilitation, and which QREs have been Placed-in-Service. If the Owner of the Certified Historic Structure is a pass-through entity, an Assignable Historic Preservation Tax Credit Certificate may be issued to each participant in the pass-through entity. The certificate shall specify the amount of the historic preservation tax credit allocable to such Participant, determined pursuant to this regulation.

H.“Assignee” means a Person to whom the historic preservation tax credit certificate is assigned pursuant to R.I. Gen. Laws Chapter 44-33.6.

I.“Assignor” means a holder of an Assignable Historic Preservation Tax Credit Certificate pursuant to § 6.21(A) of this Part, who assigns such Assignable Historic Preservation Tax Credit Certificate to an Assignee pursuant to § 6.21(C) of this Part.

J.“Authorized to be reserved” means the Applicant has previously entered into a Contract with the Division of Taxation, on behalf of the state, which guarantees that the stated estimated tax credits will be available when earned.

K.“Certified historic structure” means a property which is located in the state of Rhode Island and is:

1.Listed individually on the national register of historic places; or

2.Listed individually in the State Register of Historic Places; or

3.Located in a Registered Historic District and certified by either the Commission or Secretary of the Interior as being of historic significance to the district.

L.“Certified rehabilitation” means any Rehabilitation of a Certified Historic Structure consistent with the historic character of such property or the district in which the property is located as determined by the Commission guidelines.

M“Certificate of completed work” means the written approval issued by the Commission that the completed Rehabilitation is consistent with the Standards for Rehabilitation.

N.“Certification of proposed rehabilitation” means the certification issued by the Commission that the proposed Rehabilitation is consistent with the Standards for Rehabilitation.

O“Commencement of substantial construction activities” has the meaning set forth in § 6.12 of this Part.

P.“Commission” means the Rhode Island Historical Preservation & Heritage Commission created pursuant to R.I. Gen. Laws § 42-45-2.

Q.“Contract” means a contract entered into between Applicant and the Division of Taxation, on behalf of the state, which guarantees that the stated estimated tax credits will be available when earned and may be claimed in full, to the extent of:

1.QREs actually approved by the Division of Taxation; and

2.the taxpayer’s tax liability, in the year earned subject in the case of Phased Projects to the provisions of § 6.10 of this Part.

R.“Division of Taxation” means the Rhode Island Division of Taxation.

S.“Estimated qualified rehabilitation expenditures” means the estimated amount of QREs set forth in a Contract for a planned Rehabilitation.

T.“Executive Director” means the executive director of the Commission.

U.“Exempt from real property tax” means, with respect to any Certified Historic Structure, that the structure is exempt from taxation pursuant to R.I. Gen. Laws § 44-3-3.

V.“Force majeure” means an event which is

1.reasonably unforeseen,

2.outside the control of the Applicant and

3.could not be avoided by the Applicant’s exercise of due care. By way of example, and not in limitation, any delays, work stoppages, or work force reductions caused by financial difficulties, labor disputes or violations of the law shall not be deemed a force majeure.

W.“Hard construction cost” means the direct Contractor costs for labor, material, equipment, and services associated with an approved project, contractors’ overhead and profit, and other direct construction costs. Hard construction costs do not include architectural and engineering fees, survey, legal expenses, insurance premiums, development fees and other soft costs.

X.“Historic preservation certification application” means Parts 1, 2 and 3 of the Commission’s application forms for each stage of the certification process, as more fully set forth herein.

Y.“Holding period” means twenty-four (24) months after the Commission issues a Certificate of Completed Work to the Owner. In the case of a Rehabilitation which may reasonably be expected to be completed in phases as described in R.I. Gen. Laws § 44-33.6-2(16), "holding period" shall be extended to include a period of time beginning on the date of issuance of a Certificate of Completed Work for the first phase or phases for which a certificate is issued and continuing until the expiration of twenty-four (24) months after the Certificate of Completed Work issued for the last phase.

Z.“Initial certificate holder” means an Owner or participant named by the Owner to receive the historic tax credit certificate.

AA.“Inspection” means a visit by an authorized representative of the Commission to a property for the purposes of reviewing and evaluating the significance of the building and the proposed, ongoing or completed Rehabilitation work, and by an authorized representative of the Division of Taxation to verify expenses and costs reported.

BB.“Measuring period” means the twenty-four (24) month period selected by the Owner ending within the taxable year in which a Certified Historic Structure is Placed-in-Service. In the case of a Rehabilitation which may reasonably be expected to be completed in phases set forth in architectural plans and specifications completed before the Rehabilitation begins, this definition shall be applied by substituting "sixty (60) month period" for "twenty-four (24) month period." Notwithstanding anything to the contrary herein, the measuring period shall not commence prior to July 3, 2013.

CC.“Neighborhood revitalization plan” means any plan or portion of a plan for the revitalization of one or more defined communities that was developed by a state agency, municipality, or one or more non-profit organizations, each of which is exempt from taxation under Internal Revenue Code, 26 U.S.C. § 501(c)(3) and has as one of its exempt purposes the provision of housing for low and moderate income households [or the revitalization of one or more communities].

DD.“Notification of assignment” means the notification filed with the Division of Taxation of the assignment of all or a portion of the state historic preservation tax credit.

EE.“Owner” means a Person or Persons who hold legal fee or leasehold title to the historic building or an identifiable portion thereof.

FF.“Part 1 application” means the Historic Preservation Certification Application Part 1-Request for Historical Certification.

GG.“Part 2 application” means the Historic Preservation Certification Application Part 2-Request for Certification of Proposed Rehabilitation (2013) and must include a detailed project timeline and associated costs.

HH.“Part 3 application” means the Historic Preservation Certification Application Part 3-Request for Certification of Completed Rehabilitation.

II.“Participant” means a partner in a partnership, member of an LLC, shareholder of a subchapter S corporation, beneficial Owner of a trust, or any other Person having an interest in a pass-through entity.

JJ.“Pass-Through entity” means a partnership, LLC, subchapter S-corporation, association, nominee trust, or any other entity, the tax attributes of which are passed through to the participants in such entity.

KK.“Percentage interest” means the percentage interest in the historic preservation tax credit allocated to an Owner, a participant, a co-owner of a multiple-owner building or identifiable portion thereof, or another Person pursuant to the terms of the applicable Allocation Agreement.

LL.“Person” means any person, partnership, firm, corporation, (including both business and non-profit corporations), LLC, trust, estate, association, or other business entity.

MM.“Phased project” means a project with identifiable portions of the building(s) to be completed in phases set forth in architectural plans and specifications prepared before the physical work on the Rehabilitation begins, as reported in the Part 2 of the application filed with the Commission.

NN.“Placed-in-service” means that Substantial Rehabilitation work has been completed which would allow for occupancy of the entire structure or some identifiable portion of the structure, as established in the Part 2 Application or the Owner has commenced depreciation of the QREs, whichever occurs first. Issuance of a certificate of occupancy or similar permit authorizing occupancy of the entire building or some identifiable portion by the municipal authority having jurisdiction shall constitute sufficient evidence for purposes of the Act that the building or the identifiable portion thereof that is the subject of the certificate of occupancy has been placed-in-service. However, a building or identifiable portion thereof may be treated as placed-in-service without a certificate of occupancy if the building or identifiable portion thereof is placed in a condition or state of readiness and availability for a specifically defined function, or upon the commencement of the period for depreciation with respect to the building under the Owner’s depreciation practice, whichever occurs earlier.

OO.“Principal residence” means the principal residence of the Owner within the meaning of Internal Revenue Code, 26 U.S.C. § 121 or any successor provision.

PP.“Processing fees” means any of the fees set forth, defined and imposed in R.I. Gen. Laws § 44-33.6-4(d).

QQ.“Qualified rehabilitation expenditures or "QREs” means any amounts expended in the Rehabilitation of a Certified Historic Structure properly capitalized to the building and either:

1.Depreciable under Internal Revenue Code, 26 U.S.C. § 1 et seq., or

2.Made with respect to property (other than the Principal Residence of the Owner) held for sale by the Owner. Processing Fees paid pursuant to this chapter are not qualified Rehabilitation expenses. Notwithstanding the foregoing, except in the case of a nonprofit corporation, there will be deducted from QREs for the purposes of calculating the tax credit any funds made available to the Person (including any entity specified in R.I. Gen. Laws § 44-33.6-3(a)) incurring the QREs in the form of a direct grant from a federal, state or local governmental entity or agency or instrumentality of government.

RR.“Registered historic district” means any district listed in the national register of historic places or the State Register of Historic Places.

SS.“Rehabilitation” means the preservation of a historic building, its component elements, and its structural system by means of repairs and/or selective replacement of worn out materials and alterations to the building generally which are consistent with the building’s documented historic appearance without destroying historically significant later additions.

TT.“Remain idle” means that substantial work has ceased at the subject project; work crews have been reduced by more than twenty-five percent (25%) for reasons unrelated to scheduled completion of work in accordance with the project schedule, reasonably unanticipated physical conditions, or Force Majeure; or the project schedule that was originally submitted by the taxpayer to the Commission has been extended by more than twelve (12) months for reasons other than reasonably unanticipated physical conditions or an event of Force Majeure (by way of example, and not in limitation, any delays, work stoppage, or work force reduction caused by issues with project funding, finances, disputes, or violation of laws shall be deemed to cause a project to Remain Idle).

UU.“Scattered site development” means a development project for which the developer seeks or has obtained unified financing to rehabilitate dwelling units in two (2) or more buildings located in an area that is defined by a Neighborhood Revitalization Plan and is not more than one mile in diameter.

VV.“Social club” means a corporation or other entity and/or its Affiliate that offers its facilities primarily to members for social or recreational purposes and the majority source of its revenue is from funds and/or dues paid by its members and/or an entity defined as a social club pursuant to the Internal Revenue Code, 26 U.S.C. § 501(c)(7).

WW.“Standards for rehabilitation” or "Standards" means the United States Secretary of the Interior’s Standards for Rehabilitation.

XX.“State register of historic places” means the state register of historical, architectural, and cultural sites, buildings, places, landmarks, or areas compiled by the Commission pursuant to R.I. Gen. Laws § 42-45-5. Properties are listed on the state register in accordance with the Commission’s procedures for registration and protection of historic properties.

YY.“Substantial construction” means that:

1.The Owner of a Certified Historic Structure has entered into a Contract with the Division of Taxation and paid the Processing Fee;

2.The Commission has certified that the Certified Historic Structure’s Rehabilitation will be consistent with the standards set forth in R.I. Gen. Laws Chapter 44-33.6; and

3.The Owner has, within five (5) years from the date of the executed Contract, expended ten percent (10%) of its QREs, estimated in the Contract entered into with the Division of Taxation for the project or its first phase of a Phased Project as detailed in the Part 2 Application filed with and approved by the Commission.

ZZ.“Substantial rehabilitation” means, with respect to a Certified Historic Structure, that the qualified Rehabilitation expenses of the building during the twenty-four (24) month period selected by the taxpayer ending with or within the taxable year exceed the Adjusted Basis in such building and its structural components as of the beginning of such period, or July 3, 2013, whichever is later. In the case of any Rehabilitation, which may reasonably be expected to be completed in phases set forth in architectural plans and specifications completed before the Rehabilitation begins, the above definition shall be applied by substituting “sixty (60) month period” for “twenty-four (24) month period”.

AAA.“Tax administrator” means the person within the Rhode Island Department of Revenue as described in R.I. Gen. Laws § 44-1-1 et seq.

BBB.“Trade or business” means an activity that is carried on for the production of income from the sale or manufacture of goods or performance of services, excluding residential rental activity.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.6 General Overview

A.Effective July 3, 2013, R.I. Gen. Laws Chapter 44-33.6 establishes the “Historic Preservation Tax Credits 2013” program. Persons wishing to participate in this program must:

1.Beginning August 1, 2013 file an application for the Rhode Island historic preservation tax credits 2013 program with the Division of Taxation using Rhode Island Form HTC-13. Any application received prior to August 1, 2013 will be deemed received on August 1, 2013. These projects will be placed in sequence on a “first come, first served” basis. This sequence is also referred to within as the “queue”, and further described in § 6.8 of this Part.

2.File Part 1 and Part 2 Applications with the Commission within ninety (90) days of the date of notification by the Division of Taxation that tax credits are available for the project.

a.Projects shall have twelve months from the certification date of Part 2 Application to commence Substantial Construction.

3.Within thirty (30) days after the date of Part 2 certification, Applicant shall pay to the Division of Taxation a non-refundable Processing Fee equal to three percent (3%) of the estimated QREs;

4.Enter into a Contract with the Division of Taxation. Prior to entering into the Contract with the Division of Taxation, any taxpayer who has a project that is currently entitled to Tax Credits under the Historic Structures - Tax Credit program under R.I. Gen. Laws Chapter 44-33.2 must withdraw from said program with respect to that project and forfeit any claims or redress against the State attributable to that project made available under R.I. Gen. Laws Chapter 44-33.2.

B.The maximum project credit is $5 million. No building to be completed in phases or in multiple projects may exceed the maximum project credit of $5 million for all phases or projects involved in the Rehabilitation of the building.

C.Persons incurring QREs for Substantial Rehabilitation of a Certified Historic Structure certified in accordance with these rules and regulation are entitled to a credit in an amount equal to the following:

1.Twenty percent (20%) of the QREs; or

2.Twenty-five percent (25%) of the QREs provided that either:

a.At least twenty-five percent (25%) of the total rentable area of the Certified Historic Structure will be made available for a Trade or Business; or

b.The entire rentable area located on the first floor of the Certified Historic Structure will be made available for a Trade or Business.

D.Substantial Rehabilitation of the following properties are ineligible for the tax credit authorized by R.I. Gen. Laws Chapter 44-33.6;

1.Property that is Exempt from Real Property Tax;

2.A Social Club; or

3.A single family home or a property that contains less than three (3) residential apartments or condominiums.

E.Division of Taxation Reporting Requirements:

1.By August 15th of each year, the Division of Taxation must publicly report the name, address, and amount of tax credit received for each recipient (developer or initial holder) during the previous state fiscal year.

2.By September 1st of each year, the Division of Taxation must publicly report in the aggregate certain information regarding the credits, such as the number of jobs created, the number of Rhode Island businesses retained for work, the total amount of QREs, and other items as required by the Tax Administrator.

3.By September 1, 2018, and biennially thereafter, the Division of Taxation must report in the aggregate the total number of approved projects, project costs, and associated amount of tax credits.

F.Restrictive covenant. As provided in § 6.23 of this Part, upon issuance of a Certificate of Completed Work, the Owner shall cause to be recorded in the applicable land evidence records a restrictive covenant pursuant to which:

1.During the Holding Period, no alteration to the Certified Historic Structure will be made without the Commission’s approval and in a manner consistent with the Standards for Rehabilitation,

2.The Certified Historic Structure may not become Exempt from Real Property Tax, and

3.The Commission and/or the Division of Taxation shall be granted the right to one or more Inspections during the Holding Period to confirm matters represented in the Historic Preservation Certification Application and to review any alterations. If the Owner is the holder of leasehold title, the fee Owner of the Certified Historic Structure must also execute the restrictive covenant.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.7 Tax Credit

A.Subject to the maximum credit provisions set forth in §§ 6.7(C) and (D) of this Part below, any Person, firm, partnership, trust, estate, LLC, corporation (whether for profit or nonprofit) or other business entity that incurs QREs for the Substantial Rehabilitation of a Certified Historic Structure certified in accordance with these regulations, provided the Rehabilitation is consistent with the Standards of Rehabilitation as certified by the Commission and said Person, firm, partnership, trust, estate, LLC, corporation or other business entity is not a Social Club or Exempt from Real Property Tax, is entitled to a credit against the tax imposed on such Person pursuant to R.I. Gen. Laws Chapters 44-11, 44-13, (other than the tax imposed under R.I. Gen. Laws § 44-13-13), 44-14, 44-17 or 44-30 in an amount equal to the following:

1.Twenty percent (20%) of the QREs; or

2.Twenty-five percent (25%) of the QREs provided that either:

a.At least twenty-five percent (25%) of the total rentable area of the Certified Historic Structure will be made available for a Trade or Business; or

b.The entire rentable area located on the first floor of the Certified Historic Structure will be made available for a Trade or Business.

c.Tax credits shall be allowed for the taxable year in which such Certified Historic Structure or an identifiable portion of the structure is Placed-in-Service provided that the Substantial Rehabilitation test is met for such year.

B.Maximum project credit. The credit allowed pursuant to R.I. Gen. Laws Chapter 44-33.6 shall not exceed five million dollars ($5,000,000) for any Certified Rehabilitation project under this program. No building to be completed in phases or in multiple projects shall exceed the maximum project credit of five million dollars ($5,000,000) for all phases or projects involved in the Rehabilitation of such building.

C.Maximum aggregate credits. The aggregate credits Authorized to be Reserved pursuant to R.I. Gen. Laws Chapter 44-33.6 shall not exceed sums estimated to be available in the historic preservation tax credit fund as determined by the Division of Taxation.

D.Subject to the exception provided in § 6.7(H) of this Part, if the amount of the tax credit exceeds the taxpayer’s total tax liability for the year in which the substantially rehabilitated property is Placed-in-Service, the amount that exceeds the taxpayer’s tax liability may be carried forward for credit against the taxes imposed for the succeeding ten (10) years, or until the full credit is used, whichever occurs first. Credits allowed to a partnership, an LLC taxed as a partnership or multiple Owners of property shall be passed through to the Persons designated as partners, members or Owners respectively pro rata or pursuant to an executed agreement among such Persons designated as partners, members or Owners documenting an alternate distribution method without regard to their sharing of other tax or economic attributes of such entity. Credits may be allocated to partners, members or Owners that are exempt from taxation under Internal Revenue Code, 26 U.S.C. §§ 501(c)(3), 501(c)(4) or 501(c)(6) and these partners, members or Owners must be treated as taxpayers for purposes of these rules and regulations.

E.If the taxpayer has not claimed the tax credits in whole or part, taxpayers eligible for the tax credits may assign, transfer or convey the credits, in whole or in part, by sale or otherwise to any individual or entity, including, but not limited to, condominium Owners in the event the Certified Historic Structure is converted into condominiums and Assignees of the credits that have not claimed the tax credits in whole or part may assign, transfer or convey the credits, in whole or in part, by sale or otherwise to any individual or entity. The Assignee of the tax credits may use acquired credits to offset up to one hundred percent (100%) of the tax liabilities otherwise imposed pursuant to R.I. Gen. Laws Chapters 44-11, 44-13, (other than the tax imposed under R.I. Gen. Laws § 44-13-13), 44-14, 44-17 or 44-30. The Assignee may apply the tax credit against taxes imposed on the Assignee until the end of the tenth calendar year after the year in which the substantially rehabilitated property is Placed-in-Service or until the full credit assigned is used, whichever occurs first. Fiscal year Assignees may claim the credit until the expiration of the fiscal year that ends within the tenth year after the year in which the substantially rehabilitated property is Placed-in-Service. The Assignor shall perfect the transfer by notifying the state of Rhode Island Division of Taxation, in writing, within thirty (30) calendar days following the effective date of the transfer and shall provide any information as may be required by the Division of Taxation to administer and carryout the provisions of R.I. Gen. Laws Chapter 44-33.6.

F.For purposes of R.I. Gen. Laws Chapter 44-33.6, any assignment or sales proceeds received by the taxpayer for its assignment or sale of the tax credits allowed pursuant to R.I. Gen. Laws Chapter 44-33.6 shall be exempt from tax under R.I. Gen. Laws Title 44. If a tax credit is subsequently recaptured under R.I. Gen. Laws Chapter 44-33.6, revoked or adjusted, the seller’s tax calculation for the year of revocation, recapture, or adjustment shall be increased by the total amount of the sales proceeds, without proration, as a modification under R.I. Gen. Laws Chapter 44-30. In the event that the seller is not a natural person, the seller’s tax calculation under R.I. Gen. Laws Chapters 44-11, 44-13 (other than with respect to the tax imposed under R.I. Gen. Laws § 44-13-13), 44-14, or 44-17, as applicable, for the year of revocation, recapture, or adjustment, shall be increased by including the total amount of the sales proceeds without proration.

G.Credits allowed to partners, members or Owners that are exempt from taxation under Internal Revenue Code, 26 U.S.C. §§ 501(c)(3), 501(c)(4) or 501(c)(6), and only said credits, shall be refundable. Said entities shall file Rhode Island Form HTC-14, Refund Request with the Division of Taxation, together with a copy of a valid determination letter from the Internal Revenue Service certifying their exempt status, and will be entitled to payment equal to 100% of the credit.

H.Substantial Rehabilitation of the following properties is ineligible for the tax credits authorized under R.I. Gen. Laws Chapter 44-33.6:

1.Property that is Exempt from Real Property Tax;

2.A Social Club; or

3.A single family home or a property that contains less than three (3) residential or condominiums; provided, however, a scattered site development with five (5) or more residential units in the aggregate (which may include single family homes) shall be eligible for tax credits, In the event a Certified Historic Structure undergoes a Substantial Rehabilitation pursuant to R.I. Gen. Laws Chapter 44-33.6 and within twenty-four (24) months (sixty (60) months for a Phased Project) after issuance of a Certificate of Completed Work the property becomes Exempt from Real Property Tax, the taxpayer’s tax for the year shall be increased by the total amount of credit actually used against the tax.

I.In the case of a corporation, this credit is only allowed against the tax of a corporation included in a consolidated return that qualifies for the credit and not against the tax of other corporations that may join in the filing of a consolidated tax return.

J.The Initial Certificate Holder or the Assignee of such person may also claim the credit in accordance with these rules and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.8 Queuing Process

A.In order to comply with the requirements of § 6.7(D) of this Part, the Division of Taxation has developed a “queuing” process, which is an equitable process that will provide Applicants some degree of certainty as to what credit amounts may be available to them at the conclusion of a project. This queuing process shall consist of the following:

1.On or after August 1, 2013, any Person intending to participate in the historic preservation tax credit 2013 program must first apply to the Division of Taxation using basis as Form HTC-13. These projects will be placed in sequence on a “first come, first served” further described in § 6.8(A)(7) of this Part below. Any application received before August 1, 2013 will be deemed received on August 1, 2013. This sequence is also referred to within as the “queue.”

2.To remain eligible for the tax credits, Applicants have ninety (90) days from the of date the Division of Taxation’s notice that credits are available for their project to apply for Part 1 and Part 2 certification from the Commission. Failure to do so will result in the loss of place in the queue and forfeiture of all rights, claims and entitlements to the credits initially available to the project. The project may reapply in accordance § 6.8(A)(1) of this Part. At the time of reapplication the project will be placed at the end of the queue. Any Part 1 or Part 2 certification received prior to August 1, 2013 must be re-certified by the Commission.

3.Within thirty (30) days after the date of Part 2 certification, the Applicant shall pay to the Division of Taxation a non-refundable Processing Fee equal to three percent (3%) of the estimated QREs and shall execute the Contract with the Division of Taxation.

4.The estimated credit amount, as filed on Form HTC-13, will not be allocated to any other project, unless the project:

a.Remains Idle; or

b.Declares in writing to the Division of Taxation the Owner wishes to abandon its claim under R.I. Gen. Laws Chapter 44-33.6; or

c.Fails to meet the deadlines as indicated in this Part; or

d.Fails to pay the appropriate Processing Fee; or

e.Fails to timely enter into a Contract with the Division of Taxation.

5.In order to maintain place in the queue, a project shall commence Substantial Construction within twelve (12) months from the date of the Part 2 certification letter, and cannot Remain Idle.

6.Upon the project’s voluntary or involuntary abandonment of tax credits, the estimated tax credit which originally had been assigned to the project shall be released and made available to other projects in sequence in the queue, subject to the sunset provision in § 6.25 of this Part.

7.If all available tax credits have been allocated, a project applying for tax credits shall be put at the end of the queue in the order of the date the application was received by the Division of Taxation.

8.If multiple applications are received by the Division of Taxation on the same day seeking credits in excess of the amount of credits available, the Division of Taxation shall hold a public drawing to determine the queuing order for such projects.

9.Applications will be deemed received on the date postmarked for delivery in the U.S. mail or on the date delivered to the Division of Taxation by the taxpayer or his representative, by messenger, or by an overnight delivery service.

B.In the event funds become available, the Division of Taxation may notify a project in the queue credits are available to them, provided the project has not been Placed-in-Service. In the case of a Phased Project, credits may become available only to those phases not yet Placed-in-Service.

1.Example 1: Project not Placed-in-Service: An Applicant in the Queue for which credits were not initially available decides to rehabilitate the building even though credits are not available to the project. Subsequently, credits became available and the project had not yet been Placed-in-Service. The project would be eligible to receive tax credits.

2.Example 2: Project Placed-in-Service: An Applicant in the Queue for which credits were not initially available decides to rehabilitate building even though credits are not available to the project. The project was Placed-in-Service before credits become available. The Applicant is not eligible to receive tax credits.

3.Example 3 Phased Project: An Applicant in the Queue for which credits were not initially available decides to rehabilitate building even though credits are not available to the project. Subsequently, credits are available to the project and the Applicant has completed Phase 1 and that phase has been Placed-in Service. Accordingly, Phase 1 is not eligible for credits. The other two phases of the project have not yet been completed and have not been Placed-in-Service. The remaining phases of the project would be eligible to receive tax credits.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.9 Administration

A.To claim the tax credit authorized in R.I. Gen. Laws Chapter 44-33.6, the Applicant shall apply:

1.To the Commission, prior to the Certified Historic Structure being Placed-in-Service, for a determination of historic significance;

2.To the Commission, prior to the Certified Historic Structure being Placed-in-Service, for a certification that the Certified Historic Structure’s Rehabilitation will be consistent with the Standards of the Secretary of the United States Department of the Interior for Rehabilitation;

3.To the Commission, after completion of the Rehabilitation work of the Certified Historic Structure, for a certification that the Rehabilitation is consistent with the standards of the Secretary of the United States Department of the Interior for Rehabilitation; and

4.To the Division of Taxation, after completion of the Rehabilitation work of the Certified Historic Structure, for a certification as to the amount of tax credit for which the Rehabilitation qualifies. The Commission and the Division of Taxation may rely on the facts represented in the application without independent investigation and, with respect to the amount of tax credit for which the Rehabilitation qualifies, upon the certification by a certified public accountant licensed in the state of Rhode Island. The applications shall be developed by the Commission and the Division of Taxation and may be amended from time to time.

B.Within thirty (30) days after the Commission’s and the Division of Taxation’s receipt of the Applicant’s fully documented application requesting certification for the completed Rehabilitation work:

1.The Commission shall issue the Applicant a written determination either denying or certifying the Rehabilitation; and

2.Subject to the Commission’s approval of the completed Rehabilitation and provided that the Division of Taxation has received all materials required by §§ 6.17 and 6.19 of this Part no later than the beginning of the thirty (30) day period referenced above the Division of Taxation shall issue a certification of the amount of credit for which the Rehabilitation qualifies. To claim the tax credit, the Applicant shall attach the Division of Taxation’s certification as to the amount of the tax credit to all state tax returns on which the Credit is claimed.

C.No taxpayer may benefit from the provisions of R.I. Gen. Laws Chapter 44-33.6 unless the Owner of the Certified Historic Structure grants a restrictive covenant to the Commission, agreeing that during the Holding Period no material alterations to the Certified Historic Structure will be made without the Commission’s prior approval and agreeing that such shall be done in a manner consistent with the standards of the Secretary of the United States Department of the Interior; and, in the event the Owner applies for the twenty-five percent (25%) tax credit, that either:

1.At least twenty-five percent (25%) of the total rentable area of the Certified Historic Structure will be made available for a Trade or Business; or

2.The entire rentable area located on the first floor of the Certified Historic Structure will be made available for a Trade or Business, in either case, for a period of sixty (60) months after the placed-in-service date of the Certified Historic Structure or identifiable portion thereof.

3.In the event at least twenty-five percent (25%) of the total rentable area, or the entire first floor, of the Certified Historic Structure is not made available for a Trade or Business, the tax credit shall be reduced from twenty-five percent (25%) to twenty percent (20%) of QREs.

D.Within thirty (30) days after the certification date of Part 2 Application, the Applicant shall pay to the Division of Taxation a non-refundable Processing Fee equal to three percent (3%) of estimated QREs. The fee shall be payable prior to the signing of the Contract.

E.Under authority of R.I. Gen. Laws § 44-33.6-4(e) the Division of Taxation is expressly authorized and empowered to enter into Contracts with Persons, firms, partnerships, trusts, estates, LLCs, corporations (whether for profit or nonprofit) or other business entities that incur QREs for the Substantial Rehabilitation of Certified Historic Structures or some identifiable portion of a structure. Upon payment of the fee set forth in § 6.9(D) of this Part above, the Division of Taxation and the Applicant shall enter into a Contract for tax credits consistent with the terms and provisions of this chapter.

F.Upon satisfaction of all the requirements set forth in this regulation and the payment of the fees as set forth in § 6.9(D) of this Part above, the Division of Taxation shall, on behalf of the State of Rhode Island, guarantee the delivery of one hundred percent (100%) of the tax credit and use of one hundred percent (100%) of the tax credit in the tax year a Certified Historic Structure is Placed-in-Service through a contract with Persons, firms, partnerships, trusts, estates, LLCs, corporations (whether for profit or nonprofit) or other business entities that will incur QREs for the Substantial Rehabilitation of a Certified Historic Structure or some identifiable portion of a structure. The maximum credit will not exceed the lesser of the amount originally contracted or the credit based on QREs actually incurred and audited by the Division of Taxation.

G. Any Contract executed pursuant to R.I. Gen. Laws Chapter 44-33.6 by a Person, firm, partnership, trust, estate, LLC, corporation (whether for profit or nonprofit) or other business entity shall be assignable to:

1.An Affiliate thereof without any consent from the Division of Taxation;

2.A banking institution as defined by R.I. Gen. Laws § 44-14-2(2) or credit union as defined in R.I. Gen. Laws § 44-15-1.1(1) without any consent from the Division of Taxation;

3.A Person, firm, partnership, trust, estate, LLC, corporation (whether for profit or nonprofit) or other business entity that incurs QREs for the Substantial Rehabilitation of Certified Historic Structures or some identifiable portion of a structure, with such assignment to be approved by the Division of Taxation, which approval shall not be unreasonably withheld or conditioned; or

4.Any other Person, firm, partnership, trust, estate, LLC, corporation (whether for profit or nonprofit) or other business entity that is approved by the Division of Taxation, which approval shall not be unreasonably withheld or conditioned.

H.If information comes to the attention of the Commission or the Division of Taxation at any time, up to and including the last day of the Holding Period, that is materially inconsistent with representations made in an application, the Commission may deny the requested certification or revoke a certification previously given, and, in either instance, all fees paid by the Applicant shall be deemed forfeited. In the event that tax credits or a portion of tax credits are subject to recapture for ineligible costs and such tax credits have been transferred, assigned and/or allocated, the state will pursue its recapture remedies and rights against the Applicant for the tax credits, and all fees paid by the Applicant shall be deemed forfeited. No redress shall be sought against Assignees, transferees or allocates of such credits provided they acquired the tax credits by way of an arms-length transaction, for value, and without notice of violation, fraud or misrepresentation.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.10 Phased Projects

A.In the case of a Phased Project, the credit allowed shall be limited to the estimated QREs as reported in the Contract for “Historic Preservation Tax Credit 2013” for each phase. Any QREs in excess of the estimated amount for any phase shall be carried over to the next subsequent phase and added to the QREs for that phase. The credit allowed for that subsequent phase shall still be limited to the estimated QREs for that phase as reported in the Contract.

1.Examples

a.A four-phase project, where at least twenty-five percent (25%) of the total rentable area of the Certified Historic Structure will be made available for a Trade or Business, with total estimated QREs of sixteen million dollars ($16,000,000) in equal phases of four million dollars ($4,000,000) each with a total credit amount of twenty-five percent (25%) or four million dollars ($4,000,000) was reported in the Contract. In the first phase, the QREs were six million dollars ($6,000,000). The credit will be limited to twenty-five percent (25%) of the first four million dollars ($4,000,000) of QREs or one million dollars ($1,000,000). The excess two million dollars ($2,000,000) of QREs will be carried forward to the next subsequent phase. In the next phase, the actual QREs were three million dollars ($3,000,000) plus the two million dollars ($2,000,000) carried forward amount for a total allowable QREs of five million dollars ($5,000,000). The credit will be limited to twenty-five percent (25%) of the first four million dollars ($4,000,000) of QREs or one million dollars ($1,000,000). The excess one million dollars ($1,000,000) of QREs will be carried forward to the next subsequent phase. This procedure will be continued until the project has reached the total estimated QREs or the total credit amount has been reached, whichever is less.

b.A two-phase project, for residential rental real estate, with total QREs of ten million dollars ($10,000,000) in equal phases of five million dollars ($5,000,000) each with a total credit of twenty percent (20%) or two million dollars ($2,000,000) was reported in the Contract with completion dates of December 31, 2014 for the first phase and December 31, 2016 for the second phase. The first phase was completed on December 31, 2014, and all required filings were submitted timely. The Assignable Historic Preservation Tax Credit Certificate will be issued in the amount of one million dollars ($1,000,000). The second phase was completed on December 31, 2015. Since phase two was completed one year earlier than the time reported in the Contract, the Assignable Historic Preservation Tax Credit Certificate will not be issued until December 31, 2016.

B.If the actual QREs for a phase are less than the estimated amount as reported in the Contract, the credit shall be limited to the applicable percentage of the actual QREs incurred for that phase. Any unused credit amount of a phase may be carried forward to the next subsequent phase. That subsequent phase shall be allowed a credit calculation as if the carried forward credit amount has been reported in the Contract.

1.Example: A four-phase project, where at least twenty-five percent (25%) of the total rentable area of the Certified Historic Structure will be made available for a Trade or Business, with a total QREs of sixteen million dollars ($16,000,000) in equal phases of four million dollars ($4,000,000) each with a total credit amount of twenty-five percent (25%) or four million dollars ($4,000,000) was reported in the Contract. In the first phase the QREs were two million dollars ($2,000,000). The credit will be limited to twenty-five percent (25%) of the actual two million dollars ($2,000,000) of QREs or five hundred thousand dollars ($500,000). The remaining estimated QREs from phase one will be carried forward to the next subsequent phase. In the next phase, the actual QREs were five million dollars ($5,000,000). The allowed credit will be limited to twenty-five percent (25%) of the five million dollars ($5,000,000) or one million two hundred fifty thousand dollars ($1,250,000). The remaining estimated QREs will be carried forward to the next subsequent phase. This procedure will be continued until the project has reached the total QREs or the total credit amount has been reached, whichever is less.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.11 Election; Limitations

A.Taxpayers who elect and qualify to claim tax credits for the Substantial Rehabilitation of a Certified Historic Structure pursuant to R.I. Gen. Laws Chapter 44-33.6 are ineligible for any tax credits that may also be available to the taxpayer for the Substantial Rehabilitation of that particular Certified Historic Structure under the provisions of R.I. Gen. Laws Chapter 44-33.1 and 42-64.7, and/or 44-31.

B.Prior to entering into the Contract with the Division of Taxation, any taxpayer who has a project that is currently entitled to Tax Credits under the Historic Structures Tax Credit program under R.I. Gen. Laws Chapter 44-33.2 must withdraw from said program with respect to that project and forfeit any claims or redress against the State attributable to that project made available under R.I. Gen. Laws Chapter 44-33.2.

C.Neither taxpayers nor Assignees may apply any tax credits issued in accordance with R.I. Gen. Laws Chapter 44-33.6 until on or after July 1, 2013.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.12 Timing and Reapplication

A.Taxpayers shall have twelve (12) months from the certification date of Part 2 Application to commence Substantial Construction activities.

1.For this purpose, Substantial Construction activities shall be deemed to have commenced upon receipt by the Division of Taxation of all of the following:

a.Building permit;

b.Executed construction contract; and

c.Notice to proceed issued to the contractor.

2.For taxpayers acting as their own contractor, Substantial Construction activities shall be deemed to have commenced upon receipt by the Division of Taxation of the building permit along with an affidavit of commencement of Substantial Construction and supporting documentation.

B.Upon commencing Substantial Construction activities, the Applicant shall submit an affidavit of Commencement of Substantial Construction Activities to the Commission and the Division of Taxation, together with evidence of such requirements having been satisfied.

C.Pursuant to R.I. Gen. Laws § 44-33.6-7, no project shall Remain Idle prior to completion for a period of time exceeding six (6) months. In the event that an Applicant does not commence Substantial Construction activities within twelve (12) months from the date of Part 2 Certification, or in the event that a project Remains Idle prior to completion for a period of time exceeding six (6) months, the subject Applicant shall forfeit all fees paid prior to such date, and all rights and entitlements to the tax credits, and its then-current Contract for tax credits shall be deemed null and void, and shall terminate without need for further action or documentation.

D.Applicants may reapply for tax credits providing the applicant satisfies the requirements established in R.I. Gen. Laws Chapter 44-33.6. However, notwithstanding anything contained herein to the contrary, one hundred percent (100%) of the Processing Fees required shall be paid upon reapplication and such Processing Fees shall be non-refundable. Additionally, any taxpayer reapplying for tax credits pursuant to R.I. Gen. Laws § 44-33.6-7 shall be required to submit evidence with its application establishing the reason for delay in commencement or the project sitting idle, as the case may be, and provide evidence, reasonably satisfactory to the Commission, that such condition or event causing same has been resolved. All taxpayers shall submit a reasonably detailed project timeline to the Commission together with the Part 2 Application. The provisions of this regulation shall be further detailed and incorporated into a Contract for tax credits used in connection with R.I. Gen. Laws Chapter 44-33.6.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.13 Historic Tax Credit Apprenticeship Requirements

A.Notwithstanding any laws to the contrary, any credit allowed under R.I. Gen. Laws Chapter 44-33.6 for Hard Construction Costs valued at ten million dollars ($10,000,000) or more shall include a requirement that any contractor and subcontractor working on the project shall have an apprenticeship program as defined herein for all apprenticeable crafts that will be employed on the project as determined at the time of bid. The Contract entered into with the Division of Taxation shall contain a covenant to meet the requirements § 6.13 of this Part. At the time of review of the accountant’s cost certification, the Division of Taxation shall confirm with the Rhode Island Department of Labor and Training that the project is/was in compliance with § 6.13 of this Part and shall not approve tax credits related to any QREs disqualified due to the Apprenticeship Requirements under R.I. Gen. Laws § 44-33.6-8. The provisions of this § 6.13 of this Part shall only apply to contractors and subcontractors with five (5) or more employees. For purposes of R.I. Gen. Laws Chapter 44-33.6, an apprenticeship program is one that is registered with and approved by the United States Department of Labor in conformance with 29 C.F.R. § 29 and 29 C.F.R. § 30.

B.The Rhode Island Department of Labor and Training must provide information and technical assistance to affected governmental, quasi-governmental agencies, and any contractors awarded projects relative to their obligations under R.I. Gen. Laws Chapter 44-33.6.

C.The Rhode Island Department of Labor and Training may also impose a penalty on the developer of up to five hundred dollars ($500) for each calendar day of noncompliance with R.I. Gen. Laws § 44-33.6-8, as determined by the director of labor and training. Mere errors and/or omissions shall not be grounds for imposing a penalty under this § 6.13 of this Part.

D.Any penalties assessed under R.I. Gen. Laws Chapter 44-33.6 shall be paid to the Rhode Island general fund and shall not be considered QREs.

E.To the extent that any of the provisions contained in R.I. Gen. Laws §§ 37-13-3.1 or 37-13-3.2 conflict with the requirements for federal aid contracts, federal law and regulations shall control.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.14 Information Requests

A.The Division of Taxation and its agents, for the purpose of ascertaining the correctness of any credit claimed under the provisions of this chapter, may examine any books, papers, records, or memoranda bearing upon the matters required to be included in the return, report, or other statement, and may require the attendance of the person executing the return, report, or other statement, or of any officer or employee of any taxpayer, or the attendance of any other person, and may examine the person under oath respecting any matter which the Tax Administrator or his or her agent deems pertinent or material in determining the eligibility for credits claimed and may request information from the Commission, and the Commission shall provide the information in all cases, to the extent not otherwise prohibited by statute.

B.Submissions to the Rhode Island Division of Taxation shall include:

1.CPA cost Certification Report;

2.Rhode Island Form HTC-8016;

3.Schedule of all development costs – qualified and non-qualified;

4.Schedule of all documents filed with the Commission, including pictures; and

5.Excel spreadsheet (or similar program) containing all costs, qualified and nonqualified, associated with the project. This spreadsheet shall:

a.Be sorted and subtotaled by the historic cost categories as outlined on the Rhode Island Form HTC-8016. Subtotals must agree with the line items on the cost report.

b. All categories in the cost report shall be itemized separately.

c.The detail shall include the vendor’s name, amount and date of each invoice. Copies of invoices may be requested.

d.The spreadsheet shall have columns for qualified and non-qualified costs.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.15 Reporting Requirements

A.Each taxpayer requesting certification of a completed Rehabilitation shall report to the Commission and the Division of Taxation the following information:

1.The number of total jobs created;

2.The number of Rhode Island businesses retained for work;

3.The total amount of QREs;

4.The total cost of materials or products purchased from Rhode Island businesses; and

5.Such other information deemed necessary by the Tax Administrator.

B.Any agreements or Contracts entered into under R.I. Gen. Laws Chapter 44-33.6 by the Division of Taxation, the Commission, or the Rhode Island Commerce Corporation and the Applicant shall be sent to the Division of Taxation and be available to the public for Inspection by any person and shall be published by the Tax Administrator on the Division of Taxation’s website.

C.By August 15th of each year the Division of Taxation shall report the name, address, and amount of tax credit received for each credit recipient (Developer or initial holder) during the previous state fiscal year to the governor, the chairpersons of the House and Senate Finance Committees, the House and Senate Fiscal Advisors, and the Department of Labor and Training. This report shall be available to the public for Inspection by any person and shall be published by the Tax Administrator on the Division of Taxation’s website.

D.By September 1st of each year the Division of Taxation shall report in the aggregate the information required under R.I. Gen. Laws § 44-33.6-9(a). This report shall be available to the public for Inspection by any person and shall be published by the Tax Administrator on the Division of Taxation’s website.

E.By September 1, 2018, and biennially thereafter, the Division of Taxation shall report in the aggregate the total number of approved projects, project costs, and associated amount of approved tax credits.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.16 Historic Preservation Tax Credit Fund

All Processing Fees collected pursuant to R.I. Gen. Laws Chapter 44-33.6 after July 1, 2013 shall be deposited in a historic preservation tax credit restricted receipt account within the historic preservation tax credit fund, which shall be used, to the extent resources are available, to refund or reimburse the state for any credits certified by the Division of Taxation.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.17 Application Guidelines

A.Certifications of Significance and Rehabilitation – General.

1.Application. Request for designation of a building as a Certified Historic Structure and of a proposed Rehabilitation shall be made on the Historic Preservation Certification Application forms.

a.Part 1 of the application is used to request certification of historic significance and is filed with the Commission and shall contain such information as is required in § 6.17(B)(2) of this Part;

b.Part 2 of the application is used to request certification of a proposed Rehabilitation plan as meeting the Standards for Rehabilitation. Part 2 of the application must be filed with and approved by the Commission prior to entering into a Contract with the Division of Taxation and shall contain such information as is required in § 6.17(D)(1) of this Part;

c.Part 3 of the application is used to request certification of a completed Rehabilitation project by the Commission;

d.The Part 1, Part 2 and Part 3 applications are submitted to and reviewed by the Commission;

e.In order to obtain an Assignable Historic Preservation Tax Credit Certificate upon issuance by the Commission of the Certificate of Completed Work, the Owner shall file the Accountant’s Certification with the Division of Taxation. The Owner shall also file with the Division of Taxation a complete and fully documented Rhode Island Form HTC-8016; and

f.The Owner must also have entered into a Contract with the Division of Taxation and paid the Processing Fee described in § 6.9(D) of this Part in order to qualify for tax credits.

2.Forms. Application forms are available from the Commission at the Old State House 150 Benefit Street, Providence, RI 02903; Tel: (401) 222-2678; website: www.preservation.ri.gov and from the Division of Taxation at One Capitol Hill, Providence, RI 02908; Tel. (401) 574-8970; website: www.tax.ri.gov.

3.Coordination with Federal Filings. If the Applicant also seeks to claim the federal historic Rehabilitation tax credit, application for the Rhode Island credit may be made on Parts 1, 2 and 3 of the Historic Preservation Certification Application used by the national park service, with such additional forms and certifications as may be requested by the Commission.

4.Commission and Division of Taxation Review. The Commission and the Division of Taxation generally complete reviews of certification requests within thirty (30) days of receiving a complete, fully documented application. Where adequate information is not provided, the Commission and/or the Division of Taxation will notify the Applicant of the additional information needed to complete the review. The Commission and the Division of Taxation will adhere to this time period as closely as possible, but failure to complete a review within the designated period does not waive or alter any certification requirement or imply approval. Notwithstanding the foregoing:

a.Within thirty (30) after receipt of a complete and fully documented application for a Certificate of Completed Work, the Commission must issue a written determination either granting or denying a Certificate of Completed Work; and

b.Within thirty (30) days after receipt of a complete and fully documented RI Form HTC-8016 and an Accountant’s Certification and a Certificate of Completed Work, the Division of Taxation shall issue a written determination as to the amount of historic preservation tax credit for which a Substantial Rehabilitation qualifies, conditioned on the Commission issuing a Certificate of Completed Work.

5.Commission Decisions; Reliance on Application. Certifications of Part 1, 2, and 3 are only given in writing by the Executive Director or other duly authorized representative of the Commission. Certifications of the amount of the historic tax credit for which the Rehabilitation qualifies are only given in writing by the Division of Taxation. Decisions with respect to certifications are made on the basis of the information contained in the application form and other available information. The Applicant’s signature on any application form is a representation to the Commission and to the Division of Taxation that the facts contained therein are true and correct, and the Commission and the Division of Taxation are entitled to rely thereon. If information comes to the attention of the Commission or the Division of Taxation at any time, up to and including the last day of the applicable Holding Period, that is materially inconsistent with representations made in an application, the Commission may deny the requested certifications or revoke a certification previously given or the Division of Taxation may terminate the Contract and any Processing Fees paid thereunder will be forfeited. Such denial or revocation may be appealed pursuant to the procedures set forth in § 6.18 of this Part.

B.Certification of Historic Significance.

1.Consultation. Any Owner may consult with the Commission to determine whether a property is a Certified Historic Structure.

2.Part 1 - Application. The Applicant shall submit Part 1 to the Commission. Such application form shall be filed according to the instructions accompanying the application.

3.Review of Application for Certification of Historic Structure.

a.Scope of Review. The Commission will determine if the property is:

(1)Listed individually on the national register of historic places;

(2)Listed individually on the State Register of Historic Places; or

(3)Located in a Registered Historic District and certified by either the Commission or the United States Secretary of the Interior as being of historic significance to the district.

b.Physical Integrity. The Commission will determine if the property possesses sufficient physical integrity to convey its historical significance.

c.Multiple Buildings or Complex. For purposes of a determination of historic significance, properties containing more than one building, where the Commission determines that the buildings have been functionally related historically to serve an overall purpose, such as a mill complex or a residence and carriage house, will be treated as a single certified historic building, whether the property is individually listed in the national register of historic places or the State Register of Historic Places or is located within a Registered Historic District. Buildings that are functionally related historically are those which have functioned together to serve an overall purpose during the property’s period of significance.

d.Determination of Significance to District. Properties within Registered Historic districts will be evaluated to determine if they contribute to the historic significance of the district by application of the standards set forth in § 6.17(B)(3)(c) of this Part.

e.Preliminary Determination of Eligibility for Listing a Structure. Owners of properties that are not listed on the national register of historic places or the State Register of Historic Places may request a written opinion from the Commission as to whether the property meets the criteria for listing on the register. Owners of properties that the Commission considers to be eligible for listing may apply for preliminary certification of their properties, pursuant to § 6.17(B)(3)(c) of this Part. Preliminary certifications will become final, and the properties will become Certified Historic Structures, as of the date of listing on the national register of historic places or the state register. Issuance of preliminary certification does not obligate the Commission to nominate the property. Applicants proceed with Rehabilitation projects at their own risk; if the historic property is not listed prior to completion of the project, the preliminary certification will not become final.

f.Preliminary Determination of Eligibility for Registering a District. Owners of properties that are located in potential historic district may request a written opinion from the Commission as to whether the potential historic district meets the criteria for being listed as a Registered Historic District. Owners of properties located in districts that the Commission considers to be eligible for listing may apply for preliminary certification of their properties. Applications for preliminary certification of buildings within eligible historic districts must show how the district meets the criteria for being listed as a historic district, and how the property contributes to the significance of that district, pursuant to § 6.17(B)(3)(c) of this Part. Preliminary certifications will become final, and the properties will become Certified Historic Structures, as of the date of listing the district as a Registered Historic District. Issuance of preliminary certification does not obligate the Commission to nominate the potential district. Applicants proceed with Rehabilitation projects at their own risk; if the historic district is not listed as a Registered Historic District prior to completion of the project, the preliminary certification will not become final.

C.Standards for Evaluating Significance within Registered Historic Districts

1.Evaluations of Significance. Some historic districts are resources whose concentration or continuity possess greater historical significance than many of their individual buildings. These usually are documented as a group rather than individually. Accordingly, this type of documentation is not conclusive for the purposes of an evaluation of the significance of an individual component. The Applicant shall supplement this documentation using Part 1 of the Historic Preservation Certification Application, providing information on the significance of the specific property, as set forth in § 6.17(B)(2) of this Part.

a.A property contributing to the historic significance of a district is one which by location, design, setting, materials, workmanship, feeling, and association adds to the district’s sense of time and place and historical development.

b. A property not contributing to the historic significance of a district is one which does not add to the district’s sense of time and place and historical development; or one where the location, design, setting, materials, workmanship, feeling and association have been so altered or have so deteriorated that the overall integrity of the building has been irretrievably lost.

3.If a non-historic surface material obscures a building’s facade, it may be necessary for the Owner to remove a portion of the surface material before requesting certification so that a determination of significance can be made. After the material has been removed, if the obscured facade has retained substantial historic integrity and the property otherwise contributes to the significance of the historic district, it may be determined to be a Certified Historic Structure.

D.Certifications of Rehabilitation.

a.Part 2 - Application. An application for certification of a proposed Rehabilitation shall be submitted to the Commission prior to the Certified Historic Structure being Placed-in-Service. Applicants are strongly encouraged to request the Commission’s review before beginning a Rehabilitation project. To request review of a proposed Rehabilitation, the Applicant shall submit Part 2 Application form according to the instructions accompanying the application. This documentation includes but is not limited to:

(2)Name and address of the property;

(3)Color photographs of the property adequate to document the appearance of the building, both on the Interior and the exterior, and its site and environment before Rehabilitation;

(4)The Applicant’s estimate of projected QREs and of Adjusted Basis in the Certified Historic Structure as of the date of application but no earlier than July 3, 2013;

(5)Signature of the Applicant and, if the Applicant is not the holder of the fee interest in the Certified Historic Structure, the signature of the fee Owner as to the Adjusted Basis in the Certified Historic Structure as of the date of application but no earlier than July 3, 2013;

(6)Other documentation, including but not limited to plans, specifications, surveys and/or structural reports may be required to evaluate Rehabilitation projects. Where necessary documentation is not provided, review and evaluation will be delayed and a denial of certification may be issued on the basis of lack of information. Because the circumstances of each Rehabilitation are unique, certifications that may have been granted to other Rehabilitations are not specifically applicable and may not be relied on by Applicants as applicable to other projects; and

(7)A reasonably detailed project timeline, including associated costs.

2.Part 3 - Application. To request certification of a completed Rehabilitation, the Applicant shall submit Part 3 of the Historic Preservation Certification Application, "Request for Certification of Completed Work," to the Commission according to the instructions accompanying the application, and provide documentation to the Commission that the completed project is consistent with the work described in Part 2. This documentation includes but is not limited to:

a.Name and mailing address of the Owner and, if the Owner holds leasehold title to the Certified Historic Structure or an identifiable portion thereof, the name and mailing address of the holder of the fee interest;

b.Name and address of the property;

c.Color photographs of the property showing the completed Rehabilitation work, including exterior and interior features and spaces, sufficient to demonstrate that the completed work is consistent with the Standards for Rehabilitation. Photographic views after Rehabilitation should correspond with photographic views submitted in Part 2;

d.Final costs attributed to the Rehabilitation;

e.The Placed-in-Service date; and

f.Signature of the Applicant.

3.Certification by Commission of Proposed Rehabilitation. The Commission shall issue to the Applicant a written determination either denying or certifying the proposed Rehabilitation.

4.Certification of Completed Work. Within thirty (30) days after the Commission’s receipt of a complete and fully documented application for certification of completed work, the Commission shall issue to the Applicant a written determination either denying or certifying the Rehabilitation "Certificate of Completed Work."

5.Assignable Historic Preservation Investment Tax Credit Certificate.

a.To request one or more Assignable Historic Preservation Tax Credit Certificates, the Applicant shall submit to the Division of Taxation:

(1)Accountant’s certification of the actual QREs attributed solely to the Rehabilitation of the certified historic building and the satisfaction of the Substantial Rehabilitation test;

(2)The Placed-in-Service date;

(3)A complete and fully documented Rhode Island Form HTC-8016; and

(4)The certification of completed work issued by the Commission.

b.Within thirty (30) days after the Division of Taxation’s receipt of the Accountant’s Certification, the Rhode Island Form HTC-8016 and the placed in-service date, the Division of Taxation shall issue to the Applicant a certification of the amount of historic preservation tax credit for which the Rehabilitation qualifies and shall issue a Assignable Historic Preservation Tax Credit Certificate pursuant to the procedures of § 6.21 of this Part; both of which are conditioned on the Commission issuing a Certificate of Completed Work.

6.Abandonment of Project.

a.For those projects that enter into a Contract with the Division of Taxation on or after August 1, 2013, and five (5) years have elapsed, the Commission and the Division of Taxation may require the Owner submit evidence that Substantial Construction has occurred which shall include the certification of an accountant licensed in the State of Rhode Island that at least ten percent of the estimated QREs have been incurred. If the project has not met the criteria of Substantial Construction the project shall be considered abandoned and shall forfeit the rights and entitlements to the tax credits and the Processing Fee.

b.At any time after payment of the Processing Fee and execution of a Contract, the Applicant may inform the Commission and the Division of Taxation in writing that it intends to abandon the project or to complete it without compliance with the Standards for Rehabilitation and that it relinquishes all claims to the tax credits and the Processing Fee.

E.Scope of Rehabilitation. For purposes of Commission reviews and certification, a Rehabilitation project encompasses all work on the interior and exterior of the certified historic building(s) and its site and environment, as well as related demolition, new construction or Rehabilitation work that may affect the historic qualities, integrity, site, landscape features, and environment of the property. The Commission will determine if such work is consistent with the Standards for Rehabilitation - whether or not a credit is claimed for those costs. However, only those costs that constitute QREs may be included in the calculation of the historic preservation tax credit. The Commission and the Division of Taxation may rely on the Accountant’s Certification regarding the QREs actually incurred included with the application without independent investigation. However, the Division of Taxation reserves the right to request additional documentation and supporting detail to verify QREs, including but not limited to, the original documents of entry, vendor lists, payroll record, accounts, and other records.

1.All elements of the Rehabilitation project shall be consistent with the Standards for Rehabilitation. Portions of a project that are not in conformance with the standards may not be exempted from review. In general, an Applicant undertaking a Rehabilitation will not be held responsible for Rehabilitation work not part of the current project that occurred more than five (5) years before the current project began, or Rehabilitation work not part of the current project that was undertaken by previous Owners.

2.Consistency with the Standards for Rehabilitation will be determined on the basis of the application documentation and other available information by evaluating the property, as it existed before the beginning of the Rehabilitation.

F.Determination of Consistency with Standards for Rehabilitation. The Commission, on receipt of the complete application describing the completed Rehabilitation project, shall determine if the project is consistent with the Standards for Rehabilitation. If the project does not meet the Standards for Rehabilitation, the Commission shall advise the Applicant of that fact in writing. Where possible, the Commission will advise the Applicant of necessary revisions to meet the Standards for Rehabilitation.

G.Determination of QREs. The Division of Taxation, upon receipt of the complete and fully documented Rhode Island Form HTC-8016, shall determine if the costs attributed to the Rehabilitation meet the criteria of QREs. If any costs of a project are denied as QREs, the Division of Taxation shall advise the Applicant of that fact in writing briefly setting forth the grounds for said denial.

H.Changes after Determination. Once a proposed or ongoing project has been approved, substantive changes in the work as described in the application shall be brought promptly to the attention of the Commission and the Division of Taxation by written amendment to the application to ensure continued consistency to the Standards for Rehabilitation.

I.Standards for Rehabilitation. The Standards for Rehabilitation are the criteria used to determine if a Rehabilitation qualifies as a Certified Rehabilitation (36 C.F.R. § 67).

J.Application of Standards for Rehabilitation. The Standards for Rehabilitation shall be applied to specific Rehabilitation projects in a reasonable manner taking into consideration economic and technical feasibility (36 C.F.R. § 67).

K.Quality of Materials and Work. The quality of materials, craftsmanship, and related new construction in a Rehabilitation project should be commensurate with the quality of materials, craftsmanship, and design of the Certified Historic Structure in question. This standard will be applied in a reasonable manner taking into account economic and technical feasibility. Certain treatments, if improperly applied, or certain materials by their physical properties, may cause or accelerate physical deterioration of historic buildings. Inappropriate Rehabilitation measures include, but are not limited to: excessively abrasive paint removal; improper masonry repointing techniques; improper exterior masonry cleaning methods; improper introduction of insulation where damage to historic fabric would result; and incompatible additions and new construction on historic properties. In almost all situations, these measures and treatments will result in denial of certification.

L.Certified Historic Structure to stabilize and repair weakened structural members and systems. In these cases, the Commission will consider this extreme intervention as part of a Certified Rehabilitation if:

1.The necessity for dismantling is justified in supporting documentation;

2.Significant architectural features and overall design are retained; and

Adequate historic materials are retained to maintain the architectural and historic integrity of the overall structure.

4.These standards will be applied in a reasonable manner taking into account economic and technical feasibility.

M.All Available Information Used in Determination. The qualities of a property and its environment which qualify it as a Certified Historic Structure are determined by taking into account all available information, including information derived from the physical and architectural attributes of the building; these determinations are not limited to information contained in the State Register of Historic Places nomination reports.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.18 Appeals

A.From an action of the Commission. For matters pertaining exclusively to application, and certification of historic Rehabilitation projects, any Person aggrieved by a denial action of the Commission shall notify the Commission in writing, within thirty (30) days from the date of mailing of the notice of denial or revocation by the Commission, and request a hearing relative to the denial or revocation. The Commission shall, as soon as is practicable, fix a time and place of hearing. Following the hearing, the Commission shall render a final decision. Appeals from a final decision of the Commission shall be to the Rhode Island Superior Court pursuant to R.I. Gen. Laws § 42-35-15.

B.Relating to a denial of tax credit or any portion thereof. Any Person aggrieved by the Division of Taxation’s denial of a tax credit or tax benefit under this program shall notify the Division of Taxation in writing, within thirty (30) days from the date of mailing of the notice of denial of the tax credit, and request a hearing relative to the denial of the tax credit. The Division of Taxation shall, as soon as is practicable, set a time and place for hearing, and shall render a final decision. The final decision of the Division of Taxation shall be deemed a final decision of the Tax Administrator. Appeals from a final decision of the Tax Administrator shall be to the Rhode Island Sixth (6th) Division District Court pursuant to R.I. Gen. Laws Chapter 8-8 et seq. The taxpayer’s right to appeal to the district court is expressly made conditional upon prepayment of all taxes, interest, and penalties, unless the taxpayer files a timely motion for exemption from prepayment with the district court in accordance with the requirements imposed pursuant to R.I. Gen. Laws § 8-8-26.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.19 Substantial Rehabilitation; Qualified Rehabilitation Expenditures

A.Substantial Rehabilitation.

1.A Rehabilitation of Certified Historic Structure shall be deemed a Substantial Rehabilitation only if the QREs incurred in the twenty-four (24) month period selected by the Owner ending within the taxable year in which the Rehabilitation is Placed-in-Service and beginning no earlier than July 3, 2013 shall exceed the Adjusted Basis of the Certified Historic Structure as of the beginning of the twenty-four (24) month period or July 3, 2013, whichever is later. In the case of projects involving multiple buildings (except for phased Rehabilitations addressed in § 6.19(B) of this Part below), the Substantial Rehabilitation test must be met with respect to each building separately based on the Adjusted Basis attributable to each such building and the QREs attributable to each such building. The twenty-four (24) month period is a Measuring Period for testing whether the Rehabilitation is a Substantial Rehabilitation. QREs incurred in connection with the Rehabilitation either before the beginning of the twenty-four (24) month period, but not prior to July 3, 2013, or after the Rehabilitation is Placed-in-Service but prior to the end of the taxable year in which the Rehabilitation is Placed-in-Service may be included in the calculation of the credit provided the Substantial Rehabilitation test is met. Expenditures incurred prior to July 3, 2013 are ineligible as QREs, but are included in the calculation of Adjusted Basis.

2.In the case of any Rehabilitation that may reasonably be expected to be completed in phases as set forth in architectural plans and specifications prepared before the physical work on the Rehabilitation begins, at the election of the Owner, § 6.19(A) of this Part may be applied by substituting sixty (60) month period for twenty-four (24) month period. A Rehabilitation may reasonably be expected to be completed in phases if it consists of two or more distinct stages of development. The Commission may review each phase of a Phased Project as it is presented, and may issue a certificate for completed work upon completion of each phase. However, an Assignable Historic Preservation Tax Credit Certificate may be issued only upon satisfaction of the Substantial Rehabilitation test for the entire Phased Project. Thereafter, Assignable Historic Preservation Tax Credit Certificates may be issued upon receipt of a Certificate of Completed Work for later phases without again having to meet the Substantial Rehabilitation test. The Applicant may elect to claim the credit allowable for each completed phase of a Phased Project, upon receipt from the Division of Taxation of an Assignable Historic Preservation Tax Credit Certificate, which shall be issued no earlier than the estimated completion date for such phase set forth in the Contract. Any credit claimed prior to final certification of the completed Rehabilitation will be contingent upon final certification of the completed Rehabilitation.

B.Qualified Rehabilitation Expenditures (QREs).

1.QREs are those amounts expended in the Rehabilitation of a Certified Historic Structure properly capitalized to the building and either:

a.Depreciable under the IRC; or

b.Made with respect to property (other than the Principal Residence of the Owner) held for sale by the Owner.

2.Amounts are properly capitalized to the building if they are properly includible in computing the depreciable basis of real property under federal income tax law. Amounts treated as an expense and deducted in the year paid or incurred or amounts that are otherwise not added to the basis of real property do not qualify. Amounts incurred for soft costs – including, without limitation, architectural and engineering fees, survey fees, legal expenses, insurance premiums, development fees and other construction related costs that are added to the depreciable basis of real property - satisfy this requirement.

3.Expenses that do not qualify as QREs include, without limitation:

a.The cost of acquiring a building, an interest in a building (including a leasehold interest) or land. For this purpose, interest incurred on a construction loan, the proceeds of which are used for QREs (and which is added to the basis of the certified historic building), is not treated as a cost of acquisition.

(1)Example: A historic Rehabilitation project includes a new rear wing. A new air-conditioning system and a new roof are installed on the building. A reasonable basis for allocating the expenditures between the historic building and the new rear wing generally would be the volume of the historic building (excluding the new wing), served by the air-conditioning system on the roof, relative to the volume of the new wing that is served by the air-conditioning system and the roof.

c.Any expense attributable to the Rehabilitation of a Certified Historic Structure, or a building located in a Registered Historic District, which is not a Certified Rehabilitation.

d.Any site work expenses.

e.Any costs of demolition of adjacent structures.

f.Processing Fees imposed under R.I. Gen. Laws Chapter 44-33.6.

g.Additional expenses that do not qualify as QREs include, without limitation:

(1)Appliances;

(2)Cabinets;

(3)Carpeting (if tacked in place and not glued);

(4)Decks (not part of the original building);

(5)Fencing;

(6)Feasibility studies;

(7)Financing fees;

(8)Furniture leasing expenses;

(9)Landscaping;

(10)Moving (building) costs (if part of acquisition);

(11)Outdoor lighting remote from building;

(12)Parking lot;

(13)Paving;

(14)Planters;

(15)Porches and porticos (not part of original building);

(16)Retaining walls;

(17)Sidewalks;

(18)Signage;

(19)Storm sewer construction costs; or

(20)Window treatments.

4.Public Grants. Except in the case of nonprofit corporations, there shall be deducted for purposes of calculating the historic preservation tax credit any funds made available to the Person incurring the QREs in the form of a direct grant from a federal, state or local governmental entity or agency or instrumentally thereof.

C.Step in the Shoes.

1.The Owner may take into account QREs incurred in connection with the same plan of Rehabilitation by any other person who has or had an interest in the building. Where QREs are incurred with respect to a building by a Person (or Persons) other than the Owner, and the Owner acquires the building or a portion of the building (including a leasehold interest in the building or a portion thereof) to which the expenditures were allocable, the Owner acquiring such property will be treated as having incurred the QREs actually incurred by the transferor, provided that:

a.The Rehabilitation was not Placed-in-Service by the transferor; and no credit with respect to such QREs is claimed by anyone other than the Owner acquiring the property or that Owner’s Assignee(s).

b.The Adjusted Basis against which QREs are tested shall be the Adjusted Basis of the transferor as of the beginning of the Measuring Period, provided that no QREs incurred before July 3, 2013 may be included in calculating the tax credits available to the project.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.20 Determination of Credit

A.The amount of the credit shall be determined by multiplying the total amount of QREs incurred in connection with the plan of Rehabilitation by the appropriate percentage as elected in the Contract. QREs may include expenses in connection with the Rehabilitation which were incurred prior to the start of Rehabilitation or of the Measuring Period but not prior to July 3, 2013. Further, QREs may include expenses incurred prior to completion of a formal plan of Rehabilitation but not prior to July 3, 2013, provided the expenses were incurred in connection with the Rehabilitation which was completed.

B.The Division of Taxation shall certify the amount of QREs. In the case of Phased Projects, the Division of Taxation shall certify the amount of QREs for each phase.

C.The Division of Taxation shall also issue an Assignable Historic Preservation Tax Credit Certificate, which shall certify as to the amount of historic preservation tax credit for which the Substantial Rehabilitation qualifies as more fully provided in § 6.21 of this Part.

D.The Division of Taxation may rely without independent investigation on the Accountant’s Certification as to the amount of QREs actually incurred and the satisfaction of Substantial Rehabilitation test. However, the Division of Taxation reserves the right to review such certifications and to audit the original documents of entry, vendor lists, payroll records, accounts or other records supporting such Accountant’s Certification.

E.If the amount of the credit exceeds the taxpayer’s tax liability for the taxable year in which the credit may be claimed, the amount that exceeds the tax liability may be carried over for credit against the income taxes of such taxpayer for the next ten (10) taxable years or until the full credit is used, whichever occurs first.

F.In the case of a corporation, the historic preservation tax credit is only allowed against the tax of a corporation included in a consolidated return that qualifies for the credit and not against the tax of other corporations that may join in the filing of a consolidated tax return.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.21 Assignment of Historic Preservation Tax Credits

A.Issuance of Assignable Historic Preservation Tax Credit Certificate to Owner, initial Assignee, or participant. Upon approval by the Commission of the Substantial Rehabilitation of a Certified Historic Structure and by the Division of Taxation of the amount of credit allowed pursuant to these rules, the Division of Taxation shall issue an Assignable Historic Preservation Tax Credit Certificate to the Owner or any eligible Initial Certificate Holder. If the Owner or the participant is a pass-through entity, or if there are multiple Owners, the Division of Taxation may issue an Assignable Historic Preservation Tax Credit Certificate to each participant in such pass-through entity or each Owner, indicating on the face of such certificate(s) the amount of the historic preservation tax credit allocable to such participant. The amount assigned to each participant will be the amount represented by the Applicant in the application for issuance of tax credit certification.

B.Determination of Amount of Credit allocated to Participants in Pass-Through Entities. The amount allocated to each participant on the Assignable Historic Preservation Tax Credit Certificate issued to such participant must be either:

1.In proportion to the number of participants in the Owner; or

2.Determined in accordance with any allocation method set forth in an Allocation Agreement among all participants, which may be without regard to their sharing of other tax or economic attributes of such entity set forth in the Allocation Agreement. The Division of Taxation shall have no obligation to confirm the amount stated for each participant in the application for completed work or to review the Allocation Agreement.

C.Assignment of Certificate. An Assignable Historic Preservation Tax Credit Certificate may be assigned to any Person, whether or not such Person has an Ownership interest in the Certified Historic Structure, provided that no credit has been claimed based on the Assignable Historic Preservation Tax Credit Certificate being assigned. The certificate may be assigned by endorsing the assignment clause set forth on the certificate and delivery of the original certificate to the Assignee. Assignees of the credit and their Assignees may further assign the credits, provided that no credit has been claimed based on the Assignable Historic Preservation Tax Credit Certificate being assigned.

D.Assignee Recognition of Credit. The Assignee may use the historic preservation tax credit only to offset the tax imposed for the taxable year in which the certified structure or an identifiable portion thereof is Placed-in-Service, or for taxable years to which the credit is carried forward. The Assignee may apply the historic preservation tax credit against taxes imposed on the Assignee until the end of the tenth (10th) calendar year after the year in which the Substantial Rehabilitation is Placed-in-Service or until the full credit assigned is used, whichever occurs first. Fiscal year Assignees may claim the credit until the expiration of the fiscal year that ends within the tenth (10th) year after the year in which the Substantial Rehabilitation is Placed-in-Service.

E.Filing with Tax Return. An original executed copy of the Assignable Historic Preservation Tax Credit Certificate shall be attached to the tax return of the Owner, participant or Assignee who desires to claim the credit. A participant of a pass-through entity who transfers its interest in the entity must also endorse and deliver the Assignable Historic Preservation Tax Credit Certificate to the transferee if the transferee desires to claim the historic preservation tax credit.

F.Notification of Assignment to Division of Taxation. An Assignor of all or any portion of the historic preservation tax credit shall notify the Division of Taxation in writing within thirty (30) calendar days following the effective date of such assignment. Attached to such written notification (the Notification of Assignment) shall be:

1.A copy of the Assignable Historic Preservation Tax Credit Certificate, endorsed to the Assignee. The original certificate shall not be included with the Notification of assignment, which must be retained by the Assignee and attached to the Assignee’s tax return for the year with respect to which the historic preservation tax credit is claimed.

A copy of the Certificate of Completed Work issued by the Commission.

3.The name, address and telephone number of the Assignor and of the Assignee.

4.The taxpayer identification number or social security number of the Assignor and the Assignee.

5.For non-resident corporations, partnerships, LLCs, or other entities, the name and address of such entity’s registered agent in the state of Rhode Island and evidence of qualification to do business in Rhode Island.

G.Multiple Assignees; Reissuance of Certificate. If an Assignable Historic Preservation Tax Credit Certificate has not been used in whole or in part, and the holder desires to assign its interest in the credit to one or more Assignee(s), the holder must make a request of the Division of Taxation to reissue the original certificate in such number of certificate(s) as the holder desires. The request must be made in writing, must specify the number of new certificates desired and the amount to be specified on each certificate, and must attach the original certificate for cancellation by the Division of Taxation.

H.Treatment of Proceeds of Assignment for State Tax Purposes. The Assignor of all or a portion of the historic tax credit shall not recognize any state income tax under the provisions of R.I. Gen. Laws Title 44 with respect to the proceeds of such assignment. The Assignor of any credit shall attach a copy of the Assignable Historic Preservation Tax Credit Certificate to its tax return to evidence that such proceeds are not subject to state income tax. If the historic preservation tax credit is subsequently recaptured under R.I. Gen. Laws § 44-33.6-4(h), revoked or adjusted, the Assignor’s tax calculation for the year of revocation, recapture, or adjustment shall be increased by the total amount of the sales proceeds, if any, without proration, as a modification under R.I. Gen. Laws Chapter 44-30. In the event that the Assignor is not a natural person, the Assignor’s tax calculation under R.I. Gen. Laws Chapters 44-11, 44-13 (other than with respect to the tax imposed under R.I. Gen. Laws § 44-13-13), 44-14, 44-17, or 44-30 as applicable, for the year of revocation, recapture, or adjustment, shall be increased by including the total amount of the sales proceeds, if any, without proration.

I.Administrative Fees. The Commission and/or the Division of Taxation may assess reasonable administrative fees for issuing multiple Assignable Historic Preservation Tax Credit Certificates or for reissuing certificates.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.22 Processing Fees and Contracts of Guaranty

A.Within thirty (30) days of the date of Part 2 certification, the Applicant shall pay to the Division of Taxation a non-refundable Processing Fee equal to three percent (3%) of the estimated QREs and shall enter into a Contract with the Division of Taxation.

B.The Contract will guarantee the amount of tax credit as the lesser of:

1.The amount specified in the Contract; or

2.The actual QREs as verified by the Division of Taxation multiplied by the applicable tax credit percentage as provided in § 6.7 of this Part, provided that the project’s Substantial Construction activities are commenced within twelve (12) months from the certification date of the Part 2 Application, that the project has not Remained Idle, and that the tax credits are not otherwise revoked, forfeited, recaptured or disallowed pursuant to the express provisions of this regulation.

C.The Contract shall be assignable:

1.to an Affiliate of the Person incurring the QREs, without consent from the Division of Taxation;

2.to a banking institution as defined by R.I. Gen. Laws § 44-14-2 or credit union as defined by R.I. Gen. Laws § 44-15-1.1(1), without consent from the Division of Taxation;

3.to a Person, firm, partnership, trust, estate, LLC, corporation (whether for profit or nonprofit) or other business entity that incurs QREs for the Substantial Rehabilitation of Certified Historic Structures or some identifiable portion of a structure, with such assignment to be approved by the Division of Taxation, which approval shall not be unreasonably withheld or conditioned; or

4.to any other Person, firm, partnership, trust, estate, LLC, corporation (whether for profit or nonprofit) or other business entity that is approved by the Division of Taxation, which approval shall not be unreasonably withheld or conditioned.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.23 Restrictive Covenant; Recapture

A.Restrictive covenant. Upon issuance of a Certificate of Completed Work, the Owner shall cause to be recorded in the applicable land evidence records a restrictive covenant pursuant to which:

1.During the Holding Period, no alteration to the Certified Historic Structure will be made without the Commission’s approval and in a manner consistent with the Standards for Rehabilitation;

2.The Certified Historic Structure may not become Exempt from Real Property Tax; and

B.Recapture. No credit may be claimed with respect to property that is Exempt from Real Property Tax. Any credit claimed under the Act shall be recaptured in full (by increasing the taxpayer’s tax for the year by the total amount of historic preservation tax credit actually used against the tax) if, within twenty-four (24) months after the issuance of a Certificate of Completed Work, the property becomes Exempt from Real Property Tax. The Assignor, if any, of any recaptured credit shall recognize income in the amount of the proceeds of the assignment upon any recapture of the credit. Recapture of the credit may be appealed to the Division of Taxation in accordance with § 6.18 of this Part.

C.Liability for Recapture. In the event that tax credits that are subject to recapture have been transferred or assigned, the state will pursue its recapture remedies and rights against the Assignor or transferor of the tax credits or any other interested or responsible parties. No redress shall be sought against Assignees or transferees of such credits provided they acquired the tax credits by way of an arms-length transaction, for value, and without notice of violation, fraud or misrepresentation. It will be presumed that any transferee or Assignee who is an Affiliate or a participant of the Assignor has notice of violation, fraud or misrepresentation and did not acquire the tax credits in an arms-length transaction.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.24 Inspection Rights

A.Commission’s and Division of Taxation’s Inspection Rights. The Commission or the Division of Taxation shall have the right at reasonable times to make an Inspection and to enter upon any property that is the subject of an application for certification, whether the Rehabilitation is proposed, ongoing, or completed, and for the entire Holding Period following issuance of a Certificate of Completed Work, to verify that the Rehabilitation is as represented and that no unpermitted alterations or changes are made after issuance of a Certificate of Completed Work.

B.Commission’s and Division of Taxation’s Inspection Rights to Deny or Revoke Credit. If information comes to the attention of the Commission at any time up to and including the last day of the Holding Period that is materially inconsistent with representations made in an application, the Commission may deny the requested certification or revoke a certification previously given. If information comes to the attention of the Division of Taxation at any time up to and including the last day of the Holding Period that is materially inconsistent with representations made in the Accountant’s Certification or any supporting materials, the Division of Taxation may revoke the Assignable Historic Tax Credit Certificate and cancel the Contract for tax credits and any Processing Fees paid thereunder shall be forfeited, and the Applicant shall forfeit the rights and entitlements to any remaining tax credits. If any tax credits have been claimed by any taxpayer based on an Assignable Historic Preservation Tax Credit Certificate that has been revoked or a Contract that has been canceled, the Person who filed the Accountant’s Certification shall pay to the Division of Taxation an amount equal to the tax credits issued. There shall be no adjustment to the tax credit claimed by the taxpayer if a taxpayer acquired the Assignable Historic tax Credit Certificate, directly or indirectly, from the Owner or a participant in the Owner without notice of the materially inconsistent information upon which the certificate or Contract has been revoked.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-6 § 6.25 Sunset

No credits shall be authorized to be reserved or contract entered into pursuant to R.I. Gen. Laws Chapter 44-33.6 on or after the established date in R.I. Gen. Laws § 44-33.6-11 or upon the exhaustion of the maximum aggregate credits, whichever comes first.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2014-02-27 to 07/31/2018

280-RICR-20-20-11 Small Business Capital Development

280-RICR-20-20-11 § 11.1 General

R.I. Gen. Laws Chapter 44-43 provides special tax incentives for small business capital development. These special incentives are of three types: deductions or modifications for investment, capital gain exclusions and wage credits.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-11 § 11.2 Certification

No deductions, modifications, capital gain exclusions or wage credits will be allowed unless the qualifying business entity or certified venture capital partnership has been certified (or recertified) by the Commerce Corporation to tax incentive eligibility. The certification number must be shown where required on all tax incentive claims.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-11 § 11.3 Definition

A.In general, definitions and regulations set out by the Commerce Corporation in accordance with R.I. Gen. Laws § 44-43-7 will be used in administering the small business capital development incentives unless a different meaning is clearly intended.

1."Entrepreneur" means any individual employed full time by the qualifying business entity who owns an equity interest in the qualifying business entity of at least 5% of the value of the entity.

2."Value of the entity" means the net book value of the entity as shown on the entity's books and records computed for each calendar year for the purposes of calculation of the wage credit.

3."Wages" means the sums defined in Internal Revenue Code, 26 U.S.C. § 3121(a).

4."Qualifying investment" means that part of a taxpayer's investment in a certified venture capital partnership (Internal Revenue Code, 26 U.S.C. § 702(a)(8)) that was invested by the partnership in qualifying business activities during the taxpayer's taxable year.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-11 § 11.4 Deductions or Modifications

A.General: As applicable, deductions or modifications for investments in certified venture capital partnerships or in qualifying business entities are allowed in the computation of business corporation tax (R.I. Gen. Laws Chapter 44-11), public service corporation tax (R.I. Gen. Laws Chapter 44-13), bank excise tax (R.I. Gen. Laws Chapter 44-14), gross premiums tax (R.I. Gen. Laws Chapter 44-17) and personal income tax (R.I. Gen. Laws Chapter 44-30).

B.Calculation and Documentation: The deduction or modification allowed is equal to the taxpayer's qualifying investment in a certified venture capital partnership or equal to the entrepreneur's investment in a qualifying business entity. The amount is measured at the year end of the certified venture capital partnership, the year end of the qualifying business entity or the year end of the investing taxpayer, whichever comes first. The deduction or modification is allowed only in the year in which the taxpayer first makes an investment.

1.EXAMPLE: C Corporation makes a first time investment of $40,000 in a certified venture capital partnership which invests 90% of its capital in qualifying activities. All year ends coincide. C Corporation may deduct 90% of the $40,000 or $36,000 from net income in computing its business corporation tax under R.I. Gen. Laws Chapter 44-11.

2.EXAMPLE: John Taxpayer is an entrepreneur in Small Company, a qualifying business entity, and makes two investments of $10,000 each. One investment is made on March 10 and the other is made on July 10. John is a calendar year taxpayer and Small Company is a June 30 year end. John is entitled to a modification of $10,000 reducing his federal adjusted gross income because Small Company's year end (June 30) occurs first and, at that time, John had made only the March 10th investment of $10,000. Taxpayers seeking the deduction or modification must provide proof of the investment in a certified venture capital partnership or qualifying business entity; of that partnership's or entity's status AT THE DATE OF INVESTMENT; of the amount of investment and of the year ends of the taxpayer and partnership or entity. The taxpayer must show the certification number of the certified venture capital partnership or qualifying business entity where indicated on appropriate tax forms.

C.Restrictions and Carryovers:

1.The deduction or modification cannot reduce the business corporation tax, public service corporation tax or bank excise tax to less than $100.

2.The deduction or modification cannot reduce the personal income tax or gross premiums tax to less than $0.

3.If the investor entitled to a deduction is a partnership, joint venture or small business corporation, the deduction shall be divided in the same manner as income.

4.The deduction allowed in the computation of net income (business corporation tax) shall only be allowed to that corporation (included in a consolidated return) that qualifies for the deduction and may not be used in the computation of net income of other corporations that may join in the filing of a consolidated return.

5.Amounts of unused deduction or modification may not be carried over to the following year.

D.Recapture:

1.The taxpayer or entrepreneur which has been allowed a deduction or modification must recapture ALL the deduction or modification in the year:

a.the taxpayer or entrepreneur sells, exchanges or otherwise has a reduction in his/her interest in a qualifying business entity, or

b.in which there is a reduction in the taxpayer's interest in a qualifying investment in a certified venture capital partnership.

2.The recapture is limited to the proceeds resulting from any such reduction.

3.There will be no recapture as a result of the death of an entrepreneur or taxpayer, nor will there be recapture of any investment held by the entrepreneur or taxpayer for at least 5 years.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-11 § 11.5 Capital Gains Exclusion

A.General: The calculation of business corporation tax, public service corporation tax, bank excise tax or personal income tax may exclude long term capital gains from the sale or exchange of an interest in a qualifying business entity or certified venture capital partnership.

B.Calculation and Documentation: To the extent that a long term capital gain (Internal Revenue Code 26 U.S.C. § 1222(3)) was included in the calculation of tax under R.I. Gen. Laws Chapter 44-11, R.I. Gen. Laws Chapter 44-13, R.I. Gen. Laws Chapter 44-14 or R.I. Gen. Laws Chapter 44-30, the gain shall be excluded if:

1.it is recognized by a partner in a certified venture capital partnership from the sale or exchange of an interest in the partnership, or

2.it is a partner's distributive share (from a certified venture capital partnership) of a long term capital gain recognized by the partnership from the sale or exchange of an interest in a qualifying business entity; or

3.it is recognized by an entrepreneur from the sale or exchange of an interest in a qualifying business entity.

C.EXAMPLE: B Corporation is a one-half partner in a certified venture capital partnership. During the year, the partnership sold an interest in a qualifying business entity resulting in a long term capital gain of $250,000. The partnership invests 100% in qualifying activities. B Corporation is entitled to exclude its distributive share or $125,000 from its calculation of business corporation tax under R.I. Gen. Laws Chapter 44-11. Because of the length of time which may pass between the certification of businesses as either qualifying business entities or as certified venture capital partnerships, the investment in these businesses and the subsequent sale or exchange resulting in long term capital gains, taxpayers seeking exclusion of the gain must provide proof of the date and amount of the investment in the qualifying business entity and/or certified venture capital partnership. Taxpayers must also provide documentation that the entity or the partnership had been property certified by the Department of Economic Development when the taxpayer acquired the interest. Additionally, in the case of the distributive share from a certified venture capital partnership, it is the taxpayer's responsibility to secure and retain documentation that the business entity in which the partnership invested was properly certified by the Department of Economic Development at the time the partnership invested.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-11 § 11.6 Wage Credit

A.General: A credit is available against an entrepreneur's personal income tax (R.I. Gen. Laws Chapter 44-30) for his/her share of wages paid by a qualifying business entity.

B.Calculation and Documentation: The wage credit is computed annually beginning with the first calendar year in which the business first qualified as a qualified business entity. The credit is first computed at 3% of the wages paid to employees for the calendar year in excess of $50,000 and excludes;

1.wages paid to owners;

2.wages paid more than 5 years after the start or purchase of the business; and

3.wages paid to employees who are not principally employed in Rhode Island and whose wages are not subject to Rhode Island withholding.

4.The credit is then divided among the entrepreneurs of the qualifying business entity by using the ratio of each entrepreneur's interest compared to the total interest held by all entrepreneurs.

C.EXAMPLE: A corporation has been certified as a qualifying business entity and, for its first year of certification, it paid $300,000 in wages to employees. It has been in business for 2 years. Part of the wages paid include $20,000 to owners and $22,000 paid to sales people working in Massachusetts and subject to Massachusetts withholding. The total credit is computed as follows:

Total Wages $300,000

Base Exclusion 50,000

Subtotal $250,000

Owners' Wages 20,000

Out-of-State Wages 22,000

Eligible Wages $208,000 @ 3%

Credit $ 6,240

1.The credit is then divided among the entrepreneurs according to their interests in A Corporation. If there were two entrepreneurs in A Corporation with equal interests, each would be eligible for a $3,120 credit against his/her Rhode Island personal income tax. Documentation showing the composition and calculation of the total credit by the qualifying business entity and of each of the entrepreneur's shares shall be prepared by the qualifying business entity and shall be attached to the personal income tax return of each entrepreneur claiming a share.

D.Restrictions and Carryovers

1.The wage credit cannot reduce the entrepreneur's personal income tax to less than $0 and is not refundable.

2.Amounts of wage credit available to the entrepreneur may not be applied against his/her tax liability until all other credits available to the entrepreneur have been applied.

3.Amounts of unused wage credit may not be carried over to the following year.

4.The wage credit ceases in the tax year following the year in which the qualifying business entity's average annual gross revenue exceeds $1,500,000.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-12 Elective Deduction for New Research and Development Facilities

280-RICR-20-20-12 § 12.1 General

A.For taxable years beginning on or after July 1, 1974, at the election of a taxpayer who is subject to the income tax imposed by R.I. Gen. Laws Chapter 44-11 or 44-30, there shall be deducted from the portion of its entire net income allocated within this state, a one-year write-off of new research and development facilities, as described in R.I. Gen. Laws § 44-31-2, in lieu of depreciation or investment tax credit. The research and development deduction shall be allowed on all qualifying depreciable tangible property including buildings constructed, reconstructed, erected or acquired during the taxable year, provided, however, that a research and development deduction will be allowed against the entire net income of only that corporation, included in a consolidated Rhode Island tax return, that qualifies for the research and development deduction and will not be allowed against the entire net income of other corporations that may join in the filing of a consolidated Rhode Island tax return with such corporation.

B.In order to qualify for this deduction from allocated net income, the property must:

1.be new property (not used);

2.be depreciable pursuant to 26 U.S.C. § 179(d);

3.be acquired by purchase as defined in 26 U.S.C. § 179(d);

4.have a situs in this state;

5.be used or acquired for use by the taxpayer in Rhode Island in its trade or business for the purposes of research and development in the experimental or laboratory sense;

6.not have been allowed an election for amortization of air or water pollution control facilities;

7.not have been allowed an investment tax credit;

8.not be leased to or by the taxpayer.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 12/20/2001
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-12 § 12.2 Time and Scope of Election

The election provided by R.I. Gen. Laws § 44-31-1 may be made for any taxable year beginning on or after July 1, 1974, but only if made not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof).

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 12/20/2001
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-12 § 12.3 Deduction Allowed

The deduction for new research and development facilities shall be allowed in the year in which the expenditure is paid or incurred, provided, however, that only the portion of expenditures that is property attributable to construction, reconstruction, erection or acquisition on or after July 1, 1974 is taken into account. Any unused deduction may be carried forward for three years. A research and development deduction shall be applied only after any net operating loss deduction has been applied for that year.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 12/20/2001
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-12 § 12.4 Definitions

A."Research and Development Deduction" means the elective deduction under R.I. Gen. Laws § 44-32-1 for expenditures paid or incurred during the taxable year for new depreciable tangible property including buildings which is used or to be used by the taxpayer in its trade or business for the purpose of research or development in the experimental or laboratory sense. The term "research and development" includes, generally, the development of an experimental or pilot model, a plant process, a product, a formula, an invention or similar property and the improvement of already existing property of the type mentioned. The term "research and development" does not include the ordinary testing or inspection of materials or products for quality control, efficiency surveys, management studies, consumer surveys, advertising, promotions or research in connection with literary, historical or similar projects.

B."Taxpayer" mean and include, as appropriate, an individual, a partnership, a corporation or other taxable entity.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 12/20/2001
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-12 § 12.5 Depreciation not Allowed

The research and development deduction shall be allowed only on condition that entire net income for the taxable year and all succeeding taxable years be computed without the deduction of any such expenditures allowed for federal purposes and without any deduction for depreciation of the same property except to the extent that its basis may be attributable to factors other than such expenditures. In case only a part of the deduction for research and development facilities is allowable pursuant to this section and a deduction is fully allowable for federal income tax purposes, then such expenditures and depreciation as allowed for federal purposes shall be proportionately reduced for the taxable year and all succeeding taxable years.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 12/20/2001
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-12 § 12.6 Leased Property

A.A taxpayer shall not be allowed a deduction with respect to tangible property leased by it to any other person or corporation or leased from any other person or corporation. For the purpose of the preceding sentence, any contract or agreement to lease or rent or for a license to use such property shall be considered a lease unless such contract or agreement is treated for federal income tax purposes as an installment purchase rather than a lease.

B.In order to be considered the owner of such property, a taxpayer must be allowed federal depreciation on such property. Since property rented to others does not qualify for the deduction, the deduction shall not be allowed where the purchaser is not the user of the qualified property, even where the purchaser and the user may be included in a consolidated federal and/or a consolidated state tax return.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 12/20/2001
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-12 § 12.7 Recomputation

A.A recomputation of a portion of the research and development deduction is required where property on which such deduction has been allowed is used for purposes other than research and development to a greater extent than originally reported, except where the property was in qualified use in Rhode Island for its entire useful life. As used in R.I. Gen. Laws 44-32-1(1)(a) and this paragraph, the phrase "purposes other than research and development" includes any change in use of the property in whole or in part from that which originally qualified the property for the research and development deduction. For the purpose of this paragraph, the useful life of the property shall be the same as the taxpayer uses for depreciation purposes when computing the federal tax liability.

B.The following are examples of events that may require a recomputation of the research and development deduction:

1.Liquidation or legal dissolution;

2.Exchange of property;

3.Foreclosure of a security interest;

4.Retirement prior to expiration of useful life;

5.Involuntary conversion arising from fire, storm, shipwreck, or other casualty, or from theft;

6.Leasing property;

7.Removal of property from Rhode Island;

8.Termination of ownership interest;

9.Reduction or cessation of qualified use;

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 12/20/2001
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-12 § 12.8 Property Ceasing to Qualify

A.Generally, the format for the computation of the research and development deduction to be recomputed as Rhode Island income when the property is used for purposes other than for research and development will be;

1.Research and development deduction taken on property ceasing to qualify X Useful Life (in months) - Qualified Use (in months) = Useful life (in months)

2.Research and development deduction recomputed is reportable as additional Rhode Island income for the year or years for which the deduction was allowed. Any tax that may be due as a result of this recomputation must be paid at the time of reporting such recomputation.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 12/20/2001
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-12 § 12.9 Transaction in which Recomputation is not Required

A.A recomputation of the research and development deduction is not required if all of the following elements are present in the transaction:

1.The property is transferred from one taxpayer to another by a transaction in which the basis of the property in the hands of the transferee is determined in whole or in part by reference to the basis in the hands of the transferor, or a mere change in the form of the taxpayer's business; and

2.the acquiring taxpayer is taxable under R.I. Gen. Laws Chapters 44-11 or 44-30, and

3.the property continues to be in qualified use:

B.If all of the preceding elements are present in the transaction, such transfer will not require a recomputation of the research and development deduction, and any unused research and development deduction on the transferred property may be passed through to and carried forward by the acquiring taxpayer;

C.If the property in the hands of the acquiring taxpayer is not in qualified use for its entire life, a recomputation of the research and development deduction by the acquiring taxpayer is required. In measuring the period of qualified use, the period during which the property was held by the transferor taxpayer and the acquiring taxpayer shall be taken into account.

D.A recomputation is required where a transfer is made other than to an acquiring taxpayer taxable under R.I. Gen. Laws Chapters 44-11 or 44-30 (on the theory that the property is no longer in qualified use).

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 12/20/2001
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-12 § 12.10 Non-recognized Gain or Loss

In any taxable year the gain or loss entering into the computation of federal taxable income from the sale or other disposition of property before the end of its useful life on which a research and development deduction has been allowed, shall be disregarded in computing entire net income and there shall be added to or subtracted from the portion of entire net income allocated within the state the gain or loss upon such sale or other disposition. In computing such gain or loss the basis of the property sold or disposed of shall be adjusted to reflect the research and development deduction allowed under R.I. Gen. Laws § 44-32-1. No loss will be recognized with respect to a sale or other disposition of qualified property to a taxpayer whose acquisition thereof is not a purchase as defined in section 179(d) of the Internal Revenue Code (26 U.S.C. § 179(d).

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 12/20/2001
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-12 § 12.11 Sale of Qualified Property

A.A sale, as described in § 12.10 of this Part, will include any transaction giving rise to both realized and recognized gain or loss as those terms are understood for federal income tax purposes. Any transaction not giving rise to both realized and recognized gain or loss for federal income tax purposes will not constitute a sale. The terms "or other disposition" appearing in § 12.10 of this Part, and "disposed of" appearing in R.I. Gen. Laws § 44-32-1(5) are defined as any transaction substantially equivalent to a sale.

B.Any event or transaction not constituting a sale or other disposition will be subject to the rules regarding recomputations under R.I. Gen. Laws § 44-32-1(a) and §§ 12.7, 12.8, and 12.9 of this Part.

C.In any case where property which has been the subject of a research and development deduction is liable to a recomputation under R.I. Gen. Laws § 44-32-1(a) and §§ 12.7, 12.8, and 12.9 of this Part, and is subsequently sold or otherwise disposed of by the taxpayer, the subsequent sale will be accountable to R.I. Gen. Laws § 42-35-1(5) and § 12.10 of this Part. However, an appropriate adjustment shall be made to reflect the previous recomputation.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 12/20/2001
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-13 Daycare Assistance and Development Tax Credit

280-RICR-20-20-13 § 13.1 General

A.R.I. Gen. Laws Chapter 44-47 provides a Rhode Island employer or the owner of Rhode Island commercial property credits against the business corporation tax (R.I. Gen. Laws Chapter 44-11); the public service corporation tax (R.I. Gen. Laws Chapter 44-13 but not the special property tax provisions of R.I. Gen. Laws § 44-13-13); the bank excise tax (R.I. Gen. Laws Chapter 44-14); the insurance companies' gross premiums tax (R.I. Gen. Laws Chapter 44-17) and the personal income tax (R.I. Gen. Laws Chapter 44-30). The types and amount of credit generally differ according to the nature of the taxpayer's activity in the provision of the daycare. The three types of daycare activity considered for credit computation include credit for purchased daycare, for the establishment and/or operation of a daycare facility alone or with another taxpayer and for rental and lease amounts foregone by the owner of commercial property in Rhode Island.

1.Effective January 1, 1995, the credit has been extended to include amounts paid for the care of dependent adult family members.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-13 § 13.2 Licensing Requirement

No credit will be allowed unless the daycare facility has a valid Rhode Island license issued under R.I. Gen. Laws Chapter 42-72.1 Laws and agrees to accept children whose child care services are paid for in whole or in part by the Rhode Island Department of Human Services. The daycare facility license number must be shown where required on all credit claims. As of January 1, 1995, any credit claimed for adult daycare must be for facilities certified by the Department of Elderly Affairs.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-13 § 13.3 Definitions

A."Amount expended" means the actual sums of money spent, or the cost or other basis for federal tax purposes of realty or tangible personalty donated or dedicated to the establishment of a daycare center.

B."Donated" means a process whereby title and possession of realty or tangible personalty are transferred to a new owner of such property. Credit involving donated property may be calculated whether or not the donation was, or qualified for, a charitable contribution by the taxpayer but, in the event of a charitable contribution, the basis used by the taxpayer for federal income tax purposes must be the basis used in calculation of the credit. In the event that no charitable contribution has been made, the basis to be used is the basis normally used for federal income tax purposes.

C."Dedicated to the establishment and/or operation of a daycare facility" means restricted for the sole and exclusive use of the daycare facility. Property so dedicated must be physically segregated from other similar property of the taxpayer and the books and records of the taxpayer must reflect the dedication and limitation of use.

D."Used primarily" means used more than 50%.

E."Rental or lease space" means commercially zoned realty space rented or leased or available for rental or lease.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-13 § 13.4 Purchased Daycare

A.Calculation and Documentation

1.The credit for purchased daycare is measured at 30% of the sums expended. Purchased daycare has a maximum credit of $30,000 per year and the yearly limit is calculated per individual taxpayer. Taxpayers purchasing daycare for or at one or more locations must obtain and retain appropriate documentation for each location (including the amount expended by the taxpayer, the name and address of the Rhode Island licensed daycare facility and, in the case of the owner of commercial property, the name of the commercial tenant and the names of the commercial tenants' employees for whose children the daycare is being purchased). Taxpayers claiming credits must also obtain written certification from the facility that it agrees to accept children whose child care services are paid in full or in part by the Rhode Island Department of Human Services. Taxpayers should aggregate the sums expended for the various locations and then perform the mathematics prior to determining the $30,000 limit. (Purchases of daycare for dependent adult family members on or after January 1, 1995 are subject to the same provisions above.)

2.EXAMPLE: Big Corporation has two major plants in Rhode Island and purchases daycare for its employees at two different Rhode Island licensed daycare facilities. Big Corporation pays $100,000 for daycare at facility A and $75,000 for daycare at facility B. Big Corporation's credit for purchased daycare is computed as follows:

a.Daycare Purchased:

Center A $100,000‎Center B $ 75,000‎Total $175,000

b.Credit = 30% x $175,000 but not more than $30,000 = $52,500 but subject to the $30,000 maximum credit If Big Corporation's tax was less than $30,000, Big Corporation would have amounts of excess credit. Such excess credit cannot be carried forward to future years.

B.Direct Payment or Reimbursement

1.Purchased daycare must be paid directly by the employer or by the commercial landlord to the Rhode Island licensed daycare facility. Reimbursements to employees for daycare from employers whose employee benefit packages contain such provisions do not qualify as sums expended for the purposes of purchased daycare provisions. Any monies reimbursed by the employee to the employer as part of the daycare purchased should be subtracted from the sums expended by the employer before calculation of the purchased daycare. With the extension of the credit to daycare for depending adult family members for payments made on or after January 1, 1995, the requirements above are likewise extended. The facility must be certified by the Department of Elderly Affairs.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-13 § 13.5 Establishment/Operation of daycare facility

A.General

1.The credit for establishing and/or operating a Rhode Island licensed daycare facility is measured at 30% of the sums expended to a maximum of $30,000. The taxpayer may establish and/or operate the daycare facility alone or with other taxpayers; but the daycare facility must be used primarily by the taxpayer's employees' children or the children of the employees of the commercial tenants during the employees' hours of employment.

2.Effective January 1, 1995, the above provisions have been extended to include daycare facilities for depending adult family members.

B.Calculation and Documentation

1.Calculation of the sums expended for the establishment and/or operation of each licensed daycare facility must be made separately from calculation of other daycare items available under R.I. Gen. Laws 44-47.

2.For example: Life Insurance Company established its own licensed daycare facility and paid $20,000 for equipment and $30,000 for staff; Life owes gross premiums tax under R.I. Gen. Laws 44-17 of $20,000.

a.Equipment $20,000‎Staffing $30,000‎Total $50,000

b.Credit = 30% x $50,000 or $15,000

c.Tax before Credit $ 20,000‎Credit $ 15,000‎Tax Payable $ 5,000

d.If insurance company's tax was less than $15,100, then it would have had an excess credit available to be carried forward for the next 5 years. Any credit claimed for establishing/operating a daycare facility must include written certification that such facility agrees to also accept children whose child care services are paid in full or in part by the Rhode Island Department of Human Services.

C.Reimbursement

1.Any monies paid by the employee to the employer as part of the child daycare program offered to employees at a facility established and/or operated and for which a credit is being claimed under R.I. Gen. Laws Chapter 44-47 should be subtracted from the "sums expended" by the employer before calculation of the credit. Similarly, these provisions have been extended to daycare for dependent adult family members effective January 1, 1995.

D.Timing the Credit Claim

1.The credit claimed for a child daycare facility established and/or operated should be made in the year in which the facility is first placed in service. Property is considered first placed in service by the taxpayer in the tax year in which under the taxpayer's depreciation practice, the period for depreciation for the property begins or the year in which the property is placed in a condition or state of readiness and availability for a specifically assigned function, whichever is earlier. In the event that the facility is considered to be first placed in service in a year prior to the issuance of its Rhode Island Daycare License, the facility will be considered to be first placed in service in the year concurrent with the license.

2.Effective January 1, 1995, the credit has been extended to include facilities certified by the Rhode Island Department of Elderly Affairs for the care of dependent adult family members.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-13 § 13.6 Rentals and Leases Forgone

A.General

1.The credit for rentals and leases foregone by the owner of Rhode Island commercial realty related to the dedication of rental or lease space for daycare services is measured at 30% of the difference between the fair market value of the rental/lease and the actual rental/lease amount. The credit has a yearly maximum of $30,000.

2.Effective January 1, 1995, the credit has been extended to include daycare services for dependent adults at facilities certified by the Rhode Island Department of Elderly Affairs.

B. Calculation and Documentation

1.Calculation of the amounts of rentals or leases foregone for each licensed daycare facility must be made separately for each location and should be made separately from any other daycare items otherwise available to the taxpayer under R.I. Gen. Laws Chapter 44-47. Taxpayers claiming amounts for one or more locations must obtain and retain appropriate documentation for each location (including the amount foregone by the taxpayer, the name, license number and address of the Rhode Island licensed daycare facility). Any credit claimed for rentals and leases foregone must include written certification that such daycare facility agrees to also accept children whose child care services are paid in full or in part by the Rhode Island Department of Human Services.

2.The burden of proof of fair market value is upon the claimant taxpayer and such proof should include prior rental/lease of the same property. Where the property was not previously rented or leased, appraisals of the property by competent parties independent of the claimant taxpayer should be used.

3.A typical claim for rentals/leases foregone might be performed as follows:

a.Real Estate Corporation allowed a Rhode Island licensed daycare facility to be operated in some available space in Providence which has a prior rental history of rents of $25,000 per year. Credit = 30% x $25,000 or $7,500

b.If Real Estate's tax was less than $7,600, it should have an excess credit available to be carried forward for the next 5 years.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-13 § 13.7 Miscellaneous

A.In the case of a business corporation filing a consolidated return under the provisions of R.I. Gen. Laws Chapter 44-11, a credit will be allowed against the tax of only that corporation which qualifies for the credit and will not be allowed against the tax of other corporations that may join in the filing of the consolidated Rhode Island return.

B.The maximum annual credit for purchased daycare is $30,000 and the credit cannot reduce the tax payable to less than its applicable minimum. The balance of unused credit may not be carried forward to any subsequent year.

C.The maximum annual credit for daycare establishment and operation and for amounts foregone is $30,000 and the amounts of unused credits may be carried forward to the next 5 succeeding tax years.

D.The maximum total credit a taxpayer may apply against its taxes during any one tax year cannot exceed $30,000 regardless of the composition of the types of daycare items claimed.

E.Credits carried over to succeeding tax years may not be used if, during that time, the facility was operated for less than six months.

F.Calculations for sums expended, realty or tangible personalty, or for rentals/leases foregone for the purposes of claiming the Rhode Island credit DO NOT require recapture or recalculation of those items for federal income tax purposes except as provided federally.

G.If the employer or commercial landlord is a partnership, joint venture or small business corporation having an election in effect under subchapter S of the internal revenue code, the credit must be divided in the same manner as income.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-14 Research and Development Property Credit

280-RICR-20-20-14 § 14.1 General

A credit is available to corporations, sole proprietors or passed through from partnerships, joint ventures or subchapter S corporations for research and development property acquired, constructed, reconstructed or erected after July 1, 1994. The credit is 10% of the cost or other basis of realty and tangible personality which is depreciable; has a useful life of 3 years or more; was acquired by purchase; has a situs in Rhode Island and is used principally for purposes of research and development in the experimental or laboratory sense.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 12/20/2001
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-14 § 14.2 Definitions

A."Research and development' means in the experimental or laboratory sense and shall not be deemed to include the ordinary testing or inspection of materials or products for quality control, efficiency surveys, management studies, consumer surveys, advertising, promotions, or research in connection with literary, historical or similar projects.

B."Structural components" means such separately attached parts of a building, as walls and built-in partitions, permanent paneling and tiling, doors, stairways, the entire central heating, plumbing, electrical, and air conditioning systems. Sink and toilet facilities, sprinkler systems, fire escapes, elevators and escalators do not qualify. For the purpose of this regulation, the building and all of its structural components are treated as a whole when the building is acquired, constructed, reconstructed or erected and first placed in service. The repairs, alterations, improvements or replacement of a structural component subsequent to the acquisition, construction, reconstruction or erection of the building will not be allowed the credit.

C."Principally used" means used more than 50%. A building or addition is principally used in research and development in the experimental or laboratory sense where more than 50% of its usable business floor space is thusly used. Floor space used for bathrooms, cafeterias and lounges is not usable business floor space. Machinery is principally used in research and development in the experimental or laboratory sense when it is thusly used more than 50% of its normal operating time.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 12/20/2001
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-14 § 14.3 Rate

The credit is ten percent (10%) of the cost or other basis for federal income tax purposes of tangible personal property, and other tangible property, including buildings and structural components of buildings acquired, constructed or reconstructed, or erected after July 1, 1994.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 12/20/2001
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-14 § 14.4 Basic Test

A.In order to qualify for this credit, the tangible personal property and other tangible property, including buildings and structural components of buildings must meet all of the following tests and therefore must:

1.be depreciable pursuant to 26 U.S.C. § 167 or recovery property with respect to which a deduction is allowable under 26 U.S.C. § 168;

2.have a useful life of three (3) years or more;

3.be acquired by purchase as defined in section 26 U.S.C. §179(d);

4.have a situs in this state; and

5.be used principally for purposes of research and development in the experimental or laboratory sense.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 12/20/2001
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-14 § 14.5 Leased/Rented Property

A.Partially leased/rented to others: Generally, a taxpayer is not allowed a credit for realty or tangible personalty including buildings and structural components of buildings which it leases or rents to any other person or corporation. However, if real property (buildings) is principally used by the taxpayer in research and development and is partially rented or leased or leased to others, the basis of the property must be adjusted for that proportionate share of non-qualifying use.

B.EXAMPLES: RST Corporation, a calendar year corporation, acquires a five story building (with each story of equal square footage) on October 1, 1994. The basis of the building is $200,000.

1.The taxpayer rents or leases out three floors and uses the remaining two floors for research and development in the experimental or laboratory sense. Since less than 50% of the building is used for research and development in the experimental or laboratory sense, no credit is allowed on any part of the building.

2.The taxpayer rents or leases out two floors and uses the remaining three floors for research and development in the experimental or laboratory sense. Since more than 50% of the building is used for research and development in the experimental or laboratory sense, credit will be allowed on that part of the building which is not leased.

3.The taxpayer does not rent/lease any of the building; uses three floors for research and development in the experimental or laboratory sense; and uses the other two floors for office space. Since more than 50% of the building is used for research and development in the experimental or laboratory sense and none is leased, credit will be allowed on the entire building.

C.Leased/rented from any other person or corporation: A taxpayer is not allowed a credit for realty or tangible personalty including buildings and structural components of buildings which it leases from any other person or corporation. Any contract or agreement to lease or rent or for a license to use the property shall be considered a lease unless such contract or agreement is treated for federal income tax purposes as an installment purchase rather than as a lease. In order to be considered the owner of the research and development property, the taxpayer must be allowed federal depreciation on such property.

D.User of the property: Since property rented to others (rather than principally used by the taxpayer in research and development) does not qualify for the credit, the credit shall not be allowed where the purchaser is not the user of the research and development property even where the purchaser and the user may be included in a consolidated federal and/or consolidated state tax return.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 12/20/2001
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-14 § 14.6 Timing

A.Property is considered first placed in service by the taxpayer in the tax year in which under the taxpayer's depreciation practice, the period for depreciation for the property begins or the year in which the property is placed in a condition or state of readiness and availability for a specifically assigned function, whichever is earlier.

B.Only the amounts actually paid by the taxpayer for qualifying property after July 1, 1994 qualify for the credit.

C.Acquisitions in a taxable year do not affect similar property previously qualifying. For example, a taxpayer builds an addition to a previously qualifying building for use as office space. The investment in the addition will not qualify for the credit since it is not used for research and development in the experimental or laboratory sense but it will not trigger a recapture of the credit taken on the previously existing structure. If the addition were built for and used principally in research and development in the experimental or laboratory sense (and the other criteria for the credit were satisfied), the credit would apply to the addition.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 12/20/2001
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-14 § 14.7 Limitation, Carryovers and Miscellaneous

A.No deduction for research and development facilities under R.I. Gen. Laws § 44-32-1 shall be allowed for research and development property for which the credit is allowed under these provisions.

B.No investment tax credit under R.I. Gen. Laws § 44-31-1 shall be allowed for research and development property for which the credit is allowed under these provisions.

C.Consolidated returns: The credit allowed for research and development property for which the credit is claimed under these provisions shall only be allowed against the tax of that corporation included in a consolidated return that qualifies for the credit and not against the tax of other corporations that may join in the filing of a consolidated return.

D.Division of the credit: In the event that the taxpayer is a partnership, joint venture or small business corporation, the credit shall be divided in the same manner as income.

E.Order of credits: The investment tax credit allowed by R.I. Gen. Laws § 44-31-1 shall be used by the taxpayer before the credit claimed under these provisions.

F.Minimum tax and carryover: In the case of corporations, the credit for research and development property allowed shall not reduce the tax due to less than the minimum fixed by R.I. Gen. Laws § 44-11-2(e). However, any amount of credit not used in such taxable year may be carried over to the following year or years, up to a maximum of seven (7) years, and may be credited against the taxpayer's tax for such year or years. For purposes of R.I. Gen. Laws Chapter 44-30, if the credit allowed exceeds the taxpayer's tax for such year, the amount of credit not used in such taxable year may be carried over to the following year or years, up to a maximum of seven (7) years, and may be credited against the taxpayer's tax for such year or years.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 12/20/2001
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-14 § 14.8 Recapture

A.In general, a recapture of a portion of the credit is required where the property on which a credit has been allowed is disposed of or ceases to be in qualified use. The following are examples of some types of incidents which require recapture of the credit (this list is not all-inclusive):

1.A legal dissolution;

2.A trade in;

3.Foreclosure of a security interest;

4.Retirement before expiration of its useful life;

5.Destruction or damage by fire, storm or other casualty or by reason of its theft or other involuntary conversion;

6.Where property is leased to others;

7.Removal of property from this state;

8.Cease to own property;

9.Cease to be in qualified use.

B.Generally, recapture is computed:

1.Recapture = Tax Credit taken on property ceasing to qualify

2.Multiplied by (Useful life months - qualified use in months)

3.Divided by Useful life of property in months

C.The following rules apply to transactions between taxpayers:

1.A recapture of this credit is required unless all of the following elements are present in the transaction:

b.the acquiring taxpayer is taxable under R.I. Gen. Laws Chapters 44-11 or 44-30; and

c.the property continues to be in qualified use if all of the preceding elements are present in the transaction, the transfer will not require a recapture of the credit and any unused credit on the transferred property may be passed through to and carried forward by the acquiring taxpayer. If the property in the hands of the acquiring taxpayer is not in qualifying use for its entire life or for the period of time outlined in the recapture provisions below, a recapture by the acquiring taxpayer is required. In measuring the period of qualified use, the period during which the property was held by the transferor taxpayer and the acquiring taxpayer shall be taken into account.

2.The above rules do not strictly conform to federal treatment.

a.For example, a recapture is required where a transfer is made other than to an acquiring taxpayer taxable under R.I. Gen. Laws Chapters 44-11 or 44-30 (on the theory that the property is no longer in qualified use).

D.Recapture of 26 U.S.C. § 167 property:

1.In the year initially claimed: If property depreciable under 26 U.S. Code § 167 of the Internal Revenue Code is disposed of or ceases to be in qualified use prior to the end of the taxable year in which the credit is to be taken, the amount of the credit shall be that portion of the credit provided for in this section which represents the ratio which the months of qualified use bear to the months of useful life.

2.In subsequent years: If property on which credit has been taken is disposed of or ceases to be in qualified use prior to the end of its useful life, the difference between the credit taken and the credit allowed for actual use must be added back in the year of disposition.

3.After 12 consecutive years: If qualifying property is disposed of or ceases to be in qualified use after it has been in qualified use for more than twelve (12) consecutive years, it shall not be necessary to recapture any remaining credit as provided in this subparagraph. The amount of credit allowed for actual use shall be determined by multiplying the original credit by the ratio which the months of qualified use bear to the months of useful life. For purposes of this subparagraph, useful life of property shall be the same as the taxpayer uses for depreciation purposes when computing the federal income tax liability.

E.Recapture of the 26 U.S.C. §168, (3 year property): This type of recapture applies to three (3) year property, as defined in 26 U.S.C. § 168(c), other than that type of property included in the recapture of buildings and structural components of buildings (§ 14.8(F) of this Part).

1.In the year initially claimed: If the property is disposed of or ceases to be in qualified use prior to the end of the taxable year in which the credit is to be taken, the amount of the credit shall be that portion of the credit which represents the ratio which the months of qualified use bear to thirty-six.

2.In subsequent years: If property on which credit has been taken is disposed of or ceases to be in qualified use prior to the end of thirty-six (36) months, the difference between the credit taken and the credit allowed for actual use must be added back in the year of disposition. The amount of credit allowed for actual use shall be determined by multiplying the original credit by the ratio which the months of qualified use bear to thirty-six (36).

F.Recapture of the 26 U.S.C. § 168 property: This section deals with recapture and any recovery property which is a building or a structural component of a building to which 26 U.S.C. § 168 applies.

1.In the year initially claimed: If qualifying property which is a building or a structural component of a building is disposed of or ceases to be in qualified use prior to the end of the taxable year in which the credit is to be taken, the amount of the credit shall be that portion of the credit provided for in this section which represents the ratio which the months of qualified use bear to the total number of months over which the taxpayer chooses to deduct the property under 26 U.S.C. § 168.

2.In subsequent years: If property on which credit has been taken is disposed of or ceases to be in qualified use prior to the end of the period over which the taxpayer chooses to deduct the property under 26 U.S.C. § 168, the difference between the credit taken and the credit allowed for actual use must be added back in the year of disposition.

3.After 12 consecutive years: If such property is disposed of or ceases to be in qualified use after it has been in qualified use for more than twelve (12) consecutive years, it shall not be necessary to add back the credit as provided in this subparagraph. The amount of credit allowed for actual use shall be determined by multiplying the original credit by the ratio which the months of qualified use bear to the total number of months over which the taxpayer chooses to deduct the property under 26 U.S.C. § 168.

G.Where property is disposed of or ceases to be in qualified use during other than the initial taxable year, the taxpayer may not reduce the amount of tax liability created by a recapture of this credit by credits of this type allowed for the year in which the asset is disposed of, nor can that liability be reduced by any carryovers of this credit to that year. The amount of recapture must be added to the taxpayer's tax in that year.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 12/20/2001
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-14 § 14.9 Federal References

For the purpose of determining the basis of qualifying property, the carryover of credit and of the recapture of the credit, pertinent portions of the Internal Revenue Code and regulations thereunder, including provisions applicable to corporations, Subchapter S corporations, estates and trusts, and partnerships are deemed adopted to the extent not inconsistent with this regulation and Rhode Island law.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 12/20/2001
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-15 Tax Incentives for Employers

280-RICR-20-20-15 § 15.1 General

Effective January 1, 1998, an incentive in the form of a deduction or modification is available to businesses who hire employees who are Rhode Island residents and who have been "unemployed" as defined in § 15.2(A)(2) of this Part. Once each employee has been employed by the business for a minimum of 52 consecutive calendar weeks, has a minimum of 1,820 hours of paid employment and is certified by the Department of Labor and Training, the business shall be entitled to an incentive of 40% of the employee's first year wages up to a maximum of $2,400 per employee.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-15 § 15.2 Procedure

A.If a business hires an employee who has been unemployed as defined herein and who has been a domiciled resident of Rhode Island for at least 52 consecutive calendar weeks before the date of hire seeks the tax incentives provided herein, the following procedure shall be followed:

1.Upon being hired the employee must attest to the employer that he or she has been both unemployed and a domiciled resident for the required time.

2.Within 30 days from the first day the employee begins work, the business must file with the Department of Labor and Training for confirmation of the employee's unemployment status. The Department of Labor and Training shall notify the business of its findings as soon as practicable. If the employee was "unemployed" by being a recipient of Rhode Island Aid to Families with Dependent Children (Family Independence Program) for the required period, the business shall request confirmation from the Rhode Island Department of Human Services.

3.After the employee has been employed for at least 52 consecutive weeks and a minimum of 1,820 hours of paid employment, the business shall request the Department of Labor and Training to provide final certification for that employee. If the employee has achieved both minimum standards above, the Department shall issue a certificate for that employee to the business. When claiming the incentive, the business shall attach the certificate to its return.

4.Once the certificate is received, the business shall calculate and claim the incentive on its tax return for the tax year in which the minimum standards are met.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-15 § 15.3 Definitions

A."Business" means any corporation, limited liability company, partnership, individual, sole proprietorship, joint stock company, joint venture or any other legal entity through which business is legally conducted or the successors or assigns thereof.

B."Unemployed" means and refers to an individual who attests that he or she is not working and

1.has received unemployment compensation benefits under R.I. Gen. Laws Chapter 28-44 or any similar laws of another state any time within a one-year period before the date of hire; or

2.has been a recipient of Rhode Island Aid to Families with Dependent Children (R.I. Gen. Laws Chapter 40-6) for a minimum of one year before the date of hire.

C."Paid employment" shall mean a period of time during which any employee has been hired by a business and is receiving Rhode Island wages or salaries for his or her service.

D."Tax incentives or incentive" means a deduction or modification in the computed taxes owed by a claimant business.

E."First year wages" shall mean the Rhode Island wages or Rhode Island salary of the newly-hired employee and actually paid by the business for a period of 365 days from the employee's first day of work as evidenced by the W-2's provided by the claimant's business for the calendar years into which such time period falls. Wages subject to the incentive shall be reduced by any direct state or federal assistance.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-15 § 15.4 The Employee

A.The incentive shall be applied only once for any given employee.

B.The employee must be a first-time hire of the business and cannot have worked for any company that subsequently merges with or is acquired by the claimant business.

C.Leased or temporary employees do not qualify.

D.The employee cannot be a relative of any controlling shareholder, director, or officer of the claimant corporation; nor controlling shareholder, officer, or manager of the claimant limited liability company; nor partner or owner of any claimant partnership, joint venture, sole proprietorship or any other type of legal business entity claiming this incentive.

E.If the hiring of the employee will be used to obtain any other tax incentive/tax benefit for the business, then that employee cannot be used in the computation of this tax incentive.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-15 § 15.5 Calculation of the Incentive

A.At the end of the business' tax year, the employer claims the incentive for each employee who has been finally certified during that tax year by the Department of Labor and Training.

B.The incentive is calculated using the W-2's for each employee to determine the "first year wages". Since the "first year wages" are the Rhode Island wages or Rhode Island salary of the newly-hired employee and actually paid by the business for a period of 365 days from the employee's first day of work, the W-2's for more than one year will be used.

C.For most certified employee, the calculation involves:

1.the first W-2 for the employee's first year of employment;

2.a determination of how many days of pay (of the mandated 365) were present during that calendar year;

3.the W-2 for the employee's second year of employment;

4.a determination of how many days remained (of the mandated 365) during that (second) calendar year; and

5.a proration (or specific identification if details are available for review) to determine the remaining portion of the "first year wages".

D.Depending upon the date of hire, the calculation of the "first year wages" may involve more than 2 years' W-2's for the certified employee.

E.Once the "first year wages" have been determined, the employer must reduce that amount by any direct state or federal assistance received for that employee.

F.The incentive is then calculated using Form 107 at forty percent (40%) of the employee's first year wages up to a maximum of $2,400 and the employer attaches a copy of the certification from the Department of Labor and Training for each employee claimed to the Form 107; attaches the Form 107 to the tax return being filed for that year and enters the incentive where appropriate in the tax calculation.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-15 § 15.6 Employee Tax Credit Examples

A.Example 1 - Calendar year Employer

1.the incentive shall be applied only once for any given employee

2.Employee John Doe is hired on January 1, 1998 and the employer is a calendar year end taxpayer. Since the 365 day requirement is satisfied in 1 year, the stated total wages on the 1998 W-2 for the employee may then be used for the calculation of the modification or deduction.

John Doe 1998 W-2 Total Wages for his Employer

$12,000

Incentive rate (40%)

X .40

Total

$4,800

3.Maximum incentive of $2,400 for John Doe may be utilized a modification or adjustment on year end 12/31/98 tax return of his employer.

B.Example 2 - Calendar Year Employer:

1.Employee Jane Doe is hired on April 28, 1998 and the employer is a calendar year end taxpayer. Jane Doe 1998 W-2 Total Wages from this Employer $ 7,400.00 Jane Doe 1999 W-2 Total Wages from this Employer 12,600.00. Since the 365 day requirement is satisfied in 2 different years, the measure calculation is:

04/28/98 through 12/31/98 =

247 days

01/01/98 through 04/28/99 =

118 days

Total

365 days

1998 Wages Total =

$ 7,400.00

1999 Wages 118/365 x $12,600 =

4,073.42

Total Eligible Wages

$11,073.42

Incentive Rate (40%)

X .40

Total

$ 4,589.37

2.Maximum incentive of $2,400 for Jane Doe may be utilized as a modification or adjustment on year end 12/31/99 tax return of her employer.

C.Example 3 - Fiscal Year Employer:

1.Under the same facts, except the taxpayer is a fiscal year end June 30th filer, the incentive is calculated as follows:

a.For John Doe, the calculation and incentive amount would remain the same; however, the taxpayer would not be able to modify or adjust until the June 30, 1999 filing since the 365 days of employment would not be reached until the middle of the employer's fiscal year.

b.For Jane Doe, since the 365 day criteria will be met within the June 30, 1999 fiscal year and before Jane's W-2 is prepared for 1999, the calculation will use Jane's 1998 W-2 wages and her actual wages for the first 118 days of 1999.

D.Example 4 - Fiscal year Employer:

1.Employee Jane Smith is hired on July 30, 1998 and the employer is a June 30 fiscal year end.

Jane Smith 1998 W-2 wages from this Employer

$4,580.00

Jane Smith 1999 W-2 wages from this Employer

7,050.00

Measure Calculation

07/30/98 through 12/31/98 =

154 days

01/1/99 through 07/30/99 =

211 days

Total

365 days

1998 Wages from this Employer

$4,580.00

1999 Wages 211/365 x $7050.00 =

4,075.48

Total Eligible Wages

$8,555.48

Incentive Rate (40%)

X .40

Total

$3,462.19

2.Maximum incentive of $2,400.00 for Jane Smith may be utilized as a modification or adjustment on the year end June 30, 2000 tax return since the 365 day criteria is not met until that fiscal year of the return filer.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-15 § 15.7 Minimum Tax and Carryover

A.The incentive cannot reduce the business' tax for that year below the minimum (if any) for the chapter under which the business is filing.

B.Any amount of incentive not used in the business' tax year may not be carried over to any following year.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-15 § 15.8 Limitations and Miscellaneous

A.The incentive (deduction or modification) is not refundable.

B.The incentive may be used by the claimant business for taxes levied under R.I. Gen. Laws Chapter 44-11 (Business Corporation Tax); under R.I. Gen. Laws Chapter 44-13 (Public Service Corporation Tax) but not under R.I. Gen. Laws § 4-13-13; under R.I. Gen. Laws Chapter 44-14 (Bank Excise Tax); under R.I. Gen. Laws Chapter 44-15 (Bank Deposits Tax); under R.I. Gen. Laws Chapter 44-17 (Taxation of Insurance Companies); and under R.I. Gen. Laws Chapter 44-30 (Personal Income Tax).

C.If the business is liable for both Bank Excise and Bank Deposits taxes (under R.I. Gen. Laws Chapters 44-14 and 44-15), the taxpayer must elect only one tax in which to claim the incentive and may not divide the incentive between the two taxes.

D.If the business is a Sub-chapter S corporation, limited liability company, partnership or joint venture, the incentive is to be divided in the same manner as income.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-16 Disabled Access Credit for Small Businesses

280-RICR-20-20-16 § 16.1 General

Effective January 1, 1998, a small business taxpayer that pays for or incurs expenses in Rhode Island to provide access to persons with disabilities shall be allowed a 10% credit up to $1,000 against the Business Corporation Tax (R.I. Gen. Laws Chapter 44-11) or Public Service Corporation Tax (R.I. Gen. Laws Chapter 44-13).

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-16 § 16.2 Definitions

A."Small business" means one that for the preceding tax year had thirty (30) or fewer full-time employees, or had one million dollars ($1,000,000) or less in gross receipts.

B.“Full-time employees” means one employed at least thirty (30) hours a week for twenty (20) or more calendar weeks in the proceeding tax year.

C."Amount expended" means the actual sum of money spent.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-16 § 16.3 Qualifying Expenses

A.Expenses must be paid or incurred on or after January 1, 1998, and may be only for:

1.removing architectural, communication, physical, or transportation barriers;

2.providing qualified interpreters or other effective methods of delivering aurally delivered materials to persons with hearing impairments;

3.providing readers, tapes or other effective means of making visually delivered materials available to persons with visual impairments;

4.providing job coaches or other effective methods of supporting workers with severe impairments in competitive employment;

5.providing specialized transportation services to employees or customers with mobility impairments;

6.buying or modifying equipment for persons with disabilities; and

7.providing similar services, modifications, materials or equipment for persons with disabilities.

B.Expenses paid or incurred by the small business may also include payments for eligible items listed above which are capitalized and depreciated by the small business.

C.The expenses must be paid or incurred to enable the small business to comply with Federal or state laws protecting the rights of persons with disabilities. Such laws include, but are not limited to:

1.Americans with Disabilities Act of 1990, as amended (42 U.S.C. § 12100 et seq.);

2.Title V of the Rehabilitation Act of 1973, as amended (29 U.S.C. § 794);

3.Declaration of Certain Constitutional Rights and Principles - Discrimination (RI Constitution Article 1, Section 2);

4.Discrimination Against Handicapped (R.I. Gen. Laws Chapter 42-87);

5.Open Meeting Handicapped Accessibility (R.I. Gen. Laws § 42-46-13);

6.Access for Physically Handicapped (R.I. Gen. Laws § 37-8-15); and

7.AIDS Discrimination Prohibited (R.I. Gen. Laws § 23-6-22).

D.In the event that qualifying expenses paid or incurred which are also eligible to be included in the calculation of other Rhode Island tax incentives, such as but not limited to, investment credit or specialized investment credit for mill buildings, the small business must elect to use them in only one incentive.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-20-16 § 16.4 Limitations and Miscellaneous

A.The credit cannot reduce the small business' tax for that tax year below the minimum for the chapter under which the business is filing.

B.The credit is not refundable and any amount of credit not used may not be carried over to any subsequent year.

C.If the small business is included in a consolidated return, the credit is allowed against the tax of only the corporation which qualifies for the credit and will not be allowed against the tax of other corporations that may join in the filing of a consolidated state tax return with the small business.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

Subchapter 25 Business Corporation Tax

280-RICR-20-25-1 Amended Returns

280-RICR-20-25-1 § 1.1 Purpose

These rules implement R.I. Gen. Laws Chapter 44-11 with regard to filing amended returns.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 04/23/2018

280-RICR-20-25-1 § 1.2 Authority

These rules and regulations are promulgated by the Rhode Island Division of Taxation pursuant to R.I. Gen. Laws §§ 44-1-4 and 44-11-9. These rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws §§ 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 04/23/2018

280-RICR-20-25-1 § 1.3 Application

The terms and provisions of these rules and regulations shall be liberally construed to permit the Rhode Island Division of Taxation to effectuate the purposes of R.I. Gen. Laws Chapter 44-11 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 04/23/2018

280-RICR-20-25-1 § 1.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 04/23/2018

280-RICR-20-25-1 § 1.5 When to File a Claim for Refund

A.Corporate Tax

1.A refund claim may be filed at any time within three (3) years after the tax has been paid or within three (3) years after receiving notice of change or correction of taxable income by the Federal Government.

2.If the refund claim is attributable to a "net operating loss carryback" or a "net capital loss carryback," the refund may be claimed within three (3) years of the due date of the original return.

B.Insurance Companies Tax on Gross Premiums, Public Service Corporation Gross Earnings Tax, Banking institution Excise Tax, Bank Deposits Tax.

1.A refund claim may be filed at any time within two (2) years after the tax has been paid or within two (2) years after receiving notice of change or correction of taxable income by the Federal Government.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 04/23/2018

280-RICR-20-25-1 § 1.6 Forms to be Used

A.Applicable Forms Based on Entity Tax Type

1.Table

Entity Tax Type

Form

Business Corporation Tax

RI-1120C, RI1120S, RI-1065

Insurance Companies Tax

T-71

Public Service Corporation Tax

T-72

Bank Excise Tax

T-74

Bank Deposits Tax

T-86

2.All changes by the Federal Government must be reported on a fully completed amended return using the applicable Form as indicated in the table in § 1.6(A)(1) of this Part according to entity tax type and checking the “Amended” checkbox for each year of change.

a.Interest is to be calculated at each respective year's rate

b.A copy of the document evidencing the final federal change, such as Federal Form 4549, Form 870, a Decision of the United States Tax Court, or similar documents, must accompany the amended Rhode Island return for each year.

c.Taxpayers must remit the total tax and interest with the amended Rhode Island return filing.

3.These Forms are to be used to claim refunds or to increase tax resulting from all matters, other than a change made by the Federal Government, and must be reported on a fully completed amended return using the applicable Form as indicated in the table in § 1.6(A)(1) of this Part and checking the “Amended” checkbox for each year of change.

a.Taxpayers must include a copy of the Federal 1139 or 1120X whichever was submitted to IRS if relating to a taxable income change, to a net operating loss or to a net capital loss carryback.

b.Taxpayers must include a copy of the front page of the original Rhode Island return filed for year being amended. This page should also include any adjustments made by this Division.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 04/23/2018

280-RICR-20-25-1 § 1.7 Credits

Credits should be examined when filing amended returns. It is possible that an amendment may alter the original computation of the available credits.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 04/23/2018

280-RICR-20-25-2 Rhode Island Jobs Development Act

280-RICR-20-25-2 § 2.1 Purpose

These rules and regulations implement R.I. Gen. Laws Chapter 42-64.5. This Chapter grants incremental income tax rate reductions to companies that create new employment in this state.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2010-01-01 to 01/04/2022
Amendment — effective from 2010-01-01 to 01/01/2010
Technical Revision — effective from 2004-01-01 to 01/01/2010
Amendment — effective from 2004-01-01 to 01/01/2004
Amendment — effective from 2002-01-07 to 01/01/2004
Periodic Refile — effective from 2001-12-20 to 01/07/2002

280-RICR-20-25-2 § 2.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws § 44-1-4. The rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws § 42-35-1 et. seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2010-01-01 to 01/04/2022
Amendment — effective from 2010-01-01 to 01/01/2010
Technical Revision — effective from 2004-01-01 to 01/01/2010
Amendment — effective from 2004-01-01 to 01/01/2004
Amendment — effective from 2002-01-07 to 01/01/2004
Periodic Refile — effective from 2001-12-20 to 01/07/2002

280-RICR-20-25-2 § 2.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation to effectuate the purpose of R.I. Gen. Laws Chapter 42-64.5 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2010-01-01 to 01/04/2022
Amendment — effective from 2010-01-01 to 01/01/2010
Technical Revision — effective from 2004-01-01 to 01/01/2010
Amendment — effective from 2004-01-01 to 01/01/2004
Amendment — effective from 2002-01-07 to 01/01/2004
Periodic Refile — effective from 2001-12-20 to 01/07/2002

280-RICR-20-25-2 § 2.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2010-01-01 to 01/04/2022
Amendment — effective from 2010-01-01 to 01/01/2010
Technical Revision — effective from 2004-01-01 to 01/01/2010
Amendment — effective from 2004-01-01 to 01/01/2004
Amendment — effective from 2002-01-07 to 01/01/2004
Periodic Refile — effective from 2001-12-20 to 01/07/2002

280-RICR-20-25-2 § 2.5 Definitions

A."Adjusted current employment" means for any taxable year ending on or after July 1, 1995, the aggregate of the average daily number of full-time equivalent active employees employed within the state by an eligible company and its eligible subsidiaries during such taxable year.

B."Affiliated entity" means any corporation owned or controlled by the same persons or shareholders who own or control an eligible company.

C.“Average daily number or full time equivalent active employees within this state” means a fraction of which the numerator is the sum of the number of full time equivalent Employees for each business day and the denominator is the number of business days.

D."Base employment" means the aggregate number of full-time equivalent active employees employed within the State by an eligible company and its eligible subsidiaries on July 1, 1994, or at the election of the eligible company, on July 1 of any year subsequent to 1994; provided, however, that an eligible company that is a telecommunication company shall determine its base employment on either July 1, 2001 or July 1, 2002; and provided, further, that an eligible company may not use July 1, 2003 or any subsequent date to determine its base employment unless a determination has been made by the board of directors of the Rhode Island Economic Development Corporation that:

1.but for the incentives available under the law the company is not likely to retain, expand, or add employment in this state; and

2.that the company has provided reasonable evidence supporting a finding that the jobs retained, expanded, or added will generate new tax revenue for the state that is at least equivalent to the value of this incentive.

E.“Business days” means the number of days the employer is operating as a normal day whereby all full time equivalent employees are eligible to work.

F."Eligible subsidiary" means each corporation 80% or more of the outstanding common stock of which is owned by an eligible company.

G."Eligible company" means any corporation, state bank, federal savings bank, trust company, national banking association, bank holding company, loan and investment company, mutual savings bank, credit union, building and loan association, insurance company, investment company, broker-dealer company or surety company or an eligible subsidiary of any of the foregoing. An eligible company does not have to be qualified to do business in the state or have any employees in this state at the time its base employment is determined.

H."Full-time equivalent active employees" means any employee of an eligible company who:

1.works a minimum of 30 hours per week within the State, or two or more part-time employees whose combined weekly hours equal or exceed 30 hours per week within the State and

2.earns no less than 150% of the hourly minimum wage prescribed by Rhode Island law; provided, however, for tax years ending after the later of July 1, 2003 and the first tax year that an eligible company qualifies for a rate reduction pursuant to R.I. Gen. Laws § 42-64.5-3, for purposes of this section, one hundred fifty percent (150%) of the hourly minimum wage prescribed by Rhode Island law shall mean one hundred fifty percent (150%) of the hourly minimum wage prescribed by Rhode Island law at

a.the time the employee was first treated as a full-time equivalent active employee during a tax year that the eligible company qualified for a rate reduction pursuant to R.I. Gen. Laws § 42-64.5-3, or, if later

b.the time the employee first earned at least one hundred fifty percent (150%) of the hourly minimum wage prescribed by Rhode Island law as an employee of the eligible company. For eligible companies qualifying on or after July 1 2009 for a rate reduction pursuant to R.I. Gen. Laws § 42-64.5-3, the term “full-time equivalent active employee” means any employee of an eligible company who:

(1)works a minimum of thirty (30) hours per week within the state;

(2)earns healthcare insurance benefits, and retirement benefits; and

(3)earns no less than two hundred fifty percent (250%) of the hourly minimum wage prescribed by Rhode Island law at the later of:

(AA)the time the employee was first treated as a full-time equivalent active employee during a tax year that the eligible company qualified for a rate reduction pursuant to R.I. Gen. Laws § 42-64.5-3; or

(BB)the time the employee first earned at least two hundred fifty percent (250%) of the hourly minimum wage prescribed by Rhode Island law as an employee of the eligible company. For eligible companies qualifying before July 1, 2009 for a rate reduction pursuant to R.I. Gen. Laws § 42-64.5-3, any new “full-time equivalent active employee”, who replaces an existing “full-time equivalent active employee”, shall meet the following standards to remain eligible:

(i)works a minimum of thirty (30) hours per week within the state;

(ii)earns healthcare insurance benefits, and retirement benefits; and

(iii)earns no less than two hundred fifty percent (250%) of the hourly minimum wage prescribed by Rhode Island law at the later of the time the employee was first treated as a full-time equivalent active employee during a tax year that the eligible company qualified for a rate reduction pursuant to R.I. Gen. Laws § 42-64.5-3, or the time the employee first earned at least two hundred fifty percent (250%) of the hourly minimum wage prescribed by Rode Island law as an employee if the eligible company

I."New employment" means for each taxable year the amount of adjusted current employment for such taxable year minus the amount of base employment, but in no event less than zero, provided however, no eligible company is permitted to transfer, assign or hire employees who are already employed within the State by such eligible company from itself or any affiliated entity or utilize any other artifice or device for the purpose of artificially creating new employees in order to qualify for the rate reduction provided for in this chapter. New employment shall not include employees already employed in this state who become employees of an eligible company as a result of an acquisition of an existing company by purchase, merger, or otherwise, if the existing company was eligible for a rate reduction.

J."Small business concern" means any eligible company, which has a base employment level of less than one hundred (100); provided, however, that a telecommunication company may not qualify as a small business concern.

K."Telecommunications company" means any public service company or corporation whose rate of taxation is determined under R.I. Gen. Laws § 44-13-4(4).

L."Units of new employment" means

1.for eligible companies, which are not small business concerns, the amount of new employment divided by fifty (50) rounded down to the nearest multiple of fifty (50), and

2.for eligible companies which are small business concerns, the amount of new employment divided by ten (10), rounded down to the nearest multiple of ten (10); provided, however, that an eligible company (other than an eligible company that is a telecommunications company) with adjusted current employment of one hundred (100) or more employees in its first year of operation or in any other period following the date its base employment is determined shall determine its units f new employment by dividing the first one hundred (100) employees less its base employment by ten (10), rounded down to the nearest multiple of ten (10), and by dividing the number of additional employees in excess of one hundred (100) by fifty (50), rounded down to the nearest multiple of fifty (50).

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2010-01-01 to 01/04/2022
Amendment — effective from 2010-01-01 to 01/01/2010
Technical Revision — effective from 2004-01-01 to 01/01/2010
Amendment — effective from 2004-01-01 to 01/01/2004
Amendment — effective from 2002-01-07 to 01/01/2004
Periodic Refile — effective from 2001-12-20 to 01/07/2002

280-RICR-20-25-2 § 2.6 General

A.Tax rate reduction

1.The rate of tax payable by an eligible company and each of its eligible subsidiaries for any taxable year ending on or after July 1, 1995, on its net income pursuant to the applicable income tax provisions of the general laws, including the provisions of R.I. Gen. Laws §§ 44-11-2(a), 44-14-3(a), 44-14-4 and 44-17-1, or on its gross earnings pursuant to § 44-13-4(4), shall be reduced by the amount specified in § 2.6(B) of this Part; this rate reduction shall be applied annually, once to those eligible companies which are permitted by law to file a consolidated state tax return and in the case of eligible companies not permitted by law to file consolidated state tax returns, then the rate reduction shall be applied annually to each eligible company and its eligible subsidiaries; provided, however, except as provided in R.I. Gen. Laws § 42-64.5-7, should any eligible company fail to maintain in any taxable year after 1997 or, if applicable, the third taxable year following the base employment period election set forth in R.I. Gen. Laws § 42-64.5-5, the number of units of new employment it reported for its 1997 tax year or, if applicable, the third taxable year following the base employment period election set forth in R.I. Gen. Laws § 42-64.5-5, the rate reduction provided for in this chapter shall expire permanently.

B.Reduction rate schedule

1.The amount of the rate reduction specified in R.I. Gen. Laws § 42-64.5-3 for any eligible company that is not a telecommunications company, for each taxable year ending on or after July 1, 1995, shall be based upon the aggregate amount of new employment of the eligible company and its eligible subsidiaries for each taxable year, and shall be determined by multiplying the numerical equivalent of one-quarter of one percent (.25%) by the number of units of new employment for each taxable year through the taxable year ending in 1997 or, if applicable, the third taxable year following the base employment period election set forth in R.I. Gen. Laws § 42-64.5-5; and for each taxable year thereafter, the number of units of new employment reported for the taxable year 1997 or, if applicable, the third taxable year following the base employment period election set forth in R.I. Gen. Laws § 42-64.5-5; provided, however, the amount of each rate reduction shall in no event be greater than six percent (6%).

2.The amount of the rate reduction specified in R.I. Gen. Laws § 42-64.5-3 for any eligible company that is a telecommunications company shall be based upon the aggregate amount of new employment of the eligible company and its eligible subsidiaries for each taxable year and shall be determined in the same manner as set forth in § 2.6(B)(1) of this Part, except that it shall be determined by multiplying the numerical equivalent of one hundredth of one percent (.01%) by the number of units of new employment and the amount of each rate reduction shall in no event be greater than one percent (1%).

3.Notwithstanding any of the provisions of this chapter, where an eligible telecommunications company has one or more affiliated entities that is an eligible company, the eligible company entitled to a rate reduction may assign its rate reduction, to be determined in the manner as provided in § 2.6(B)(2) of this Part, to the eligible telecommunications company. An entity that assigns the rate reduction shall not be eligible for the rate reduction.

4.For eligible companies qualifying on or after July 1, 2009 for a rate reduction pursuant to R.I. Gen. Laws § 42-64.5-3, the term “full-time equivalent active employee” means any employee of an eligible company who:

a.Works a minimum of thirty (30) hours per week within the state;

b.Earns healthcare insurance benefits and retirement benefits; and

c.Earns no less than two hundred fifty percent (250%) of the hourly minimum wage prescribed by Rhode Island law at the later of:

(1)The time the employee was first treated as a full-time equivalent active employee during a tax year that the eligible company qualified for a rate reduction pursuant to R.I. Gen. Laws § 42-64.5-3; or

(2)The time the employee first earned at least two hundred fifty percent (250%) of the hourly minimum wage prescribed by Rhode Island law as an employee of the eligible company.

5.For existing eligible companies qualifying before July 1, 2009 for a rate reduction pursuant to R.I. Gen. Laws § 42-64.5-3, any new “full-time equivalent active employee” who replaces an existing “full-time equivalent active employee”, shall meet the following standards to remain eligible:

a.Works a minimum of thirty (30) hours per week within the state;

b.Earns healthcare insurance benefits and retirement benefits; and

c.Earns no less than two hundred fifty percent (250%) of the hourly minimum wage prescribed by Rhode Island law at the later of:

(2)The time the employee first earned at least two hundred fifty percent (250%) of the hourly minimum wage prescribed by Rhode Island law as an employee of the eligible company.

6.Important Note: When determining if an employee meets the new criteria, the requirement to “earn healthcare insurance benefits and retirement benefits” means that an employee is eligible to participate in the company’s healthcare and retirement programs. If the employee is eligible for the company’s healthcare and retirement program but elects not to participate, he/she is still deemed to have “earned” healthcare insurance benefits and retirement benefits. Also, if an employee is required to complete a reasonable probationary period to be eligible for healthcare insurance benefits and retirement benefits, he/she is deemed to have “earned” these benefits from day one of their employment.

7.On or before September 1, 2009 and every September 1 thereafter, all eligible companies qualifying for a rate reduction pursuant to R.I. Gen. Laws § 42-64.5-3 shall file an annual report with the tax administrator containing each full time equivalent active employee’s name, social security number, date of hire and hourly wage as of the immediately proceeding July 1 and such other information deemed necessary by the tax administrator. The report shall be filed on a form and in a manner prescribed by the tax administrator.

8.Examples

a.Rate reduction for a company with over 100 full time equivalent active employees:

Adjusted Current Employment

1,000

Less Base Employment

560

New Employment

440

Rounded Down to Nearest (50)

400

400/50 = 8

8 x .0025 = .02 The result is a 2% reduction in the rate of tax

b.Rate reduction for a company with less than 100 full time equivalent active employees:

Adjusted Current Employment

Less Base Employment

New Employment

Rounded Down to Nearest (10)

20/10 = 2

2 x .0025 = .005 The result is a 0.5% reduction in the rate of tax

C.Maximum rate reduction: No rate reduction shall exceed six (6%) percent, or In the case of a telecommunications company, one percent (1%).

D.Rate reduction applied to net income or gross earnings

1.Credit unions and insurance companies do not qualify for a rate reduction since they do not pay a tax based upon income, however, they will be able to pass the rate reduction on to an "eligible subsidiary."

2.In the case of a Subchapter S Corporation, there is no pass through to the shareholder since there is no provision for a rate reduction under R.I. Gen. Laws Chapter 44-30.

3.The amount of rate reduction for any eligible company that is a telecommunications company shall be determined by multiplying the numerical equivalent of one-hundredth of one percent (.01%) by the number of units of new employment and the amount of each rate reduction shall in no event be greater than one percent (1%).

4.Where an eligible telecommunications company has one or more affiliated entities that are eligible companies, the eligible company entitled to a rate reduction may assign its rate reduction, determined in the manner set forth in the prior paragraph, to the eligible telecommunications company. An entity that assigns the rate reduction shall not be eligible for the rate reduction.

E.Expiration of rate reduction: A rate reduction calculation must be made for each year after a base employment period is elected in accordance with R.I. Gen. Laws § 42-64.5-5. The reduction in place at the end of the third taxable year following the base employment period election shall be permanent unless the level of employment drops below the level in place at the end of the third taxable year. If the level is not maintained the rate reduction provided for shall permanently expire. Only one base employment period can be elected for purposes of rate reduction by an eligible company.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2010-01-01 to 01/04/2022
Amendment — effective from 2010-01-01 to 01/01/2010
Technical Revision — effective from 2004-01-01 to 01/01/2010
Amendment — effective from 2004-01-01 to 01/01/2004
Amendment — effective from 2002-01-07 to 01/01/2004
Periodic Refile — effective from 2001-12-20 to 01/07/2002

280-RICR-20-25-3 § 3.1 PURPOSE

These rules and regulations implement R.I. Gen. Laws § 44-11-12(2). That Section allows a deduction of the distributive share of the taxable income of any public service corporation or company liable for the tax imposed under R.I. Gen. Laws Chapter 44-13 (Public Service Corporation Tax).

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2010-12-30 to 01/04/2022
Technical Revision — effective from 2010-12-30 to 12/30/2010
Amendment — effective from 2010-12-30 to 12/30/2010
Periodic Refile — effective from 2001-12-20 to 12/30/2010

280-RICR-20-25-3 § 3.2 AUTHORITY

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2010-12-30 to 01/04/2022
Technical Revision — effective from 2010-12-30 to 12/30/2010
Amendment — effective from 2010-12-30 to 12/30/2010
Periodic Refile — effective from 2001-12-20 to 12/30/2010

280-RICR-20-25-3 § 3.3 APPLICATION

These rules and regulations shall be liberally construed so as to permit the Division of Taxation to effectuate the purpose of R.I. Gen. Laws Chapter 44-11.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2010-12-30 to 01/04/2022
Technical Revision — effective from 2010-12-30 to 12/30/2010
Amendment — effective from 2010-12-30 to 12/30/2010
Periodic Refile — effective from 2001-12-20 to 12/30/2010

280-RICR-20-25-3 § 3.4 SEVERABILITY

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2010-12-30 to 01/04/2022
Technical Revision — effective from 2010-12-30 to 12/30/2010
Amendment — effective from 2010-12-30 to 12/30/2010
Periodic Refile — effective from 2001-12-20 to 12/30/2010

280-RICR-20-25-3 § 3.5 DESCRIPTION

To the extent that the income derived from a public service corporation is subject to tax, the exclusion will apply. To the extent that the income from a public service corporation is not subject to tax, the exclusion will not apply.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2010-12-30 to 01/04/2022
Technical Revision — effective from 2010-12-30 to 12/30/2010
Amendment — effective from 2010-12-30 to 12/30/2010
Periodic Refile — effective from 2001-12-20 to 12/30/2010

280-RICR-20-25-3 § 3.6 EXAMPLES

A.A utility company sells tangible, intangible or real property not devoted to its utility operation. Such net gain distribution is a taxable transaction for R.I. Gen. Laws Chapter 44-13 purposes and therefore is excludable for R.I. Gen. Laws Chapter 44-11 purposes.

B.A utility company sells tangible, intangible or real property devoted to its utility operation. Such net gain distribution is a nontaxable transaction for R.I. Gen. Laws Chapter 44-13 purposes and therefore is not excludable for R.I. Gen. Laws Chapter 44-11 purposes.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2010-12-30 to 01/04/2022
Technical Revision — effective from 2010-12-30 to 12/30/2010
Amendment — effective from 2010-12-30 to 12/30/2010
Periodic Refile — effective from 2001-12-20 to 12/30/2010

280-RICR-20-25-4 Notice to Administrator of Sale of Assets, Letters of Good Standing

280-RICR-20-25-4 § 4.1 Purpose

The purpose of this regulation is to implement R.I. Gen. Laws §§ 44-11-29 and 44-11-29.1 that requires a corporation to notify the Tax Administrator if it is selling or transferring a major part in value of its Rhode Island assets other than in the ordinary course of trade and in the regular and usual prosecution of the corporation’s business. Filing a Request for a Letter of Good Standing is the required method for this notification. In addition, even though there is no requirement for notification by a Limited Liability Company (LLC), Limited Liability Partnership (LLP) or Limited Partnership (LP) that has not made an election to be taxed as a corporation for federal tax purposes, this regulation shall cover such Letter of Good Standing requests.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2012-07-01 to 01/04/2022
Amendment — effective from 2012-07-01 to 07/01/2012
Amendment — effective from 2003-03-01 to 07/01/2012
Periodic Refile — effective from 2001-12-20 to 03/01/2003

280-RICR-20-25-4 § 4.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws § 44-1-4. The rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws § 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2012-07-01 to 01/04/2022
Amendment — effective from 2012-07-01 to 07/01/2012
Amendment — effective from 2003-03-01 to 07/01/2012
Periodic Refile — effective from 2001-12-20 to 03/01/2003

280-RICR-20-25-4 § 4.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation to effectuate the purpose of R.I. Gen. Laws §§ 44-11-29 and 44-11-29.1 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2012-07-01 to 01/04/2022
Amendment — effective from 2012-07-01 to 07/01/2012
Amendment — effective from 2003-03-01 to 07/01/2012
Periodic Refile — effective from 2001-12-20 to 03/01/2003

280-RICR-20-25-4 § 4.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2012-07-01 to 01/04/2022
Amendment — effective from 2012-07-01 to 07/01/2012
Amendment — effective from 2003-03-01 to 07/01/2012
Periodic Refile — effective from 2001-12-20 to 03/01/2003

280-RICR-20-25-4 § 4.5 Requirements

A.R.I. Gen. Laws § 44-11-29 requires every corporation selling or transferring a major part in value of its assets other than in the ordinary course of trade and in the regular and usual prosecution of the corporation's business to notify the Tax Administrator of the proposed sale or transfer at least five (5) days before the sale or transfer. The notice shall include the price, terms and conditions, and the character and location of the assets. This notice shall accompany a request for a Letter of Good Standing with the appropriate fee as required in R.I. Gen. Laws § 44-11-29.1.

B.Whenever a corporation makes such a sale or transfer, the tax imposed by R.I. Gen. Laws Chapter 44-11 and 44-12 becomes due and payable at the time the Tax Administrator is notified, or if he/she is not so notified, at the time when he/she should have been notified.

C.If a corporation fails to comply with the notification and payment provisions, the sale or transfer shall be fraudulent and void as against the state.

D.A Request for a Letter of Good Standing shall require a tentative tax return through the date of sale or transfer, along with any past due returns and payments. (A tentative return shall present as if the tax year had ended as of the date of the sale or transfer and includes said sale or transfer).

1.Any entity treated or that has elected to be treated as a corporation shall provide a copy of a tentative federal Form 1120 including Form 4797 and Schedule D, if applicable, and a tentative Form RI-1120C.

2.For any entity that has not elected to be treated as a corporation for federal tax purposes, a schedule of the shareholders/members/partners shall be attached to the tentative tax return through the date of sale or transfer. The schedule shall include the shareholder's/member’s/partner’s name, address, identification number and allocated gain/loss. If nonresident shareholders/members/partners are involved, there are additional requirements discussed in § 4.5 of this Part.

a.Subchapter S corporations shall attach to Form RI-1120S a tentative federal Form 1120S including the Form 4797 and/or Schedule D (if applicable).

b.LLCs, LLPs and LPs not treated as corporations for federal tax purposes shall attach to Form RI-1065 a tentative federal Form 1065, federal Schedule C, federal Schedule E and/or federal Schedule F (whichever is applicable) along with federal Form 4797 and/or federal Schedule D (if applicable).

E.When the corporation complies with the provisions of R.I. Gen. Laws § 44-11-29, including the filing of required returns and the payment of any and all tax due, the Tax Administrator shall issue a Letter of Good Standing. Until such time as the returns are filed, the taxes are paid and the Letter of Good Standing has been issued, the sale or transfer shall be fraudulent and void as against the state.

F.The five day notice requirement does not apply to sales by receivers, assignees under a voluntary assignment for the benefit of creditors, trustees in bankruptcy, or public officers acting under judicial process.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2012-07-01 to 01/04/2022
Amendment — effective from 2012-07-01 to 07/01/2012
Amendment — effective from 2003-03-01 to 07/01/2012
Periodic Refile — effective from 2001-12-20 to 03/01/2003

280-RICR-20-25-4 § 4.6 Entities with Nonresident Shareholders/Members/Partners

In addition to the requirements in § 4.5 of this Part, any entity with nonresident shareholders/members/partners (S-Corps, LLCs, LLPs and LPs) would be required to file a tentative Form RI-1096PT with any payment that may be due. The tentative Form RI-1096PT shall not include Form RI-1099PTs.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2012-07-01 to 01/04/2022
Amendment — effective from 2012-07-01 to 07/01/2012
Amendment — effective from 2003-03-01 to 07/01/2012
Periodic Refile — effective from 2001-12-20 to 03/01/2003

280-RICR-20-25-5 Estimated Tax Payments

280-RICR-20-25-5 § 5.1 Purpose

These rules and regulations implement R.I. Gen. Laws Chapter 44-26. That Chapter imposes under R.I. Gen. Laws Chapters 44-11, 44-11.1, 44-13, 44-14, 44-15, 44-17, and 27-3 a requirement that an entity pay a sum equal to the entire amount of its estimated tax during its current taxable year.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Amendment — effective from 2012-07-01 to 04/23/2018
Periodic Refile — effective from 2001-12-20 to 07/01/2012

280-RICR-20-25-5 § 5.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws §§ 44-1-4 and 44-26-11. The rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws § 42-35-1 et. seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Amendment — effective from 2012-07-01 to 04/23/2018
Periodic Refile — effective from 2001-12-20 to 07/01/2012

280-RICR-20-25-5 § 5.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation to effectuate the purpose of R.I. Gen. Laws Chapter 44-26 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Amendment — effective from 2012-07-01 to 04/23/2018
Periodic Refile — effective from 2001-12-20 to 07/01/2012

280-RICR-20-25-5 § 5.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Amendment — effective from 2012-07-01 to 04/23/2018
Periodic Refile — effective from 2001-12-20 to 07/01/2012

280-RICR-20-25-5 § 5.5 Definitions

A."Advance" means a sum equal to one hundred percent (100%) of the full amount of the tax that a corporation estimates it will be required to pay under the provisions of any of the R.I. Gen. Laws Chapters 44-11, 44-11.1, 44-13, 44-14, 44-15, 44-17, and 27-3, or in any changes and amendments of those Chapters.

B."Corporation" means every corporation, utility, banking institution, insurance company, organization, association, or individual subject to taxation under R.I. Gen. Laws Chapters 44-11, 44.11.1, 44-13, 44-14, 44-15, 44-17, and 27-3, or under any changes and amendments of those chapters.

C."Taxable year," means:

1.For entities taxed under R.I. Gen. Laws Chapter 44-11, or 44-11.1, the calendar year or fiscal year for which a return is filed; and

2.For entities taxed under R.I. Gen. Laws Chapter 44-14, referred to as "income period", the calendar year or the fiscal year, or portion of the year to be covered by the filing; and

3.For entities taxed under R.I. Gen. Laws Chapters 44-13, 44-15, 44-17, or 27-3, the calendar year ending December 31st of each year.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Amendment — effective from 2012-07-01 to 04/23/2018
Periodic Refile — effective from 2001-12-20 to 07/01/2012

280-RICR-20-25-5 § 5.6 Declaration - Due Date - Payment - Interest

A.Every corporation is required to file estimated taxes if their estimated liability for the taxable year can reasonably be expected to exceed five hundred dollars ($500) pursuant to R.I. Gen. Laws § 44-26- 2.1(a).

1.For Calendar Year taxpayers, four (4) equal installments of twenty-five (25%) percent are due on April 15th, June 15th, September 15th, and December 15th of the taxable year.

2.For Fiscal Year Taxpayers, four (4) equal installments of twenty-five (25%) percent are due on the 15th day of the fourth, 15th day of the sixth month, 15th day of the ninth month, and 15th day of the twelfth month of the taxable year.

3.Every corporation required to make estimated tax payments shall report such payments on Rhode Island’s Form BUS-EST.

B.If multiple payments are being made for different obligations with one check (for example, an extension and an estimated tax payment), the appropriate separate coupons shall accompany the payment(s).

C.If the required estimated payments are not made, then underestimated interest shall be calculated and reported on Form RI-2220 when filing the annual return.

D.In the event the estimated tax liability increases, an entity may file an amended estimated declaration and shall file and pay an additional amount at the time of the amended declaration. However, underestimating interest may still be assessed.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Amendment — effective from 2012-07-01 to 04/23/2018
Periodic Refile — effective from 2001-12-20 to 07/01/2012

280-RICR-20-25-5 § 5.7 Credit Against Tax

All payments of any advance or installment payment, for any taxable year is allowed as a credit to the corporation against the tax imposed upon the corporation for the taxable year under the provisions of any of the chapters enumerated in R.I. Gen. Laws § 44-26-1.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Amendment — effective from 2012-07-01 to 04/23/2018
Periodic Refile — effective from 2001-12-20 to 07/01/2012

280-RICR-20-25-5 § 5.8 Failure to File

If any corporation is required under R.I. Gen. Laws Chapter 44-26 to file a declaration of estimated tax for any taxable year at any time on or before the fifteenth day of the tenth month of the taxable year and the corporation fails to file any declaration, although the declaration may otherwise be late, on or before that date, there shall be assessed as a penalty against the corporation an amount equal to five percent (5%) of the tax imposed upon the corporation for the taxable year. The tax administrator may waive the penalty, if it is shown to his or her satisfaction that the failure to file the declaration was due to reasonable cause and not to willful neglect.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Amendment — effective from 2012-07-01 to 04/23/2018
Periodic Refile — effective from 2001-12-20 to 07/01/2012

280-RICR-20-25-6 Limited Liability Partnerships and Limited Partnerships

280-RICR-20-25-6 § 6.1 Purpose

The purpose of these rules and regulations is to implement R.I. Gen. Laws §§ 7-12-60 and 7-13-69, which imposes on Limited Liability Partnerships (LLPs) and Limited Partnerships (LPs) a filing requirement and an annual charge equal to the minimum tax imposed upon a corporation under R.I. Gen. Laws § 44-11-2(e) and the filing requirements of their partners.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Adoption — effective from 2012-07-01 to 04/23/2018

280-RICR-20-25-6 § 6.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws § 44-1-4. The rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws § 42-35-1 et. seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Adoption — effective from 2012-07-01 to 04/23/2018

280-RICR-20-25-6 § 6.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation to effectuate the purpose of R.I. Gen. Laws §§ 7-12-60 and 7-13-69 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Adoption — effective from 2012-07-01 to 04/23/2018

280-RICR-20-25-6 § 6.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Adoption — effective from 2012-07-01 to 04/23/2018

280-RICR-20-25-6 § 6.5 Filing of Returns

A.Every LLP and LP which has elected to be treated as a C-corporation for federal income tax purposes shall for Rhode Island purposes be subject to the Rhode Island Business Corporation Tax and file a Form RI-1120C with the Division of Taxation annually as follows:

1If the tax year of the LLP or LP is a calendar year filer, the return shall be filed on or before the fifteenth (15th) day of April in the year following the close of the calendar year.

2.If the tax year of the LLP or LP is a fiscal year filer, the return shall be filed on or before the fifteenth (15th) day of the fourth (4th) month following the close of the fiscal year.

B.Every LLP and LP which has elected to be treated as an S-corporation for federal income tax purposes shall for Rhode Island purposes be subject to the Rhode Island business corporation tax and file a Form RI-1120S with the Division of Taxation annually as follows:

1If the tax year of the LLP or LP is a calendar year filer, the return shall be filed on or before the fifteenth (15th) day of March in the year following the close of the calendar year.

2.If the tax year of the LLP or LP is a fiscal year filer, the return shall be filed on or before the fifteenth (15th) day of the third (3rd) month following the close of the fiscal year.

C.Every LLP and LP which has not elected to be treated as a corporation for federal income tax purposes shall file Form RI-1065 with the Division of Taxation annually as follows:

1.If the tax year of the LLP or LP is a calendar year, the return shall be filed on or before the fifteenth (15th) day of March in the year following the close of the calendar year.

2.If the tax year of the LLP or LP is fiscal year, the return shall be filed on or before the fifteenth (15th) day of the third (3rd) month following the close of the fiscal year.

D.When filing the annual return the LLP or LP shall attach a copy of their federal Form 1065 or federal pro forma return for that fiscal or calendar year.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Adoption — effective from 2012-07-01 to 04/23/2018

280-RICR-20-25-6 § 6.6 Annual Charge

An annual charge shall be due for LLPs and LPs not treated as corporations for federal tax purposes upon the filing of the required returns with the Division of Taxation. The annual charge shall be a fee in an amount equal to the minimum tax imposed upon a corporation under R.I. Gen. Laws § 44-11-2(e).

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Adoption — effective from 2012-07-01 to 04/23/2018

280-RICR-20-25-6 § 6.7 Filing Requirements for Partners

If a domestic or foreign LLP or LP is not treated as a corporation for federal income tax purposes, any partner of the LLP or LP during any part of the entity’s taxable year shall file a Rhode Island income tax return and shall include in Rhode Island gross income that portion of the LLP’s or LP’s Rhode Island income allocable to such partner.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Adoption — effective from 2012-07-01 to 04/23/2018

280-RICR-20-25-6 § 6.8 Pass-through Withholding Requirements

A.Any LLP or LP with a nonresident partner(s) shall withhold income taxes on the income that is being passed through to the nonresident partners. The Form RI-1096PT shall be filed reporting these withholding payments. The nonresident partner(s) shall be provided a Form RI-1099PT in order to claim these withholding payments on their income tax return. If the nonresident partner is another pass-through entity, that entity shall also be required to file a Form RI-1096PT to pass-through the withholding payments to their member(s). The “Bulletin on Pass-through Entities to Non-resident Taxpayers” may be consulted for further information.

B.Any LLP or LP with nonresident partner(s) may file Form RI-1040C composite tax return instead of filing Form RI-1096PT. Each nonresident partner shall complete Form RI-1040C-NE and file it with the entity. The “Bulletin on Pass-through Entities to Non-resident Taxpayers” may be consulted for further information. This bulletin can be obtained at www.tax.ri.gov/misc/passthrough_entities.php

C.If the nonresident withholding tax liability of an LLP or LP can reasonably be expected to exceed $250 for the taxable year, then estimated payments are required on the 15th day of the 4th month, the 15th day of the 6th month, the 15th day of the 9th month and the 15th day of the first month of the entity’s next succeeding taxable year. For a calendar year taxpayer, that would be April 15th, June 15th, September 15th and January 15th of the entity’s next succeeding taxable year. LLPs and LPs are covered by the “safe harbor” provisions (80% of the current year tax liability or 100% of the prior year’s tax liability at the current year rates) for the requirements of estimated tax payments as well as calculating underestimated interest. The appropriate estimated tax payment coupons for Form RI-1096PT-ES or Form RI-1040C-ES, as the case may be, shall be used to make these estimated payments.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Adoption — effective from 2012-07-01 to 04/23/2018

280-RICR-20-25-7 Limited Liability Companies

280-RICR-20-25-7 § 7.1 Purpose

The purpose of these rules and regulations is to implement R.I. Gen. Laws §§ 7-16-67 and 7-16-73, which imposes an annual filing requirement on Limited Liability Companies (LLCs) and their members.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Amendment — effective from 2013-07-01 to 07/01/2018
Amendment — effective from 2012-07-01 to 07/01/2013
Periodic Refile — effective from 2001-12-20 to 07/01/2012

280-RICR-20-25-7 § 7.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Amendment — effective from 2013-07-01 to 07/01/2018
Amendment — effective from 2012-07-01 to 07/01/2013
Periodic Refile — effective from 2001-12-20 to 07/01/2012

280-RICR-20-25-7 § 7.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation to effectuate the purpose of R.I. Gen. Laws §§ 7-16-67 and 7-16-73 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Amendment — effective from 2013-07-01 to 07/01/2018
Amendment — effective from 2012-07-01 to 07/01/2013
Periodic Refile — effective from 2001-12-20 to 07/01/2012

280-RICR-20-25-7 § 7.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Amendment — effective from 2013-07-01 to 07/01/2018
Amendment — effective from 2012-07-01 to 07/01/2013
Periodic Refile — effective from 2001-12-20 to 07/01/2012

280-RICR-20-25-7 § 7.5 Filing of Returns

A.Every LLC which has elected to be treated as a Subchapter C corporation for federal income tax purposes shall file with the Division of Taxation annually as follows:

1.If the taxable year of the LLC is a calendar year, Form RI-1120C shall be filed on or before the fifteenth (15th) day of April in the year following the close of the calendar year.

2.If the taxable year of the LLC is a fiscal year, Form RI-1120C shall be filed on or before the fifteenth (15th) day of the fourth (4th) month following the close of the fiscal year.

B.Every LLC which has elected to be treated as a Subchapter S Corporation for federal income tax purposes shall file with the Rhode Island Division of Taxation annually as follows:

1.If the taxable year of the LLC is a calendar year, Form RI-1120S shall be filed on or before the fifteenth (15th) day of March in the year following the close of the calendar year.

2.If the taxable year of the LLC is a fiscal year, Form RI-1120S shall be filed on or before the fifteenth (15th) day of third (3rd) month following the close of the calendar year.

C.Every LLC, except for Single Member LLCs referred to in § 7.5(D) of this Part, which has not elected to be treated as a corporation for federal income tax purposes shall file with the Rhode Island Division of Taxation annually as follows:

1.If the taxable year of the LLC is a calendar year, Form RI-1065 shall be filed on or before the fifteenth (15th) day of March in the year following the close of the calendar year.

2.If the taxable year of the LLC is a fiscal year, Form RI-1065 shall be filed on or before the fifteenth (15th) day of the third (3rd) month following the close of the fiscal year.

D.Every "Single Member LLC” whose single member is an individual or Sub chapter C corporation shall file with the Division of Taxation annually as follows:

1.If the taxable year of the LLC is a calendar year, Form RI-1065 shall be filed on or before the fifteenth (15th) day of April in the year following the close of the calendar year.

2.If the taxable year of the LLC is a fiscal year, Form RI-1065 shall be filed on or before the fifteenth (15th) day of the fourth (4th) month following the close of the fiscal year.

E.Every "Single Member LLC” whose single member is an individual or Sub chapter S corporation or a partnership shall file with Rhode Island the Division of Taxation annually as follows:

1.If the taxable year of the LLC is a calendar year, Form RI-1065 shall be filed on or before the fifteenth (15th) day of March in the year following the close of the calendar year.

2.If the taxable year of the LLC is a fiscal year, Form RI-1065 shall be filed on or before the fifteenth (15th) day of the third (3rd) month following the close of the fiscal year.

F.When filing the Rhode Island annual return the LLC shall attach a copy of its Federal return for that taxable year.

1.If the LLC elects to be treated as a C corporation for federal income tax purposes, a copy of federal Form 1120 shall be attached to the Form RI-1120C. If the LLC elects federal Subchapter S treatment, then a copy of federal Form 1120S shall be attached to Form RI-1120S.

2.If the LLC elects to be treated as a partnership for federal income tax purposes, a copy of federal Form 1065 shall be attached to the Form RI-1065.

3.If the LLC elects to be treated as a disregarded entity for federal income tax purposes, a copy of federal pro forma tax return, federal Form 1040 Schedule C, federal Form 1040 Schedule E, federal Form 1040 Schedule F (whichever is applicable) shall be attached to Form RI-1065. For a LLC with a single member taxed as a Subchapter C corporation or as a Subchapter S corporation, a profit or loss statement shall be an acceptable attachment to Form RI-1065.

G.Any LLC disregarded for federal income tax purposes is still required to file the Form RI-1065 with payment of the annual charge. The pass-through entity’s income, loss or other activity shall flow through to the single member’s income tax return and be taxed at that level. The single member’s income tax return is not considered to be a filing for the LLC.

H.Any LLC disregarded for federal income tax purposes shall use their federal employer identification number to file Form RI-1065. However, if the entity does not have a federal identification number, the entity is required to obtain a federal employer identification number (EIN) from the United States internal revenue service to be used when filing the required Rhode Island tax return.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Amendment — effective from 2013-07-01 to 07/01/2018
Amendment — effective from 2012-07-01 to 07/01/2013
Periodic Refile — effective from 2001-12-20 to 07/01/2012

280-RICR-20-25-7 § 7.6 Annual Charge

A.An annual charge shall be due upon the filing of the LLC's return with the Rhode Island Division of Taxation. The charge shall be determined as follows:

1.If the LLC is treated as a C corporation for federal income tax purposes, it shall pay as an annual charge the taxes as provided in R.I. Gen. Laws § 44-11-2(e).

2.If the LLC is treated as a Subchapter S corporation for federal income tax purposes, it shall pay as an annual charge an amount equal to the minimum tax imposed under R.I. Gen. Laws § 44-11-2(e).

3.If the LLC is treated as a partnership for federal income tax purposes, it shall pay as an annual charge an amount equal to the minimum tax imposed upon a corporation under R.I. Gen. Laws § 44-11-2(e).

4.If the LLC is a single member LLC and is treated as a disregarded entity for federal income tax purposes, it shall pay as an annual charge an R.I. Gen. Laws § 44-11-2(e).

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Amendment — effective from 2013-07-01 to 07/01/2018
Amendment — effective from 2012-07-01 to 07/01/2013
Periodic Refile — effective from 2001-12-20 to 07/01/2012

280-RICR-20-25-7 § 7.7 Filing Requirements for Members

A.If a domestic or foreign LLC is not treated as a corporation for of federal income tax purposes, for tax years beginning on or after January 1, 2012, LLCs are required to file Form RI-1065. Prior to January 1, 2012, LLCs shall file Form RI-1120S.

1.Any member of the LLC during any part of the LLC’s taxable year shall file a Rhode Island income tax return and shall include in Rhode Island gross income that portion of the LLC’s Rhode Island income allocable to such member's interest in the LLC.

2.A nonresident member is required to file a Rhode Island income tax return even though the member's only source of Rhode Island income was such member's share of the LLC’s income which was derived from or attributable to sources within this state, and the amount of nonresident pass-through withholding remitted by the LLC on behalf of the nonresident member shall be allowed as a credit against such member's Rhode Island income tax liability.

B.A domestic or foreign LLC or other pass-through entity may file a composite return reporting the Rhode Island source income attributable to the nonresident members. A nonresident member of a pass-through entity who participates in a composite return will be considered to have satisfied the Rhode Island filing requirement and no further filing by the nonresident member is required. For a nonresident member of a pass-through entity to participate in a composite return, the nonresident member must:

1.be an individual; and

2.have no Rhode Island source income other than from the pass-through entity filing the composite return; and

3.elect to participate in the composite by filing an election form (RI Form 1040C-NR) with the entity. The election form is to be kept on file by the entity for inspection by personnel of the Rhode Island Division of Taxation.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Amendment — effective from 2013-07-01 to 07/01/2018
Amendment — effective from 2012-07-01 to 07/01/2013
Periodic Refile — effective from 2001-12-20 to 07/01/2012

280-RICR-20-25-7 § 7.8 Pass-through Withholding Requirements

A.Any LLC with a nonresident member(s) shall withhold income taxes on the income that is being passed through to the nonresident members. The Form RI-1096PT shall be filed reporting these withholding payments. The nonresident member(s) shall be provided a Form RI-1099PT in order to claim these withholding payments on their income tax return. If the nonresident member is another pass-through entity, that member shall also be required to file a Form RI1096PT to pass-through the withholding payments to their member(s). The “Bulletin on Pass-through Entities to Non-resident Taxpayers” may be consulted for further information. This bulletin can be found at http://www.tax.ri.gov/misc/passthrough_entities.php

B.Any LLC with nonresident member(s) may file Form RI-1040C composite tax return instead of filing the Form RI-1096PT. Each nonresident member shall complete Form RI-1040C-NE and file it with the entity. The “Bulletin on Pass-through Entities to Non-resident Taxpayers” may be consulted for further information.

C.If the LLC’s expected pass-through withholding tax liability is more than $250 for the taxable year, then estimated payments are required on the 15th day of the 4th month, 15th day of the 6th month, 15th day of the 9th month and 15th day of the first month of the pass-through entity’s next succeeding taxable year. For a calendar year taxpayer, that would be April 15th, June 15th, September 15th and January 15th of the next succeeding taxable year. LLCs are covered by the “safe harbor” provisions (80% of the current year tax liability or 100% of the prior year’s tax liability at the current year rates) for the requirements of estimated tax payments as well as calculating underestimated interest. The appropriate estimated tax payment coupons of Form RI1096PT-ES or Form RI-1040C-ES shall be used to make these estimated payments.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Amendment — effective from 2013-07-01 to 07/01/2018
Amendment — effective from 2012-07-01 to 07/01/2013
Periodic Refile — effective from 2001-12-20 to 07/01/2012

280-RICR-20-25-8 Nexus

280-RICR-20-25-8 § 8.1 Purpose

These rules and regulations implement R.I. Gen. Laws §§ 44-11-1, 44-11-2, 44-11-4.1, 44-11-14, and other sections within R.I. Gen. Laws Chapters 44-11. These sections allow taxation of net income from businesses within and partially within the state.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Periodic Refile — effective from 2001-12-20 to 01/12/2016

280-RICR-20-25-8 § 8.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws § 44-1-4, which authorizes and empowers the Rhode Island tax administrator to make rules and regulations, as the administrator may deem necessary for the proper administration and enforcement of the tax laws of this state. The rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws § 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Periodic Refile — effective from 2001-12-20 to 01/12/2016

280-RICR-20-25-8 § 8.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation the authority to effectuate the purpose of R.I. Gen. Laws Chapters 44-11-1, 44-11-2, 44-11-4.1, 44-11-14, and other applicable Rhode Island state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Periodic Refile — effective from 2001-12-20 to 01/12/2016

280-RICR-20-25-8 § 8.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Periodic Refile — effective from 2001-12-20 to 01/12/2016

280-RICR-20-25-8 § 8.5 Definitions

A.“Combined group” means a group of two or more corporations in which more than fifty percent (50%) of the voting stock of each member corporation is directly or indirectly owned by a common owner or owners, either corporate or non-corporate, or by one or more of the member corporations, and that are engaged in a unitary business.

B.“Corporation” has the meaning set forth in R.I. Gen. Laws § 44-11-1(4), and includes an LLC, partnership or other entity electing to be taxed as a corporation for federal tax purposes. When a partnership or other pass-through entity is directly or indirectly held by a corporation, the business conducted by such a partnership or pass-through entity is considered the business of the corporation to the extent of the corporation’s distributive share of the partnership or pass-through entity net income.

C.“Foreign corporation” means a corporation not organized under the laws of Rhode Island.

D.“General partner” has the meaning set forth in R.I. Gen. Laws § 7-13-1(7), as amended.

D.“Income” encompasses both profits and losses, whether active or passive.

E.“Limited partner” has the meaning set forth in R.I. Gen. Laws § 7-13-1(8), as amended.

F.“Nexus” means a connection or link with the state sufficient to subject a person to tax by the state, as described in § 8.6 of this Part.

G.“Office” means a permanent or temporary location where any person or other entity makes sales or holds itself out to the public as conducting a business. An in-home office of a sales representative is generally not considered an “office” of a corporation for purposes of this Part, provided that the representative does not hold himself out as doing business on behalf of the corporation at that location by either publishing the home address or phone number as a corporate business address or phone number or through other actions.

H.“Partnership” has the meaning set forth in R.I. Gen. Laws § 7-12-17, as amended.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Periodic Refile — effective from 2001-12-20 to 01/12/2016

280-RICR-20-25-8 § 8.6 Nexus – Generally

A.Establishing nexus generally means that a business has sufficient connection or presence in Rhode Island for the State to have taxing authority. A foreign corporation is subject to Rhode Island corporate income tax if it conducts business activity in Rhode Island and has income properly apportionable to Rhode Island pursuant to R.I. Gen. Laws § 44-11-14, et seq., regardless of whether it is authorized to do business in Rhode Island. The State Tax Administrator construes Rhode Island law to assert the tax jurisdiction of Rhode Island to the fullest extent permitted by the United States Constitution and the laws of the United States. Some type of physical or economic presence is necessary to establish nexus with the State. The United States Constitution places limitations on a state’s jurisdiction to tax. These constitutional limitations derive from two clauses in the United States Constitution: the Due Process Clause, in Amend. XIV, Section 1; and the Commerce Clause, in Art. 1, Section 8, cl. 3. The nexus requirement of both clauses must be satisfied before an out-of-state business may be subject to the taxing jurisdiction of a state.

1.Due Process Clause nexus is satisfied when a person has minimum contacts with a state such that maintenance of a lawsuit against the person would not offend traditional notions of fair play and substantial justice. Due process clause nexus is satisfied when the person has a physical presence in the state, but physical presence is not always necessary to establish Due Process Clause nexus. Even without physical presence in the taxing state, Due Process Clause nexus is satisfied when an out-of-state commercial actor’s efforts are purposefully directed toward residents of the taxing state.

2.A state tax satisfies the Commerce Clause if it meets the following four requirements: the tax is applied to an activity with a substantial nexus with the taxing state, the tax is fairly apportioned, the tax does not discriminate against interstate commerce, and the tax is fairly related to services provided by the state. The Commerce Clause nexus requirement limits the reach of state taxing authority so as to ensure that state taxation does not unduly burden interstate commerce. The Commerce Clause “substantial nexus” requirement is not satisfied when the only contacts of a vendor of tangible goods with the taxing state are by mail or common carrier. However, in the area of corporate income taxation, the substantial nexus requirement can be satisfied through a showing of significant economic presence, absent any finding of physical presence. Significant economic presence can be demonstrated through activities such as the solicitation of orders for services and intangibles by in-state residents, and through the provision of significant services and intangibles to in-state residents.

BFederal statutory law places additional limits on a state’s ability to tax interstate commerce. Section 101 of Public Law 86-272, codified at 15 U.S.C. §§ 381-384, prohibits a state from taxing the income of a foreign corporation whose only business activities within the state consist of “solicitation of orders” for tangible personal property, provided that the orders are sent outside the state for approval or rejection and the tangible personal property is shipped or delivered from out of state. The leasing, renting, licensing or other disposition of tangible personal property, or transactions involving intangibles, such as franchises, patents, copyrights, trademarks, service marks and the like, are not protected under the act. Also, solicitation, sale, or performance of any type of services is not protected under the act unless entirely ancillary to facilitate the request for an order for the sale of tangible personal property. Corporations incorporated within Rhode Island have physical presence in Rhode Island. For more detailed guidance regarding interpretation of 15 U.S.C. §§ 381-384 (Public Law 86-272), including what activities constitute solicitation, what activities constitute activities ancillary to solicitation, what activities are protected, and what activities are unprotected, refer to § 8.9 of this Part.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Periodic Refile — effective from 2001-12-20 to 01/12/2016

280-RICR-20-25-8 § 8.7 Corporations Subject to Taxation – Generally

A.General nexus standards require the physical presence or economic presence of the taxpayer within the state for the taxpayer to be subject to taxation by the state.

B.The term “corporation” is defined in R.I. Gen. Laws § 44-11-1(4) to include various entities that are “deriving any income from sources within the state or engaging in any activities or transactions within this state for the purposes of profit or gain, whether or not an office or place of business is maintained in this state, or whether or not such income, activities or transactions are connected with intrastate, interstate, or foreign commerce,” subject to certain limitations. Correspondingly, R.I. Gen. Laws § 44-11-2 subjects such corporations to an income tax by the State of Rhode Island.

CThe Rhode Island corporate income tax is levied on corporations with Rhode Island business activity, unless prohibited by 15 U.S.C. §§ 381-384 (Public Law 86-272). For more detailed guidance regarding corporations that are members in a combined group, refer to § 8.8 of this Part.

D.Imputed Activity. For the purposes of determining whether a foreign corporation is subject to Rhode Island’s tax jurisdiction, the activities of the corporation’s employees, agents, or representatives, however designated, will be imputed to the corporation. An agent or representative may be an individual, corporation, partnership or other entity. Activities conducted in Rhode Island on behalf of a foreign corporation by an independent contractor will be imputed to the corporation to the extent permitted by the United States Constitution and the laws of the United States.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Periodic Refile — effective from 2001-12-20 to 01/12/2016

280-RICR-20-25-8 § 8.8 Combined Reporting Requirement for C-corporations and Combined Groups – Factor-Based Nexus Approach for Tax Years Beginning on or after January 1, 2015.

A.For tax years beginning on or after January 1, 2015, all C-corporations that do business in Rhode Island and are members in a combined group are subject to combined reporting, whether the combined group does business in multiple states or only in Rhode Island.

B.In such situations, the C-corporation must, for Rhode Island tax purposes, include in its combined report the income and apportionment factors of all members in its combined group. As long as one member in a combined group has corporate income tax nexus with Rhode Island and also engages in activities that exceed the protection of 15 U.S.C. §§ 381-384 (Public Law 86-272), then all members in the combined group, including those protected from state taxation by 15 U.S.C. §§ 381-384 (Public Law 86-272) and those that do not have nexus with Rhode Island, must be included when calculating the combined group’s net income and apportionment factors. The Rhode Island receipts of a combined group member that lacks nexus with Rhode Island or that is protected from Rhode Island taxation by 15 U.S.C. §§ 381-384 (Public Law 86-272) must always be included in the numerator of an apportionment fraction on the combined return, as set forth in Part 9 of this Subchapter (Apportionment of Net Income).

C.The purpose of apportionment in the context of a combined report is to determine the combined group’s Rhode Island source income, which is taxable. In determining the combined group’s taxable income in this manner, the Division of Taxation is merely measuring the in-state activities of the combined group, and not imposing a tax on members in the combined group that lack nexus with Rhode Island or that are protected from Rhode Island taxation by 15 U.S.C. §§ 381-384 (Public Law 86-272). After determining through such an apportionment formula the amount of a combined group’s net income apportioned to Rhode Island, combined group net income is solely attributed to and tax is solely imposed on those members in the combined group that have corporate income tax nexus with Rhode Island.

D.Examples

1.Corporations M, N, and O, all foreign corporations, are engaged in a unitary business and are members in the same combined group. Only Corporation M has nexus with Rhode Island. The combined group of Corporations M, N, and O must file a combined report with Rhode Island as a single taxpayer, including the receipts of Corporations N and O that are attributable to Rhode Island in the numerator of the combined group’s apportionment formula, without regard to whether Corporations N or O have nexus with Rhode Island or are protected from state taxation under 15 U.S.C. §§ 381-384 (Public Law 86-272). The apportioned Rhode Island income will then be attributed to taxable members in the combined group, as set forth in Part 9 of this Subchapter (Apportionment of Net Income).

2.Books.com is a corporation operating a website and internet business headquartered in New York with no physical presence in Rhode Island. It has an affiliated corporation, Booksellers, Inc. which has three stores in Rhode Island. The two corporations share common ownership, cross marketing, book return policy, and gift card/customer loyalty program, and are therefore engaged in a unitary business. As a result, the businesses are subject to mandatory combined reporting in Rhode Island and must file a combined return as a combined group. The Rhode Island sales of Books.com would be included in the numerator of the combined group’s sales factor. In order to determine the amount of the combined group’s net income apportioned to Rhode Island, it is not necessary for the Books.com corporation to have nexus with Rhode Island.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Periodic Refile — effective from 2001-12-20 to 01/12/2016

280-RICR-20-25-8 § 8.9 Public Law 86-272 (15 U.S.C. §§ 381-384) – Solicitation Defined; Protected Activities.

A.Section 101 of Public Law 86-272, codified at 15 U.S.C. §§ 381-384, prohibits a state from taxing the income of a foreign corporation whose only business activities within the state consist of “solicitation of orders” for tangible personal property, provided that the orders are sent outside the state for approval or rejection and the tangible personal property is shipped or delivered from out of state. For purposes of 15 U.S.C. §§ 381-384 (Public Law 86-272), solicitation is defined as follows:

1.Solicitation means speech or conduct which explicitly or implicitly invites an order and activities that neither explicitly, nor implicitly, invite an order, but which are entirely ancillary to requests for an order.

a.Ancillary activities are those activities that serve no independent business function for the seller apart from their connection to the solicitation of orders. The mere assignment of activities to sales personnel does not, merely by such assignment, make such activities ancillary to solicitation of orders. Activities not entirely ancillary include those that the company would have reason to engage in anyway, but chooses to allocate to its in-state sales force. Activities that seek to promote sales are not ancillary unless, taken as whole, they are de minimis.

b.De minimis activities are those that, when taken together as a whole, establish only a trivial connection with the taxing state. An activity conducted within a taxing state on a regular or systematic basis or pursuant to a company policy, whether such policy is in writing or not, shall not ordinarily be considered trivial. Whether or not an activity consists of a trivial or non-trivial connection with the State is to be measured on both a qualitative and quantitative basis. If such activity either qualitatively or quantitatively creates a non-trivial connection with the taxing state, then such activity exceeds the protection of 15 U.S.C. § 381 (P.L. 86-272).

c.Example

(1)Corporation H, a manufacturer located outside Rhode Island, sends a small team of officers and employees into Rhode Island to meet with potential suppliers for purposes of a plant tour. The officers and employees are in Rhode Island for two days and conduct no other activity in the state. This is de minimis activity and the connection with Rhode Island is only trivial. As a result of the immunity afforded by 15 U.S.C. § 381 (P.L. 86-272), Rhode Island is not permitted to impose tax.

2.Only the solicitation for orders of tangible personal property is afforded protection under 15 U.S.C. §§ 381-384 (Public Law 86-272); therefore, the leasing, renting, licensing or other disposition of tangible personal property, or transactions involving intangibles, such as franchises, patents, copyrights, trademarks, service marks, and the like, or any other type of property are not protected activities under 15 U.S.C. §§ 381-384 (Public Law 86-272). The solicitation, sale, or performance of any type of service is also not protected under 15 U.S.C. §§ 381-384 (Public Law 86-272) unless entirely ancillary to solicitation for an order for tangible personal property, de minimis, or otherwise protected under this regulation.

B.In accordance with 15 U.S.C. §§ 381-384 (Public Law 86-272), certain activities of foreign corporations shall be considered protected activities for purposes of corporate income tax nexus. This means that companies engaged in such activities, and nothing more, shall not through such activities alone be considered to have corporate income tax nexus with the State. The protection from state taxation afforded by 15 U.S.C. §§ 381-384 (Public Law 86-272) and under the provisions of this Part shall be determined on a tax-year by tax-year basis. Therefore, if at any time during a tax year the company conducts activities that are not protected by 15 U.S.C. §§ 381-384 (Public Law 86-272) or this regulation, then no sales in this state or income earned by a company attributed to this state during any part of that year will be protected from taxation under 15 U.S.C. §§ 381-384 (Public Law 86-272) or this Regulation. The effect of a company’s activities is cumulative and all activities must be considered as a whole when determining corporate income tax nexus. The protected activities enumerated below are intended as guidelines; they are not exhaustive and will not precisely describe the activities of many foreign corporations. In light of the foregoing, the following activities shall be considered protected activities for purposes of corporate income tax nexus in this State:

1.Soliciting orders for sales of tangible personal property through advertising activities that do not make use of a physical presence in the State.

2.Soliciting of orders for tangible personal property by an in-state resident employee or representative of the company, so long as such person does not maintain or use any office or other place of business in the state other than an "in-home" office as described in this Regulation.

3.Carrying samples of tangible goods and related promotional materials only for display or distribution without charge or other consideration.

4.Furnishing and setting up display racks of tangible goods and advising customers on the display of the company's products without charge or other consideration.

5.Providing automobiles to sales personnel for their use in conducting protected activities.

6.Passing orders, inquiries, and complaints related to tangible goods on to the home office.

7.Missionary sales activities; i.e., the solicitation of indirect customers for the company's tangible goods. For example, a manufacturer's solicitation of retailers to buy the manufacturer's goods from the manufacturer's wholesale customers would be protected if such solicitation activities are otherwise immune.

8.Coordinating shipment or delivery without payment or other consideration and providing information relating thereto either prior to or subsequent to the placement of an order for tangible goods.

9.Checking of customers' inventories without a charge therefore (for re-order, but not for other purposes such as quality control).

10.Maintaining a sample or display room for two weeks (14 days) or less within the state during the tax year.

11.Recruiting, training or evaluating sales personnel, including occasionally using homes, hotels, or similar places for meetings with sales personnel.

12.Mediating direct customer complaints when the purpose thereof is solely for ingratiating the sales personnel with the customer and facilitating requests for orders of tangible goods.

13.Owning, leasing, using, or maintaining personal property for use in the employee or representative's "in-home" office or automobile that is solely limited to the conducting of protected activities. The use of personal property such as a cellular telephone, fax machine, duplicating equipment, personal computer and computer software that is limited to the carrying on of protected solicitation and activity entirely ancillary to such solicitation, by itself, will not remove the protection under regulation.

14.Shipping or delivering tangible goods into this state by means of private vehicle, rail, water, air or other carrier, irrespective of whether a shipment or delivery fee or other charge is imposed, directly or indirectly, upon the purchaser.

15.Non-controlling ownership of shares in a corporation that does business in Rhode Island.

16.Depositing of funds or maintaining securities brokerage accounts with financial institutions unrelated to the foreign corporation that do business in Rhode Island.

C.Independent contractors.

1.Independent contractors may engage in the following limited activities within the State on behalf of an out-of-state hiring company, without the hiring company's loss of immunity:

a.Soliciting orders for sales of tangible personal property.

b.Making sales of qualifying tangible personal property.

c.Maintaining an office.

2.Sales representatives who represent a single principal are not considered to be independent contractors and are subject to the same limitations as those provided under 15 U.S.C. §§ 381-384 (Public Law 86-272). Maintenance of a stock of goods in the State by the independent contractor under consignment or any other type of arrangement with the out-of-state hiring company, except for purposes of display and solicitation, shall remove the hiring company’s protection from taxation under 15 U.S.C. §§ 381-384 (Public Law 86-272), unless such activities are de minimis.

D.A company that registers or otherwise voluntarily qualifies to do business within this state does not, by that fact alone, lose its protection under Public Law 86-272. Where, separate from or ancillary to such registration or qualification, a company receives and seeks to use or protect any additional benefit or protection from the State through activity not otherwise protected under 15 U.S.C. §§ 381-384 (Public Law 86-272) or this Regulation, the protection afforded by 15 U.S.C. §§ 381-384 (Public Law 86-272) shall be lost.

E.Federal Limitations. A foreign corporation’s activities will not subject it to the corporate income tax jurisdiction of Rhode Island if the United States Constitution or laws of the United States preclude the exercise of jurisdiction.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Periodic Refile — effective from 2001-12-20 to 01/12/2016

280-RICR-20-25-8 § 8.10 Activities that Create Nexus.

A.This Rule describes activities that are sufficient for creating corporate income tax nexus between the State of Rhode Island and a foreign corporation. The activities enumerated in this Rule below are intended merely as guidelines. The activities enumerated are not exhaustive and will not precisely describe the activities of many foreign corporations.

B.Any amount of physical presence, however limited, will presumptively trigger income tax nexus between a foreign corporation and the State. Physical presence is determined on a case-by-case basis, according to the applicable facts and circumstances. Physical presence can be established through the holding of property or the activities of agents, representatives, or independent contractors who act as representatives of a foreign corporation in maintaining the foreign corporation’s ability to market goods and services in the State. The burden is on the taxpayer to rebut the presumption of corporate income tax nexus when there is any amount of physical presence.

1.Example.

a.Intangible, Inc. is a foreign corporation that holds intangible assets. Intangible has no employees, tangible property, or sales. However, the majority of its corporate functions are performed in Rhode Island. These functions include maintaining books and records, holding directors’ meetings and making day-to-day business decisions. The corporate functions are performed in Rhode Island by the directors or by employees of an affiliate. Intangible has nexus with Rhode Island.

C.In the absence of physical presence, substantial nexus with a foreign corporation can be established through the foreign corporation’s economic presence in the State. Substantial nexus for corporate income tax purposes requires that a foreign corporation has created continuing obligations and relationships with State residents such that the foreign corporation has purposefully availed itself of State markets, benefits, or protections, or that the corporation is subject to State regulation and sanctions for the consequences of its actions. Additional factors that serve to demonstrate sufficient economic presence to establish substantial nexus with the State include, but are not limited to, the presence of a foreign corporation’s moveable property or lease interests in the State, the presence of a foreign corporation’s representatives in the State, and a foreign corporation’s controlling ownership of in-state pass-through entities, as well as other activities enumerated in § 8.10(D) of this Part.

D.The in-state activities by a foreign corporation that are enumerated in this provision shall trigger corporate income tax nexus with the State, so long as they are not of a de minimis character. The activities enumerated in this provision shall not be considered as either solicitation of orders for tangible personal property or as activities that are entirely ancillary to such solicitation. In-state activities by foreign corporations that will trigger corporate income tax nexus with the State include, but are not limited to, the following:

1.Making repairs or providing maintenance or service to the property sold or to be sold.

2.Collecting current or delinquent accounts, whether directly or by third parties, through assignment or otherwise.

3.Investigating creditworthiness or issuing lines of credit or credit cards to in-state residents.

4.Installation or supervision of installation at or after shipment or delivery.

5.Conducting training courses, seminars, or lectures for personnel other than personnel involved only in solicitation.

6.Providing any kind of technical assistance or service including, but not limited to, engineering assistance or design service, when one of the purposes thereof is other than the facilitation of the solicitation of orders.

7.Investigating, handling, or otherwise assisting in resolving customer complaints, other than mediating direct customer complaints when the sole purpose of such mediation is to ingratiate the sales personnel with the customer.

8.Approving or accepting orders.

9.Repossessing property.

10.Securing deposits on sales.

11.Picking up or replacing damaged or returned property or stale or unsaleable inventory.

12.Hiring, training, or supervising personnel, other than personnel involved only in solicitation.

13.Using agency stock checks or any other instrument or process by which sales are made within this state by sales personnel.

14.Maintaining a sample or display room in excess of two weeks (14 days) within the state during the tax year.

15.Carrying samples for sale, exchange, or distribution in any manner for consideration or other value.

16.Owning, leasing, using, or maintaining any of the following facilities or property in-state:

a.Repair shop

b.Parts department

c.Any kind of office other than an in-home office

d.Warehouse

e.Meeting place for directors, officers, or employees

f.Stock of goods other than samples for sales personnel or that are used entirely ancillary to solicitation

g.Telephone answering service that is publicly attributed to the company or to employees or agent(s) of the company in their representative status

h.Mobile stores, i.e., vehicles with drivers who are sales personnel making sales from the vehicles

i.Real property or fixtures to real property of any kind

17.Consigning stock of goods or other tangible personal property to any person, including an independent contractor, for sale.

18.Maintaining wholesaling activities directed into the State.

19.Maintaining, by any employee or other representative, an office or place of business of any kind other than an in-home office located within the residence of the employee or representative.

a.The maintenance of an in-home office as described above shall only be considered a protected activity so long as the in-home office (1) is not publicly attributed to the company or to the employee or representative of the company in an employee or representative capacity; and (2) so long as the use of such office is strictly limited to soliciting and receiving orders from customers, for transmitting such orders outside the state for acceptance or rejection by the company, or for such other activities that are protected under 15 U.S.C. §§ 381-384 (Public Law 86-272).

b.A telephone listing or other public listing within the state for the company or for an employee or representative of the company in such capacity or other indications through advertising or business literature that the company or its employee or representative can be contacted at a specific address within the state shall normally be determined as the company maintaining within this state an office or place of business attributable to the company or to its employee or representative in a representative capacity. This includes the posting of such information on a company website. However, the normal distribution and use of business cards and stationery identifying the employee's or representative's name, address, telephone and fax numbers and affiliation with the company shall not, by itself, be considered as advertising or otherwise publicly attributing an office to the company or its employee or representative.

c.The maintenance of any office or other place of business in this state that does not strictly qualify as an "in-home" office as described above shall, by itself, cause the loss of protection under this regulation. For the purpose § 8.10(D)(19)(c) of this Part, it is not relevant whether the company pays directly, indirectly, or not at all for the cost of maintaining such in-home office.

20.Entering into franchising or licensing agreements, including licensing the use of trade names to in-state affiliates; selling or otherwise disposing of such franchises and licenses; or selling or otherwise transferring tangible personal property pursuant to such franchise or license by the franchisor or licensor to its franchisee or licensee within the state.

a.Example

(1)Rhode Island Retailer transfers its trademarks to Friendly Corporation in Delaware which then licenses these intangibles back to Rhode Island Retailer in exchange for royalty payments. Rhode Island Retailer and Friendly Corporation are closely related affiliates. Friendly Corporation has no physical presence in this state. Because Friendly Corporation licenses trademarks to an in-state affiliate, Friendly Corporation has nexus in Rhode Island.

21.Licensing the use of non-trademark intangible property to in-state affiliates.

22.Conducting any activity not enumerated in § 8.10 of this Part as a protected activity, which is not entirely ancillary to solicitations for orders of tangible personal property, even if such activity helps to increase sales.

23.Ownership of in-state LLCs, partnerships, and other pass-through entities or owning an interest in any partnership or other pass-through entity whose activities, if conducted by a foreign corporation, would give Rhode Island jurisdiction over the foreign corporation under R.I. Gen. Laws Chapter 44-11, unless the activities of the partnership or pass-through entity are limited to activities protected under 15 U.S.C. §§ 381-384 (Public Law 86-272).

24.Performing services.

25.Installing or supervising installation at or after shipment or delivery.

26.Providing consulting services.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Periodic Refile — effective from 2001-12-20 to 01/12/2016

280-RICR-20-25-9 Apportionment of Net Income

280-RICR-20-25-9 § 9.1 Purpose

These rules and regulations implement R.I. Gen. Laws §§ 44-11-13 through 44-11-15. These sections allow for apportionment of net income for businesses within and partially within the state.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Technical Revision — effective from 2004-01-26 to 01/12/2016
Amendment — effective from 2004-01-01 to 01/26/2004
Amendment — effective from 2003-04-01 to 01/01/2004
Periodic Refile — effective from 2001-12-20 to 01/01/2004

280-RICR-20-25-9 § 9.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws §§ 44-11-13 through 44-11-15, and R.I. Gen. Laws § 44-1-4, which authorizes the Rhode Island tax administrator to make rules and regulations, as the administrator may deem necessary for the proper administration and enforcement of the tax laws of this state. The rules and regulations have been prepared in accordance with the requirements in R.I. Gen. Laws § 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Technical Revision — effective from 2004-01-26 to 01/12/2016
Amendment — effective from 2004-01-01 to 01/26/2004
Amendment — effective from 2003-04-01 to 01/01/2004
Periodic Refile — effective from 2001-12-20 to 01/01/2004

280-RICR-20-25-9 § 9.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation the authority to effectuate the purpose of R.I. Gen. Laws §§ 44-11-13 through 44-11-15 and other applicable state laws and regulations. This Regulation explains apportionment for corporations, pass-through entities, sole proprietorships, and other business types as required. All examples in this Regulation are provided solely for the purpose of illustrating basic concepts that are set forth in the Rules herein, and may not introduce all relevant considerations. Such examples shall not serve as precedents in administrative hearings or other legal proceedings, and are not intended to cover all possible situations.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Technical Revision — effective from 2004-01-26 to 01/12/2016
Amendment — effective from 2004-01-01 to 01/26/2004
Amendment — effective from 2003-04-01 to 01/01/2004
Periodic Refile — effective from 2001-12-20 to 01/01/2004

280-RICR-20-25-9 § 9.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Technical Revision — effective from 2004-01-26 to 01/12/2016
Amendment — effective from 2004-01-01 to 01/26/2004
Amendment — effective from 2003-04-01 to 01/01/2004
Periodic Refile — effective from 2001-12-20 to 01/01/2004

280-RICR-20-25-9 § 9.5 Definitions

A.“Apportionment” means the formula used to determine the amount of income that is attributable to Rhode Island by a combined group or any other taxpayer.

B.“Arithmetical mean” means the sum of the factors available to the taxpayer divided by the number of fractions used.

C.“Billing address” means the location indicated in the books and records of the taxpayer as the primary mailing address relating to a customer’s account as of the time of the transaction as kept in good faith in the normal course of business and not for tax avoidance purposes.

D.“Broadcast customer” means a person who has a direct contractual relationship with a broadcaster from whom the broadcaster derives gross receipts. The term “broadcast customer” includes but is not limited to an advertiser or licensee.

E.“Broadcaster” means a taxpayer that is engaged in the business of broadcasting, and includes a television network, a cable program network, and a television distribution company. The term “broadcaster” does not include a Platform Distribution Company such as a cable system operator or a direct broadcast satellite system operator.

F."Broadcasting” means the transmission of film programming by an electronic or other signal conducted by microwaves, wires, lines, coaxial cables, wave guides, fiber optics, satellite transmissions, or through any other means of communication directly or indirectly to viewers and listeners.

G.“Business customer” means a customer that is a business operating in any form, including an individual that operates a business through the form of a sole proprietorship. Sales to a non-profit organization, to a trust, to the United States Government, to any foreign, state, or local government, or to any agency or instrumentality of such government shall be treated as sales to a business customer and shall be assigned consistent with the rules that apply to receipts from such sales.

H.“C corporation” means a corporation organized under subchapter C of the Internal Revenue Code, as defined in Section 1504 of that subchapter. For the purposes of this Regulation, the term includes those entities treated as C corporations for federal tax purposes, so long as such entities would qualify as a corporation, as defined in this Regulation.

I.“Combined group” means a group of two or more corporations in which more than fifty percent (50%) of the voting stock of each member corporation is directly or indirectly owned by a common owner or owners, either corporate or non-corporate, or by one or more of the member corporations, and that are engaged in a unitary business.

J.“Commercial domicile” has the meaning set forth in R.I. Gen. Laws § 44-14-14.2.

K.“Common ownership” means more than fifty percent (50%) of the voting control of each member of the group is directly or indirectly owned by a common owner or owners, either corporate or non-corporate, whether or not the owner or owners are members of the combined group.

L.“Corporation” has the meaning set forth in R.I. Gen. Laws § 44-11-1(4), and for purposes of mandatory unitary combined reporting under the Rhode Island General Laws, includes an LLC, partnership, or other entity electing to be taxed as a corporation for federal tax purposes. Although a partnership or other pass-through entity may not always be considered a corporation includible in the combined group on an entity basis as a member, when a partnership or other pass-through entity is directly or indirectly held by a corporation, the business conducted by such a partnership or pass-through entity is considered the business of the corporation to the extent of the corporation’s distributive share of the partnership or pass-through entity net income.

M.“Cost of performance sourcing” means the sourcing method used for gross receipts from transactions other than sales of tangible personal property under the three-factor apportionment formula set forth in § 9.9 of this Part.

N.“Division of Taxation” means the Rhode Island Department of Revenue, Division of Taxation. The Division of Taxation may also be referred to as the “Division” or the “Tax Division.”

O.“Documentary evidence” means journals, books of account, invoices, expense reports, or other records maintained in the regular course of business, or any other records required to be maintained for legal or accounting purposes.

P.“Film programming” means one (1) or more performances, events, or productions (or segments of performances, events, or productions) intended to be distributed for visual and auditory perception, including but not limited to news, entertainment, sporting events, plays, stories, or other literary, commercial, educational, or artistic works.

Q.“Income-producing activity” means, for each separate item of income, the transactions and activity directly engaged by the taxpayer for the ultimate purpose of obtaining profit or gain. For apportionment purposes, such activity does not include transactions and activities performed on behalf of a taxpayer, such as those conducted on the taxpayer’s behalf by an independent contractor. Income-producing activity includes, but is not limited to:

1.The rendering of personal services by employees or the utilization of tangible and intangible property by the taxpayer in performing a service;

2.The sale, rental, leasing, licensing the use of, or other use of real property; and;

3.The rental, leasing, licensing the use of, or other use of tangible or intangible personal property.

R.“Individual customer” means any customer that is not a business customer.

S.“Intangible property” within the meaning of this Regulation generally includes, without limitation, copyrights; patents; trademarks; trade names; brand names; franchises; licenses; trade secrets; trade dress; information; know-how; methods; programs; procedures; systems; formulae; processes; technical data; designs; licenses; literary, musical, or artistic compositions; information; ideas; contract rights including broadcast rights; agreements not to compete; goodwill and going concern value; securities; and computer software.

T.“Market based sourcing” means the sourcing method used for gross receipts from transactions other than sales of tangible personal property under the single sales factor apportionment formula set forth in § 9.8 of this Part.

U.“Place of order” means the physical location from which a customer places an order for a sale other than a sale of tangible personal property from a seller, resulting in a contract with the seller.

V.“Platform Distribution Company” means a cable service provider, a direct broadcast satellite system, an internet content distributor or any other distributor that directly charges viewers for access to any film programming.

W.“Single sales factor” means the apportionment fraction set forth in § 9.8 of this Part. The sales factor may also be referred to as the “receipts factor” or “gross receipts factor”.

X.“State where a contract of sale is principally managed by the customer,” means the primary location at which an employee or other representative of a customer serves as the primary contact person for the seller with respect to the implementation and day-to-day execution of a contract entered into by the seller with the customer.

Y.“Taxpayer” means and includes any person subject to taxation under the Rhode Island General Laws. For tax years beginning on or after January 1, 2015, a combined group is included within the definition of taxpayer.

Z.“Three-factor apportionment” means the apportionment formula set forth in § 9.9 of this Part. The three-factor apportionment formula takes into account the property factor, the payroll factor, and the sales factor of the trade or business of the taxpayer.

AA.“Unitary business” means the activities of a group of two or more corporations under common ownership that are sufficiently interdependent, integrated or interrelated through their activities so as to provide mutual benefit and produce a significant sharing or exchange of value among them or a significant flow of value between the separate parts.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Technical Revision — effective from 2004-01-26 to 01/12/2016
Amendment — effective from 2004-01-01 to 01/26/2004
Amendment — effective from 2003-04-01 to 01/01/2004
Periodic Refile — effective from 2001-12-20 to 01/01/2004

280-RICR-20-25-9 § 9.6 Apportionment – Generally

A.Purpose of Apportionment. The purpose of apportionment is to determine the amount of income attributable to Rhode Island by any taxpayer under the Rhode Island General Laws.

B.Business Income vs. Non-Business Income. Rhode Island does not distinguish between business income and non-business income for formulary apportionment purposes.

C.Combined Group Members’ Share of Tax. The use of a combined report does not disregard the separate identities of the taxpayer members of the combined group. Each taxpayer member is responsible for tax based on its taxable income or loss apportioned to this state. Thus, only those members in a combined group that have corporate income tax nexus with Rhode Island shall be assessed a tax on the combined group’s Rhode Island-apportioned net income. Any member in a combined group that lacks corporate income tax nexus with Rhode Island shall not be responsible for the tax assessed on the combined group.

D.Apportionment of Income Derived Entirely Within State. In the case of any taxpayer, including a C corporation, deriving all its income from sources within this state, or engaging in activities or transactions wholly within this state for the purpose of profit or gain, or where said taxpayer does not have a regular place of business outside of this state other than a statutory office, one hundred (100%) percent of its net income shall be apportioned to this state.

1.Note. For tax years beginning on or after January 1, 2015, any corporation that independently meets the criteria set forth in § 9.6(D) of this Part, but which is also a member in a combined group subject to R.I. Gen. Laws Chapter 44-11 that derives income from sources both within and outside of this state for the purpose of profit or gain, shall be included in the combined group’s combined return.

2.Examples.

a.During the 2014 through 2016 tax years, Independent Man Corp., a Rhode Island C corporation unaffiliated with any other business entity, derives 100% of its income from the sale of yellow and green paper cups. For tax years 2014 through 2016, all of Independent Man Corp.’s income shall be apportioned to Rhode Island.

3.For tax year 2017, Independent Man Corp. is acquired by Lemon, Inc. and becomes part of a combined group with multiple members, not all of whom derive income entirely from Rhode Island sources. A combined return must be filed with the Division of Taxation on behalf of the combined group. The combined group derives only a portion of its income from Rhode Island sources, but Independent Man Corp. continues to derive 100% of its income from sources within Rhode Island. The combined group’s income will be apportioned to Rhode Island as set forth in § 9.6 (E)(3) of this Part and Independent Man Corp.’s income and apportionment information must be included on a schedule attached to the combined group’s combined return.

E.Apportionment of Income Derived Partially within State.

1.Pre-2015. For tax years beginning before January 1, 2015, all taxpayers that derive their income from sources both within and outside of this state for the purpose of profit or gain, shall apportion net income to this state by means of a three-factor apportionment formula, using sales (receipts), property, and payroll, as set forth in R.I. Gen. Laws § 44-11-14(a), and as detailed in § 9.9 of this Part. In certain cases, a taxpayer may use a special apportionment formula available under R.I. Gen. Laws §§ 44-11-14.1 through 44-11-14.6, as detailed in § 9.10 of this Part.

2.Example:

a.During tax year 2013, Quahog Jewelry LLC and Netop Corp. are separate business entities engaged in the manufacture, design, and sale of expensive charm bracelets derived from Rhode Island seashells. Both companies sell their wares in Rhode Island and also more widely throughout the United States. Quahog Jewelry LLC operates a manufacturing facility in Massachusetts, whereas Netop Corp. manufactures all of its bracelets in Rhode Island. Both companies own retail locations in Rhode Island and nowhere else. Because both companies – one an LLC and the other a corporation – derive income from sources both within and outside of this State in a pre-2015 tax year, they must both apportion their income according to a three-factor apportionment formula on the basis of sales, property and payroll, consistent with §§ 9.9 and 9.10 of this Part.

(1)Note. For tax years beginning before January 1, 2015, the existence of a combined group shall be disregarded, and a combined group shall not be considered a taxpayer within the meaning of this Regulation.

3.2015 and Thereafter – C Corporations and Combined Groups. For tax years beginning on or after January 1, 2015, all C corporations and combined groups deriving income from sources both within and outside of this state, or engaging in any activities or transactions both within and outside of this state for the purpose of profit or gain, including those C corporations that are members in a combined group and those that are not members in a combined group, shall apportion net income to this state by means of an allocation fraction. The fraction shall be computed by means of a simple arithmetical operation employing a single factor that represents total receipts from sales or other sources during the taxable year which is attributable to the taxpayer’s activities or transactions within this state during the taxable year, as set forth in R.I. Gen. Laws § 44-11-14(b), and as detailed § 9.8 of this Part. In limited cases, such C corporations may use a special apportionment formula available under R.I. Gen. Laws §§ 44-11-14.1 through 44-11- 14.6, and as detailed in § 9.11 of this Part.

a.Combined Group Tax Liability Determinations. When a C corporation subject to tax under R.I. Gen. Laws Chapter 44-11 is a member in a combined group, the corporation must determine the tax liability of the combined group and its own individual tax liability based upon the income and apportionment information of all members in the combined group, using a combined report as set forth in R.I. Gen. Laws § 44-11-4.1, and subject to exclusions therein, if any.

b.Federal Affiliated Groups. An affiliated group of C corporations, as defined in section 1504 of the Internal Revenue Code, may elect to be treated as a combined group with respect to the combined reporting requirement imposed by R.I. Gen. Laws § 44-11-4.1(a), as set forth in Tax Division’s Combined Reporting Regulation, and subject to the statutory and regulatory conditions set forth therein.

4.2015 and Thereafter – Other Taxpayers. For tax years beginning on or after January 1, 2015, any taxpayer that derives income from sources both within and outside of this state or engages in any activities or transactions both within and outside of this state for the purpose of profit or gain, but which is not:

a.a C corporation;

b.a combined group with a C corporation member; or

c.a member in a combined group with a C corporation member, shall apportion net income to this state by means of a three-factor apportionment formula, using sales (receipts), property, and payroll, as set forth in R.I. Gen. Laws § 44-11-14(a), and as detailed in § 9.9 of this Part. In the case of a combined group without a C corporation member, no combined report shall be filed on behalf of the combined group. In certain cases, a taxpayer subject to this provision may use a special apportionment formula available under R.I. Gen. Laws §§ 44-11-14.1 through 44-11-14.6, and as detailed in § 9.10 of this Part.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Technical Revision — effective from 2004-01-26 to 01/12/2016
Amendment — effective from 2004-01-01 to 01/26/2004
Amendment — effective from 2003-04-01 to 01/01/2004
Periodic Refile — effective from 2001-12-20 to 01/01/2004

280-RICR-20-25-9 § 9.7 Combined Reporting Requirement for Tax Years Beginning on or After January 1, 2015

A.Commencement of Mandatory Unitary Combined Reporting. For tax years beginning on or after January 1, 2015, a C corporation must report on its Rhode Island corporate income tax return not only its own income, but also the combined income of the other corporations that are members in its combined group. The C corporation must treat all such corporations and affiliates as if they comprise one, single unitary company, and combine all income into a single pool. Thus, each member in the combined group must include all receipts, i.e., total receipts or gross receipts, from sales or other sources, without regard to whether the member has corporate income tax nexus in this state. In calculating the single sales factor for a combined group, receipts between members included in the group must be eliminated.

B.Treatment of C Corporation’s Pass-Through Entity Income. When a partnership or other pass-through entity does not elect to be taxed as a corporation for federal tax purposes and is directly or indirectly held by a corporation, including any member in a combined group, then the business conducted by the partnership or pass-through entity shall be considered the business of the corporation to the extent of the corporation’s distributive share of the partnership or pass-through entity income. Such distributive share shall be included in the net income calculations of the corporation and the combined group, and shall be apportioned to Rhode Island for corporate income tax purposes as set forth in this Regulation, consistent with the decision reached by the Rhode Island Supreme Court in Homart Dev. Co. v. Norberg, 529 A.2d 115 (R.I. 1987).

C.Single Sales Factor Apportionment. For purposes of combined reporting, a C corporation must use the single sales factor apportionment formula, as described in § 9.8 of this Part. The purpose of apportionment in the context of combined reporting is to determine the combined group’s Rhode Island source income, which is taxable. In determining the combined group’s taxable income in this manner, the Division of Taxation is merely measuring the in-state activities of the combined group, and not imposing a tax on members in the combined group that lack nexus with Rhode Island or that are protected from Rhode Island taxation by Public Law 86-272. After determining through such an apportionment formula the amount of a combined group’s net income apportioned to Rhode Island, combined group net income is solely attributed to and tax is solely imposed on those members in the combined group that have corporate income tax nexus with Rhode Island.

D.Members of the Combined Group with Different Accounting Periods:

1.Mandatory Election of Uniform Accounting Period. If the taxable year of a member in a combined group differs from the taxable year of the combined group, the designated agent shall elect to determine the portion of that member’s income to be included in one of the following ways:

a.a separate income statement prepared from the books and records for the months included in the group’s taxable year; or

b.including all of the income for the year that ends during the group’s taxable year.

2.Year-to-Year Consistency Requirement. The same method must be used for each member with a different accounting period. Once an election is made under this section, it is the only method that may be used from year to year with respect to members in the combined group, except upon prior written approval of the Tax Administrator.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Technical Revision — effective from 2004-01-26 to 01/12/2016
Amendment — effective from 2004-01-01 to 01/26/2004
Amendment — effective from 2003-04-01 to 01/01/2004
Periodic Refile — effective from 2001-12-20 to 01/01/2004

280-RICR-20-25-9 § 9.8 Single Sales Factor Apportionment and Market Based Sourcing (applicable to entities taxed as C corporations)

A.Applicability of Single Sales Factor Apportionment and Market Based Sourcing. This apportionment Rule applies to the following taxpayers for tax years beginning on or after January 1, 2015:

1.C corporations deriving income from sources both within and outside of this state, or engaging in any activities or transactions both within and outside of this state for the purpose of profit or gain;

2.all members in a combined group that derives income from sources both within and outside of this state, or engages in any activities or transactions both within and outside of this state for the purpose of profit or gain, when such a combined group includes at least one C corporation member; and

3.all combined groups deriving income from sources both within and outside of this state, or engaging in any activities or transactions both within and outside of this state for the purpose of profit or gain, when such a combined group includes at least one C corporation member.

B.Limited Availability of Special Apportionment Formulas. In limited cases, for tax years beginning on or after January 1, 2015, taxpayers may use a special apportionment formula available under R.I. Gen. Laws §§ 44-11-14.1 through 44-11-14.6 and § 9.11 of this Part. In such situations, eligible entities shall nevertheless apportion income to Rhode Island according to the provisions of this § 9.8 of this Part to the extent that such apportionment is not inconsistent with the formula available under R.I. Gen. Laws §§ 44-11-14.1 through 44-11-14.6 and § 9.11 of this Part.

C.C Corporation’s Net Income Attributable to Rhode Island. To arrive at a determination of the share of net income attributable to Rhode Island for an individual C corporation that is not a member in a combined group, the total reported net income of the C corporation is multiplied by the C corporation’s apportionment percentage, referred to elsewhere in this Regulation as the corporation’s sales factor. The apportionment percentage is determined as a fraction, the numerator of which is the total Rhode Island sales of the C corporation, determined as set forth in R.I. Gen. Laws § 44-11-14(b) and § 9.8(I) of this Part, and the denominator of which is the total sales everywhere of the C corporation.

D.Combined Group’s Net Income Attributable to Rhode Island. To arrive at a determination of a combined group’s net income attributable to Rhode Island, the total reported combined group net income is multiplied by the apportionment percentage of the combined group, described elsewhere in this Regulation as the combined group’s sales factor. The apportionment percentage is determined as a fraction, the numerator of which is the total Rhode Island sales of the combined group, determined as set forth in R.I. Gen. Laws § 44-11-14(b) and § 9.8(I) of this Part, and the denominator of which is the total sales everywhere of the combined group.

E.Finnigan Method Requirement. In calculating any sales factor for purposes of combined reporting as required by this § 9.8 of this Part, Rhode Island employs the Finnigan Method. Thus a C corporation filing a combined return on behalf of a combined group must include all receipts attributable to Rhode Island for all members in the combined group, without regard to whether a member has corporate income tax nexus with this state. As long as one member in a combined group has corporate income tax nexus with Rhode Island and also engages in activities that exceed the protection of Public Law 86-272, then all members in the combined group, including those protected from state taxation by Public Law 86-272 and those that do not have nexus with Rhode Island, must be included when calculating the combined group’s net income and apportionment factors. The Rhode Island receipts of a combined group member that lacks nexus with Rhode Island or that is protected from Rhode Island taxation by Public Law 86-272 must always be included in the numerator of an apportionment fraction on the combined return. For purposes of apportioning a combined group’s net income to Rhode Island by means of such an apportionment fraction, the determination of what constitutes a Rhode Island sale or a Rhode Island receipt is governed by § 9.8(I) of this Part. The determination of what constitutes a Rhode Island sale or receipt for purposes of the combined group’s apportionment calculation is unrelated to and unaffected by Constitutional and other federal limitations on the minimum activities necessary to establish nexus with this State.

1.Example:

a.A combined group has four members with a combined net income of $3,500,000. The total sales of the combined group is $4,000,000, half of which qualifies as Rhode Island sales for purposes of apportionment. Members 1 and 2 have $500,000 in Rhode Island sales each. Member 3 has $100,000 in Rhode Island sales. Member 4 has $900,000 in Rhode Island sales. Members 1, 2, and 3 have corporate income tax nexus with Rhode Island and engage in activities that exceed the protection of Public Law 86-272. Member 3 is the combined group’s designated agent. Member 4 does not have corporate income tax nexus with Rhode Island. As the combined group’s designated agent, Member 3 must file a combined return on behalf of the combined group. All members in the combined group must be included when calculating the combined group’s net income and apportionment fraction. To determine the combined group’s apportionment fraction, Rhode Island sales in the amount of $200,000 would be placed in the numerator. Because all sales are included in the apportionment fraction, irrespective of whether a member has corporate income tax nexus with Rhode Island, the denominator would be the combined group’s total sales, i.e., $400,000. As a result, the combined group’s apportionment fraction is fifty percent (50%). To arrive at the combined group’s net income apportioned to Rhode Island, the combined group’s apportionment fraction is multiplied by combined net income. As a result, $1,750,000 of the combined group’s income is apportioned to Rhode Island.

F.Market-Based Sourcing Requirement. When receipts from sales, other than sales of tangible personal property, contribute to the sales factor determination of a taxpayer subject to this § 9.8 of this Part, the method for calculating receipts from such sales shall rely on the principle of market-based sourcing. Market-based sourcing treats receipts from transactions for other than tangible personal property, including services and intangible property, as sourced to a state if and to the extent that the corporation’s market for the sales is in the state. In the case of sales of services, the sale is sourced to the state where the recipient of the service receives the benefit of the service. If the recipient receives less than the full benefit of the service in this State, then receipts from the associated transaction shall be included in the numerator of the apportionment factor in proportion to the extent that the recipient receives the benefit in this State. In other cases involving sales that are not sales of tangible personal property, the market-based sourcing principle considers a sale or receipt to be within this state for purposes of apportionment as provided in this § 9.8 of this Part. The Tax Administrator may promulgate regulations for specific industries. Examples of the market-based sourcing principle are provided in § 9.8(I)(8) of this Part.

G.Sourcing for Sales of Tangible Personal Property. A sale of tangible personal property shall be attributed to the jurisdiction from which the property was shipped only if no member in the combined group has nexus for corporate income tax purposes with the state of destination. In addition, a sale of tangible personal property shipped to this state by a member in the combined group shall be assigned to this state if any member in the combined group has nexus for corporate income tax purposes in this state.

H.Accuracy in Assigning Sales Factor Receipts and Maintaining Records. A taxpayer’s method of assigning its receipts shall be determined in good faith, applied in good faith, and applied consistently with respect to similar transactions and year to year. A taxpayer shall retain contemporaneous records that explain the determination and application of its method of assigning its receipts, including its underlying assumptions, and shall provide such records to the Division of Taxation upon request. A taxpayer’s method of assigning its receipts, including the use of a method of approximation, where applicable, must reflect an attempt to obtain the most accurate assignment of receipts consistent with the regulatory standards set forth in this Regulation, rather than an attempt to lower the taxpayer’s tax liability. A method of assignment that is reasonable for one taxpayer may not necessarily be reasonable for another taxpayer, depending on the applicable facts. In any case in which a taxpayer fails to properly assign receipts from a sale in accordance with the rules set forth in this Regulation, the Division of Taxation may adjust the assignment of such receipts in accordance with the applicable rules in this Regulation. In any case in which the Division of Taxation concludes that a taxpayer’s customer’s billing address was selected for tax avoidance purposes, the Division of Taxation may adjust the assignment of receipts from sales to such a customer in a manner consistent with the applicable rules in this Regulation. The Division of Taxation reserves the authority to review and adjust a taxpayer’s assignment of receipts on a return to more accurately assign such receipts, consistent with the rules or standards in this Regulation.

I.Activities and Transactions that Constitute Sales or Receipts within the State. Sales or receipts within this state means all gross receipts of the taxpayer in the State of Rhode Island including, but not limited to, receipts derived from the sale of tangible personal property and receipts derived from the sale of other than tangible personal property. Interest income, service charges, carrying charges or time-price differentials incidental to a sale must be included as sales in the state to which the sale is attributable, regardless of the place where the accounting records are located. Sales include federal and state excise taxes, including sales taxes, if those taxes are passed on to the buyer or included as part of the selling price of the product. Sales or receipts within this State include but are not limited to the following:

1.Sales of tangible personal property in Rhode Island:

a.Destination Sales. Sales are in Rhode Island if the property is delivered or shipped to a purchaser in Rhode Island regardless of the F.O.B. point or other condition of sale. Tangible property is deemed to have been shipped or delivered to a purchaser within Rhode Island if:

(1)The property is delivered directly by the vendor to the possession and control of the purchaser or its representative within Rhode Island unless the vendor can substantiate that no use is made of the property in Rhode Island other than immediate transshipment;

(2)The property is delivered to the possession and control of the purchaser by the vendor or by a common carrier outside Rhode Island, if the property is immediately transshipped to Rhode Island;

(3)The property is diverted to a purchaser in Rhode Island while en route to a third party consignee in another state. For example, the ABC Corp is a produce grower in state A and begins shipment of produce to customer in state B. While en route the shipment is diverted to Rhode Island where ABC Corp has corporate income tax nexus. This would be classified as a Rhode Island sale; or

(4)The third party recipient of the tangible personal property is located in Rhode Island, even if the property is ordered from outside the state. For example, Big Car Dealer, Inc. located in State A sells a red sports car to a Rhode Island customer. However, Big Car Dealer, Inc. doesn’t have a red sports car in stock. Big Car Dealer, Inc. contacts another dealership in state A which does have such a model in stock and directs the other dealership to deliver the car directly to the customer in Rhode Island. This would be classified as a Rhode Island sale, assuming Big Car Dealer has corporate income tax nexus in Rhode Island.

2.Throwback sales. Where tangible personal property is delivered or shipped from Rhode Island to a purchaser outside of Rhode Island and the vendor does not have corporate income tax nexus in that other state, such sale is sourced to Rhode Island.

a.Example:

(1)123 Inc., a C-corporation, with branches and inventory in Rhode Island, has its head office and factory located in State A. 123 Inc. receives an order from a customer located in State B. 123 Inc. fills the order by shipping merchandise to the customer in State B from stocks of inventory located in Rhode Island. 123 Inc. does not have corporate income tax nexus with State B. Because 123 Inc. has corporate income tax nexus in Rhode Island and not in State B, this sale is attributed to Rhode Island for purposes of apportionment.

3.Sales related to manufacturing and selling, sales related to purchasing and reselling, and sales related to goods or products. Sales include gross sales, less returns and allowances. Sales also include all service charges, carrying charges, and other non-interest charges incidental to sales.

a.Examples:

(1)Taxpayer Corp. has an inventory warehouse in Massachusetts and sells $100,000 of product to a purchaser with stores in various states, including Rhode Island. The order was placed by the purchaser through its central purchasing department in Delaware. $25,000 of the order was shipped to the store in Rhode Island. Taxpayer Corp. will include this $25,000 in the numerator of its sales factor.

(2)XYZ Inc., a C-corporation with inventory in State A, sold 100,000 units of its product to a customer having branch stores in several states, including Rhode Island. The order was placed by the customer’s central purchasing department in State B, and 25,000 units of the product were shipped by XYZ, Inc. directly to the customer’s branch store in Rhode Island. Since XYZ, Inc. shipped 25,000 units of product to a customer’s location in Rhode Island, that sale is sourced to Rhode Island for purposes of XYZ, Inc.’s apportionment factor.

4.Cost-plus contracts. Sales include entire reimbursed cost plus the fee.

5.Lease or rental of real or tangible personal property located in Rhode Island. Sales include the gross receipts from renting, leasing, or licensing the use of real or tangible personal property within the state, except in cases in which the lease, rental, or license of the asset is treated as the sale or other disposition of a capital asset used in a seller’s trade or business, in which case sales include only the gain from the disposition of the property. Sales are attributable to Rhode Island if and to the extent that the property is located in Rhode Island.

6.Capitalized leases. Property located in Rhode Island subject to a capitalized lease for federal income tax purposes is treated as a capitalized lease for Rhode Island tax purposes. Any income or gain realized from a capitalized lease transaction is includable for Rhode Island purposes to the extent that the income or gain from such transaction is included in the federal gross income of the seller.

7.Sale, exchange, or other disposition of fixed assets located in Rhode Island. In the case of the sale, exchange or other disposition of a fixed asset used in a seller’s trade or business, such as property, plant or equipment, sales are measured by the gain from such transaction. Gain from the disposition of a fixed asset shall include, but is not limited to, the deemed gain from a transaction that is treated as a sale of a seller’s assets and that results in recognition of income.

8.Sales other than sales of tangible personal property. Receipts from sales, other than sales of tangible personal property, are in Rhode Island within the meaning of this regulation if and to the extent that the seller’s market for the sales is in Rhode Island. For purposes of § 9.8(I)(8) of this Part, sales other than sales of tangible personal property are classified broadly into four categories:

a.Sale of a Service;

b.License or Lease of Intangible Property;

c.Sale of Intangible Property; and

d.Special Rules. To facilitate determinations of what activities and transactions constitute a sale or receipt within Rhode Island, the four broad categories of sales other than sales of tangible personal property are further broken down into subcategories, as set forth below in § 9.8(I)(8) of this Part.

9.General Principle of Application; Rules of Reasonable Approximation. The various sales assignment rules set forth § 9.8 (I)(8)(10) through § 9.8(I)(8)(13) of this Part are intended to apply sequentially in a hierarchy. For each sale to which a hierarchical rule applies, a taxpayer must make a reasonable effort to apply the primary rule applicable to the sale before seeking to apply the next rule in the hierarchy (and must continue to do so with each succeeding rule in the hierarchy, where applicable). For example, in some cases, the applicable rule first requires a taxpayer to determine the state or states of assignment, and where the taxpayer cannot do so, the rule then requires the taxpayer to reasonably approximate such state or states. In such cases, the taxpayer must in good faith and with reasonable effort attempt to determine the state or states of assignment (i.e., apply the primary rule in the hierarchy) before it may reasonably approximate such state or states. The provisions that set forth rules of reasonable approximation apply where the state or states of assignment cannot be determined. In some instances, a reasonable approximation must be made in accordance with specific rules of approximation prescribed by this Regulation. In other cases, the applicable rule in this regulation permits a taxpayer to reasonably approximate the state or states of assignment, using a method that reflects an effort to approximate the results that would be obtained under the applicable rules or standards set forth in this Regulation.

10.Sale of a Service. Rhode Island sales of services are determined according to the principle of market-based sourcing and include gross receipts from the performance of services including commissions, fees, management charges, and similar items. The receipts from a sale of a service are in Rhode Island if and to the extent that the recipient of the service receives the benefit of the service in Rhode Island. The rules to determine the location where the recipient receives the benefit of the service in the context of several specific types of service transactions are set forth below in §§ 9.8(I)(10)(1) through 9.8(K)(5) of this Part. In any instance where, applying the applicable rules set forth below in this § 9.8(I)(10) pertaining to sales of services, a taxpayer can ascertain the state or states of assignment of a substantial portion of its receipts from sales of substantially similar services (“assigned receipts”), but not all of such sales, and the taxpayer reasonably believes, based on all available information, that the geographic distribution of some or all of the remainder of such sales generally tracks that of the assigned receipts, it shall include receipts from those sales which it believes tracks the geographic distribution of the assigned receipts in its sales factor in the same proportion as its assigned receipts. This rule also applies in the context of licenses and sales of intangible property where the substance of the transaction resembles a sale of goods or services.

a.In-Person Services. Except as otherwise provided in this Rule, in-person services are services that are physically provided in person by the service provider, where the customer or the customer’s real or tangible property upon which the services are performed is in the same location as the service provider at the time the services are performed. This rule includes situations where the services are provided on behalf of the service provider by a third-party contractor. Examples of in-person services include, without limitation, warranty and repair services; cleaning services; plumbing services; carpentry; construction contractor services; pest control; landscape services; medical and dental services, including medical testing and x-rays and mental health care and treatment; child care; hair cutting and salon services; live entertainment and athletic performances; and in-person training or lessons. In-person services include services within the description above that are performed at

(1)a location that is owned or operated by the service provider or;

(2)a location of the customer, including the location of the customer’s real or tangible personal property. Various professional services, including legal, accounting, financial and consulting services, and other such services as described in § 9.8(K)(5) of this Part, although they may involve some amount of in-person contact, are not treated as in-person services within the meaning of § 9.8 of this Part.

11.Assignment of Receipts. Except as otherwise provided in § 9.8 of this Part, where the service provided by the service provider is an in-person service, the benefit of the service is received at the location where the service is received. Therefore, the receipts from a sale are in Rhode Island if and to the extent the customer receives the in-person service in Rhode Island. In assigning its receipts from sales of in-person services, a taxpayer shall first attempt to determine the location where a service is received, as follows:

a.Where the service is performed with respect to the body of an individual customer in Rhode Island (e.g. hair cutting or x-ray services) or in the physical presence of the customer in Rhode Island (e.g. live entertainment or athletic performances), the benefit of the service is received in Rhode Island.

b.Where the service is performed with respect to the customer’s real estate in Rhode Island or where the service is performed with respect to the customer’s tangible personal property at the customer’s residence or in the customer’s possession in Rhode Island, the benefit of the service is received in Rhode Island.

c.Where the service is performed with respect to the customer’s tangible personal property and the tangible personal property is to be shipped or delivered to the customer, whether the service is performed in Rhode Island or outside Rhode Island, the benefit of the service is received in Rhode Island if such property is shipped or delivered to the customer in Rhode Island. In any instance in which the state or states where the benefit of a service is actually received cannot be determined, but the taxpayer has sufficient information from which it can reasonably approximate the state or states where the benefit of the service is received, the taxpayer shall reasonably approximate such state or states.

d.Examples.

(1)Example 1. Salon Corp has retail locations in Rhode Island and in other states where it provides hair-cutting services to individual and business customers, the latter of whom are paid for through the means of a company account. The receipts from sales of services provided at Salon Corp’s in-state locations are in Rhode Island. The receipts from sales of services provided at Salon Corp’s locations outside Rhode Island, even when provided to state residents, are not receipts from in-state sales.

(2)Example 2. Landscape Corp provides landscaping and gardening services in Rhode Island and in neighboring states. Landscape Corp provides landscaping services at the in-state vacation home of an individual who is a resident of another state and who is located outside Rhode Island at the time the services are performed. The receipts from sale of services provided at the in-state location are in Rhode Island.

(3)Example 3. Same facts as in Example 2, except that Landscape Corp provides the landscaping services to Retail Corp, a corporation with retail locations in several states, and the services are with respect to such locations of Retail Corp that are in Rhode Island and in other states. The receipts from the sale of services provided to Retail Corp are in Rhode Island to the extent the services are provided in Rhode Island.

(4)For additional examples demonstrating the assignment of receipts for in-person services under this section, please see the corresponding section of the Appendix § 9.15 of this Part.

12.Services Delivered to the Customer or on Behalf of the Customer, or Delivered Electronically through the Customer. Where the service provided by the service provider is not an in-person service within the meaning of § 9.8(I)(10)(a) of this Part or a professional service within the meaning of § 9.8(K)(5) of this Part, and the service is delivered to or on behalf of the customer, or delivered electronically through the customer, the benefit of the service is received in Rhode Island if and to the extent that the service is delivered in Rhode Island. For purposes of this § 9.8 of this Part a service that is delivered “to” a customer is a service in which the customer and not a third party is the recipient of the service. A service that is delivered “on behalf of” a customer is one in which a customer contracts for a service but one or more third parties, rather than the customer, is the recipient of the service, such as fulfillment services. A service that is delivered electronically “through” a customer is a service that is delivered electronically to a customer for purposes of resale and subsequent electronic delivery in substantially identical form to an end user or other third-party recipient. Except in the instance of a service that is delivered through a customer (where the service must be delivered electronically), a service is included within the meaning of this regulation, irrespective of the method of delivery, e.g., whether such service is delivered by a physical means or through an electronic transmission.

13.Assignment of Receipts. The assignment of receipts from a sale to a state or states in the instance of a service that is delivered to the customer or on behalf of the customer, or delivered electronically through the customer, depends upon the method of delivery of the service and the nature of the customer. Separate rules of assignment apply to services delivered by physical means and services delivered by electronic transmission. (For purposes of § 9.8(I)(12) of this Part, a service delivered by an electronic transmission shall not be considered a delivery by a physical means). In any instance where, applying the rules set forth in § 9.8 of this Part, the rule of assignment depends on whether the customer is an individual or a business customer, and the taxpayer acting in good faith cannot reasonably determine whether the customer is an individual or business customer, the taxpayer shall treat the customer as a business customer.

14.Delivery to or on Behalf of a Customer by Physical Means, Whether to an Individual or Business Customer. Services delivered to a customer or on behalf of a customer through a physical means include, for example, product delivery services where property is delivered to the customer or to a third party on behalf of the customer; the delivery of brochures, fliers or other direct mail services; the delivery of advertising or advertising-related services to the customer’s intended audience in the form of a physical medium; and the sale of custom software (e.g., where software is developed for a specific customer in a case where the transaction is properly treated as a service transaction for purposes of corporate taxation) where the taxpayer installs the custom software at the customer’s site. The rules in § 9.8 of this Part apply whether the taxpayer’s customer is an individual customer or a business customer.

J.Rule of Determination. In assigning the receipts of a sale of a service delivered to a customer or on behalf of a customer through a physical means, a taxpayer must first attempt to determine the state or states where such services are delivered. Where the taxpayer is able to determine the state or states where the service is delivered, it shall assign the receipts to such state or states.

K.Rule of Reasonable Approximation. Where the taxpayer cannot determine the state or states where the service is actually delivered, but has sufficient information regarding the place of delivery from which it can reasonably approximate the state or states where the service is delivered, it shall reasonably approximate such state or states.

1.Examples.

a.Example 1. Direct Mail Corp, a corporation based outside Rhode Island, provides direct mail services to its customer, Business Corp. Business Corp transacts with Direct Mail Corp to deliver printed fliers to a list of customers that is provided to it by Business Corp. Some of Business Corp’s customers are in Rhode Island and some of those customers are in other states. Direct Mail Corp will use the postal service to deliver the printed fliers to Business Corp’s customers. The receipts from the sale of Direct Mail Corp’s services to Business Corp are assigned to Rhode Island to the extent that the services are delivered on behalf of Business Corp to Rhode Island customers (i.e., to the extent that the fliers are delivered on behalf of Business Corp to Business Corp’s intended audience in Rhode Island).

b.Example 2. Ad Corp is a corporation based outside Rhode Island that provides advertising and advertising-related services in Rhode Island and in neighboring states. Ad Corp enters into a contract at a location outside Rhode Island with an individual customer who is not a Rhode Island resident to design advertisements for billboards to be displayed in Rhode Island, and to design fliers to be mailed to Rhode Island residents. All of the design work is performed outside Rhode Island. The receipts from the sale of the design services are in Rhode Island because the service is physically delivered on behalf of the customer to the customer’s intended audience in Rhode Island.

c.Example 3. Same facts as example 2, except that the contract is with a business customer that is based outside Rhode Island. The receipts from the sale of the design services are in Rhode Island because the services are physically delivered on behalf of the customer to the customer’s intended audience in Rhode Island.

2.For additional examples demonstrating the assignment under this section of receipts for services delivered to or on behalf of a customer by physical means, whether to an individual or business customer, please see the corresponding section of the Appendix § 9.15 of this Part.

3.Delivery to a Customer by Electronic Transmission. Services delivered by electronic transmission include, without limitation, services that are transmitted through the means of wire, lines, cable, fiber optics, electronic signals, satellite transmission, audio or radio waves, or other similar means, whether or not the service provider owns, leases or otherwise controls the transmission equipment. In the case of the delivery of a service by electronic transmission to a customer, the following rules apply.

a.A. Services Delivered by Electronic Transmission to an Individual Customer.

(1)Rule of Determination. In the case of the delivery of a service to an individual customer by electronic transmission, the service is delivered in Rhode Island if and to the extent that the service provider’s customer receives the service in Rhode Island. If the taxpayer can determine the state or states where the service is received, it shall assign the receipts from that sale to such state or states.

(2)Rule of Reasonable Approximation. If the taxpayer cannot determine the state or states where the customer actually receives the service, but has sufficient information regarding the place of receipt from which it can reasonably approximate the state or states where the benefit of the service is received, it shall reasonably approximate such state or states. Where a taxpayer does not have sufficient information from which it can determine or reasonably approximate the state or states in which the benefit of the service is received, it shall reasonably approximate such state or states using the customer’s billing address.

b.Services Delivered by Electronic Transmission to a Business Customer.

(1)Rule of Determination. In the case of the delivery of a service to a business customer by electronic transmission, the service is delivered in Rhode Island if and to the extent that the service provider’s customer receives the service in Rhode Island. If the taxpayer can determine the state or states where the service is received, it shall assign the receipts from that sale to such state or states. For purposes of this § 9.8 of this Part, it is intended that the state or states where the service is received reflect the location at which the service is directly used by the employees or designees of the customer.

(3)Secondary Rule of Reasonable Approximation. In the case of the delivery of a service to a business customer by electronic transmission where a taxpayer does not have sufficient information from which it can determine or reasonably approximate the state or states in which the benefit of the service is received, such state or states shall be reasonably approximated as set forth in this regulation. In such cases, unless the taxpayer can apply the safe harbor set forth immediately below in § 9.8(K)(b)(4) of this Part, the taxpayer shall reasonably approximate the state or states in which the benefit of the service is received as follows: first, by assigning the receipts from the sale to the state where the contract of sale is principally managed by the customer; second, if the state where the customer principally manages the contract is not reasonably determinable, by assigning the receipts from the sale to the customer’s place of order; and third, if the customer’s place of order is not reasonably determinable, by assigning the receipts from the sale using the customer’s billing address; provided, however, that in any instance in which the taxpayer derives more than 5% of its receipts from sales of services from a customer, the taxpayer is required to identify the state in which the contract of sale is principally managed by that customer.

(4)Safe Harbor. In the case of the delivery of a service to a business customer by electronic transmission a taxpayer may not be able to determine, or reasonably approximate under § 9.8(K)(3)(b)(3) of this part, the state or states in which the benefit of the service is received. In these cases, the taxpayer may, in lieu of the rule stated in the immediately preceding § 9.8(K)(3)(b)(3) of this Part, apply the safe harbor stated in § 9.8 of this Part. Under this safe harbor, a taxpayer may assign receipts from sales to a particular customer based upon the customer’s billing address in any taxable year in which the service provider (1) engages in substantially similar service transactions with more than 250 customers, whether business or individual, and (2) does not derive more than 5% of its receipts from sales of services from such customer. This safe harbor applies only to services delivered by electronic transmission to a business customer, and not otherwise.

c.Examples.

(1)Example 1. Support Corp, a corporation that is based outside Rhode Island, provides software support and diagnostic services to individual and business customers that have previously purchased certain software from third-party vendors. These individual and business customers are located in Rhode Island and other states. Support Corp supplies its services on a case-by-case basis when directly contacted by its customer. Support Corp generally provides these services through the Internet but sometimes provides these services by phone. In all cases, Support Corp verifies the customer’s account information before providing any service. Using the information that Support Corp verifies before performing a service, Support Corp can determine where its services are received, and therefore must assign its receipts to these locations. The receipts from sales made to Support Corp’s individual and business customers are in Rhode Island to the extent that Support Corp’s services are received in Rhode Island.

(2)Example 2. Online Corp, a corporation based outside Rhode Island, provides web-based services through the means of the Internet to individual customers who are resident in Rhode Island and in other states. These customers access Online Corp’s web services primarily in their states of residence, and sometimes, while traveling, in other states. For a substantial portion of its receipts from the sale of services, Online Corp can either determine the state or states where such services are received, or, where it cannot determine such state or states, it has sufficient information regarding the place of receipt to reasonably approximate such state or states. However, Online Corp cannot determine or reasonably approximate the state or states of receipt for all of such sales. Assuming that Online Corp reasonably believes, based on all available information, that the geographic distribution of the receipts from sales for which it cannot determine or reasonably approximate the location of the receipt of its services generally tracks those for which it does have this information, Online Corp must assign to Rhode Island the receipts from sales for which it does not know the customers’ location in the same proportion as those receipts for which it has this information.

(3)Example 3. Same facts as in Example 2, except that Online Corp reasonably believes that the geographic distribution of the receipts from sales for which it cannot determine or reasonably approximate the location of the receipt of its web-based services do not generally track the sales for which it does have this information. Online Corp must assign the receipts from sales of its services for which it lacks information as provided to its individual customers using the customers’ billing addresses.

d.For additional examples demonstrating the assignment under this section of receipts for services delivered to a customer by electronic transmission, please see the corresponding section of the Appendix § 9.15 of this Part.

4.Services Delivered Electronically Through or on Behalf of an Individual or Business Customer.

a.A service delivered electronically “on behalf of” the customer is one in which a customer contracts for a service to be delivered electronically but one or more third parties, rather than the customer, is the recipient of the service, such as the direct or indirect delivery of advertising on behalf of a customer to the customer’s intended audience. A service delivered electronically “through” a customer to third-party recipients is a service that is delivered electronically to a customer for purposes of resale and subsequent electronic delivery in substantially identical form to end users or other third-party recipients.

b.Rule of Determination. In the case of the delivery of a service by electronic transmission, where the service is delivered electronically to end users or other third-party recipients through or on behalf of the customer, the benefit of the service is received in Rhode Island if and to the extent that the end users or other third-party recipients are in Rhode Island. For example, in the case of the direct or indirect delivery of advertising on behalf of a customer to the customer’s intended audience by electronic means, the benefit of the service is received in Rhode Island to the extent that the audience for such advertising is in Rhode Island. In the case of the delivery of a service to a customer that acts as an intermediary in reselling the service in substantially identical form to third-party recipients, the benefit of the service is received in Rhode Island to the extent that the end users or other third-party recipients receive such services in Rhode Island. The rules § 9.8 of this Part apply whether the service provider’s customer is an individual customer or a business customer and whether the end users or other third-party recipients to which the services are delivered through or on behalf of the customer are individuals or businesses.

c.Rule of Reasonable Approximation. If the taxpayer cannot determine the state or states where the services are actually received by the end users or other third-party recipients either through or on behalf of the customer, but has sufficient information regarding the place of reception from which it can reasonably approximate the state or states where the benefit of services are received, it shall reasonably approximate such state or states.

d.Select Secondary Rules of Reasonable Approximation

(1)Where a service provider’s service is the direct or indirect electronic delivery of advertising on behalf of its customer to the customer’s intended audience, if the taxpayer lacks sufficient information regarding the location of the audience from which it can determine or reasonably approximate such location, the taxpayer shall reasonably approximate the audience in a state for such advertising using the following secondary rules of reasonable approximation. Where a service provider is delivering advertising directly or indirectly to a known list of subscribers, the taxpayer shall reasonably approximate the audience for advertising in a state using a percentage that reflects the ratio of the state’s subscribers in the specific geographic area in which the advertising is delivered relative to the total subscribers in such area. For a taxpayer with less information about the service provider’s audience, the taxpayer shall reasonably approximate the audience in a state using the percentage that reflects the ratio of the state’s population in the specific geographic area in which the advertising is delivered relative to the total population in such area.

(2)Where a service provider’s service is the delivery of a service to a customer that then acts as the service provider’s intermediary in reselling such service to end users or other third-party recipients, if the taxpayer lacks sufficient information regarding the location of the end users or other third-party recipients from which it can determine or reasonably approximate such location, the taxpayer shall reasonably approximate the extent to which the service is received in a state by using the percentage that reflects the ratio of the state’s population in the specific geographic area in which the service provider’s intermediary resells such services, relative to the total population in such area.

(3)Where a service provider’s service is the delivery of a service other than advertising to a party that then acts as the service provider’s intermediary in reselling such service to end users or other third party recipients, if the taxpayer lacks sufficient information regarding the location of the end users or other third party recipients from which it can determine or reasonably approximate such location, the taxpayer shall reasonably approximate the extent to which the service is received in a state by using the percentage that reflects the ratio of the state’s population in the specific geographic area in which the service provider’s intermediary resells such services, relative to the total population in such area.

(4)When using the secondary reasonable approximation methods provided above, the relevant specific geographic area of service reception shall only include the areas where the service was substantially and materially delivered or resold. Unless the taxpayer demonstrates the contrary, it will be presumed that the area where the service was substantially and materially delivered or resold does not include areas outside the United States.

e.Examples.

(1)Example 1. Cable TV Corp, a corporation that is based outside of Rhode Island, has two revenue streams. First, Cable TV Corp sells advertising time to business customers pursuant to which the business customers’ advertisements will run as commercials during Cable TV Corp’s televised programming. Some of these business customers, though not all of them, have a physical presence in Rhode Island. Second, Cable TV Corp sells monthly subscriptions to individual customers in Rhode Island and in other states. The receipts from Cable TV Corp’s sale of advertising time to its business customers are assigned to Rhode Island to the extent that the audience for Cable TV Corp’s televised programming during which the advertisements run is in Rhode Island. If Cable TV Corp is unable to determine the actual location of its audience for the programming, and lacks sufficient information regarding audience location to reasonably approximate such location, Cable TV Corp must approximate its Rhode Island audience using the percentage that reflects the ratio of its Rhode Island subscribers in the geographic area in which Cable TV Corp’s televised programming featuring such advertisements is delivered relative to its total number of subscribers in such area. To the extent that Cable TV Corp’s sales of monthly subscriptions represent the sale of a service, the receipts from such sales are properly assigned to Rhode Island in any case in which the programming is received by a customer in Rhode Island. In any case in which Cable TV Corp cannot determine the actual location where the programming is received, and lacks sufficient information regarding the location of receipt to reasonably approximate such location, the receipts from such sales of Cable TV Corp’s monthly subscriptions are assigned to Rhode Island where its customer’s billing address is in Rhode Island. Note that whether and to the extent that the monthly subscription fee represents a fee for a service or for a license of intangible property does not affect the analysis or result as to the state or states to which the receipts are properly assigned.

(2)For additional examples demonstrating the assignment under this section of receipts for services delivered electronically through or on behalf of an individual or business customer, please see the corresponding section of the Appendix § 9.15 of this Part.

5.Professional Services. Except as otherwise provided in § 9.8(K)(5) of this Part, professional services are services that require specialized knowledge and in some cases require a professional certification, license or degree. Professional services include, without limitation, management services, financial services, financial custodial services, investment and brokerage services, fiduciary services, tax preparation, payroll and accounting services, lending and credit card services, legal services, consulting services, video production services, graphic and other design services, engineering services, and architectural services.

(a) Overlap with Other Categories of Services. Certain services that fall within the definition of “professional services” set forth in § 9.8(K)(5) of this Part are nevertheless treated as “in-person services” within the meaning of § 9.8(I)(10)(a) of this Part, and are assigned under the rules of that subsection. Specifically, professional services that are physically provided in person by the service provider such as carpentry, certain medical and dental services or child care services, where the customer or the customer’s real or tangible property upon which the services are provided is in the same location as the service provider at the time the services are performed, are “in-person services” and are assigned as such, notwithstanding that they may also be considered to be “professional services.” However, professional services where the service is of an intellectual or intangible nature, such as legal, accounting, financial and consulting services, are assigned as professional services as set forth in § 9.8(K)(5)(b) of this Part, notwithstanding the fact that such services may involve some amount of in-person contact. Professional services may in some cases include the transmission of one or more documents or other communications by mail or by electronic means. However, in such cases, despite the transmission, the assignment rules that apply are those set forth in § 9.8(K)(5) of this Part, and not those set forth in § 9.8(I)(12) of this Part, pertaining to services delivered to a customer or through or on behalf of a customer.

(b)Assignment of Receipts. In the case of a professional service, it is generally possible to characterize the location where the benefit of the service is received in multiple ways by emphasizing different elements of the service provided, no one of which will consistently represent the market for the services. Therefore, for purposes of consistent application of the market-based sourcing principle, the Division of Taxation has concluded that the location where the benefit of the service is received in the case of professional services is not susceptible to a general rule of determination, and must be reasonably approximated. The assignment of receipts from a sale of a professional service depends in many cases upon whether the customer is an individual or business customer. In any instance in which the taxpayer, acting in good faith, cannot reasonably determine whether the customer is an individual or business customer, the taxpayer shall treat the customer as a business customer. For purposes of assigning the receipts from a sale of a professional service, a service provider’s customer is the person who contracts for such service, irrespective of whether another person pays for or also benefits from the service provider’s services.

L.General Rule. Unless provided otherwise by the Rhode Island General Laws or by this Regulation, receipts from sales of professional services shall be assigned in accordance with this § 9.8(L) of this Part, as follows:

1.A. Professional Services Delivered to Individual Customers. Except as otherwise provided in this § 9.8(K)(5) of this Part, in any instance in which the service provided is a professional service and the service provider’s customer is an individual customer, the state or states in which the benefit of the service is received shall be reasonably approximated as set forth in this § 9.5(L)(1) of this Part. In particular, the taxpayer shall assign the receipts from a sale to the customer’s state of primary residence, or, if the taxpayer cannot reasonably identify the customer’s state of primary residence, to the state of the customer’s billing address; provided, however, that in any instance in which the service provider derives more than 5% of its receipts from sales of services from an individual customer, the taxpayer is required to identify the customer’s state of primary residence and must assign the receipts from the service or services provided to that customer to that state.

2.Professional Services Delivered to Business Customers. Except as otherwise provided in this § 9.8(K)(5) of this Part, in any instance in which the service is a professional service and the service provider’s customer is a business customer, the state or states in which the benefit of the service is received shall be reasonably approximated as set forth in this § 9.8(L)(2) of this Part. In particular, unless the taxpayer may use the safe harbor set forth in § 9.8(L)(3) of this Part, the taxpayer shall assign the receipts from the sale as follows: first, by assigning the receipts to the state where the contract of sale is principally managed by the customer; second, if such place of customer management is not reasonably determinable, to the customer’s place of order; and third, if such customer place of order is not reasonably determinable, to the customer’s billing address; provided, however, in any instance in which the service provider derives more than 5% of its receipts from sales of services from a customer, the taxpayer is required to identify the state in which the contract of sale is principally managed by the customer.

3.Safe Harbor; Large Volume of Transactions. Notwithstanding the rules set forth in § 9.8(L)(1), a taxpayer may assign receipts from sales to a particular customer based on the customer’s billing address in any taxable year in which the service provider (1) engages in substantially similar service transactions with more than 250 customers, whether individual or business, and (2) does not derive more than 5% of its receipts from sales of services from such customer. This safe harbor applies only for purposes of § 9.8(L), and not otherwise.

M.Architectural and Engineering Services with respect to Real or Tangible Personal Property. Architectural and engineering services with respect to real or tangible personal property are professional services within the meaning of § 9.8(K)(5) of this Part. However, unlike in the case of the general rule that applies to professional services,

(1)the receipts from a sale of such an architectural service are assigned to a state or states if and to the extent that the services are with respect to real estate improvements located, or expected to be located, in such state or states; and

(2)the receipts from a sale of such an engineering service are assigned to a state or states if and to the extent that the services are with respect to tangible or real property located in such state or states, including real estate improvements located in, or expected to be located in, such state or states. These rules apply whether or not the customer is an individual or business customer. In any instance in which architectural or engineering services are not described in § 9.8(M), the receipts from a sale of such services shall be assigned under the general rule for professional services.

N.Legal Services. Legal services are professional services within the meaning of this section. As an exception to the general rules for assignment of such receipts, however, receipts for the sale of professional services involving the initiation, defense or maintenance of a judicial or administrative proceeding within this state shall be assigned to this state.

O Examples.

1.Example 1. Architecture Corp provides building design services as to buildings located, or expected to be located, in Rhode Island to individual customers who are resident in Rhode Island and other states, and to business customers that are based in Rhode Island and other states. The receipts from Architecture Corp’s sales are assigned to Rhode Island because the locations of the buildings to which its design services relate are in Rhode Island, or are expected to be in Rhode Island. For purposes of assigning these receipts, it is not relevant where, in the case of an individual customer, the customer primarily resides or is billed for such services, and it is not relevant where, in the case of a business customer, the customer principally manages the contract, placed the order for the services or is billed for such services. Further, such receipts are assigned to Rhode Island even if Architecture Corp’s designs are either physically delivered to its customer in paper form in a state other than Rhode Island or are electronically delivered to its customer in a state other than Rhode Island.

2.Example 2. Law Corp provides legal services to individual clients who are resident in Rhode Island and in other states. In some cases, Law Corp may prepare one or more legal documents for its client as a result of these services and/or the legal work may be related to litigation or a legal matter that is ongoing in a state other than where the client is resident. Assume that Law Corp knows the state of primary residence for many of its clients, and where it does not know this state of primary residence, it knows the client’s billing address. Also assume that Law Corp does not derive more than 5% of its receipts from sales of services from any one individual client. Where Law Corp knows its client’s state of primary residence, it shall assign the receipts to that state. Where Law Corp does not know its client’s state of primary residence, but rather knows the client’s billing address, it shall assign the receipts to that state. For purposes of the analysis it is irrelevant whether the legal documents relating to the service are mailed or otherwise delivered to a location in another state, or the litigation or other legal matter that is the underlying predicate for the services is in another state.

3.Example 3. Law Corp provides legal services to several multistate business clients. In each case, Law Corp knows the state in which the agreement for legal services that governs the client relationship is principally managed by the client. In one case, the agreement is principally managed in Rhode Island; in the other cases, the agreement is principally managed in a state other than Rhode Island. Where the agreement for legal services is principally managed by the client in Rhode Island, the receipts from sale of the services shall be assigned to Rhode Island; in the other cases, the receipts are not assigned to Rhode Island. In the case of receipts that are assigned to Rhode Island, the receipts shall be so assigned even if:

a.the legal documents relating to the service are mailed or otherwise delivered to a location in another state, or

b.the litigation or other legal matter that is the underlying predicate for the services is in another state.

4.For additional examples demonstrating the assignment under this section of receipts for professional services, please see the corresponding section of the Appendix § 9.18 of this Part.

P.License or Lease of Intangible Property. The gross receipts from the license of intangible property are in Rhode Island if and to the extent the intangible property is used in Rhode Island. The rules that apply to determine the location of the use of intangible property in the context of several specific types of licensing transactions are set forth below in §§ 9.8(P)(1) through (4) of this Part. For purposes of the rules set forth in § 9.8(P) of this Part, a lease of intangible property is to be treated the same as a license of intangible property. In general, a license of intangible property that conveys all substantial rights in such property is treated as a sale of intangible property for purposes of this Regulation. Note, however, that for purposes of §§ 9.8(P) and (Q) of this Part, a sale or exchange of intangible property is treated as a license of such property where the receipts from the sale or exchange derive from payments that are contingent on the productivity, use or disposition of the property. Intangible property licensed as part of the sale or lease of tangible property is treated under this Regulation as the sale or lease of tangible property. To the extent that the transfer of a security or business “goodwill” or similar intangible value, including, without limitation, “going concern value” or “workforce in place,” may be characterized as a license or lease of intangible property, receipts from such transaction shall be excluded from the numerator and the denominator of the taxpayer’s sales factor.

1.License of a Marketing Intangible. Where a license is granted for the right to use intangible property in connection with the sale, lease, license, or other marketing of goods, services, or other items (i.e., a marketing intangible), the royalties or other licensing fees paid by the licensee for such right are assigned to Rhode Island to the extent that the fees are attributable to the sale or other provision of goods, services, or other items purchased or otherwise acquired by consumers or other ultimate customers in Rhode Island. Examples of a license of a marketing intangible include, without limitation, the license of a service mark, trademark, or trade name; certain copyrights; the license of a film, television or multimedia production or event for commercial distribution; and a franchise agreement. In each of these instances the license of the marketing intangible is intended to promote consumer sales. In the case of the license of a marketing intangible, where a taxpayer has actual evidence of the amount or proportion of its receipts that is attributable to Rhode Island, it shall assign such amount or proportion to Rhode Island. In the absence of actual evidence of the amount or proportion of the licensee's receipts that are derived from Rhode Island customers, the portion of the licensing fee to be assigned to Rhode Island shall be reasonably approximated by multiplying the total fee by a percentage that reflects the ratio of the Rhode Island population in the specific geographic area in which the licensee makes material use of the intangible property to regularly market its goods, services or other items relative to the total population in such area. Where the license of a marketing intangible is for the right to use the intangible property in connection with sales or other transfers at wholesale rather than directly to retail customers, the portion of the licensing fee to be assigned to Rhode Island shall be reasonably approximated by multiplying the total fee by a percentage that reflects the ratio of the Rhode Island population in the specific geographic area in which the licensee's goods, services, or other items are ultimately and materially marketed using the intangible property relative to the total population of such area. In the case of sales made to a jurisdiction outside the United States, it will be presumed that the licensing is not material unless the taxpayer shows otherwise.

2.License of a Production Intangible. A license for the right to use intangible property other than in connection with the sale, lease, license, or other marketing of goods, services, or other items, and to be used in a production capacity is a “production intangible.” Examples of a license of a production intangible include, without limitation, the license of a patent, a copyright, or trade secrets to be used in a manufacturing process, where the value of the intangible lies predominately in its use in such process. The licensing fees paid by the licensee for such right are assigned to Rhode Island to the extent that the use for which the fees are paid takes place in Rhode Island. Where the Division of Taxation can reasonably establish that the actual use of intangible property pursuant to a license of a production intangible takes place in part in Rhode Island, it shall be presumed that the entire use is in this state except to the extent that the taxpayer can demonstrate that the actual location of a portion of the use takes place outside Rhode Island. In the case of a license of a production intangible where the actual use is unknown, it shall be presumed that the use of the intangible property takes place in the state of the licensee's commercial domicile (where the licensee is a business) or the licensee’s state of primary residence (where the licensee is an individual).

3.License of a Mixed Intangible. Where a license of intangible property includes both a license of a marketing intangible and a license of a production intangible (a “mixed intangible”) and the fees to be paid in each instance are separately and reasonably stated in the licensing contract, the Division of Taxation will accept such separate statement for purposes of this Regulation. Where a license of intangible property includes both a license of a marketing intangible and a license of a production intangible and the fees to be paid in each instance are not separately and reasonably stated in the contract, it shall be presumed that the licensing fees are paid entirely for the license of the marketing intangible except to the extent that the taxpayer or the Division of Taxation can reasonably establish otherwise.

4.License of Intangible Property where Substance of Transaction Resembles a Sale of Goods or Services. In some cases, the license of intangible property will resemble the sale of an electronically-delivered good or service rather than the license of a marketing intangible or a production intangible. In such cases, the receipts from the licensing transaction shall be assigned by applying the rules set forth in §§ 9.8(K)(3) and (4) of this Part, as if the transaction were a service delivered to an individual or business customer or delivered electronically through an individual or business customer, as applicable. Examples of transactions to be assigned under this § 9.8(P) of this Part include, without limitation, the license of database access, the license of access to information, the license of digital goods, and the license of certain software (e.g., where the transaction is not the license of pre-written software that is treated as the sale of tangible personal property).

a.Sublicenses. Pursuant to § 9.8(P) of this Part, the rules of § 9.8(K)(4) of this Part may apply where a holder of intangible property licenses intangible property to a customer that in turn sublicenses the intangible property to end users as if the transaction were a service delivered electronically through a customer to end users. In particular, the rules set forth in § 9.8(K)(4) of this Part that apply to services delivered electronically to a customer for purposes of resale and subsequent electronic delivery in substantially identical form to end users or other recipients may also apply with respect to licenses of intangible property for purposes of sublicense to end users, provided that for these purposes, the intangible property sublicensed to an end user shall not fail to be substantially identical to the property that was licensed to the sublicensor merely because the sublicense transfers a reduced bundle of rights with respect to such property (e.g., because the sublicensee’s rights are limited to its own use of the property and do not include the ability to grant a further sublicense), or because such property is bundled with additional services or items of property.

5.Examples.

a.Example 1. Crayon Corp and Dealer Co enter into a license contract under which Dealer Co as licensee is permitted to use trademarks that are owned by Crayon Corp in connection with Dealer Co's sale of certain products to retail customers. Under the contract, Dealer Co is required to pay Crayon Corp a licensing fee that is a fixed percentage of the total volume of monthly sales made by Dealer Co of products using the Crayon Corp trademarks. Under the contract, Dealer Co is permitted to sell the products at multiple store locations, including store locations that are both within and without Rhode Island. Further, the licensing fees that are paid by Dealer Co are broken out on a per-store basis. The licensing fees paid to Crayon Corp by Dealer Co represent fees from the license of a marketing intangible. The portion of the fees to be assigned to Rhode Island shall be determined by multiplying the fees by a percentage that reflects the ratio of Dealer Co’s receipts that are derived from its Rhode Island stores relative to Dealer Co’s total receipts.

b.Example 2. Moniker Corp enters into a license contract with Wholesale Co. Pursuant to the contract Wholesale Co is granted the right to use trademarks owned by Moniker Corp to brand sports equipment that is to be manufactured by Wholesale Co or an unrelated entity, and to sell the manufactured equipment to unrelated companies that will ultimately market the equipment to consumers in a specific geographic region, including a foreign country. The license agreement confers a license of a marketing intangible, even though the trademarks in question will be affixed to property to be manufactured. In addition, the license of the marketing intangible is for the right to use the intangible property in connection with sales to be made at wholesale rather than directly to retail customers. The component of the licensing fee that constitutes the Rhode Island receipts of Moniker Corp is determined by multiplying the amount of the fee by a percentage that reflects the ratio of the Rhode Island population in the specific geographic region relative to the total population in such region.

c.Example 3. Formula, Inc. and Appliance Co enter into a license contract under which Appliance Co is permitted to use a patent owned by Formula, Inc. to manufacture appliances. The license contract specifies that Appliance Co is to pay Formula, Inc. a royalty that is a fixed percentage of the gross receipts from the products that are later sold. The contract does not specify any other fees. The appliances are both manufactured and sold in Rhode Island and several other states. Assume the licensing fees are paid for the license of a production intangible, even though the royalty is to be paid based upon the sales of a manufactured product (i.e., the license is not one that includes a marketing intangible). Because the Division of Taxation can reasonably establish that the actual use of the intangible property takes place in part in Rhode Island, the royalty is assigned based to the location of such use rather than to location of the licensee’s commercial domicile. It is presumed that the entire use is in Rhode Island except to the extent that the taxpayer can demonstrate that the actual location of some or all of the use takes place outside Rhode Island. Assuming that Formula, Inc. can demonstrate the percentage of manufacturing that takes place in Rhode Island using the patent relative to such manufacturing in other states, that percentage of the total licensing fee paid to Formula, Inc. under the contract will constitute Formula, Inc.'s Rhode Island receipts.

d.For additional examples demonstrating the assignment under this section of receipts for the license or lease of intangible property, please see the corresponding section of the Appendix 9.15 of this Part.

Q.Sale of Intangible Property.

1.The assignment of gross receipts from a sale to a state or states in the instance of a sale or exchange of intangible property depends upon the nature of the intangible property sold. For purposes of this § 9.8(Q) of this Part, a sale or exchange of intangible property includes a license of such property where the transaction is treated for tax purposes as a sale of all substantial rights in the property and the receipts from the transaction are not contingent on the productivity, use or disposition of the property. For the rules that apply where the consideration for the transfer of rights is contingent on the productivity, use or disposition of the property, see § 9.8(P) of this Part.

a.Contract Right or Government License that Authorizes Business Activity in Specific Geographic Area. In the case of a sale or exchange of intangible property where the property sold or exchanged is a contract right, government license or similar intangible property that authorizes the holder to conduct a business activity in a specific geographic area, the receipts from the sale are assigned to a state if and to the extent that the intangible property is used or is authorized to be used within the state. Where the intangible property is used or may be used only in Rhode Island the taxpayer shall assign the receipts from the sale to Rhode Island. Where the intangible property is used or is authorized to be used in Rhode Island and one or more other states, the taxpayer shall assign the receipts from the sale to Rhode Island to the extent that the intangible property is used in or authorized for use in Rhode Island, through the means of a reasonable approximation.

b.Sale that Resembles a License (Receipts are Contingent on Productivity, Use or Disposition of the Intangible Property). In the case of a sale or exchange of intangible property where the receipts from the sale or exchange are contingent on the productivity, use or disposition of the property, the receipts from the sale shall be assigned by applying the rules set forth in § 9.8(P) of this Part (pertaining to the license or lease of intangible property).

c.Sale that Resembles a Sale of Goods and Services. In the case of a sale or exchange of intangible property where the substance of the transaction resembles a sale of goods or services and where the receipts from the sale or exchange do not derive from payments contingent on the productivity, use or disposition of the property, the receipts from the sale shall be assigned by applying the rules set forth in § 9.8(P)(4) of this Part (relating to licenses of intangible property that resemble sales of goods and services). Examples of such transactions include those that are analogous to the license transactions cited as examples in § 9.8(P)(4) of this Part.

d.Examples.

(1)Example 1. Sports League Corp, a corporation that is based outside Rhode Island, sells the rights to broadcast the sporting events played by the teams in its league in all 50 U.S. states to Network Corp. Although the games played by Sports League Corp will be broadcast in all 50 states, the games are of greater interest in the northeast region of the country, including Rhode Island. Because the intangible property sold is a contract right that authorizes the holder to conduct a business activity in a specified geographic area, Sports League Corp must attempt to reasonably approximate the extent to which the intangible property is used in or may be used in Rhode Island. For purposes of making this reasonable approximation, Sports League Corp may rely upon audience measurement information that identifies the percentage of the audience for its sporting events in Rhode Island and the other states.

(2)Example 2. Business Corp, a corporation based outside Rhode Island engaged in business activities in Rhode Island and other states, enters into a covenant not to compete with Competition Corp, a corporation that is based outside Rhode Island, in exchange for a fee. The agreement requires Business Corp to refrain from engaging in certain business activity in Rhode Island and other states. The component of the fee that constitutes receipts from a sale in Rhode Island is determined by multiplying the amount of the fee by a fraction represented by the percentage of the Rhode Island population over the total population in the specified geographic region.

2.Special Rules.

a.Software Transactions. A license or sale of pre-written software for purposes other than commercial reproduction (or other exploitation of the intellectual property rights), when transferred on a tangible medium, is treated as the sale of tangible personal property, rather than as either the license or sale of intangible property or the performance of a service. In such cases, the gross receipts are in Rhode Island as determined under the rules for the sale of tangible personal property. In all other cases, the receipts from a license or sale of software are to be assigned to Rhode Island as determined otherwise under this regulation (e.g., depending on the facts, as the development and sale of custom software, see § 9.8(I)(12) of this Part, as a license of a marketing intangible, see § 9.8(P)(1) of this Part, as a license of a production intangible, see § 9.8(P)(2) of this Part, as a license of intangible property where the substance of the transaction resembles a sale of goods or services, see § 9.8(P)(4) of this Part, or as a sale of intangible property, see § 9.8(Q) of this Part.

b.Sales or Licenses of Digital Goods or Services. In the case of a sale or license of digital goods or services, including, among other things, the sale of various video, audio and software products or similar transactions, the gross receipts from the sale or license shall be assigned by applying the same rules as are set forth in §§ 9.8(K)(3) or (4) of this Part, as if the transaction were a service delivered to an individual or business customer or delivered through or on behalf of an individual or business customer. For purposes of the analysis, it is not relevant what the terms of the contractual relationship are or whether the sale or license might be characterized, depending upon the particular facts, as, for example, the sale or license of intangible property or the performance of a service.

c.Gross Receipts from Broadcasting. Notwithstanding the sourcing requirements required for sales other than sales of tangible personal property set forth in §§ 9.8(I)(9) through 9.8(A) through 9.8(D) of this Part, in the case of a broadcaster the following provisions apply for purposes of determining whether sales are in this state:

(1)Receipts of a broadcaster arising from the provision of advertising services are in this State if the commercial domicile of the corresponding broadcast customer is in this State.

(2) Receipts of a broadcaster arising from fees paid directly by a consumer to the broadcaster for access to the broadcaster’s film programming are in this State if the address of the consumer listed in the broadcaster’s records is in this State.

(3)Receipts of a broadcaster arising from license fees paid directly by a Platform Distribution Company are in this State if the commercial domicile of the corresponding broadcast customer is in this State.

3.Dividends. Sales include dividends, such as dividends received from shares of stock of any payee liable for taxes as outlined in R.I. Gen. Laws Chapters 44-11, 44-13 and 44-14, and dividends excluded for federal tax purposes, less exclusion for Rhode Island purposes.

4.Interest. Sales include interest, such as interest on certain obligations of the United States and its possessions or interests on obligations of Rhode Island Public Service Corporations, less exclusions for Rhode Island purposes.

a.Exclusion of Receipts from Sales Factor. Gross receipts do not include, for example, such items as:

(1)Transactions solely between affiliates that are members in the same combined group;

(2)Repayment, maturity, or redemption of the principal of a loan, bond, or mutual fund or certificate of deposit or similar marketable instrument;

(3)The principal amount received under a repurchase agreement or other transaction properly characterized as a loan;

(4)Proceeds from issuance of the taxpayer’s own stock or from the sale of treasury stock;

(5)Damages and other amounts received as the result of litigation;

(6) Property acquired by an agent on behalf of another;

(7)Tax refunds and other benefit recoveries, unless such refunds or benefit recoveries are claimed as deductions;

(8) Pension reversions;

(9)Contributions to capital other than sales of securities by securities dealers;

(10)Income from forgiveness of indebtedness; or

(11)Amounts realized from exchanges of inventory that are not recognized by the Internal Revenue Code.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Technical Revision — effective from 2004-01-26 to 01/12/2016
Amendment — effective from 2004-01-01 to 01/26/2004
Amendment — effective from 2003-04-01 to 01/01/2004
Periodic Refile — effective from 2001-12-20 to 01/01/2004

280-RICR-20-25-9 § 9.9 Three-Factor Apportionment Using Sales, Property and Payroll

A.Applicability of Three-Factor Apportionment. This apportionment Rule applies to the following taxpayers, unless the taxpayer is eligible to use a special apportionment formula available under R.I. Gen. Laws §§ 44-11-14.1 through 44-11-14.6 and §§ 9.10 and 9.11 of this Part:

1.2015 and Thereafter. For tax years beginning on or after January 1, 2015, any taxpayer that derives income from sources both within and outside of this state or engages in any activities or transactions both within and outside of this state for the purpose of profit or gain, but which is not:

a.a C corporation,

b.a combined group with a C corporation member, or

c.a member in a combined group with a C corporation member.

2.Pre-2015. For tax years beginning before January 1, 2015, all taxpayers that derive their income from sources both within and outside of this state for the purpose of profit or gain.

a.Note: With respect to the corporate income tax responsibilities of C corporations for tax years beginning on or after January 1, 2015, such taxpayers must refer to and comply with § 9.8 of this Part.

B.Three-Factor Apportionment – Formula. For all taxpayers to whom this § 9.9 of this Part applies, income shall be apportioned to this state by means of an apportionment formula to be computed as a simple arithmetical mean of three (3) fractions, as follows:

1.Property. The first fraction shall represent that part held or owned within this state of the average net book value of the total tangible property (real estate and tangible personal property) held or owned by the taxpayer during the taxable year, without deduction on account of any encumbrance thereon. Included in this property factor are the following:

a.Inventory,

b.Depreciable Assets,

c.Leasehold improvements,

d.Land,

e.Construction in progress to the extent shown as a capital asset on the books of the corporation, and

f.Rental property (capitalized times 8).

2.Sales. The second fraction shall represent that part of the taxpayer’s total receipts from sales or other sources during the taxable year which is attributable to the taxpayer’s activities or transactions within this state during the taxable year. Under the three-factor apportionment formula applicable in § 9.9 of this Part, taxpayers determining sales attributable to Rhode Island for transactions other than sales of tangible personal property shall adhere to cost of performance sourcing principles, and not the market-based sourcing principles that apply in the context of single sales factor apportionment. Under cost of performance sourcing principles, gross receipts from transactions other than sales of tangible personal property are attributed to this state if the income-producing activity which gave rise to the receipts is performed wholly within this state. Also, gross receipts are attributed to this state if, with respect to a particular item of income, the income-producing activity is performed within and without this state but the greater portion of the income-producing activity is performed within this state, based on costs of performance. In all cases where a three-factor apportionment formula applies, the sales fraction shall continue to be determined in the same manner that applied in Rhode Island prior to the introduction of mandatory unitary combined reporting. Taxpayers’ receipts from sales include, but are not limited to, receipts from the following:

a.Gross sales of tangible personal property (inventory sold in the ordinary course of business) where:

(1)Shipments are made to points within this state; or

(2)Shipments are made from an office, store, warehouse, factory or other place of storage in this state and the selling entity does not have corporate income tax nexus in the state of delivery.

b.Gross income from services performed within this state;

c.Gross income from rentals from property situated within this state;

d.Net income from the sale of real and personal property, other than inventory sold in the ordinary course of business as described in paragraph § 9.9(B)(1) of this Part, or other capital assets located in the state;

e.Net income from the sale or other disposition of securities or financial obligations;

f.Gross income from all other receipts within this state;

g.Dividends less exclusions for Rhode Island purposes, such as dividends received from shares of stock of any payee liable for taxes as outlined in R.I. Gen. Laws Chapters 44-11, 44-13 and 44-14 and dividends excluded for federal tax purposes;

h.Interest less exclusion for Rhode Island purposes, such as interest on certain obligations of the United States and its possessions or interest on obligations of Rhode Island Public Service Corporations;

i.Rent

j.Royalties;

k.Net Capital Gain as reported for federal tax purposes;

l.Net Ordinary Gain as reported for federal tax purposes;

m.Other Income; and

n.Income exempt from federal taxation but taxable for Rhode Island purposes, such as income from obligations from other states.

3.Payroll. The third fraction shall represent that part of the total wages, salaries, and other compensation to officers, employees, and agents paid or incurred by the taxpayer during the taxable year which is attributable to services performed in connection with the taxpayer’s activities or transactions within this state during the taxable year.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Technical Revision — effective from 2004-01-26 to 01/12/2016
Amendment — effective from 2004-01-01 to 01/26/2004
Amendment — effective from 2003-04-01 to 01/01/2004
Periodic Refile — effective from 2001-12-20 to 01/01/2004

280-RICR-20-25-9 § 9.10 Special Apportionment Formulas – Pre-2015

A.Applicability of Special Apportionment Formulas – Pre-2015. For tax years beginning before January 1, 2015, special apportionment rules, as set forth in §§ 9.10(B) through (J) of this Part, shall apply to the categories of taxpayers listed below when such taxpayers derive their income from sources both within and outside of this state for the purpose of profit or gain:

1.Manufacturers;

2.Motor carriers;

3.Airlines;

4.Taxpayers with specialty receipts;

5.Taxpayers with qualified USFDA manufacturing facilities in Rhode Island;

6.Regulated investment companies and securities brokerage services;

7.Credit card banks;

8.Retirement and pension plans;

9.Sellers of international investment management services.

10.In all such cases, apportionment fractions shall be determined in the same manner that applied in Rhode Island prior to the introduction of mandatory unitary combined reporting. For tax years beginning on or after January 1, 2015, refer to § 9.11 of this Part.

B.Manufacturers (tax years beginning before January 1, 2015).

1.Manufacturers who maintain a principal business as described in Sector 31, 32 or 33 of the North American Industry Classification System as adopted by the United States Office of Management and Budget as revised from time to time, may, in lieu of apportioning net income to this state based on the apportionment fraction described in R.I. Gen. Laws § 44-11-14(a), elect for any year to apportion net income to this state based upon the following apportionment fraction:

a.For the tax year beginning on or after January 1, 2004, but before January 1, 2005, thirty percent (30%) of the property factor, thirty percent (30%) of the payroll factor and forty percent (40%) of the receipts factor may be used;

b.For the tax year beginning on or after January 1, 2005, twenty-five percent (25%) of the property factor, twenty-five percent (25%) of the payroll factor and fifty percent (50%) of the receipts factor may be used.

c.Motor carriers (tax years beginning before January 1, 2015).

2.In the case of motor carriers, the following method is used to determine the numerator of each factor:

a.Property Factor:

(1)Consists of the average net book value of situs assets plus a portion of the net book value of the line-haul vehicles. In determining the net book value of line-haul vehicles, compare Rhode Island pickup and delivery equipment to pick up and delivery equipment everywhere to arrive at a percentage due to Rhode Island for line-haul equipment.

(2)For a motor carrier who does not have a Rhode Island facility, but who regularly picks up and delivers in Rhode Island, delivery equipment will be apportioned to Rhode Island based upon its Rhode Island activities.

(3)Rental property shall be valued at eight times the annual net rental paid less annual sub-rentals received.

b.Receipts Factor: Average of the inbound/outbound Rhode Island receipts plus all other receipts attributable to Rhode Island.

C.Salaries and Wages Factor:

1.Consists of the situs wages plus a portion of the line-haul wages. Rhode Island line-haul wages are determined by the percentage of activity in Rhode Island.

2.For a motor carrier who does not have a Rhode Island facility, but who regularly picks up and delivers in Rhode Island, drivers’ wages will be apportioned to Rhode Island based upon its Rhode Island activities.

D.Airlines (tax years beginning before January 1, 2015).

1.In the case of airlines, the following method is used to determine the numerator of each factor:

a.Property Factor:

(1)Situs assets shall be included based on the average net book value. Flight aircraft shall be included based on the following ratio: mileage of aircraft, by type, flown in this state compared to total aircraft mileage flown everywhere, multiplied by the net book value of flight aircraft everywhere.

(2)Rental property shall be valued at eight times the annual net rental paid less annual sub rentals received.

b.Receipts Factor:

(1)Passenger revenue and freight revenue shall be allocated to Rhode Island based on the ratio of departures of flight aircraft, by type, from locations in this state compared to total departures everywhere, multiplied by total passenger revenue everywhere

(2)All other receipts attributable to Rhode Island shall also be included in the numerator.

c.Salaries and Wages Factor:

(1)Situs wages shall be included plus a portion of flight payroll. Flight payroll shall be included based on the following ratio: mileage of aircraft, by type, flown in this state compared to total aircraft mileage flown everywhere, multiplied by the total flight payroll everywhere.

E.Taxpayers with specialty receipts (tax years beginning before January 1, 2015).

1.For those taxpayers whose Rhode Island receipts include sums from the exercise of various legal rights such as patents, copyrights, royalties, franchises, licenses, etc. which are used, broadcast, or copied (in any media), such receipts shall be included in the numerator of the gross receipts factor and the total of such receipts shall be included in the denominator. A patent is used in Rhode Island to the extent that it is employed in fabrication, manufacturing, production or other processing in Rhode Island or to the extent that a patented product is produced in Rhode Island.

2.A copyright is used in Rhode Island to the extent that printing or other publication originated therein.

3.Broadcast media is used in Rhode Island to the extent that the Rhode Island target audience is determinable as a part of the total audience. If the Rhode Island audience is not determinable, then the entire receipts from the Rhode Island source are includible in the numerator of the gross receipts.

4.In all cases, a taxpayer’s method of assigning its sales shall be determined in good faith, applied in good faith, and applied consistently with respect to similar transactions and year to year. A taxpayer shall retain contemporaneous records that explain the determination and application of its method of assigning its sales, including its underlying assumptions, and shall provide such records to the tax administrator upon request.

F.Taxpayers with qualified USFDA manufacturing facilities in Rhode Island (tax years beginning before January 1, 2015).

1.A taxpayer with a Rhode Island facility which is both certified and registered by the United States Food and Drug Administration (USFDA) and is considered manufacturing as defined by the US Standard Industrial Classification Code(s)(SIC Code) 283, and 384 shall follow the three-factor apportionment formula as described in § 9.9 of this Part, except that the taxpayer may exclude certain values from the apportionment fraction, as follows:

a.From the numerator of the property fraction, the taxpayer may exclude the amount, if any, by which the net book value of qualified property in the tax year for which an exclusion is claimed under this provision exceeds the net book value of qualified property in the preceding tax year. For the purposes of this provision, “qualified property” means real estate and tangible personal property used solely and exclusively in all of the taxpayer’s certified Rhode Island facilities.

b.From the numerator of the wages/payroll fraction, the taxpayer may exclude the amount, if any, by which total qualified payroll expenses of the taxpayer in the tax year for which an exclusion is claimed under this provision exceeds the total qualified payroll expenses of the taxpayer in the immediately preceding tax year. For purposes of this provision, "qualified payroll" means the total amount of salaries, wages and other compensation paid to employees and to officers, except officers who have a direct or indirect ownership interest in the taxpayer in excess of five percent (5%) or who are substantial creditors of the taxpayer, which is attributable solely and exclusively to services performed in connection with the taxpayer's activities or transactions at all of the taxpayer's certified Rhode Island facilities.

c.In the event that a facility is certified during the taxpayer's tax year or in the event that a facility ceases to be certified during the taxpayer's tax year, the taxpayer shall prorate the amounts determined under subsections §§ 9.10(F)(1)(a) and (b) of this Part.

d.The taxpayer shall attach to the return for each tax year for which an exclusion is claimed under this provision detailed calculations substantiating each exclusion and proof that the taxpayer has satisfied the conditions relating to registration and certification by USFDA contained in this section.

G.Regulated investment companies and securities brokerage services (tax years beginning before January 1, 2015).

1.Any taxpayer located within the state which sells management, distribution or administration services (including without limitations, transfer agent, fund accounting, custody and other similar or related services) as described in this provision to or on behalf of a regulated investment company (as defined in the Internal Revenue Code of 1986, as amended) may elect the allocation and apportionment method for the taxpayer's net income provided for in this provision. The election, if made, shall be irrevocable for successive periods of five (5) years. All net income derived directly or indirectly from the sale of management, distribution, or administration services to or on behalf of regulated investment companies, including net income received directly or indirectly from trustees, and sponsors or participants of employee benefit plans which have accounts in a regulated investment company, shall be apportioned to Rhode Island only to the extent that shareholders of the regulated investment company are domiciled in Rhode Island as follows:

a.Net income shall be multiplied by a fraction, the numerator of which shall be Rhode Island receipts from the services during the taxable year and the denominator of which shall be the total receipts everywhere from the services for the same taxable year.

b.For purposes of this provision, Rhode Island receipts shall be determined by multiplying total receipts for the taxable year from each separate regulated investment company for which the services are performed by a fraction. The numerator of the fraction shall be the average of the number of shares owned by the regulated investment company's shareholders domiciled in this state at the beginning of and at the end of the regulated investment company's taxable year, and the denominator of the fraction shall be the average of the number of the shares owned by the regulated investment company shareholders everywhere at the beginning of and at the end of the regulated investment company's taxable year.

2.Any taxpayer which provides securities brokerage services and which operates within the state may elect the allocation and apportionment method for the taxpayer's net income provided for in this provision. The election, if made, shall be irrevocable for successive periods of five (5) years. All net income derived directly or indirectly from the sale of securities brokerage services by a taxpayer shall be apportioned to Rhode Island only to the extent that securities brokerage customers of the taxpayer are domiciled in Rhode Island. The portion of net income apportioned to Rhode Island shall be determined by multiplying the total net income from the sale of the services by a fraction determined in the following manner:

a.The numerator of the fraction shall be the brokerage commissions and total margin interest paid in respect of brokerage accounts owned by customers domiciled in Rhode Island for the taxpayer's taxable year; and

b.The denominator of the fraction shall be the brokerage commissions and total margin interest paid in respect of brokerage accounts owned by all of the taxpayer's customers for the same taxable year.

H.Credit card banks (tax years beginning before January 1, 2015).

1.Any banking institution whose business activities are taxable within and outside of this state and whose activities are limited to those described in Section 2(c)(2)(F) of the Bank Holding Company Act (12 U.S.C. § 1841(c)(2)(F)) may elect the allocation and apportionment method for the taxpayer's net income provided for in this provision. The election, if made, shall be irrevocable for successive periods of five (5) years. All net income derived directly or indirectly from the banking institution shall be apportioned to Rhode Island only to the extent that customers of the taxpayer are domiciled in Rhode Island. The portion of net income apportioned to Rhode Island shall be determined by multiplying the total net income from the sale of the services by a fraction determined in the following manner:

a.The numerator of the fraction shall be the income derived from accounts owned by customers domiciled in Rhode Island for the banking institution's taxable year; and

b.The denominator of the fraction shall be income derived from accounts owned by all of the banking institution's customers for the same taxable year.

I.Retirement and pension plans (tax years beginning before January 1, 2015).

1.Any taxpayer located within the state that sells management, distribution or administration services, including without limitations, transfer agent, fund accounting, custody and other similar or related services, as described in this provision to or on behalf of an employee retirement plan or pension plan may elect the allocation and apportionment method for the taxpayer's net income provided for in this provision. The election, if made, shall be irrevocable for successive periods of five (5) years. All net income derived directly and indirectly from the sale of the management, distribution, or administration services to or on behalf of a retirement plan or pension plan, including net income received directly or indirectly from trustees, sponsors or participants of such a retirement plan or pension plan, shall be apportioned to Rhode Island only to the extent that the beneficiaries or participants of a retirement plan or pension plan are domiciled in Rhode Island as follows:

b.For the purposes of this provision, Rhode Island receipts shall be determined by multiplying total receipts for the taxable year from a retirement plan or pension plan for which the services are performed by a fraction. The numerator of the fraction shall be the average of the number of total beneficiaries or participants of each retirement plan or pension plan domiciled in this state at the beginning of and at the end of taxable year of the taxpayer, and the denominator of the fraction shall be the average of the number of total beneficiaries or participants of the retirement plan or pension plan everywhere at the beginning of and at the end of each taxable year of the taxpayer.

J.Sellers of international investment management services (tax years beginning before January 1, 2015).

1.Any qualified taxpayer located within the state which sells international investment management services to non-U.S. persons or non-U.S. investment funds shall exclude from its net income any income derived directly or indirectly from the sale of international investment management services.

2.For purposes of this section, "non-U.S. persons" means any person who is not a citizen of the United States and who is domiciled outside of the United States during the entire taxable year; "non-U.S. investment funds" means any collective investment fund the sole beneficiaries of which are non-U.S. persons.

3.For purposes of this section, "international investment management services" shall include, without limitation, investment advice, investment research, investment consulting, portfolio management, administration or distribution services (including, without limitation, transfer agent, fund accounting, customary and other similar or related services) rendered to or on behalf of non-U.S. persons and non-U.S. investment funds.

4.For purposes of this section, a "qualified taxpayer" is one which during the taxable year employs, or together with affiliated taxpayers with which it is eligible to file a consolidated tax return for federal income tax purposes, an average of not less than five hundred (500) full-time equivalent employees in the state.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Technical Revision — effective from 2004-01-26 to 01/12/2016
Amendment — effective from 2004-01-01 to 01/26/2004
Amendment — effective from 2003-04-01 to 01/01/2004
Periodic Refile — effective from 2001-12-20 to 01/01/2004

280-RICR-20-25-9 § 9.11 Special Apportionment Formulas – 2015 and Thereafter

A.Applicability of Special Apportionment Formulas – 2015 and Thereafter.

1.For tax years beginning on or after January 1, 2015, taxpayers deriving income from sources both within and outside of this state, or engaging in any activities or transactions both within and outside of this state for the purpose of profit or gain, shall generally apportion income according to the manner prescribed in § 9.8 of this Part, using single sales factor apportionment and the principle of market-based sourcing. Notwithstanding this general rule, certain categories of taxpayers or members in combined groups listed below remain eligible to apportion income to Rhode Island according to modified formulas of apportionment, as set forth in § 9.11(B)(G) of this Part:

a.Motor carriers;

b.Airlines;

c.Regulated investment companies and securities brokerage services;

d.Credit card banks;

e.Retirement and pension plans;

f.Sellers of international investment management services.

2.In all such cases, taxpayers and combined group members eligible to apportion income according to a modified formula shall remain obligated to comply with Rhode Island’s mandatory unitary combined reporting regime. When a taxpayer or member in a combined group that is categorized in §§ 9.11(A)(1)(a) through (f) of this Part is a member in a combined group with other categories of taxpayers (whether such categories of taxpayers are listed in this Regulation or not), the modified formula used for determining the portion of the sales factor of the taxpayer or member categorized in §§ 9.11(A)(1)(a) through (f) of this Part, as set forth in §§ 9.11(B) through (G) of this Part, shall not apply to the combined group as a whole or to members in the combined group that are categorized differently.

B.Motor carriers (tax years beginning after January 1, 2015).

1.To arrive at a determination of the share of net income attributable to Rhode Island for a motor carrier, the motor carrier’s net income is multiplied by the motor carrier’s apportionment percentage. The apportionment percentage is determined as a fraction, the numerator of which is the motor carrier’s total Rhode Island sales, and the denominator of which is the motor carrier’s total worldwide sales.

2.A motor carrier’s Rhode Island sales consist of the average of the inbound/outbound Rhode Island receipts plus all other receipts attributable to Rhode Island.

C.Airlines (tax years beginning after January 1, 2015).

1.To arrive at a determination of the share of net income attributable to Rhode Island for an airline, passenger revenue and freight revenue shall be allocated to Rhode Island based on the ratio of departures of flight aircraft, by type, from locations in this state compared to total departures everywhere, multiplied by total passenger revenue everywhere. All other receipts attributable to Rhode Island shall also be included in the numerator.

D.Regulated investment companies and securities brokerage services (tax years beginning after January 1, 2015).

1.The method for determining the share of net income attributable to Rhode Island for any taxpayer located within the state which sells management, distribution or administration services (including without limitations, transfer agent, fund accounting, custody and other similar or related services) to or on behalf of a regulated investment company (as defined in the Internal Revenue Code of 1986, as amended) is the same as the method set forth in § 9.10(G)(1) of this Part.

2.The method for determining the share of net income attributable to Rhode Island for any taxpayer which provides securities brokerage services and which operates within the state is the same as the method set forth in § 9.10(G)(2) of this Part.

E.Credit card banks (tax years beginning after January 1, 2015).

1.The method for determining the share of net income attributable to Rhode Island for any banking institution whose business activities are taxable within and outside of this state and whose activities are limited to those described in Section 2(c)(2)(F) of the Bank Holding Company Act (12 U.S.C. § 1841(c)(2)(F)) is the same as the method set forth in § 9.10(H)(1) of this Part.

F.Retirement and pension plans (tax years beginning after January 1, 2015).

1.The method for determining the share of net income attributable to Rhode Island for any taxpayer located within the state that sells management, distribution or administration services, including without limitations, transfer agent, fund accounting, custody and other similar or related services to or on behalf of an employee retirement plan or pension plan is the same as the method set forth in § 9.10(I)(1) of this Part.

G.Sellers of international investment management services (tax years beginning after January 1, 2015).

1.Regarding qualified taxpayers located within the state which sell international investment management services to non-U.S. persons or non-U.S. investment funds, such taxpayers shall determine net income in accordance with the provisions of § 9.10(J) of this Part.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Technical Revision — effective from 2004-01-26 to 01/12/2016
Amendment — effective from 2004-01-01 to 01/26/2004
Amendment — effective from 2003-04-01 to 01/01/2004
Periodic Refile — effective from 2001-12-20 to 01/01/2004

280-RICR-20-25-9 § 9.12 Variation of Method of Apportioning Income

A.Tax Administrator’s Authority to Vary Methods of Apportionment. If at any time the Tax Administrator, on his or her own motion or acting upon a complaint by a taxpayer, determines that the methods of apportionment provided are inequitable either to the state or to the taxpayer, the tax administrator, after affording the taxpayer reasonable opportunity to be heard, may apply any other method of apportionment that is equitable and, if necessary, shall re-determine the tax.

B.Disputes Regarding Applicable Methods of Apportionment. When a dispute arises between the Tax Administrator and a taxpayer with respect to the method of apportionment applied, both the taxpayer and the Tax Administrator shall be entitled to initiate an appeals process through an independent arbitrator who has specific expertise in state tax matters. In all cases, the arbitration process must be mutually agreed to by the parties, the arbitrator shall be selected by the taxpayer from a list of independent arbitrators approved by the American Arbitration Association, and all costs and fees of the arbitral tribunal shall be borne by the taxpayer, regardless of the outcome of the arbitration on the merits. Legal fees for the arbitration shall be borne separately by the respective parties, unless the outcome of the arbitration is in favor of the Tax Division, in which case all legal fees shall be borne by the taxpayer. For purposes of the independent appeals process described in this provision, the various methods of apportionment are set forth in §§ 9.8, 9.9, 9.1 and 9.11 of this Part. The independent appeals process described in this provision shall be available only for disputes where proper selection of the method of apportionment to be applied to the taxpayer, in any given year, is the sole issue in dispute. The independent appeals process is not intended to resolve disputes concerning composition of a combined group, determination of combined group net income, the actual determination of apportionment factors, or to any other matter arising before or after selection of the taxpayer’s method of apportionment. The decision resulting from the independent appeals process shall not prohibit either party from pursuing any legal remedy otherwise available if the issue is not resolved as a result of the appeal process. The limited arbitration option set forth in this § 9.12 of this Part is not a necessary step for pursuing tax appeals. The decision resulting from the independent appeals process can be used as evidence.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Technical Revision — effective from 2004-01-26 to 01/12/2016
Amendment — effective from 2004-01-01 to 01/26/2004
Amendment — effective from 2003-04-01 to 01/01/2004
Periodic Refile — effective from 2001-12-20 to 01/01/2004

280-RICR-20-25-9 § 9.13 Record Keeping

All C corporations shall maintain documentary evidence of all market sourcing determinations. A taxpayer’s application of the rules set forth in this Regulation shall be based on objective criteria and shall consider all sources of information reasonably available to the taxpayer at the time of its tax filing including, without limitation, the taxpayer’s books and records kept in the normal course of business. A taxpayer’s method of assigning its receipts shall be determined in good faith, applied in good faith, and applied consistently with respect to similar transactions and year to year. A taxpayer shall retain contemporaneous records that explain the determination and application of its method of assigning its receipts, including its underlying assumptions, and shall provide such records to the Division of Taxation upon request. Failure to keep such records may result in market sourcing determinations by the Tax Administrator. In any case in which a taxpayer fails to retain contemporaneous records that explain the determination and application of its method of assigning receipts, including its underlying assumptions, or fails to provide such records to the Division of Taxation upon request, the Division of Taxation may treat the taxpayer’s assignment of receipts as unsubstantiated, and may adjust the assignment of such receipts in a manner consistent with the applicable rules in this Regulation. Such determinations by the Tax Administrator shall be presumptively valid. The burden shall be on the taxpayer to maintain necessary evidence supporting classification of all income and all information related to calculation of Rhode Island income. The record keeping requirements of this Regulation are not intended to discourage taxpayers from refining methods of approximation based on demonstrably improved systems of tracking information.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Technical Revision — effective from 2004-01-26 to 01/12/2016
Amendment — effective from 2004-01-01 to 01/26/2004
Amendment — effective from 2003-04-01 to 01/01/2004
Periodic Refile — effective from 2001-12-20 to 01/01/2004

280-RICR-20-25-9 § 9.14 Effective Date

The effective date of this regulation is January 12, 2016. It supersedes and replaces regulation CT04-04 Corporate Tax – Allocation of Income and Net Worth.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Technical Revision — effective from 2004-01-26 to 01/12/2016
Amendment — effective from 2004-01-01 to 01/26/2004
Amendment — effective from 2003-04-01 to 01/01/2004
Periodic Refile — effective from 2001-12-20 to 01/01/2004

280-RICR-20-25-9 § 9.15 Appendix – Additional Examples

A.Additional Examples – from § 9.8(I)(11)(d) of this Part, sales of in-person services

1.Camera Corp provides camera repair services at an in-state retail location to walk-in individual and business customers. In some cases, Camera Corp actually repairs a camera that is brought to its in-state location at a facility that is in another state. In such cases, the repaired camera is then returned to the customer at Camera Corp’s in-state location. The receipts from sale of such services are in Rhode Island.

2.Same facts as in Example 1 above, except that a customer located in Rhode Island mails the camera directly to the out-of-state facility owned by Camera Corp to be fixed, and receives the repaired camera back in Rhode Island by mail. The receipts from sale of the service are in Rhode Island.

3.Teaching Corp provides seminars in Rhode Island to individual and business customers. The seminars and the materials used in connection with the seminars are prepared outside the state, the teachers who teach the seminars include teachers that are resident outside the state, and the students who attend the seminars include students that are resident outside the state. Because the seminars are taught in Rhode Island the receipts from sales of the services are in Rhode Island.

B.Additional Examples – from § 9.8(K)(1)(a) of this Part, sales of services delivered to or on behalf of a customer by physical means, whether to an individual or business customer.

1.Fulfillment Corp, a corporation based outside Rhode Island, provides product delivery fulfillment services in Rhode Island and in neighboring states to Sales Corp, a corporation located outside Rhode Island that sells tangible personal property through a mail order catalog and over the Internet to customers. In some cases when a customer purchases tangible personal property from Sales Corp to be delivered in Rhode Island, Fulfillment Corp will, pursuant to its contract with Sales Corp, deliver that property from its fulfillment warehouse located outside Rhode Island. The receipts from the sale of the fulfillment services of Fulfillment Corp to Sales Corp are assigned to Rhode Island to the extent that Fulfillment Corp’s deliveries on behalf of Sales Corp are to recipients in Rhode Island.

2.Software Corp, a software development corporation, enters into a contract with a business customer, Buyer Corp, which is physically located in Rhode Island, to develop custom software to be used in Buyer Corp’s business. Software Corp develops the custom software outside Rhode Island, and then physically installs the software on Buyer Corp’s computer hardware located in Rhode Island. The development and sale of the custom software is properly characterized as a service transaction, and the receipts from the sale are assigned to Rhode Island because the software is physically delivered to the customer in Rhode Island.

3.Same facts as Example 5, except that Buyer Corp has offices in Rhode Island and several other states, but is commercially domiciled outside Rhode Island and orders the software from a location outside Rhode Island. The receipts from the development and sale of the custom software service are assigned to Rhode Island because the software is physically delivered to the customer in Rhode Island.

C.Additional Examples – from § 9.8(K)(3)(c)(1) of this Part, sales of services delivered to a customer by electronic transmission.

1.Net Corp, a corporation based outside Rhode Island, provides web-based services to a business customer, Business Corp, a company with offices in Rhode Island and two neighboring states. Particular employees of Business Corp access the services from computers in each Business Corp office. Assume that Net Corp determines that Business Corp employees in Rhode Island were responsible for 75% of Business Corp’s use of Net Corp’s services, and Business Corp employees in other states were responsible for 25% of Business Corp’s use of Net Corp’s services. In such case, 75% of the receipts from the sale are received in Rhode Island. Assume alternatively that Net Corp lacks sufficient information regarding the location or locations where Business Corp’s employees used the services to determine or reasonably approximate such location or locations. Under these circumstances, if Net Corp derives 5% or less of its receipts from sales to Business Corp, Net Corp must assign the receipts to the state where Business Corp principally managed the contract, or if that state is not reasonably determinable, to the state where Business Corp placed the order for the services, or if that state is not reasonably determinable, to the state of Business Corp’s billing address. If Net Corp derives more than 5% of its receipts from sales of services to Business Corp, Net Corp is required to identify the state in which its contract of sale is principally managed by Business Corp and must assign the receipts to that state.

2.Net Corp, a corporation based outside Rhode Island, provides web-based services through the means of the Internet to more than 250 individual and business customers in Rhode Island and in other states. Assume that for each customer Net Corp cannot determine the state or states where its web services are actually received, and lacks sufficient information regarding the place of receipt to reasonably approximate such state or states. Also assume that Net Corp does not derive more than 5% of its receipts from sales of services to any single customer. Net Corp may apply the safe harbor provision and may assign its receipts using each customer’s billing address.

D.Additional Examples – from § 9.8(K)(4)(e)(1) of this Part, sales of services delivered electronically through or on behalf of an individual or business customer.

Web Corp, a corporation that is based outside Rhode Island, provides Internet content to viewers in Rhode Island and other states. Web Corp sells advertising space to business customers pursuant to which the customers’ advertisements will appear in connection with Web Corp’s Internet content. Web Corp receives a fee for running the advertisements that is determined by reference to the number of times the advertisement is viewed or clicked upon by the viewers of its website. The receipts from Web Corp’s sale of advertising space to its business customers are assigned to Rhode Island to the extent that the viewers of the Internet content are in Rhode Island, as measured by viewings or clicks. If Web Corp is unable to determine the actual location of its viewers, and lacks sufficient information regarding the location of its viewers to reasonably approximate such location, Web Corp must approximate the amount of its Rhode Island receipts by multiplying the amount of receipts from sales of advertising by a percentage that reflects the Rhode Island population in the specific geographic area in which the content containing the advertising is delivered relative to the total population in such area.

2.Retail Corp, a corporation that is based outside of Rhode Island, sells tangible property through its retail stores located in Rhode Island and other states, and through a mail order catalog. Answer Co, a corporation that operates call centers in multiple states, contracts with Retail Corp to answer telephone calls from individuals placing orders for products found in Retail Corp’s catalogs. In this case, the phone answering services of Answer Co are being delivered to Retail Corp’s customers and prospective customers. Therefore, Answer Co is delivering a service electronically to Retail Corp’s customers or prospective customers on behalf of Retail Corp, and must assign the proceeds from this service to the state or states from which the phone calls are placed by such customers or prospective customers. If Answer Co cannot determine the actual locations from which phone calls are placed, and lacks sufficient information regarding the locations to reasonably approximate such locations, Answer Co must approximate the amount of its Rhode Island receipts by multiplying the amount of its fee from Retail Corp by a percentage that reflects the Rhode Island population in the specific geographic area from which the calls are placed relative to the total population in such area.

3.Web Corp, a corporation that is based outside of Rhode Island, sells tangible property to customers via its Internet website. Design Co. designed and maintains Web Corp’s website, including making changes to the site based on customer feedback received through the site. Design Co.’s services are delivered to Web Corp. The fact that Web Corp’s customers and prospective customers incidentally benefit from Design Co.’s services, and may even interact with Design Co in the course of providing feedback, does not transform the service into one delivered “on behalf of” Web Corp to Web Corp’s customers and prospective customers.

4.Wholesale Corp, a corporation that is based outside Rhode Island, develops an Internet-based information database outside Rhode Island and enters into a contract with Retail Corp whereby Retail Corp will market and sell access to this database to end users. Depending on the facts, the provision of database access may be either the sale of a service or the license of intangible property or may have elements of both. Assume that on the particular facts applicable in this example Wholesale Corp is selling database access in transactions properly characterized as involving the performance of a service. When an end user purchases access to Wholesale Corp’s database from Retail Corp, Retail Corp in turn compensates Wholesale Corp in connection with that transaction. In this case, Wholesale Corp’s services are being delivered through Retail Corp to the end user. Wholesale Corp must assign its receipts from sales to Retail Corp to the state or states in which the end users receive access to Wholesale Corp’s database. If Wholesale Corp cannot determine the state or states where the end users actually receive access to Wholesale Corp’s database, and lacks sufficient information regarding the location from which the end users access the database to reasonably approximate such location, Wholesale Corp must approximate the extent to which its services are received by end users in Rhode Island by using a percentage that reflects the ratio of the Rhode Island population in the specific geographic area in which Retail Corp regularly markets and sells Wholesale Corp’s database relative to the total population in such area. Note that it does not matter for purposes of the analysis whether Wholesale Corp’s sale of database access constitutes a service or a license of intangible property, or some combination of both.

E.Additional Examples – from § 9.8(O)(1) of this Part, sales of professional services

1.Consulting Corp, a company that provides consulting services to law firms and other customers, is hired by Law Corp in connection with legal representation that Law Corp provides to Client Co. Specifically, Consulting Corp is hired to provide expert testimony at a trial being conducted by Law Corp on behalf of Client Co. Client Co pays for Consulting Corp’s services directly. Assuming that Consulting Corp knows that its agreement with Law Co is principally managed by Law Corp in Rhode Island, the receipts from the sale of Consulting Corp’s services shall be assigned to Rhode Island. It is not relevant for purposes of the analysis that Client Co is the ultimate beneficiary of Consulting Corp’s services, or that Client Co pays for Consulting Corp’s services directly.

2.Design Corp is a corporation based outside Rhode Island that provides graphic design and similar services in Rhode Island and in neighboring states. Design Corp enters into a contract at a location outside Rhode Island with an individual customer to design fliers for the customer. Assume that Design Corp does not know the individual customer’s state of primary residence and does not derive more than 5% of its receipts from sales of services from the individual customer. All of the design work is performed outside Rhode Island. Receipts from the sale are in Rhode Island if the customer’s billing address is in Rhode Island.

F.Additional Examples – from § 9.8(P)(5)(a) of this Part, license or lease of intangible property

1.Axel Corp enters into a license agreement with Biker Co in which Biker Co is granted the right to produce motor scooters using patented technology owned by Axel Corp, and also to sell such scooters by marketing the fact that the scooters were manufactured using the special technology. The contract is a license of both a marketing and production intangible, i.e., a mixed intangible. The scooters are manufactured outside Rhode Island. Assume that Axel Corp lacks actual information regarding the proportion of Biker Co.’s receipts that are derived from Rhode Island customers. Also assume that Biker Co is granted the right to sell the scooters in a U.S. geographic region in which the Rhode Island population constitutes 25% of the total population during the period in question. The licensing contract requires an upfront licensing fee to be paid by Biker Co to Axel Corp and does not specify what percentage of the fee derives from Biker Co's right to use Axel Corp's patented technology. Because the fees for the license of the marketing and production intangible are not separately and reasonably stated in the contract, it is presumed that the licensing fees are paid entirely for the license of a marketing intangible, unless either the taxpayer or Division of Taxation reasonably establishes otherwise. Assuming that neither party establishes otherwise, 25% of the licensing fee constitutes Rhode Island receipts.

2.Same facts as Example 5, except that the license contract specifies separate fees to be paid for the right to produce the motor scooters and for the right to sell the scooters by marketing the fact that the scooters were manufactured using the special technology. The licensing contract constitutes both the license of a marketing intangible and the license of a production intangible. Assuming that the separately stated fees are reasonable, the Division of Taxation will:

a.assign no part of the licensing fee paid for the production intangible to Rhode Island, and

b.assign 25% of the licensing fee paid for the marketing intangible to Rhode Island.

3.Super Burger Corp, which is based outside Rhode Island, enters into franchise contracts with franchisees who agree to operate Better Burger restaurants as franchisees in various states. Several of the Super Burger Corp franchises are in Rhode Island. In each case, the franchise contract between the individual and Super Burger provides that the franchisee is to pay Super Burger Corp an upfront fee for the receipt of the franchise and monthly franchise fees, which cover, among other things, the right to use the Super Burger name and service marks, food processes and cooking know-how, as well as fees for management services. The upfront fees for the receipt of the Rhode Island franchises constitute fees paid for the licensing of a marketing intangible. These fees constitute Rhode Island receipts because the franchises are for the right to make Rhode Island sales. The monthly franchise fees paid by Rhode Island franchisees constitute fees paid for:

a.the license of marketing intangibles (the Super Burger name and service marks),

b.the license of production intangibles (food processes and know-how) and

c.personal services (management fees). The fees paid for the license of the marketing intangibles and the production intangibles constitute Rhode Island receipts because in each case the use of the intangibles is to take place in Rhode Island. The fees paid for the personal services are to be assigned pursuant to the assignment rules associated with the sale of a service.

4.Online Corp, a corporation based outside Rhode Island, licenses an information database through the means of the Internet to individual customers that are resident in Rhode Island and in other states. These customers access Online Corp’s information database primarily in their states of residence, and sometimes, while traveling, in other states. The license is a license of intangible property that resembles a sale of goods or services. If Online Corp can determine or reasonably approximate the state or states where its database is accessed, then it must do so. Assuming that Online Corp cannot determine or reasonably approximate the location where its database is accessed, Online Corp must assign the receipts made to the individual customers using the customers’ billing addresses to the extent known. Assume for purposes of this example that Online Corp knows the billing address for each of its customers. In this case, Online Corp’s receipts from sales made to its individual customers are in Rhode Island in any case in which the customer’s billing address is in Rhode Island.

5.Net Corp, a corporation based outside Rhode Island, licenses an information database through the means of the Internet to a business customer, Business Corp, a company with offices in Rhode Island and two neighboring states. The license is a license of intangible property that resembles a sale of goods or services. Assume that Net Corp cannot determine where its database is accessed but reasonably approximates that 75% of Business Corp’s database access took place in Rhode Island, and 25% of Business Corp’s database access took place in other states. In such case, 75% of the receipts from database access is in Rhode Island. Assume alternatively that Net Corp lacks sufficient information regarding the location where its database is accessed to reasonably approximate such location. Under these circumstances, if Net Corp derives 5% or less of its receipts from database access from Business Corp, Net Corp must assign the receipts to the state where Business Corp principally managed the contract, or if that state is not reasonably determinable to the state where Business Corp placed the order for the services, or if that state is not reasonably determinable to the state of Business Corp’s billing address. If Net Corp derives more than 5% of its receipts from database access from Business Corp, Net Corp is required to identify the state in which its contract of sale is principally managed by Business Corp and must assign the receipts to that state.

6.Net Corp, a corporation based outside Rhode Island, licenses an information database through the means of the Internet to more than 250 individual and business customers in Rhode Island and in other states. The license is a license of intangible property that resembles a sale of goods or services. Assume that Net Corp cannot determine or reasonably approximate the location where its information database is accessed. Also assume that Net Corp does not derive more than 5% of its receipts from sales of database access from any single customer. Net Corp may apply the safe harbor provision, and may assign its receipts to a state or states using each customer’s billing address.

7.Web Corp, a corporation based outside of Rhode Island, licenses an Internet-based information database to business customers who then sublicense the database to individual end users that are resident in Rhode Island and in other states. These end users access Web Corp’s information database primarily in their states of residence, and sometimes, while traveling, in other states. Web Corp’s license of the database to its customers includes the right to sublicense the database to end users, while the sublicenses provide that the rights to access and use the database are limited to the end users’ own use and prohibit the individual end users from further sublicensing the database. Web Corp receives a fee from each customer based upon the number of sublicenses issued to end users. The license is a license of intangible property that resembles a sale of goods or services. If Web Corp can determine or reasonably approximate the state or states where its database is accessed by end users, then it must do so. Assuming that Web Corp lacks sufficient information from which it can determine or reasonably approximate the location where its database is accessed by end users, Web Corp must approximate the extent to which its database is accessed in Rhode Island using a percentage that represents the ratio of the Rhode Island population in the specific geographic area in which Web Corp’s customer sublicenses the database access relative to the total population in such area.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2016-01-12 to 01/04/2022
Amendment — effective from 2016-01-12 to 01/12/2016
Technical Revision — effective from 2004-01-26 to 01/12/2016
Amendment — effective from 2004-01-01 to 01/26/2004
Amendment — effective from 2003-04-01 to 01/01/2004
Periodic Refile — effective from 2001-12-20 to 01/01/2004

280-RICR-20-25-10 Combined Reporting

280-RICR-20-25-10 § 10.1 Purpose

These rules and regulations implement R.I. Gen. Laws § 44-11-4.1 et seq., as well as other provisions of R.I. Pub. Laws 2014, Chapter 145, Art. 12, which changed the Rhode Island corporate income tax structure to one of mandatory unitary combined reporting in lieu of separate entity reporting for tax years beginning on or after January 1, 2015.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws § 44-11-4.1(g), which requires the Rhode Island Tax Administrator to prescribe and amend, from time to time, rules and regulations as he or she may deem necessary in order that the tax liability of any group of corporations filing as a combined group and each corporation in the combined group, liable to taxation, may be determined, computed, assessed, collected, and adjusted in a manner as to clearly reflect the combined income of the combined group and the individual income of each member of the combined group. These rules and regulations are also promulgated pursuant to R.I. Gen. Laws § 44-1-4, which authorizes and empowers the Rhode Island Tax Administrator to make rules and regulations, as he or she may deem necessary, for the proper administration and enforcement of the tax laws of this state. These rules and regulations have been prepared in accordance with the requirements R.I. Gen. Laws § 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation to effectuate the purpose of R.I. Gen. Laws § 44-11-4.1 et seq., as well as other provisions of R.I. Pub. Laws 2014, Chapter 145, Art. 12, which changed the Rhode Island corporate income tax structure to one of mandatory unitary combined reporting in lieu of separate entity reporting for tax years beginning on or after January 1, 2015, as well as other applicable state laws and regulations. This regulation explains Rhode Island’s mandatory unitary combined reporting regime for entities that are treated as C corporations for federal income tax purposes. All examples in this regulation are provided solely for the purpose of illustrating basic concepts that are set forth in the rules herein, and may not introduce all relevant considerations. Such examples shall not serve as precedents in administrative hearings or other legal proceedings, and are not intended to cover all possible situations.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.5 Definitions

A.“Affiliated group” means the same as it does in Internal Revenue Code (IRC) 26 U.S.C. § 1504.

B.“Apportionment” means, for purposes of Rhode Island’s combined reporting requirements, the formula used to determine the amount of a combined group’s income that is to be taxed under the Rhode Island corporate income tax. The term “allocation” is used interchangeably with the term “apportionment” and shall have the same meaning and effect.

C.“Captive REIT” means, as further defined in R.I. Gen. Laws § 44-11-1(a), a corporation, trust or association:

1.that is considered a real estate investment trust for the taxable year under IRC, 26 U.S.C. § 856;

2.that is not regularly traded on an established securities market; and

3.more than fifty percent (50%) of the voting power or value of the beneficial interests or shares of which at any time during the last half of the taxable year, is owned or controlled, directly or indirectly, by a single entity that is subject to the provisions of Subchapter C of the Internal Revenue Code.

D.“Combined group” means a group of two or more entities treated as C corporations for federal income tax purposes in which more than fifty percent (50%) of the voting stock of each member entity is directly or indirectly owned by a common owner or owners, either corporate or non-corporate, or by one or more of the member corporations, and that are engaged in a unitary business. In this regulation, the term “combined group” may refer to an affiliated group making the federal consolidated group election for Rhode Island combined reporting purposes.

E.“Combined reporting” means the corporate taxation framework under which a corporation must report on its Rhode Island corporate income tax return not only its own income, but also the combined income of the other corporations, or affiliates, that are under common ownership and part of a unitary business.

F.“Common ownership” means that more than fifty percent (50%) of the voting control of each member of the group is directly or indirectly owned by a common owner or owners, either corporate or non-corporate, whether or not the owner or owners are members of the combined group.

G.“Consolidated return” means a return filed with the Internal Revenue Service on a consolidated basis by an affiliated group of corporations under terms of IRC, 26 U.S.C. § 1501 et seq.

H.“Corporate income tax rate” means the Rhode Island corporate income tax rate that applies to a corporation’s taxable income apportioned to Rhode Island.

I.“Corporation” has the meaning set forth in R.I. Gen. Laws § 44-11-1(4), and for purposes of mandatory unitary combined reporting under the Rhode Island General Laws, includes an LLC, partnership, or other entity electing to be taxed as a corporation for federal tax purposes. Although a partnership or other pass-through entity may not always be considered a corporation includible in the combined group on an entity basis as a member when a partnership or other pass-through entity is directly or indirectly held by a corporation, the business conducted by such a partnership or pass-through entity is considered the business of the corporation to the extent of the corporation’s distributive share of the partnership or pass-through entity income.

J.“Cost of performance sourcing” means the sourcing method used for gross receipts from transactions other than sales of tangible personal property under the three-factor apportionment formula in R.I. Gen. Laws § 44-11-14(a). Entities that are treated as C corporations for federal income tax purposes shall use the market-based sourcing method instead of the cost-of-performance sourcing method. (See “market-based sourcing” method below.)

K.“Designated agent” means the member of the combined group – or the member’s designee – which represents the combined group and whose myriad responsibilities include filing the combined return.

L.“Division of Taxation” means the Rhode Island Department of Revenue, Division of Taxation. The Division may also be referred to in this regulation as the “Division of Taxation”, “Tax Division”, or “Division”.

M.“Estimated tax payments” means, for purposes of Rhode Island combined reporting, the amount computed according to R.I. Gen. Laws § 44-26-2.1(m) that must be paid by, or on behalf of, a combined group subject to Rhode Island combined reporting.

N.“Everywhere” as used in this regulation to describe sales does not include sales of a foreign corporation in a place that is located outside the United States.

O.“FAS 109” means Financial Accounting Standard 109, “Accounting for Income Taxes.”

P.“Federal income tax treaty” means a comprehensive income tax treaty between the United States and a foreign jurisdiction, other than a foreign jurisdiction which is defined as a tax haven.

Q.“Foreign corporation” means, for purposes of combined reporting, a corporation incorporated in or organized under the laws of a jurisdiction other than the United States. (See also “non-U.S. corporation” below.)

R.“Foreign jurisdiction” means, for purposes of combined reporting, a jurisdiction other than the United States.

S.“Intangible property” within the meaning of this regulation generally includes, without limitation, copyrights; patents; trademarks; trade names; brand names; franchises; licenses; trade secrets; trade dress; information; know-how; methods; programs; procedures; systems; formulas; processes; technical data; designs; licenses; literary, musical, or artistic compositions; information; ideas; contract rights including broadcast rights; agreements not to compete; goodwill and going concern value; securities; and computer software. Intangible property is also referred to in this regulation as “intangible personal property” or “intangibles”.

T.“Intangibles add-back” means related-party interest and intangibles which a corporation must add back to Rhode Island income for purposes of determining its Rhode Island corporate income tax liability.

U.“Internal Revenue Code” means the most current edition of Title 26 of the United States Code (26 U.S.C.). (It is abbreviated in this regulation as IRC.)

V.“Internal Revenue Service” means the bureau of the U.S. Treasury that is responsible for the determination, assessment, and collection of internal revenue in the United States. (It is also referred to in this regulation as the IRS.)

W.“Jobs Development Act” means the Rhode Island corporate income tax rate reduction enacted in 1994 and available to eligible entities under R.I. Gen. Laws § 42-64.5-1 et seq.

X.“Life sciences tax rate reduction” means the Rhode Island corporate income tax rate reduction enacted as “The I-195 Redevelopment Act of 2011” and available to eligible entities under R.I. Gen. Laws § 42-64.14-1 et seq.

Y.“Market-based sourcing” means the sourcing method used for gross receipts from transactions other than sales of tangible personal property under the single sales factor apportionment formula set forth at R.I. Gen. Laws § 44-11-14(b). For tax years beginning on or after January 1, 2015, market-based sourcing is the method that all entities treated as C corporations for federal income tax purposes must use to determine how to treat a corporation’s sales of services and/or intangible personal property – whether or not they are part of a combined group.

Z.“Member” means, for purposes of Rhode Island combined reporting, a corporation included in a unitary business.

AA.“Non-U.S. corporation” means any corporation not incorporated in the United States of America. (See also “foreign corporation” above.)

BB.“Partnership” means an association of two or more persons to carry on as co-owners a business for profit, and which is treated as a partnership for Rhode Island tax purposes, or which would be treated as a partnership for Rhode Island tax purposes if doing business in Rhode Island. The term “Partnership” may include a general or limited partnership, or organization of any kind treated as a partnership for tax purposes under the laws of this state.

CC.“Pass-through entity” means a corporation that for the applicable tax year is treated as an S corporation under IRC, 26 U.S.C. § 1362(a), and a general partnership, limited partnership, limited liability partnership, trust, or limited liability company that for the applicable tax year is not taxed as a corporation for federal tax purposes under the state’s check-the-box regulation.

DD.“Person” means any individual, firm, partnership, general partner of a partnership, limited liability company, registered limited liability partnership, foreign limited liability partnership, association, corporation regardless of whether the corporation is or will be taxed under R.I. Gen. Laws Chapter 44-11, company, syndicate, estate, trust, business trust, trustee, trustee in bankruptcy, receiver, executor, administrator, assignee or organization of any kind.

EE.“Receipts factor” – See “sales factor” below.

FF.“R.I. Gen. Laws” means the General Laws of Rhode Island of 1956, as amended.

GG.“Single sales factor” means, effective for apportionment purposes for tax years beginning on or after January 1, 2015, the sole factor that must be used by all entities treated as C corporations for federal income tax purposes and that are or will be taxed under the Rhode Island business corporation tax (R.I. Gen. Laws Chapter 44-11) – whether or not they are part of a combined group. The sales factor may also be referred to in this regulation as the “receipts factor” or “gross receipts factor” or “total receipts”.

HH.“Sourcing” – See “cost of performance sourcing” and “market-based sourcing” above.

II.“Tax Administrator” means the person within the Rhode Island Department of Revenue, Division of Taxation, as described in R.I. Gen. Laws § 44-1-1 et seq.

JJ.“Tax Division” – See “Division of Taxation” above.

KK.“Taxpayer” means and includes any person that is or will be taxed under Rhode Island General Laws. For tax years beginning on or after January 1, 2015, a combined group is included within the definition of “taxpayer”.

LL.“Taxpayer member” means, for purposes of this regulation, a corporation which is a member of a combined reporting group which is required to file a tax return in this state.

MM.“Tax haven” means a jurisdiction that, during the tax year in question has no, or nominal effective tax on the relevant income and;

1.has laws or practices that prevent effective exchange of information for tax purposes with other governments on taxpayers benefiting from the tax regime;

2.has a tax regime which lacks transparency. A tax regime lacks transparency if the details of legislative, legal or administrative provisions are not open and apparent or are not consistently applied among similarly situated taxpayers, or if the information needed by tax authorities to determine a taxpayer’s correct tax liability, such as accounting records and underlying documentation, is not adequately available;

3.facilitates the establishment of foreign-owned entities without the need for a local substantive presence, or prohibits these entities from having any commercial impact on the local economy;

4.explicitly or implicitly excludes the jurisdiction’s resident taxpayers from taking advantage of the tax regime’s benefits, or prohibits enterprises that benefit from the regime from operating in the jurisdiction’s domestic market; or

5.has created a tax regime which is favorable for tax avoidance, based upon an overall assessment of relevant factors, including whether the jurisdiction has a significant untaxed offshore financial/other services sector relative to its overall economy.

NN.“Tax treaty” – see “Federal income tax treaty” above.

OO.“Three-factor apportionment” means the apportionment formula set forth in R.I. Gen. Laws § 44-11-14(a). The three-factor apportionment formula takes into account the property factor, the payroll factor, and the sales factor of the trade or business of the taxpayer.

PP.“Unitary business” means the activities of a group of two (2) or more corporations under common ownership that are sufficiently interdependent, integrated or interrelated through their activities so as to provide mutual benefit and produce a significant sharing or exchange of value among them or a significant flow of value between the separate parts. The term “unitary business” shall be construed by Rhode Island to the broadest extent permitted under the United States Constitution.

QQ.“United States” means the fifty (50) states of the United States, the District of Columbia, and the United States’ territories and possessions.

RR.“United States Code” means the consolidation and codification by subject matter of the general and permanent laws of the United States, as prepared and published by the Office of the Law Revision Counsel of the U.S. House of Representatives. (It is abbreviated in this regulation as U.S.C. or USC.)

SS.“Voting stock” means shares of capital stock of a corporation entitled to vote generally in the election of directors.

TT.“Water’s edge rules” means the rules, described elsewhere in this regulation, under which some or all of a foreign corporation’s income derived from a unitary business carried on in part in Rhode Island is not subject to combination because of the degree of the corporation’s activities outside the United States.

UU.“Worldwide” – See “water’s edge rules” above.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.6 Combined Reporting – Overview

A.For tax years beginning on or after January 1, 2015, each entity treated as a C corporation for federal income tax purposes which is part of a combined group, under common ownership, and engaged in a unitary business with one or more other corporations must file a return, in a manner prescribed by the Tax Administrator, for the combined group containing the combined income of the combined group. (See, also, § 10.17 of this Part, “Filing of Return,” and § 10.19 of this Part, “Designated Agent.”)

BWhere an entity treated as a C corporation for federal income tax purposes is taxed or will be taxed under R.I. Gen. Laws Chapter 44-11, the entity must determine its Rhode Island tax liability based upon the income and apportionment information of all corporations included in the combined group using a combined return, unless it is an excluded entity as further described in § 10.7 of this Part. The use of a combined return does not disregard the separate identities of the members of the combined group; each taxpayer member is responsible for tax based on its taxable income or loss apportioned to Rhode Island. (See also “Designated Agent” in § 10.19 of this Part.)

C."Combined return” is not, in and of itself, a tax return; it is, in fact, a computational schedule or schedules – as required by Rhode Island General Laws and regulations – which are to be attached to a taxpayer member’s tax return and which report the income and apportionment information of all entities of the taxpayer member’s combined group, as well as any supporting information required by the Tax Administrator. The combined return shall include, for each taxable year, the following:

1.Listing of companies included in the combined report, along with each company’s federal Employer Identification Number (EIN) and North American Industry Classification System (NAICS) code;

Combined federal taxable income;

3.Combined Rhode Island deductions;

4.Combined Rhode Island additions;

5.Adjusted taxable income;

6.Combined receipts for Rhode Island using Finnigan method;

7.Combined receipts for everywhere using Finnigan method;

8.Combined Rhode Island tax;

9.First four pages of the completed U.S. Form 1120 as filed with the IRS;

10.Separate company income and loss consolidation spreadsheet as filed with the IRS; and

11.Information on credits, net operating losses (NOLs), and other items on such forms or schedules that the Tax Administrator may prescribe.

D.The following example shows how related entities might be affected by combined reporting. For purposes of apportionment calculations in this example, the denominators reflect worldwide sales for corporations that are included in the combined group.

1.Example: The example below compares combined reporting to separate-entity reporting for three related entities – Echo Corp., Foxtrot Corp., and Golf Corp. – that are U.S. companies, part of a combined group engaged in a unitary business, and have common ownership.

a.Echo Corp. is a Rhode Island retailer. Foxtrot Corp. is a Rhode Island retailer. Golf Corp. is a Missouri retailer with no Rhode Island nexus and, therefore, no Rhode Island filing requirement but for combined reporting. Most sales are in the U.S., but some are to customers in foreign jurisdictions.

Apportionment:

Echo Corp

(Separate)

Foxtrot Corp

(Separate)

Golf Corp

(Separate)

Combined Return

Sales Factor

In-State Sales

$400

$7,700

$8,100

Everywhere Sales

$600

$15,000

$50,000

$65,625

Sales Percentage

64.0000%

51.3333%

0.0000%

12.3429%

Taxable Income Total

$75

$900

$7,500

$8,475

In-State Taxable Income

$48

$462

$1046

Total Taxable Income to Rhode Island

$510

$1046

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.7 Combined Group – Composition; Water’s Edge; Tax Havens

A. “Combined group” means a group of two or more entities treated as C corporations for federal income tax purposes in which more than 50 percent (50%) of the voting stock of each member corporation is directly or indirectly owned by a common owner or owners, either corporate or non-corporate, or by one or more of the member corporations, and that are engaged in a unitary business. Common ownership is determined without regard to the location, residence, or domicile of the owner(s).

1.Example: Parent Corp. is organized and based in Japan. Its two subsidiaries – Unit One Corp. and Unit Two Corp. – are U.S. corporations and are treated as C corporations for federal tax purposes. Unit One Corp. and Unit Two Corp. have Rhode Island nexus. Parent Corp. owns seventy-five percent (75%) of each subsidiary. Because of their common ownership, Unit One Corp. and Unit Two Corp. are deemed to comprise a combined group for purposes of Rhode Island’s mandatory unitary combined reporting regime. Common ownership is determined without regard to the location, residence, or domicile of the owner(s). (The entities in this example must be engaged in a unitary business to file a combined return for Rhode Island.)

B. The use of a combined return does not disregard the separate identities of the taxpayer members of the combined group; each taxpayer member is responsible for tax based on its taxable income or loss apportioned to Rhode Island.

C.A group shall be deemed a combined group even if the group is not eligible to apportion its income because all corporations in the group do business solely in Rhode Island.

D.Combined group remains in existence for as long as two or more corporations are under common ownership and are engaged in a unitary business – and at least one member of the combined group has nexus in Rhode Island.

E.The mere addition of new members or departure of existing members does not create a new combined group.

F.In some cases, a taxpayer may make an election to treat, as its combined group for Rhode Island corporate income tax purposes, all of the members of its federal consolidated group. For an explanation of the election and the related requirements and limitations, please see § 10.9 of this Part.

1.If a corporation is not includible in a combined return, or in a consolidated group for Rhode Island combined reporting purposes, it must still file a Rhode Island return on a separate entity basis and pay any required tax if it has nexus in Rhode Island.

G.For additional information about non-U.S. corporations, please see the flow chart in the example at § 10.7(T) of this Part

H.Included corporations.

1.All of the income and apportionment factors must be included for the taxpayer members of a combined group. The list of members to be included in a combined group includes, but is not limited to, the following:

a.U.S. corporations; and

b.Any member, regardless of where it is incorporated or formed, if the average of its sales factor within the United States is twenty percent (20%) or more.

2.The following members that are not described above are included in the combined group only to the extent of any U.S. source income and factors:

a.Any member that is a resident of a country that does not have a comprehensive income tax treaty with the United States and earns more than twenty percent (20%) of its income, directly or indirectly, from intangible property or service-related activities that are deductible against the business income of the other members of the water’s-edge group, to the extent of that income and the apportionment factor related thereto.

I.Excluded corporations. Members of a combined group shall exclude as a member and disregard the income and apportionment factor of any corporation not incorporated in the United States (a “non-U.S. corporation”) if its sales factor for total receipts outside the United States is eighty percent (80%) or more.

1.Example: Bristol Biz Corp., Kent Biz Corp., Newport Biz Corp., Providence Biz Corp., and Washington Biz Corp. are all C corporations under common ownership engaged in a unitary business and subject to Rhode Island combined reporting. Bristol, Kent, and Newport are all non-U.S. corporations; Providence and Washington are both U.S. corporations.

Combined Reporting Group

Entity:

Sales Factor for Receipts in U.S.

Part of Combined Group

Bristol Biz Corp.

10%

Kent Biz Corp.

10%

Newport Biz Corp.

25%

Yes

Providence Biz Corp.

100%

Yes

Washington Biz Corp.

100%

Yes

a.In this example, Bristol and Kent are not part of the combined group because they are non-U.S. corporations and their sales factors for total receipts outside the U.S. are 80 percent (80%) or more. Newport is a non-U.S. corporation, but its sales factor for total receipts outside the U.S. is only 75 percent (75%), so it is part of the combined group. Providence and Washington are part of the combined group because they are U.S. corporations; a U.S. corporation is subject to combined reporting regardless of its U.S. sales factor.

b.Note, also, that the sales factor – also known as the receipts factor – takes into account total receipts and includes rents, royalties, licensing fees, and other revenue. For purposes of Rhode Island combined reporting, receipts include -- but are not limited to -- gross sales of tangible personal property, gross income from services, gross income from intangible personal property, gross income from rentals, net income from the sale of real and personal property, and net income from the sale or other disposition of securities or financial obligations. In this example, Newport Biz Corp. is organized and located in the Republic of Ireland, licensing intangibles to the U.S. – so revenue from such licensing represents a U.S. sale for combined reporting purposes.

c.For further information about excluding and including non-U.S. corporations, please see the flow chart in the example at the end of this Part.

J.A water’s edge election is not allowed for purposes of Rhode Island combined reporting. Water’s edge treatment is mandatory. Thus, members of the combined group must exclude as a member and disregard the income and apportionment factor of any corporation incorporated in a foreign jurisdiction – a foreign corporation – if its sales factor for total receipts outside the United States is eighty percent (80%) or more.

K.If an entity is treated as a C corporation for federal income tax purposes, is included on a group’s federal consolidated return, and is also taxed by Rhode Island under R.I. Gen. Laws Chapter 44-13 (“Public Service Corporation Tax”), Chapter 44-13.1 (“Taxation of Railroad Corporations”), Chapter 44-14 (“Taxation of Banks”), Chapter 44-17 (“Taxation of Insurance Companies”), or Chapter 27-43 (“Captive Insurance Companies”), said entity shall be excluded from the combined group. Furthermore, neither the income or loss nor the apportionment factor of such a person or entity shall be included – directly or indirectly – in the combined return.

L.Corporations that are not taxable under the Internal Revenue Code shall not be included in the combined group.

M.When a partnership, limited liability company, S corporation, estate, trust, or other such entity is treated as a pass-through entity for federal tax purposes, such an entity shall not be part of the combined group. However, the combined group’s share of such a pass-through entity’s income, normally reported on federal Schedule K-1, must be reported as part of the combined group’s income. When income is reported or recognized by the pass-through entity to the combined group, and thus becomes included in the group filing, only the sales of the pass-through entity shall be used for apportionment purposes at the group level.

N.In summary:

1.The following entities are not subject to combined reporting:

a.state banks;

b.mutual savings banks;

c.federal savings banks;

d.trust companies;

e.national banking associations;

f.building and loan associations;

g.credit unions;

h.loan and investment companies;

i.public service corporations;

j.insurance companies;

k.captive insurance companies taxed under R.I. Gen. Laws Chapter 27-43;

l.S corporations;

m.partnerships treated as pass-through entities for federal tax purposes;

n.limited liability companies treated as pass-through entities for federal tax purposes;

o.any sole proprietorship or similar such entity that is treated as an entity disregarded as separate from its owner for federal income tax purposes (“disregarded entities”); and

p.in general, any corporation incorporated in a foreign jurisdiction if its sales factor for total receipts outside the United States is eighty percent (80%) or more.

2.For additional information on which entities must be included or excluded from the federal consolidated group for purposes of Rhode Island combined reporting, please see § 10.9 of this Part.

O.Fifty percent test

1.The fifty percent (50%) ownership test is satisfied in the following circumstances:

a.A parent corporation and one or more corporations or chains of corporations which are connected through voting stock ownership with the parent, whether such ownership is direct or indirect, but only if –

(1)the parent owns more than fifty percent (50%) of the outstanding voting stock of at least one corporation, and

(2)more than fifty percent (50%) of the outstanding voting stock of each of the corporations, other than the parent, is owned directly or indirectly by one or more of the other corporations.

2.Any two or more corporations, if more than fifty percent (50%) of the outstanding voting stock of each of the corporations is owned, or indirectly owned, by the same person.

3.Any two or more corporations, more than fifty percent (50%) of whose voting stock is cumulatively owned (without regard to indirect ownership rules), or for the benefit of, members of the same family.

4.Members of the same family include an individual, his or her spouse, a party to a civil union, ancestors, brothers or sisters, lineal descendants, and their respective spouses.

P.Except as otherwise provided, voting stock is “owned” when title to the stock is directly held or if the voting stock is indirectly owned.

1.An individual indirectly owns voting stock that is owned by any of the following:

a.his or her spouse (other than a spouse who is legally separated from the individual);

b.party to a civil union;

c. his or her children, grandchildren, and parents;

d.an estate or trust, of which the individual is an executor, trustee, or grantor, to the extent that the estate or trust is for the benefit of that individual’s spouse, party to a civil union, children, grandchildren or parents.

2.Voting stock owned by a partnership, other than a limited partnership, is indirectly owned by a partner in proportion to the partner’s capital interest in the partnership. For this purpose, a partnership other than a limited partnership is treated as owning proportionately the stock owned by any other partnership or limited partnership in which it has a tiered interest. Voting stock owned by a limited partnership is indirectly owned by the general partner who has authority to determine how the stock is voted. (This section shall also apply to LLCs.)

3.Voting stock owned by a corporation, or a member of a controlled group of which the corporation is the parent corporation, is indirectly owned by any shareholder owning more than fifty percent (50%) of the voting stock of the corporation.

Q.In determining ownership, effective control over election of the board of directors will be considered. For example, a group of shareholders acting in concert who collectively own over fifty percent (50%) of the voting stock of each of two or more corporations will be considered to be common owners of more than fifty percent (50%) of the voting stock of each of those corporations. “Voting stock” refers only to those shares of voting stock having the power to elect the corporation’s board of directors. If the power otherwise held in corporate stock to vote the membership of the board is transferred to another, other than a transfer of proxy only, the holder of that power will be considered to be the owner of that stock to the exclusion of the transferor of such power.

R.In addition to the tests enumerated above, the Tax Administrator may consider any other circumstance that tends to demonstrate that the fifty percent (50%) direct or indirect common ownership test was met or was not met. The Tax Administrator may rely on constructive ownership rules under 26 U.S.C. § 318.

S.The following example illustrates certain principles outlined in this § 10.7 of this Part:

1.Example: Corporation D owns stock representing ten percent (10%) of the voting power of Corporation E and has a seventy-five percent (75%) interest in Partnership F. Partnership F owns stock representing forty-five percent (45%) of the voting power of Corporation E. Corporation D is considered to constructively own stock representing fifty-five percent (55%) (10% + 45%) of the voting power of Corporation E. This is because Corporation D owns more than fifty percent (50%) of Partnership F and is therefore considered to own all of the Corporation E stock owned by Partnership F.

T.The following flow chart is intended to assist corporations and their tax advisers in determining the composition of a combined group – and whether to include or exclude a member’s gross receipts in the apportionment computation – for purposes of Rhode Island’s mandatory unitary combined reporting regime.

U.The following provides further information for interpreting the flow chart above.

1.As noted elsewhere in this regulation, members of a combined group shall exclude as a member and disregard the income and apportionment factor of any corporation not incorporated in the United States (a “non-U.S. corporation”) if its sales factor for total receipts outside the United States is eighty percent (80%) or more.

2.If a non-U.S. corporation is includible as a member in the combined group, to the extent that such non-U.S. corporation’s income is subject to the provisions of a federal income tax treaty, such income is not includible in the combined group’s net income. Such member shall also not include in the combined return any expenses or apportionment factor attributable to income that is subject to the provisions of a federal income tax treaty.

3.For purposes of this § 10.7 of this Part, the term “federal income tax treaty” means a comprehensive income tax treaty between the United States and a foreign jurisdiction, other than a foreign jurisdiction which is defined as a tax haven; provided, however, that if the Tax Administrator determines that a combined group member non-U.S. corporation is organized in a tax haven that has a federal income tax treaty with the United States, its income subject to a federal income tax treaty, and any expenses or apportionment factor attributable to such income, shall not be included in the combined group net income or combined return if:

a.the transactions conducted between such non-U.S. corporation and other members of the combined group are done on an arm’s length basis and not with the principal purpose to avoid the payment of taxes due under R.I. Gen. Laws Chapter 44-11; or

b. the member establishes that the inclusion of such net income in combined group net income is unreasonable.

4.The term “tax haven" means a jurisdiction that, during the tax year in question, has no or nominal effective tax on the relevant income and:

a.has laws or practices that prevent effective exchange of information for tax purposes with other governments on taxpayers benefiting from the tax regime;

b.has a tax regime which lacks transparency. A tax regime lacks transparency if the details of legislative, legal or administrative provisions are not open and apparent or are not consistently applied among similarly situated taxpayers, or if the information needed by tax authorities to determine a taxpayer’s correct tax liability, such as accounting records and underlying documentation, is not adequately available;

c.facilitates the establishment of foreign-owned entities without the need for a local substantive presence or prohibits these entities from having any commercial impact on the local economy;

d.explicitly or implicitly excludes the jurisdiction’s resident taxpayers from taking advantage of the tax regime benefits, or prohibits enterprises that benefit from the regime from operating in the jurisdiction’s domestic market; or

e.has created a tax regime which is favorable for tax avoidance, based upon an overall assessment of relevant factors, including whether the jurisdiction has a significant untaxed offshore financial/other services sector relative to its overall economy.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.8 Unitary Business – Further Defined

A.Combined reporting in Rhode Island is required only in those instances in which a unitary business exits. A “unitary business,” as defined in § 10.5 of this Part, means the activities of a group of two (2) or more corporations under common ownership that are sufficiently interdependent, integrated or interrelated through their activities so as to provide mutual benefit and produce a significant sharing or exchange of value among them or a significant flow of value between the separate parts. The term “unitary business” also refers to a single business entity or a commonly owned or controlled group of business entities that are sufficiently interdependent, integrated, and interrelated through their activities so as to provide synergy and mutual benefit that produces a sharing or exchange of value among them and a significant flow of value to the separate parts.

B.A determination under this regulation of whether an entity forms part of a combined group engaged in a unitary business with another entity is determined based on the facts and circumstances of each case. To the extent compatible with Rhode Island law, any legal or factual determination relevant to the existence or nonexistence of a unitary business will favor consistency with legal and factual determinations of other unitary states.

C.Under the Rhode Island General Laws, the term “unitary business” shall be construed to the broadest extent permitted under the United States Constitution. Therefore, if the C corporation meets either of the tests set forth in this § 10.8 of this Part – the “Interdependence of functions test” or the “Three unities test” – the corporation is deemed to be part of the unitary business.

D.Interdependence of functions test

1.One or more related business organizations engaged in business activity – entirely within this state, or both within and without this state – are unitary if there exists interdependence in their functions. This test adopts the decisional law of the United States Supreme Court with respect to the constitutional prerequisites for requiring unitary combination. The Court has variously expressed the constitutional test, holding that a finding of unitary relationship requires “contribution or dependency” between businesses; “substantial mutual interdependency” or “flow of value”; functional integration, centralized management, or economy of scale.

2.These concepts collectively express the Court’s view of the constitutional parameters of required combination. Rhode Island’s “interdependence of functions test” extends as far as, but no further than, the constitutional limits found by the Court.

3.Any of the following circumstances indicates that an interdependence of functions exists:

a.Same Line of Business. The principal activities of the entities are in the same general line of business. Examples of the same line of business are manufacturing, wholesaling, and retailing of tangible personal property; transportation or finance.

(1)In determining whether two entities are in the same general line of business, consideration shall be given to the nature and character of the basic operations of each entity, including, but not limited to, sources of supply, goods or services produced or sold, labor force, and market.

(2)Two entities are in the same general line of business when their operations are sufficiently similar to reasonably conclude that the entities are likely to depend upon or contribute to one another.

b.Vertically Structured Business. The principal activities of the entities are different steps of a vertically structured business. Illustrations of such different steps are exploration, mining and drilling, production, refining, marketing, and transportation of natural resources.

c.Strong Centralized Management. Centralized management may be evidenced by executive level policy made by a central person, board or committee and not by each entity in areas such as, but not limited to, purchasing, accounting, finance, tax compliance, legal services, human resources, health and retirement plans, product lines, capital investment and marketing.

d. Non-Arm’s-Length Prices. Goods or services or both are supplied at non-arm’s length prices between or among entities. Existence of arm’s-length pricing between entities, however, does not indicate lack of unity.

e.Existence of Benefits from Joint, Shared or Common Activity. A discount, cost-saving, or other benefit can be shown to result from joint purchases, leaseholds, or other forms of joint, shared, or common activities between or among entities.

f.Relationship of Joint, Shared or Common Activity to Income-Producing Operations. In determining whether or not there exists a joint, shared, or common activity which is indicative of a unitary relationship, consideration shall be given to the nature and character of the basic operations of each entity. Such consideration shall include, but not be limited to, the entity’s sources of supply, its goods or services produced or sold, and its labor force and market, to determine whether the joint, shared, or common activity is directly beneficial to, related to, or reasonably necessary to the income-producing activities of the unitary business.

g.Exercise of Control. The exercise of control by one entity over another entity.

E.Three unities test

1.This test adopts the state law test for unity followed in Butler Brothers.

a.Unity of ownership. “Unity of ownership” exists with respect to corporations when the fifty percent (50%) ownership test is met.

b.Unity of operations and unity of use. These unities exist if each entity that is to be included in the unitary business benefits or receives goods, services, support, guidance, or direction arising from the actions of common staff resources or common executive resources, personnel, third-party providers, or operations under the direction of such common resources. The tests are overlapping and the indicators of each test also indicate the existence of interdependence of functions. The existence or non-existence of the following factors will assist in the determination of whether unity of operations and use exist with respect to a combined group. The existence or non-existence of any one factor, by itself, is normally not determinative of whether there is a unity of operations and use. Factors that may be considered include, but are not limited to:

(1)Common purchasing;

(2)Common advertising;

(3)Common employees, including sales force;

(4)Common accounting;

(5)Common legal support;

(6)Common retirement plan;

(7)Common insurance coverage;

(8)Common marketing;

(9)Common cash management;

(10)Common research and development;

(11)Common offices;

(12)Common manufacturing facilities;

(13)Common warehousing facilities;

(14)Common transportation facilities;

(15)Common computer systems and support;

(16)Financing support;

(17)Common management, meaning that one or more officers or directors of the parent are also officers or directors of the subsidiary;

(18)Control of major policies. For example, the parent’s board of directors require that it approve any acquisition by either the parent or subsidiary of any interest in any other company, or the parent’s board of directors requires that it approve any lending in excess of a minimum set amount to any one or more of either the parent’s or subsidiary’s suppliers;

(19)Inter-entity transactions. For example, the subsidiary has licensed to parent the use of personal property developed by the subsidiary. The parent uses the property for its production;

(20)Common policy or training manuals. For example, the parent’s employee handbook has been expanded to apply to all of a subsidiary’s employees, or the subsidiary’s employees are required to attend parent’s employee training courses, or disciplinary procedures are the same for both the parent and subsidiary’s employees – even if the appeal is only through their respective entities;

(21)Required budgetary approval. For example, the parent’s board of directors requires that it approve the budget and expenditure plans of the subsidiary on a periodic basis; and

(22)Required capital asset purchases approval. For example, the parent’s board of directors requires that it approve any capital expenditures by the subsidiary in excess of a minimum set amount.

2.The factors listed above refer to the relationship between a parent and subsidiary. For purposes of this regulation, the factors also refer to the relationship between a brother and sister entity.

F.Holding Companies. The test for a unitary business established by this § 10.8 of this Part applies in determining whether a holding company is included or excluded from a unitary business. If a holding company is organizationally between two unitary entities, such holding company does not negate unity of ownership.

1.Passive holding companies. A passive holding company that is in a commonly controlled economic enterprise and holds intangible assets that are used by the enterprise in a unitary business shall be deemed to be engaged in the unitary business, even though the holding company’s activities are primarily passive.

2.A passive parent holding company that directly or indirectly controls one (1) or more operating company subsidiaries engaged in a unitary business shall be deemed to be engaged in a unitary business with the subsidiary or subsidiaries, even if the holding company’s activities are primarily passive.

G.A commonly controlled group may be engaged in one or more unitary businesses. Therefore, a commonly controlled group may contain more than one combined group.

H.Newly formed entities

1.When a corporation forms another corporation, a presumption exists in favor of finding unity between the two corporations as of the date of formation. Any party may rebut such presumption by proving that the entities are not unitary or became unitary at a later date. For purposes of this § 10.8 of this Part, a newly formed entity includes – but is not limited to – the following:

a.A corporation that is formed through a corporate reorganization, a corporate divestiture, split-up, or split-off;

b.One (1) or more new subsidiaries is acquired and substantially all of the assets and operations of an existing division or operation are placed into or under the administrative or operational responsibility of the acquired corporation;

c.A partnership is created or formed; or

d.An existing corporation changes its form of doing business from one (1) organizational structure to a new organizational structure or merges into an existing or newly formed entity.

I.Newly acquired entities

1.When an entity acquires another entity so that the acquired entity is a member of a commonly controlled group for the first time, it shall be presumed that the acquiring and acquired entities are engaged in a unitary business for the purchaser’s taxable year that includes the acquisition. If the purchaser is already a combined group member, the taxable year that includes the acquisition is the taxable year of the combined group.

a.The presumption may be rebutted by proving that the entities are not unitary. If the presumption is rebutted, then the entities shall not be considered unitary as of the date of acquisition, unless the evidence shows that unity was established as of another date.

b.In the succeeding reporting period after the first reporting period subsequent to an acquisition whereby an entity that is a member of a combined group acquires another entity, and for all reporting periods thereafter, a presumption of a unitary relationship exists. The presumption may be rebutted by proving that the entities are not unitary.

J.Examples: The following examples illustrate some of the principles set forth in this § 10.8 of this Part:

1.Kilo Corp., which has its headquarters in Delaware, engages in the United States – directly and indirectly, through subsidiaries and affiliates – in the petroleum business, ranging from exploration for petroleum reserves to production, refining, transportation, and distribution and sale of petroleum and petroleum products. Its business activities in Rhode Island include the retail sale of gasoline, oil, and other such products. The principal activities of the entities are different steps of a vertically structured business. Executive policy is set by a centralized management team in purchasing, accounting, legal services, and other areas. Entities in the group receive cost-savings from joint purchases. Thus, there is an interdependence of functions. For these and other reasons, its business is deemed to be unitary under Rhode Island statute. Combined reporting is therefore required.

2.Lima Corp. is located in Rhode Island and manufactures tin cans. A separate but related corporation is located in California and operates a sheep farm. The two corporations are under common ownership, but do not meet the “Interdependence of functions” or the “Three unities” tests described elsewhere in this § 10.8 of this Part – and are not part of a unitary business. Thus, a Rhode Island combined return must not be filed.

3.Mike Corp. is an Illinois corporation. Its home office is in Chicago, Illinois. It is engaged in the wholesale dry goods and general merchandise business, buying from manufacturers and others and selling to retailers only. There are separate wholesale distribution operations in seven states, including Rhode Island. Each wholesale distribution operation maintains its own stock of goods, serves a separate territory, has its own sales force, handles its own sales as well as solicitation, credit, and collection arrangements, and keeps its own books of account. Each wholesale distribution operation is a separate corporation and shares common ownership with Mike Corp. Also, Mike Corp. sells products to the wholesale distribution operations, indicating a flow of value among the members of the group. This factor and other factors indicate that the enterprise is unitary – and that, combined with members being in the same line of business, indicate a unitary relationship. Rhode Island combined reporting is therefore required.

4.Timco and some of its subsidiaries and affiliates are commonly owned and part of a combined group and are engaged in oil and oil-related businesses, including land, gas, pipeline, agricultural, and chemical activities. The oil and oil-related businesses are in the same general line of business; Timco sets policy and provides for legal services, human resources, marketing, and other functions for all subsidiaries and affiliates; there is common advertising, accounting, and computer systems among Timco and all subsidiaries and affiliates; and capital asset purchases cannot be made without prior approval by Timco. The group is deemed to be unitary due to functional integration, unity of operations and unity of use, and other reasons. However, Timco also has an affiliate in Rhode Island that is engaged in shipbuilding and ship repair. The shipbuilding and repair business stands alone; it sets its own policies and procedures, makes its own purchases, shares no common processes or procedures with Timco or other Timco units, and has virtually no involvement with Timco or Timco’s other subsidiaries or affiliates. Thus, the shipbuilding and repair business is deemed not to be unitary with the Timco combined group and is therefore excluded from the group for purposes of Rhode Island mandatory unitary combined reporting.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.9 Election to Use Federal Consolidated Group

A.An affiliated group of C corporations, as defined in IRC, 26 U.S.C. § 1504, may elect to be treated as a combined group with respect to the combined reporting requirement imposed by Rhode Island General Laws. When such an election is made, the entities that appear on the federal consolidated return shall be considered a combined group for Rhode Island corporate income tax purposes. To make the election, the affiliated group shall check the appropriate box on Form RI-1120C. The consolidated return can include entities that would not otherwise be subject to combination. The election shall be upon the condition that all entities which are included on the federal consolidated return for the taxable year consent to be included in the group for Rhode Island purposes. Checking the appropriate box on Form RI-1120C and filing the completed return shall be considered as such consent.

B.For purposes of this § 10.9 of this Part, an affiliated group is one or more chains of includible corporations connected through stock ownership with a common parent corporation – as further defined in IRC, 26 U.S.C. §§ 1504 (a) and (b). The common parent must be an includible corporation and the following requirements must be met:

1.The common parent must own directly stock that represents at least eighty percent (80%) of the total voting power and at least eighty percent (80%) of the total value of the stock of at least one of the other includible corporations;

2.Stock that represents at least eighty percent (80%) of the total voting power, and at least eighty percent (80%) of the total value of the stock of each of the other corporations (except for the common parent), must be owned directly by one or more of the other includible corporations.

3.For this purpose, the term “stock” generally does not include any stock that:

a.is nonvoting;

b.is nonconvertible;

c.is limited and preferred as to dividends and does not participate significantly in corporate growth; and

d.has redemption and liquidation rights that do not exceed the issue price of the stock (except for a reasonable redemption or liquidation premium).

C.Thus, in place of the steps listed in this regulation for determining members of the combined group for purposes of filing a combined return for Rhode Island, an affiliated group of C corporations, as defined in IRC, 26 U.S.C. § 1504 and shown or reflected in the group’s federal consolidated return, may instead use all of the members of its federal affiliated group.

D.Affiliated groups that make the federal consolidated election are nevertheless not allowed to carryback NOLs. Also, affiliated groups that make the federal consolidated election must follow the same tracing provisions as combined groups. (See § 10.13 of this Part.)

1To avoid double taxation, an affiliated group that makes the federal consolidated election for purposes of Rhode Island combined reporting shall exclude from the group for Rhode Island purposes those C corporations which are taxed under R.I. Gen. Laws Chapter 44-13 (“Public Service Corporation Tax”), Chapter 44-13.1 (“Taxation of Railroad Corporations”), Chapter 44-14 (“Taxation of Banks”), Chapter 44-17 (“Taxation of Insurance Companies”), or Chapter 27-43 (“Captive Insurance Companies”) – or which would be taxed under said chapters if they had Rhode Island nexus.

a.Example: Assume that all of the entities in the following table are C corporations and comprise a combined group engaged in a unitary business. The group elects to file a federal consolidated return and includes, in that federal consolidated return, all of the entities in the table. For purposes of Rhode Island combined reporting, a group typically must include all of the entities included in its federal consolidated return. However, in this example, the number of entities included for Rhode Island purposes is modified: Only A Corp. and B Corp. will be included. C Corp. and D Corp. will not be included because if they were located in Rhode Island they would be taxed under R.I. Gen. Laws Chapter 44-14 (“Taxation of Banks”) Chapter 44-17 (“Taxation of Insurance Companies”), or Chapter 27-43 (“Captive Insurance Companies”). E Corp. is not included because it is taxed under R.I. Gen. Laws Chapter 44-14. F Corp. is not included because it is taxed under R.I. Gen. Laws Chapter 44-17.

Entities to be Counted for Rhode Island Combined Reporting Purposes

Entity Name:

Description:

In Rhode Island Combined Return?

A Corporation

Rhode Island Manufacturer

Yes

B Corporation

Massachusetts Retailer

Yes

C Corporation

Connecticut Bank

D Corporation

Pennsylvania Insurer

E Corporation

Rhode Island Bank

F Corporation

Rhode Island Insurer

2.For purposes of Rhode Island combined reporting, a taxpayer shall modify the federal consolidated group by including foreign corporations if such corporations would otherwise be included in a Rhode Island combined group based on the flow chart in § 10.7 of this Part.

E.Should the affiliated group make this election, the election shall be binding for purposes of Rhode Island combined reporting for five consecutive tax years beginning with the first tax year to which the election applies.

1.Example: X Corp., acting as designated agent for its affiliated group of C corporations, as defined in IRC, 26 U.S.C. § 1504, elects to have the affiliated group treated as a combined group with respect to Rhode Island’s mandatory unitary combined reporting regime. The election is made for tax year 2015. Thus, the election applies for tax years 2015, 2016, 2017, 2018, and 2019. The first time the election may be revoked is for tax year 2020, assuming that the affiliated group has not petitioned the Tax Administrator for permission for earlier revocation and the Tax Administrator has not approved revocation.

F.Should the affiliated group seek to revoke the election before the five-year period ends, the group’s designated agent may petition the Tax Administrator in writing, citing reasonable cause. Standards for “reasonable cause” may include, but are not limited to, a significant restructuring of the affiliated group. The final determination shall be made by the Tax Administrator.

G.Any entity entering the affiliated group after the year of the election shall be deemed to have consented to the application of the election.

H.The affiliated group making the election shall file, for the year concurrent with the filing of its Rhode Island combined return, a copy of the following:

1.its federal consolidated return;

2.any and all supporting documents, forms, schedules and statements filed with the federal consolidated return, including U.S. Form 851 (“Affiliations Schedule), and all U.S. Forms 1122 (“Authorization and Consent of Subsidiary Corporation to Be Included in a Consolidated Income Tax Return”); and

3.supporting statements for each corporation included on the federal consolidated return, including, for each such corporation, columns showing items of gross income and deduction, as well as a computation of taxable income.

I.An affiliated group shall be allowed to make the election described in this § 10.9 of this Part, but only if those entities in which it has an ownership stake of between fifty percent (50%) and eighty percent (80%) would not materially impact the combined return were they to be included in the combined return.

J.To help ensure that returns are prepared in such a way so as to clearly reflect income, the Tax Administrator may require an affiliated group to include in its Rhode Island combined return certain entities that are not included in its federal consolidated return. Also, the Tax Administrator may require an affiliated group to exclude from its Rhode Island combined return certain entities that are included in the its federal consolidated return, and to determine members of its combined return in accordance with the terms set forth in this regulation.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.10 Apportionment; Single Sales Factor; Market-Based Sourcing

A.For the convenience of taxpayers and their advisers, this § 10.10 of this Part summarizes apportionment information for entities that are part of a combined group and that are engaged in a unitary business for purposes of Rhode Island’s combined reporting regime. For additional information, taxpayers and their advisers should refer to the Rhode Island Division of Taxation’s regulations on apportionment and nexus.

B.For tax years beginning on or after January 1, 2015, all entities that are treated as C corporations for federal income tax purposes shall apportion net income to this state by means of a single factor representing total receipts – gross receipts – from sales and other applicable sources during the taxable year which are attributable to the entity’s activities or transactions.

1.When income is reported or recognized by a pass-through entity to the combined group, only the sales (total receipts) of the pass-through entity are used for apportionment purposes at the group level.

C.The sales factor is the ratio of the taxpayer’s receipts in this state to the taxpayer’s total receipts everywhere during the taxable year. Thus, the numerator shall reflect total receipts from sales and other applicable sources during the taxable year which are attributable to the taxpayer’s activities or transactions in this state – whether or not an entity has nexus with this state. The denominator shall reflect everywhere receipts.

D.Each member’s share of the combined unitary income is the product of the combined unitary income and the member’s sales factor ratio.

E.To summarize, a combined group subject to Rhode Island mandatory unitary combined reporting shall use the Finnigan method, single sales factor apportionment, and market-based sourcing in its calculations.

1.Entities that are not taxed as C corporations for federal income tax purposes shall use the cost-of-performance method in computing the sales factor in three-factor apportionment.

F.Finnigan Method

1.Rhode Island applies the Finnigan method for purposes of calculating the sales factor. For purposes of applying the Finnigan method, the entire combined group as a whole – whether a combined group, or an affiliated group making the federal consolidated election for Rhode Island combined reporting purposes – is treated as the taxpayer for apportionment purposes: All sales of members of the group attributable to Rhode Island are included in the sales factor numerator – regardless of whether an individual member of the group has nexus with Rhode Island.

G.Example: The following example illustrates the application of the Finnigan method for apportioning the combined income of a combined group.

Name of Entity

Rhode Island Receipts

Everywhere Receipts

Nexus With Rhode Island

Hotel Corporation

100

Yes

India Corporation

100

200

Yes

Juliet Corporation

100

200

Factor Total:

250

500

Finnigan apportionment includes all Rhode Island factor attributes whether entities do or do not have nexus with Rhode Island.

H.No apportionment

1.For purposes of Rhode Island’s combined reporting regime, it is possible that all corporations comprising a combined group, which is engaged in a unitary business, derive all of their income from within Rhode Island. In other words, in such a case, none of the member corporations of the combined group has income that is taxable in another state. In such a situation, none of the corporations apportions income because none of the corporations has income from activities that are taxable in another state. Therefore, one hundred percent (100%) of the combined group’s taxable income is taxable in Rhode Island.

I.The provisions of § 10.10 of this Part shall also apply to affiliated groups making the federal consolidated group election for Rhode Island combined reporting purposes (as described in § 10.9 of this Part).

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.11 Combined Net Income of Group

A.In this Part, “group” refers to the collective members of a combined group, at least one of which is doing business in Rhode Island.

B.Determination of taxable income or loss of the group using a group report.

1.Except as otherwise provided in this regulation, the taxable income of the combined group shall be determined under the provisions of R.I. Gen. Laws Chapter 44-11. The use of a group return does not disregard the separate identities of the taxpayer members of the group; each taxpayer member is responsible for tax based on its taxable income or loss apportioned to Rhode Island.

C.Components of income subject to tax in this state.

1.Each taxpayer member is responsible for tax based on its taxable income or loss apportioned to this state, which shall include a pro-rata share of a pass-through entity’s income.

D.Determination of taxpayer’s share of the taxable income of a combined group apportionable to this state.

1.The taxpayer member’s share of the taxable income apportionable to Rhode Island of each combined group of which it is a member shall be the product of:

a.the adjusted taxable income of the combined group, determined under this regulation, and

b.the taxpayer member’s apportionment percentage, including in the numerator the taxpayer’s total sales (receipts) associated with the combined group’s business in Rhode Island, and including in the denominator the total sales (receipts) of all members of the combined group, including the taxpayer member, which total sales (receipts) are associated with the combined group’s business wherever located.

2.The combined return uses the income, losses, and factors of all members included on the combined return to more accurately determine the taxable income of those entities actually doing business in Rhode Island.

E.Pass-through entities.

1.A combined group member’s numerator and denominator for purposes of the sales factor includes the apportionment factors (gross receipts) of pass-through entities owned directly or indirectly by the member, in proportion to the combined group member’s distributive share of the pass-through entity’s net income or loss included in the combined group’s income. However, a combined group member’s sales factor shall not include apportionment factors of a real estate investment trust, regulated investment company, real estate mortgage investment conduit, or financial asset securitization investment trust.

F.FAS 109 Deduction

1.Under Financial Accounting Standard 109 (“FAS 109”), a corporation that is required to issue financial statements must create a liability or an asset for estimated taxes payable or refundable for the current year. For purposes of computing taxable income under Rhode Island’s combined reporting statute, the taxpayer shall not claim a FAS 109 deduction.

G.Taxable year of the combined group

1.The group’s taxable year is determined as follows:

a.if two or more members of a group file a federal consolidated return, the group’s taxable year is the taxable year of the federal consolidated group;

b.in all other cases, the taxable year is the taxable year of the designated agent.

2.Taxpayers with a 52/53-week year-ending (for example, a year ending on the Saturday closest to December 31) shall be treated for purposes of this regulation as having a tax year beginning date of January 1. For example, suppose that a corporation is a 52/53-week corporation. Its 2015 tax year ends December 30, 2015. Its 2016 tax year begins December 31, 2015. However, for purposes of this regulation, its 2016 tax year will be deemed to begin January 1, 2016, and end December 31, 2016.

H.Members with different accounting periods

1.If the taxable year of a member differs from the taxable year of the group, the designated agent shall elect to determine the portion of that member’s income to be included in one of the following ways:

a.a separate income statement prepared from the books and records for the months included in the group’s taxable year; or

b.including all of the income for the year that ends during the group’s taxable year.

2.The same method must be used for each member with a different accounting period. Once an election is made under this section, it is the only method that may be used with respect to members of the group except upon prior approval by the Tax Administrator.

I.Example: The following example illustrates certain principles outlined in this regulation, including the determination of a combined group, the determination of a unitary business, the calculation of a combined group’s income, and apportionment. (The example assumes ownership of a fictitious entity, Al’s Bakery, which is located in Providence, Rhode Island.)

1.Al’s Bakery is owned and operated as a sole proprietorship.

a.A sole proprietorship is not subject to combined reporting.

2.Al’s Bakery is treated as a pass-through entity for federal tax purposes – an S corporation, limited liability company (LLC), or partnership.

a.Pass-through entities are not, in and of themselves, subject to combined reporting – unless such an entity elects to be treated as a C corporation for federal income tax purposes.

3.Al’s Bakery is a C Corporation, a stand-alone operation with no affiliates.

a.It is not subject to combined reporting. For combined reporting to apply, there must be two or more entities treated as C corporations under common ownership engaged in a unitary business. However, Al’s Bakery must use single sales factor apportionment and market-based sourcing for tax years beginning on or after January 1, 2015.

4.Al’s Bakery is a C corporation which makes baked goods and has nexus in Rhode Island but in no other state. Betty’s Distribution, of New Haven, Connecticut, a C corporation, distributes baked goods in Rhode Island and Connecticut, and has no nexus in Rhode Island but does have nexus in Connecticut. Catrina LLC, of Providence, is a pass-through entity which owns the real estate on which Al’s Bakery is located and passes through income to Al’s Bakery. Al’s Bakery and Betty’s Distribution have common ownership and share management and other services.

a.For 2015 and later tax years, Al’s Bakery and Betty’s Distribution are subject to Rhode Island combined reporting. They comprise a combined group and are engaged in a single business enterprise, a unitary business. They must therefore combine their income for Rhode Island corporate income tax purposes. In the computation, Al’s Bakery must include in its income the pass-through income that it receives from Catrina LLC. The pooled income of the combined group must be apportioned to Rhode Island using single sales factor apportionment and the market-based sourcing method. For apportionment purposes, the combined group uses in the numerator all sales in Rhode Island – including any sales in Rhode Island by Betty’s Distribution, even though Betty’s Distribution does not have nexus in Rhode Island. The denominator must include everywhere sales. Catrina LLC would still have a filing requirement for Rhode Island tax purposes and would still have to pay the annual filing charge under R.I. Gen. Laws § 7-16-67.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.12 Corporate Minimum Tax

A.The annual corporate minimum tax payable is the amount provided under R.I. Gen. Laws § 44-11-2(e). The combined group pays either the tax due based on the amount of its net income apportioned to Rhode Island, using the applicable rate, or the minimum tax, whichever amount is higher.

B.To compute the minimum tax, the combined group must determine the number of its members that have nexus in Rhode Island and multiply that number by the amount of the minimum tax as listed in R.I. Gen. Laws § 44-11-2(e). The sum must be compared to the actual tax due for the entire combined group. The combined group shall pay whichever amount is higher.

1.Taxpayers and their advisers should review R.I. Gen. Laws § 44-11-2 to determine the current tax rate and the current minimum tax, as well as other applicable provisions of Rhode Island General Laws, and the Division of Taxation regulation on nexus.

C.The following examples illustrate the application of this § 10.12 of this Part. The examples are for tax year 2015, when Rhode Island’s mandatory unitary combined reporting regime took effect, and assume that the minimum tax is $500 and the corporate income tax rate is seven percent (7%).

1.Example: Bryant Corp., Bentley Corp., Brandeis Corp., and Babson Corp. are all C corporations that together comprise a combined group which is engaged in a unitary business and is subject to Rhode Island combined reporting. Each has a current-year net operating loss.

Application of Corporate Minimum Tax

Name

Rhode Island Nexus

NOL

Minimum Tax

Bryant Corporation

Yes

($5,000)

$500

Bentley Corporation

Yes

($10,000)

$500

Brandeis Corporation

Yes

($15,000)

$500

Babson Corporation

($20,000)

N/A

Tax Total:

$1,500

a.The combined group determines that three of its members have Rhode Island nexus and multiplies that number by the $500 minimum tax, for a total of $1,500. The group compares that sum to its tax liability calculated under the standard formula, which is seven percent (7%) of the income apportioned to Rhode Island. Because the group has a current-year NOL of $50,000, the group owes no tax under the standard formula, so it must pay the minimum tax of $1,500. (The NOL is carried forward.)

2.Example: Bryant Corp., Bentley Corp., Brandeis Corp., and Babson Corp. are all C corporations that together comprise a combined group which is engaged in a unitary business and is subject to Rhode Island combined reporting.

Application of Corporate Minimum Tax

Name

Rhode Island Nexus

Rhode Island Apportioned Income

Minimum Tax

Bryant Corporation

Yes

$10,000

$500

Bentley Corporation

Yes

$5,000

$500

Brandeis Corporation

Yes

$500

Babson Corporation

$5,000

N/A

Totals:

$20,000

$1,500

Total Tax:

$1,400

$1,500

Note: Because minimum tax of $1,500 is greater than tax of $1,400 determined under standard formula, group pays $1,500 in minimum tax.

a.The combined group determines that three of its members have Rhode Island nexus and multiplies that number by the $500 minimum tax, for a total of $1,500. The group compares that sum to the $1,400 in tax it owes using the standard formula (7% of $20,000 in income apportioned to Rhode Island). Because the minimum tax is higher, the group pays the minimum tax.

3.Example: Bryant Corp., Bentley Corp., Brandeis Corp., Babson Corp., and Tuck Corp. are all C corporations that together comprise a combined group which is engaged in a unitary business and is subject to Rhode Island combined reporting.

Application of Corporate Minimum Tax

Name

Rhode Island Nexus

Rhode Island Apportioned Income

Minimum Tax

Bryant Corporation

Yes

$10,000

$500

Bentley Corporation

Yes

$5,000

$500

Brandeis Corporation

Yes

$500

Babson Corporation

N/A

Tuck Corporation

$3,000

N/A

Totals:

$23,000

$1,500

Total Tax:

$1,610

$1,500

Note: Group pays $1,610 in tax, as determined under standard formula, because it is higher than minimum tax of $1,500.

a.The combined group determines that three of its members have Rhode Island nexus and multiples that number by the $500 minimum tax, for a total of $1,500. The group compares that sum to the $1,610 in tax it owes using the standard formula (7% of $23,000 in income apportioned to Rhode Island). The group has $1,610 in Rhode Island tax liability and must pay that amount because it is higher than the minimum tax of $1500.

D.The provisions of § 10.12 of this Part shall also apply to affiliated groups making the federal consolidated group election for Rhode Island combined reporting purposes (as described § 10.9 of this Part).

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.13 Net Operating Losses

A.For purposes of this regulation, a tracing protocol shall apply to net operating losses (NOLs).

1.No deduction is allowable for a net operating loss sustained during any taxable year in which a taxpayer was not subject to Rhode Island business corporation tax.

2.For the year in which the loss is allowed, such loss is limited by the amount of that corporation’s federal taxable income for that year.

3.NOLs created before January 1, 2015, are allowed to offset the income only of the corporation that created the NOL; the NOL cannot be shared with other members of the combined group.

4.NOLs created in tax years beginning on or after January 1, 2015, shall receive the same treatment by Rhode Island for purposes of combined reporting and the Rhode Island corporate tax as they do under IRC, 26 U.S.C. § 172, except that:

a.Any NOL included in determining the deduction shall be adjusted to reflect the inclusions for, and exclusions from, entire net income required under the applicable section of R.I. Gen. Laws Chapter 44-11;

b.The deduction shall not include any NOL sustained during any taxable year in which the member was not taxed under R.I. Gen. Laws Chapter 44-11; and

c.The deduction shall not exceed the deduction for the taxable year allowable under IRC, 26 U.S.C. § 172 – provided that the deduction for a taxable year may not be carried back to any other taxable year for Rhode Island purposes but shall only be allowable on a carryforward basis for the five (5) succeeding taxable years.

5.Groups that make the federal consolidated election (see § 10.9 of this Part) are nevertheless not allowed to carryback NOLs. Also, consolidated groups must follow the same tracing provisions as combined groups.

B.Departing member of combined group.

1.NOLs shall be carried forward from year to year separately by the individual entity that originally incurred the underlying loss. Therefore, such NOLs remain the tax attribute of that entity, although such carryforwards may be shared in some cases with the other taxable members of a combined group, as described in this § 10.13 of this Part.

2.In any case in which a taxable member of a combined group ceases to be a member of the combined group, any NOL carryforward owned by such taxpayer is no longer available for use by the other taxable members of the combined group with which the taxpayer was previously affiliated.

3.If the taxpayer member becomes a member of a new combined group, the taxpayer member shall not share the NOL carryforward with the taxable members of its new combined group unless one of the taxable members of the new combined group was also a member of the taxpayer member’s combined group during the year the loss was incurred and all the other requirements described in § 10.13 of this Part are met.

4.In the event that a taxpayer member that has an NOL carryforward becomes a member of a new combined group, change of ownership rules may apply, although any amount of NOL carryforward that cannot be applied because of such limitations may be carried forward consistent with the rules and limitations described in § 10.13 of this Part.

5.In the event that a taxpayer member of a combined group has an NOL carryforward and subsequently takes part in a merger or consolidation, the NOL carryforward will not be lost if the taxpayer member liquidates or terminates as a result of the merger or consolidation. In such a situation, the NOL would follow into the surviving entity.

C.Examples: The following examples serve to illustrate some of the principles contained in § 10.13 of this Part.

1.November Corp., Oscar Corp., and Papa Corp. are C corporations that have common ownership, are engaged in a unitary business, and are members of a combined group. For Tax Year 2014, November Corp. was required to file a Rhode Island corporate income tax return, and did so. Oscar Corp. and Papa Corp. were not required to file.

2.November Corp. has a $200,000 NOL carryover from prior year(s). November has no other Rhode Island modifications. For Tax Year 2015, $100,000 of the NOL can be utilized to offset November’s current year income of $100,000; the remaining $100,000 may be carried forward to subsequent years. Such treatment is allowed because November Corp. has been a Rhode Island filer for those prior years in which the losses were incurred.

3.Oscar Corp., prior to combined reporting, had no Rhode Island filing requirement. Oscar has an NOL carryover from prior years of $50,000. For Tax Year 2015, and for future tax years, Oscar’s NOL is not allowed to be applied against the federal taxable income of the combined group because the loss was incurred in prior years when Oscar did not have a Rhode Island filing requirement. Papa Corp. has no NOL.

4.Under the Rhode Island combined reporting regime, the combined group must combine its income, but is allowed to use NOL carryovers only from those members that had a Rhode Island filing requirement in the year in which they incurred the loss.

5.Furthermore, the allowable loss that the combined group’s Rhode Island member generated through Tax Year 2015 is limited by the amount of income of the Rhode Island member for tax year 2015.

Net Operating Loss-Tax Year 2015

November Corp

Oscar Corp

Papa Corp

Combined Group

Federal Taxable Income

$100,000

$300,000

NOL Carryover (Form TY 2014)

($200,000)

($50,000)

NOL Carryover Allowable

($100,000)

Adjusted Taxable Income

$100,000

$200,000

6.In Tax Year 2016, assume that November, Oscar and Papa are C corporations that each has $50,000 in federal taxable income.

a.Of November’s $100,000 NOL carryover, only $50,000 can be used to offset its income; the remainder of the NOL is carried to future years and applied to the extent allowable by statute. Oscar’s $50,000 NOL still cannot be used for Rhode Island purposes because the loss was incurred in a year prior to Oscar’s being required to file with Rhode Island.

Net Operating Loss-Tax Year 2016

November Corp

Oscar Corp

Papa Corp

Combined Group

Federal Taxable Income

$50,000

$150,000

NOL Carryover

($100,000)

($50,000)

NOL Carryover Allowable

($50,000)

$50,000

Adjusted Taxable Income

$50,000

$100,000

7.Example

a.Quebec Corp., Romeo Corp., Sierra Corp., and Tango Corp. are C corporations that have common ownership, are engaged in a unitary business, and are members of a combined group. Before Tax Year 2015, only Quebec Corp. was required to file a Rhode Island corporate income tax return, and did so. In Tax Year 2015 (please see table below), Quebec, Romeo and Sierra Corp. each has $100 million in federal taxable income; Tango Corp. has a current year net loss of $800 million.

b.As a result, the combined group shows a net operating loss of $500 million for Tax Year 2015. As the example illustrates, Rhode Island law allows a combined group, for purposes of Rhode Island combined reporting, to use current year losses from the combined group’s members – even from members that would not otherwise have a Rhode Island filing requirement if it were not for combined reporting.

Net Operating Loss-Tax Year 2015

Quebec Corp.

Romeo Corp.

Sierra Corp.

Tango Corp.

Combined Group

Federal Taxable Income

$100

($800)

($500)

c.In Tax Year 2016 (please see table below), the four member corporations of the combined group each has $100 million in federal taxable income, for a total of $400 million. But because the combined group had a $500 million net operating loss carryover from Tax Year 2015, the first year in which mandatory unitary combined reporting applied in Rhode Island, the group’s Tax Year 2016 federal taxable income of $400 million is offset for Rhode Island tax purposes, and the group carries forward the remaining $100 million NOL.

Net Operating Loss-Tax Year 2016

Quebec Corp.

Romeo Corp.

Sierra Corp.

Tango Corp.

Combined Group

Federal Taxable Income

$100

$400

Allowable NOL:

($400)

Adjusted Taxable Income:

8.Example

a.Uniform Corp., Victor Corp., and Whiskey Corp. are C corporations that have common ownership, are engaged in a unitary business, and are a combined group. In Tax Year 2015, Uniform and Victor Corporations have a combined federal taxable income of $200 million, which is offset by Whiskey Corp.’s current year net operating loss of $400 million. Consequently, the combined group has a $200 million net loss for 2015. The combined group carries forward a $200 million NOL – because the NOL was generated in a year in which combined reporting was mandatory.

Net Operating Loss-Tax Year 2015

Uniform Corp.

Victor Corp.

Whiskey Corp.

Combined group

Federal Taxable Income

$100

($400)

($200) current year net loss

b.In Tax Year 2016, each corporation posts federal taxable income of $100 million. The group deducts its $200 million NOL carryover, generated in 2015, from its Tax Year 2016 federal taxable income of $300 million. That leaves $100 million in adjusted taxable income for 2016.

Net Operating Loss-Tax Year 2016

Uniform Corp.

Victor Corp.

Whiskey Corp.

Combined group

Federal Taxable Income

$100

$300

NOL carryover from 2015:

($200)

NOL carryover allowable deduction:

($200)

Combined group’s adjusted taxable income:

$100

9.Example

a.January Corp. and February Corp. are Rhode Island C corporations under common ownership engaged in a unitary business and are subject to Rhode Island combined reporting for tax year 2015 and 2016. Due to a reorganization, the corporations are no longer part of a combined group under common ownership for 2017; they file as separate entities in Rhode Island for 2017. As the following table shows, only February Corp. may use the NOL carryforward for 2017 because February Corp. generated the loss in the first place.

Split up (dollars in thousands)

2015

2016

2017

January Corp.

$100

$50

(Filing as Separate Entity)

February Corp.

($500)

$50

$50‎($300)

($250)

(Filing as Separate Entity)

Tentative Totals:

($400)

$100‎($400)‎($300)

Note: Carry $400 NOL to 2016.

Note: Apply $400 NOL from 2015 to TY2016, leaving $300 NOL to carry to 2017.

Note: January has $50 in income for 2017 and files as separate entity. $300 NOL from 2016 applies only to February, reducing February’s income to $0; remaining NOL of $250 carries forward to 2018 for February only.

10.Example

a.March Corp., April Corp., and May Corp. are Rhode Island C corporations under common ownership engaged in a unitary business and are subject to Rhode Island combined reporting for tax year 2015 and 2016. For 2017, March Corp. drops out of the group and June Corp. (a C corporation under common ownership) joins the group.

b.As the following table shows, only $100 of the NOL carryforward can be used in 2017, against the income of April Corp. and May Corp.; the NOL carryforward cannot be applied in 2017 against June Corp. in 2017 because June Corp. is new to the group that year – and June’s income cannot be offset by a loss to which it was not a party.

New member of group (dollars in thousands)

2015

2016

2017

March Corp.

$100

$50

n/a

April Corp.

($500)

$50

May Corp.

$100

$50

June Corp.

n/a

$50

Total:

($300)

$100‎($300)‎($150)‎

$100‎($150)‎($50)

$50

Note: For 2015, $500 NOL wipes out group’s income, leaving $300 NOL carryforward to 2016. For 2016, the group’s $150 income is wiped out by the $300 NOL carryforward; carry forward $150 NOL to 2017. For 2017, June Corp. joins group; June’s income cannot be offset by a loss to which it was not a party. Thus, the $150 NOL carried to 2017 wipes out April’s and May’s income only, leaving the group with $50 in income from June; the remaining $50 NOL is carried forward to 2018 – and can apply only to April’s and May’s income that year.

11.Example

a.July Corp. and August Corp. are Rhode Island C corporations under common ownership engaged in a unitary business and are subject to Rhode Island combined reporting for tax year 2015 and 2016. For 2017, September Corp. (a C corporation under common ownership) joins the group. As the following table shows, September Corp. has $60 in income for 2017, but only July Corp. and August Corp. get to use the NOL carryforward from 2016 – in other words, the group gets to use only $20 of the NOL; the remaining $80 NOL is carried forward.

New member of group (dollars in thousands)

2015

2016

2017

July Corp.

($100)

$50

$10

August Corp.

($100)

$50

$10

September Corp.

N/A

$60

Total:

($200)

$100‎($200)‎($100)‎

$20‎($100)‎($80)

$60

Note: For 2015, July and August each has current-year $100 NOL, which carries to 2016. For 2016, the NOL carryforward wipes out income, leaving $100 NOL for 2017. In 2017, $100 NOL carryforward can be used against income of July and August only; it cannot be applied against September’s income because September is new to group that year. Thus, in effect, only $20 of the NOL can be used in 2017, leaving group with September Corp.’s $60 in income for that year. Remaining $80 NOL is carried forward to 2018, when it can be applied only to income of July and August.

Example

a.Anne Corp. and Betty Corp. are Rhode Island C corporations under common ownership engaged in a unitary business and are subject to Rhode Island combined reporting for tax year 2015 and 2016. For 2017, Anne Corp. becomes a stand-alone corporation; Betty Corp. and Clara Corp. merge to become Doris Corp.

b.Thus, the $100 NOL carried forward to 2017 can apply only to Anne Corp. (because it generated the loss in the first place), reducing its income to zero and resulting in a $50 NOL carryover only for Anne Corp. for 2018. In other words, the NOL tracks with Anne Corp. only; the newly formed entity Doris Corp. cannot use the NOL.

Combinations (dollars in thousands)

2015

2016

2017

Anne Corp.

($200)

$50

$50‎Anne Becomes a Stand-Alone Corp.

Betty Corp.

$50

Betty & Clara Merge to Form D

Clara Corp.

N/A

Betty & Clara Merge to Form D

Doris Corp.

N/A

Total:

($200)

$100‎($200)‎($100)‎

$50 Anne Income‎($100) Anne NOL‎($50) Tracks with Anne

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.14 Add-Backs

A.For tax year 2014, “net income” under R.I. Gen. Laws § 44-11-11 includes, for a captive REIT, an amount equal to the amount of the dividends paid deduction allowed under the Internal Revenue Code for the taxable year.

B.For tax year 2014, a corporate taxpayer must add back to net income any otherwise deductible interest expenses and costs and intangible expenses and costs directly or indirectly paid, accrued or incurred to, or in connection directly or indirectly with one or more direct or indirect transactions with, one or more related members.

CFor tax years beginning on or after January 1, 2015, the captive REIT provision described in § 10.14(A) of this Part and the intangibles add-back provision described in § 10.14(B) of this Part above are repealed.

D.For purposes of Rhode Island combined reporting, all dividends paid by one member to another member of the combined group shall be eliminated from the income of the recipient.

E.If a combined group includes a parent and a captive-REIT subsidiary, there shall be no elimination for the REIT payment to the parent, and no dividends-received deduction for the parent. In the case of a group filing a consolidated return in lieu of a combined return for Rhode Island tax purposes, there shall be no dividends-received deduction for the parent of a captive REIT.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.15 Tax Rate

A.For tax year 2014, corporations pay either the Rhode Island corporate income tax or the Rhode Island franchise tax, whichever is higher.

B.For tax year 2014, the corporate income tax rate is nine percent (9%); the franchise tax is equal to $2.50 per $10,000 of a corporation’s authorized capital stock.

C.For tax year 2015, the corporate income tax rate is seven percent (7.0%) and the franchise tax is repealed. Thus, for tax year 2015, the maximum corporate income tax rate for a combined group engaged in a unitary business is seven percent (7.0%).

DFor additional information on the application of the minimum tax with respect to combined groups, please see § 10.12 of this Part.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.16 Tax Credits; Tracing; JDA; Life Sciences

A.For purposes of this regulation, a tracing protocol shall apply to all Rhode Island corporate income tax credits. The tracing protocol is the same as the one which applies to NOLs (see § 10.13 of this Part).

B.Rhode Island tax credits earned before January 1, 2015, shall be allowed to offset only the tax liability of the corporation that earned the credits; such credits cannot be shared with other members of the combined group.

C.Rhode Island tax credits earned in tax years beginning on or after January 1, 2015, may be applied to other members of the group unless prohibited under the terms of this Part.

D.Jobs Development Act.

1.The Jobs Development Act rate reduction under R.I. Gen. Laws Chapter 42-64.5 applies to eligible companies filing as part of a combined group and to a group making the federal consolidated election for Rhode Island combined reporting purposes. The reduction shall be allowed against the net income of the entire combined group for credits earned in tax years beginning on or after January 1, 2015.

2.For tax year 2014, the corporate income tax rate is nine percent (9.0%), and the amount of the Jobs Development Act rate reduction cannot exceed six (6) percentage points. Thus, the eligible corporation’s tax rate cannot be less than three percent (3.0%).

3.For tax year 2015, the corporate income tax rate is seven percent (7.0%), and the amount of the Jobs Development Act rate reduction cannot exceed four (4) percentage points. Thus, the eligible corporation’s tax rate cannot be less than three percent (3.0%).

4.As a result of legislation enacted on June 30, 2015 (R.I. Gen Laws § 44-48.3-12), the tax rate reduction provision allowed under the Jobs Development Act is discontinued as of July 1, 2015. However, any company that has qualified for a rate reduction under the Jobs Development Act before July 1, 2015, will be allowed to maintain the rate reduction in effect as of June 30, 2015, although no additional rate reduction under the program will be allowed.

E.Life Sciences Rate Reduction

1.The life sciences rate reduction under the I-195 Redevelopment Act of 2011, R.I. Gen. Laws Chapter 42-64.14, applies to eligible companies filing as part of a combined group and to a group making the federal consolidated election for Rhode Island combined reporting purposes. The reduction shall be allowed against the net income of the entire combined group for credits earned in tax years beginning on or after January 1, 2015.

2.For tax year 2014, the corporate income tax rate is nine percent (9.0%), and the amount of the life sciences rate reduction cannot exceed six (6) percentage points. Thus, the eligible corporation’s tax rate cannot be less than three percent (3.0%).

3.For tax year 2015, the corporate income tax rate is seven percent (7.0%), and the amount of the life sciences rate reduction cannot exceed four (4) percentage points. Thus, the eligible corporation’s tax rate cannot be less than three percent (3.0%).

Corporate Income Tax Rate Reduction

Tax Year 2014

Tax Year 2015

Corporate income tax rate:

9.00%

7.00%

Maximum rate reduction

(6.00%)

(4.00%)

Tax rate cannot be less than:

3.00%

Applies to Jobs Development Act rate reduction under R.I. Gen. Laws Chapter 42-64.5 and life sciences rate reduction (The I-195 Redevelopment Act of 2011) under R.I. Gen. Laws Chapter 42-64.14.

F.Departing member of combined group.

1.Even though a tax credit (and a credit carryforward) may sometimes be shared among the taxable members of a combined group, as described above, the credit nonetheless remains the property of the taxpayer that initially generated the credit.

2.In the event that a taxable member of a combined group ceases to be a member of the combined group, any credit carryforward owned by such taxpayer is no longer available for use by the other taxable members of the combined group with which the taxpayer was previously affiliated. In such a situation, if the taxpayer becomes a member of a new combined group, the taxpayer may not share the credit with the taxable members of its new combined group unless one of the taxable members of the new combined group was also a member of the taxpayer’s combined group during the year that the credit was generated and all other requirements described in § 10.16 of this Part and in Rhode Island General Laws are met.

3.In the event that a taxpayer that has a credit carryforward becomes a member of a new combined group, tracing protocol rules shall apply; any amount of credit carryforward that cannot be applied because of these limitations shall be carried forward consistent with the rules and limitations described in § 10.16 of this Part and in Rhode Island General Laws.

4.In the event that a member of a combined group has a credit carryforward and subsequently takes part in a merger or consolidation, the credit carryforward will be lost if, for example, the member liquidates or terminates as a result of the merger or consolidation.

G.Tax credit recapture.

1.In the event that a taxpayer generates a credit for a tax year beginning on or after January 1, 2015, and then subsequently disposes of the associated property, or where the property otherwise ceases to be in qualified use within the meaning of the applicable credit statute, recapture of the credit shall be determined pursuant to applicable Rhode Island statutes and regulations based upon the total credit previously taken by the taxpayer and its combined group members.

a.Example:

(1)In general, a business that builds, acquires, constructs, erects, or reconstructs a building for use chiefly in the production process is allowed a four percent (4%) investment tax credit against the Rhode Island corporate income tax.

(2)Recapture of the investment tax credit is required where property on which a credit has been taken is disposed of or ceases to be in qualified use prior to the end of its useful life, except:

(AA) where property was in qualified use for its entire useful life, or

(BB)where property was in qualified use for more than twelve (12) consecutive years.

(3)In such a case, the recapture formula is: tax credit taken on property ceasing to qualify times a fraction: the numerator is the useful life of property in months minus the qualified use in months; the denominator is the useful life of property in months.

(4)The formula for recapture computation is expressed as follows:

Recapture =

Tax credit taken on property ceasing to qualify, times:

(useful life of property in months - qualified use in months) / (useful life of property in months)

In this example, XYZ Corp. is treated as a C corporation for federal income tax purposes and is part of a combined group whose members are engaged in a unitary business and which is subject to Rhode Island combined reporting.

XYZ Corp., a calendar-year corporation, acquires a five-story building, including structural components, (each story of equal square footage) on January 1, 2015. The building’s basis is $100,000. The building has a 20-year life. XYZ Corp. rents out or leases out one floor. XYZ Corp. uses the remaining four floors: three of them for production, one for administration and distribution. Thus, of the five stories in the building, four are for qualified use; one is not.

Investment Tax Credit = 4% x ($100,000 - $20,000) = $3,200.

On January 1, 2016, XYZ Corp. rents out a floor that it had previously been using in administration and distribution. Thus, one of the four floors it had been using has fallen out of qualified use – and recapture is required. Recapture (expressed as “R” below) is computed as follows:

R = ($3,200 x 1/4) x (240 months – 12 months)

240 months

R = $800 x 95%‎R = $760

b.Example:

The facts and circumstances are the same as above, except that XYZ Corp. on January 1, 2016, rents out two floors that it had previously used in production. XYZ Corp. is therefore renting out three floors and using the remaining two floors: one for production, one for administration and distribution.

Because the entire building is not used more than fifty percent (50%) in production, there is a recapture of the entire remaining investment credit, computed as follows:‎‎R = ($3,200 x 4/4) x (240 months – 12 months)

240 months

R = $3,200 x 95%‎‎R = $3,040

In both examples, because the credit was generated on or after January 1, 2015, by a member of the combined group (in this case, XYZ Corp.), recapture is the responsibility of the entire group.

2.§ 10.16 of this Part applies even if the taxpayer first leaves the combined group, then in a subsequent year disposes of the qualified property or otherwise causes recapture, and therefore in such subsequent tax year is no longer included in a combined group with the corporations whose use of the credit must be considered for purposes of recapture.

3.Where a taxpayer generates a credit for a tax year beginning on or after January 1, 2015, there shall be no recapture if the taxpayer subsequently transfers the qualified property to another taxable member of its combined group with which the credit could be shared in accordance with the terms and conditions of § 10.16 of this Part. However, in this case, if the transferee leaves the combined group or subsequently transfers the property outside the combined group or to a member of the combined group with which the credit cannot be shared, there shall be recapture of the credit on the part of the taxpayer that generated the credit based upon the total credit previously taken by the combined group members. In any other case where a Rhode Island credit that is subject to recapture can be shared amongst combined group members, the recapture shall be evaluated in a similar manner.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.17 Filing of Return

A. For purposes of combined reporting, the Tax Administrator intends to make the necessary schedule(s) and instructions available in a timely fashion for taxpayers, their advisers, and software developers.

B.For tax years beginning on or after January 1, 2015, the designated agent of a combined group shall file the Rhode Island Business Corporation Tax Return, Form RI-1120C and, on schedules attached to the return, include information required by the Tax Administrator for each member of the combined group. (Please see § 10.19 of this Part below, for appointment of a designated agent.) Thus, for combined reporting purposes, the annual return shall be filed as a single unit, with all the required combined reporting schedules attached to the Form RI-1120C; the schedules shall not be filed separately from the return. The return shall be filed in accordance with the provisions of R.I. Gen. Laws § 44-11-3, subject to any extended due dates permitted by the Tax Administrator under the authority granted in R.I. Gen. Laws § 44-11-5, as set forth below in § 10.17 of this Part.

C. The extended due date for a combined group’s return on Form RI-1120C shall be seven months after the normal due date. Thus, for a calendar-year filer whose normal filing due date is March 15, the extended due date shall be October 15. It is an extension of the time to file, not of the time to pay; payments continue to be due by the regular due date.

D. If the statute of limitations applicable to refund claims and assessments is open with respect to a particular member of the combined group, the statute of limitations is open with respect to that particular taxpayer notwithstanding the fact that the statute of limitations may have expired for one or more other members of the combined group. The statute of limitations applicable to refund claims and assessments for members of a combined group which have filed their tax return based on a fiscal reporting period matched to the accounting period of the designated agent shall be the statute of limitations determined and computed based on the fiscal accounting period.

E. If a combined return is filed on behalf of a combined group, the Tax Administrator may examine and audit that return, and collect any deficiency from a combined group member for whom the statute of limitations for assessments has not expired, even if the statute of limitations for other members which filed included in the same combined return has expired. Any deficiency assessed pursuant to the audit or examination will not cause a reopening of the statute of limitations for those other members for whom the statute of limitations has expired and who were included in the same combined report.

F. A paid preparer filing a Rhode Island corporate income tax return reflecting combined reporting must file the return electronically in accordance with R.I. Gen. Laws § 44-1-31.1 and Rhode Island Division of Taxation regulation Electronic Filing for Paid Preparers, Subchapter 30 Part 2 of this Chapter.

G. A combined group’s application of the rules set forth in this regulation must be based on objective criteria and must consider all sources of information reasonably available to the taxpayer at the time of its tax filing including, without limitation, the taxpayer’s books and records kept in the ordinary course of business. A taxpayer’s method of determining the composition of the combined group and assigning its sales must be determined in good faith, applied in good faith, and applied consistently with respect to similar transactions and year to year. A taxpayer must retain contemporaneous records that explain the determination and application of its method of determining the composition of the combined group and assigning its sales, including underlying assumptions, and must provide such records to the Tax Administrator upon request.

H. The provisions of § 10.17 of this Part shall also apply to affiliated groups making the federal consolidated group election for Rhode Island combined reporting purposes (as described in § 10.9 of this Part).

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.18 Estimated Tax

A. The provisions of R.I. Gen. Laws Chapter 44-26, “Declaration of Estimated Tax by Corporations,” shall apply to a combined group engaged in a unitary business – and to each member of such a group.

B. Notwithstanding any other provisions of R.I. Gen. Laws § 44-26-2.1, any taxpayer required to file a combined return in accordance with R.I. Gen. Laws § 44-11-4.1 et seq. in a tax year beginning on or after January 1, 2015, shall compute estimated payments for that tax year as follows:

The installments must equal one hundred percent (100%) of the tax due for the prior year plus any additional tax due to the combined reporting provisions under R.I. Gen. Laws § 44-11-4.1; or
The installments must equal one hundred percent (100%) of the current year tax liability.

C. The provisions of § 10.18 of this Part shall also apply to affiliated groups making the federal consolidated group election for Rhode Island combined reporting purposes (as described in § 10.9 of this Part).

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.19 Designated Agent

A. A combined group engaged in a unitary business shall appoint a designated agent. The combined group may select any member of the combined group as the designated agent, subject to a limitation that the designated agent itself has a Rhode Island filing requirement under R.I. Gen. Laws Chapter 44-11.

B. The corporation which files, or will file, the first combined return for the combined group is deemed to be appointed as the designated agent assuming it has a Rhode Island filing requirement under R.I. Gen. Laws Chapter 44-11. The Tax Administrator may treat any member of the combined group as the designated agent.

C. The designated agent is required to act on behalf of the combined group in its own name in all matters relating to the combined return. This includes performing the following duties:

Filing the combined return, including the reporting of any separate entity items attributable to combined group members;
Filing any extension of time to file the combined return;
Filing any amended combined returns – or other filings relating to the combined return, including any separate entity items attributable to combined group members;
Sending and receiving all correspondence with the Rhode Island Division of Taxation regarding the combined return, except that if correspondence relates to separate entity items or a payment made by another member of the combined group, the Rhode Island Division of Taxation may send the correspondence to that other member or the designated agent, or both;
Participating on behalf of the group in any audit, investigation, or hearing by the Division of Taxation regarding the combined return, including producing all information requested;
Executing any and all documents relating to the combined return. (Unless the Tax Administrator and taxpayer agree otherwise in writing, any waiver, power of attorney, or other document executed by the designated agent relating to the combined return shall be considered executed by all members of the combined group, including any entities that were not included in the combined return but which the Division of Taxation asserts are members of the combined group.); and
Receiving notices regarding the combined return. In general, a notice received by the designated agent is considered received by all members of the combined group, including any entities that were not included in the combined return but which the Division of Taxation asserts are members the combined group.

D.In general, no person other than the designated agent shall have authority to act for or represent itself or the combined group regarding the duties listed in § 10.19 of this Part. A combined group member, or an entity which the taxpayer asserts is a combined group member, may assume any of the duties of designated agent under any of the following conditions:

1.By election of the designated agent or the applicable combined group member, a combined group member may perform any of the duties listed in this § 10.19 of this Part to the extent those duties relate to separate entity items. This may include the filing of a separate return to report the member’s separate entity items.

2.If a combined return was filed, the Tax Administrator may allow any entity which it asserts should be added to or eliminated from the combined group to represent itself after receipt of a written request from the entity. However, that entity shall still be bound by any action taken by the designated agent before the entity’s request to represent itself has been accepted by the Tax Administrator.

E. If the designated agent is unable or unwilling to fulfill its obligations with respect to the combined return, is unresponsive, or has not been identified to the Division of Taxation, the Tax Administrator may appoint a new designated agent, or it may deal directly with any member of the combined group in respect to its share of the combined return items in which case each member shall have full authority to act for itself.

F. The members of a combined group shall be jointly and severally liable for any tax, penalty, and/or interest levied by the Tax Administrator against the combined group or against any member of the group, including the designated agent, to the extent permitted under the United States Constitution. Any assessment against any member of a combined group for the Rhode Island corporate income tax attributable to the group’s income in a particular tax year, including any interest, additions to tax, and/or penalties, shall be deemed to constitute an assessment against all members of the combined group for that year.

G. The Tax Administrator may provide information relating to any member of the combined group to the designated agent, including information relating to the member’s separate entity items.

H. Once a member of the combined group is appointed as the designated agent, it shall remain the designated agent of that group for all future years unless the designated agent notifies the Tax Administrator in writing that another member of the combined group (or successor corporation of any member of the combined group) will thereafter act as designated agent, or unless the Tax Administrator chooses to name another member as the designated agent.

I. The provisions of § 10.19 of this Part shall also apply to affiliated groups making the federal consolidated group election for Rhode Island combined reporting purposes (as described in § 10.9 of this Part).

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.20 Tax Administrator’s Authority

A. The Tax Administrator may prescribe and amend, from time to time, rules and regulations as may be deemed necessary so that the tax liability of a combined group – or of any member of the combined group – may be determined, computed, assessed, collected, and adjusted in a manner so as to clearly reflect the combined income of the combined group and the individual income of each member of the combined group.

B. Such rules and regulations may include, but are not be limited to, issues such as the inclusion or exclusion of an entity in the combined group, the characterization and sourcing of each member’s income, and whether certain common activities constitute the conduct of a unitary business.

C. The provisions of this Part shall also apply to affiliated groups making the federal consolidated group election for Rhode Island combined reporting purposes as described in § 10.9 of this Part.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.21 Special Appeals

A. If at any time the Tax Administrator, on his own motion or acting upon a complaint by a taxpayer, determines that the methods of apportionment provided are inequitable either to the State or to the taxpayer, the Tax Administrator – after affording the taxpayer reasonable opportunity to be heard – may apply any other method of apportionment that is equitable and, if necessary, shall re-determine the tax.

B. The Division of Taxation is required by statute to establish an independent appeals process – for tax years beginning on or after January 1, 2015 – to attempt to resolve disputes between the Tax Administrator and the taxpayer with respect to the method of apportionment applied regarding the corporate income tax under R.I. Gen. Laws Chapter 44-11, including combined reporting. The Division of Taxation intends to address the requirement in the following manner:

When a dispute arises between the Tax Administrator and a taxpayer with respect to the method of apportionment applied, both the taxpayer and the Tax Administrator shall be entitled to initiate an appeals process through an independent arbitrator. The Division of Taxation’s regulation on apportionment provides additional information on this matter. It is recommended that the Tax Division’s regulation on apportionment be read in concert with the Tax Division’s regulation on combined reporting.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.22 Tax Administrator’s Report

A. On or before March 15, 2018, the Tax Administrator must file a report analyzing the policy and fiscal ramifications of the changes enacted to the Rhode Island business corporation tax statutes (R.I. Gen. Laws Chapter 44-11), as enacted in Article 12 of the fiscal year 2015 budget bill.

B. The report must be based on actual tax filings of companies for a two-year period, and must include the impact based on business category, business size, and other information – using information similar to the report on pro forma combined reporting that the Tax Administrator filed in March 2014.

C. The report is due on or before March 15, 2018, to the chairs of the House Finance Committee and Senate Finance Committee, and to the House Fiscal Advisor and Senate Fiscal Advisor.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.23 Appendix I – Combined Reporting Calculation

A.Following are the basic steps in computing tax for purposes of Rhode Island’s combined reporting regime:

1.Combine the federal taxable income of all members of the combined group.

2.Combine all deductions of all members of the combined group, including NOLs in accordance with this regulation.

3.Combine all the additions of all members of the combined group.

4.Net the combined additions and the combined deductions against the combined federal taxable income of all members of the combined group. The result is the adjusted taxable income of the combined group for Rhode Island corporate income tax purposes.

5.Combine the receipts of all members of the combined group using the Finnigan method. Calculate the apportionment ratio for the combined group. Use, as the numerator, all Rhode Island receipts – regardless of whether a group member has nexus in Rhode Island. Use, as the denominator, everywhere receipts. (Divide the numerator by the denominator to arrive at an apportionment ratio.)

6.Compute the apportioned Rhode Island taxable income of the combined group by multiplying adjusted taxable income by the combined apportionment ratio.

7.Compute and combine Rhode Island adjustments, including research and development adjustments, pollution control and hazardous waste adjustment, and capital investment deduction. Subtract total such adjustments from apportioned Rhode Island taxable income computed in § 10.23(A)(6) of this Part to arrive at Rhode Island adjusted taxable income.

8.Multiply result from § 10.23(A)(7) of this Part by applicable tax rate. (For tax year 2015, applicable tax rate is seven percent (7%)).

9.Calculate allowable credits in accordance with this regulation.

10.Subtract result in § 10.23(A)(9) of this Part (above) from the result in § 10.23(A)(8) of this Part (above). This is the tax due under combined reporting, before annual corporate minimum tax. (See § 10.23(A)(11) of this Part.)

11.For purposes of the minimum tax, determine the number of members of the combined group that have Rhode Island nexus. Multiply that number by the amount of the annual corporate minimum tax under R.I. Gen. Laws § 44-11-2(e). Compare that sum to the amount of net tax liability (after credits) from § 10.23(A)(10) of this Part. Pay whichever amount is higher.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.24 Appendix II – Further Examples

A.The following examples serve to illustrate the impact of mandatory unitary combined reporting, which is effective for tax years beginning on or after January 1, 2015.

1.Example:

a.J Corp. and K. Corp. are both C corporations that comprise a combined group engaged in a unitary business. (The corporations may have a parent-subsidiary or brother-sister relationship.) Both are based entirely in Rhode Island with all sales in Rhode Island. J Corp. has $400,000 of Rhode Island net income in 2015; K Corp. has a current year net loss in 2015 of $500,000.

b.If separate entity reporting were in effect for tax year 2015, J Corp. would pay $28,000 in Rhode Island corporate income tax, while K Corp. would pay the $500 corporate minimum tax (with a net loss carryforward).

c.But because mandatory unitary combined reporting applies for tax year 2015, the combined group pays a total of $1,000 in tax – which is the annual corporate minimum tax. The group determines that the two corporations have Rhode Island nexus, and multiplies that number by the minimum tax of $500, for a total of $1,000. Because the group has no tax due under the standard formula (given the current-year net loss), the group owes $1,000 in Rhode Island tax.

d.(K Corp.’s current-year net loss is shared with J Corp., wiping out J Corp.’s $400,000 of net income for the year; the remaining $100,000 of K Corp. NOL is carried forward.)

K Corp

J Corp

Combined Group

Net income (loss) for 2015

$400,000

($500,000)

($100,000)

Rhode Island Tax Due

$1,000

Note: Because the combined group has a net loss, it must pay the $500 annual corporate minimum tax for tax year 2015, multiplied by the number of group members with Rhode Island nexus.

2.Example:

a.L Corp. and M Corp. are both C corporations that comprise a combined group engaged in a unitary business. (The corporations may have a parent-subsidiary or brother-sister relationship.) L Corp. is based entirely in Rhode Island and all its sales are in Rhode Island. It has a current year net loss of $200,000 for tax year 2015. M Corp. does not have Rhode Island nexus, is based in another state, and has no sales in Rhode Island. It has net income of $400,000.

b.If separate entity reporting were in effect for tax year 2015, L Corp. would pay the $500 corporate minimum tax. No tax would be due from M Corp.

c.But because mandatory unitary combined reporting applies in Rhode Island for tax year 2015, M Corp.’s income is included in the combined return. M Corp.’s $400,000 in net income is reduced by L Corp.’s $200,000 current-year net loss, resulting in $200,000 of net income for the combined group.

d.For tax year 2015, L Corp. has $1 million in sales, all in Rhode Island. M Corp. has $1 million in sales in other states, none in Rhode Island. Based on single sales factor apportionment, the combined group’s apportionment factor is fifty percent (50%) (because L Corp. sales are fifty percent (50%) of the combined group’s everywhere sales of $2 million). Thus, fifty percent (50%) of the combined group’s net income of $200,000 is taxed at a rate of seven percent (7%). Therefore, the combined group pays $7,000 in Rhode Island corporate income tax.

e.(In a separate step, the group determines the number of members that have Rhode Island nexus, and multiplies that sum by $500. In this example, only one member has Rhode Island nexus, so the minimum tax is $500. However, the group must pay the higher of the tax due under the standard formula or the tax due under the minimum tax. In this example, the $7,000 in tax due under the standard formula is higher.)

L Corp. and M Corp.

Combined group

Combined group’s net income

$200,000

Group’s net income apportioned to Rhode Island

100,000

Rhode Island tax (applied at rate of 7%)

7,000

Total Rhode Island tax due

7,000

3.Example:

a.Q Corp. and R Corp. are both C corporations that comprise a combined group engaged in a unitary business. (The corporations may have a parent-subsidiary or brother-sister relationship.) Q Corp. is a ten percent (10%) partner in a partnership that is treated as a pass-through entity for federal income tax purposes. Q Corp.’s share of income derived from that partnership is $1 million.

b.Although a partnership that is treated as a pass-through entity for federal tax purposes is not subject to Rhode Island combined reporting, and is not part of a combined group, Q Corp.’s ten percent (10%) share of the partnership’s $1 million in income is included in the combined group’s income.

4.Example:

a.Tom and Jerry are equal owners of a bakery treated as a C corp. for federal income tax purposes which operates solely in Rhode Island with all sales in Rhode Island. They are also equal owners of a baked goods distribution business treated as a C corp. for federal income tax purposes which operates in Rhode Island with all receipts in Rhode Island. The bakery and the distribution company have common ownership and are engaged in a unitary business (they share common management, sales, and other functions). Both C corporations therefore are subject to Rhode Island’s combined reporting regime.

b.In addition, Tom and Jerry are equal owners of a limited liability company which is treated as a pass-through entity for federal tax purposes, operates solely in Rhode Island, and whose only function is to own the real estate on which the bakery and baked goods distribution business operate, as well as the vehicles which the distribution company uses.

c.An LLC that is treated as a pass-through entity for federal tax purposes is not subject to Rhode Island combined reporting, and is not part of a combined group. In this example, the income that is generated by the LLC passes directly through to Tom and Jerry, the LLC’s owners, and is not counted as income of the combined group.

5.Example:

a.Assume the same facts and circumstances as in Example # 4 above, except that Tom and Jerry are Connecticut residents who are equal owners of the Rhode Island bakery C corporation, the Rhode Island baked goods distribution company C corporation, a Connecticut C corporation management business, and the LLC which owns all of the real estate of all of the businesses plus the vehicles that the distribution corporation uses. The bakery’s business is entirely in Rhode Island; it sells its goods to the distribution company, which distributes the goods to customers throughout Rhode Island, Connecticut, and Massachusetts.

b.In this example, the combined group consists of the bakery in Rhode Island, the distribution company in Rhode Island, and the management services business in Connecticut.

c.The LLC charges rent to all of the businesses in both states. The Connecticut management corporation charges all of the businesses in both states a management fee. Principally as a result of the fees levied by the LLC and the management company, the bakery and distribution business in Rhode Island have reported de minimis net income for some years, a net loss for others, and each has paid to Rhode Island the $500 corporate minimum tax before combined reporting took effect.

d.Under Rhode Island’s mandatory unitary combined reporting regime, the combined group pools its income and apportions it to Rhode Island using single sales factor apportionment. The LLC is not part of the combined group; its income flows through to its owners, Tom and Jerry. However, the LLC must apportion its income, at the entity level, using Rhode Island’s three-factor apportionment formula. Both Tom and Jerry have Rhode Island source income from the LLC and are subject to Rhode Island pass-through withholding, which is calculated by the LLC. Both Tom and Jerry report their apportioned LLC income on their Rhode Island nonresident and Connecticut resident personal income tax returns.

6.Example:

a.TT Corp. is a C corporation.

b.UU Corp. is an S corporation.

c.VV LLC is a limited liability company treated as a pass-through entity for federal tax purposes.

d.All are Rhode Island entities doing business in multiple states, share common ownership, and are engaged in a single, common business enterprise. None is subject to Rhode Island’s combined reporting regime. Even though all of the entities are engaged in a unitary business and are under common ownership, only one is a C corporation; for combined reporting to apply, two or more C corporations must be involved (and must have common ownership and must be engaged in a unitary business).

e.The C corp. will apportion its income to Rhode Island using single sales factor apportionment, and using market-based sourcing for purposes of the sales factor.

f.The S corp. and the LLC will apportion their income at the entity level using three-factor apportionment and the cost-of-performance method for purposes of the sales factor.

7.Example:

a.AA Corp. is in Providence, R.I.

b.BB Corp. is in Cranston, R.I.

c.CC Corp. is in Middletown, R.I.

d.All three are treated as C corporations for federal income tax purposes, under common ownership, engaged in a unitary business – all are micro-manufacturers that sell products throughout the world. Each has nexus in Connecticut and Massachusetts.

e.For tax year 2014, each was a separate entity for Rhode Island corporate income tax purposes. Each filed its own Rhode Island corporate income tax return, apportioned its income to Rhode Island based on three-factor apportionment, with a double-weighted sales factor. For apportionment purposes, each used the cost-of-performance method for sourcing sales of services. Thus, the sale of services was assigned to the state in which the income-producing activity was performed. If the corporation performed the income-producing activity in two or more states, the sale was assigned to the state in which the corporation performed a greater proportion of the income-producing activity than in any other state, based on the costs of performance.

f.For tax year 2015 and later, they will be subject to combined reporting – i.e., they will combine their income, disregarding intercompany transactions; the resulting combined pool of income will be apportioned to Rhode Island using a single factor – sales (receipts) – for apportionment purposes. Also for apportionment purposes, they will assign sales of services to the state in which the benefit of the service is received. If a customer receives only a portion of the benefit of the service in Rhode Island, the gross receipts are assigned to Rhode Island in proportion to the extent the customer benefits from the service in Rhode Island.

8.Example:

a.Alfa Corp. is in Delaware.

b.Bravo Corp. is in Delaware.

c.Charley Corp. is in Vermont.

d.Alfa, Bravo, and Charley comprise a combined group engaged in a unitary business. Until recently, only Charley had Rhode Island sales. However, Alfa and Bravo elected to expand their business to the Rhode Island market. To do so, Alfa and Bravo formed a general partnership, Foxtrot Partnership, with Alfa and Bravo as owners. Foxtrot Partnership has annual Rhode Island sales of $1 million. The $100,000 in income from those sales passes through to the partnership’s two corporate owners, Alfa and Bravo.

e.For tax year 2014, when Rhode Island separate entity reporting applied, Alfa and Bravo each filed its own Rhode Island corporate income tax return; Foxtrot Partnership filed a partnership information return with Rhode Island; Charley had no Rhode Island filing requirement.

f.For tax years beginning on and after January 1, 2015, the group is subject to Rhode Island combined reporting and must file a return on Form RI-1120C. That is because the group has Rhode Island nexus through its partnership, Foxtrot Partnership. To compute the tax, the group will include in its numerator the $1 million of Rhode Island sales from the partnership – plus all Rhode Island sales of all other C corporations in the group, including Charley Corp. The denominator will be everywhere sales.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-10 § 10.25 Appendix III – Comprehensive Example

A.Victor Corp. is a Rhode Island business treated as a C corporation for federal income tax purposes. It is a manufacturer of jewelry, chiefly under the “Zulu” brand. It has nexus only in Rhode Island.

B.Whiskey Corp. is a Connecticut business treated as a C corporation for federal income tax purposes. It is a manufacturer of specialty packaging. Its packaging is used chiefly for “Zulu” brand jewelry. It has nexus only in Connecticut.

C.X-ray Corp. is a Nevada business treated as a C corporation for federal income tax purposes. It provides management, accounting, and related services to Victor Corp. and Whiskey Corp. X-ray Corp. has nexus only in Nevada.

D.Romeo is a limited liability company (LLC) based in Delaware that is treated as a pass-through entity for federal income tax purposes. It owns X-ray Corp.’s land and buildings. Romeo’s income and expenses flow through to X-ray Corp. of Nevada.

E.Victor Corp., Whiskey Corp., and X-ray Corp. are under common ownership – more than fifty percent (50%) of the voting control of each member of the group is directly or indirectly owned by a common owner or owners.

F.The activities of the group are sufficiently interdependent, integrated or interrelated through their activities so as to provide mutual benefit and produce a significant sharing or exchange of value among them or a significant flow of value among the separate parts.

G.Thus, the combined group is deemed to be engaged in a common business enterprise, a unitary business, for purposes of Rhode Island’s mandatory unitary combined reporting regime.

H.Tax Year 2014

1.For tax year 2014, when Rhode Island had separate entity reporting for corporate income tax purposes, only Victor Corp. was required to file a Rhode Island corporate income tax return, and only Victor Corp. had a Rhode Island corporate income tax liability.

2.Due chiefly to the expenses Victor Corp. incurred through payments it made to its Nevada affiliate for management, accounting, and related services, Victor Corp. suffered a $5,000 current-year net loss.

3.As a result, Victor Corp.’s Rhode Island corporate income tax liability for tax year 2014 was the minimum required, $500. (Please see table below.)

Tax Year 2014

Victor Corp

(Separate)

Whiskey Corp

(Separate)

X-Ray Corp

(Separate)

Combined Return

Federal taxable income

$100,000

$1,000,000

$180,000,000

n/a

deductions

(110,000)

(750,000)

(90,000,000)

n/a

additions

5,000

50,000

10,000,000

n/a

Adjusted taxable income

(5,000)

300,000

100,000,000

n/a

Rhode Island tax

500

n/a

I.Tax Year 2015

1.For tax year 2015, Rhode Island combined reporting is in effect. As a result, the income of all of Victor Corp.’s affiliates must be combined for Rhode Island corporate income tax purposes into a single pool of income. (For convenience, the example assumes that income and expenses of all the affiliates are the same for tax year 2015 as they were for tax year 2014.)

2.The income of X-ray Corp. for tax years 2014 and 2015 reflects the income and expenses of Romeo LLC in Delaware. However, for tax year 2015, the income and expenses of Romeo LLC, which pass through to X-ray Corp., must be included as part of the overall combined group’s income.

3.Under Rhode Island combined reporting rules, NOLs created before January 1, 2015, are allowed to offset the income only of the corporation that created the NOL; the NOL cannot be shared with other members of the combined group. Thus, in this example, the NOL created by Victor Corp. for tax year 2014 cannot be shared with the group for tax year 2015.

4.However, Victor Corp. created a current-year net loss for tax year 2015, which is allowed to be shared with other members of the combined group. (Please see table below.)

Tax Year 2015

Victor Corp

Whiskey Corp

X-Ray Corp

Combined Return

Federal taxable income

$100,000

$1,000,000

$180,000,000

$181,100,000

deductions

(110,000)

(750,000)

(90,000,000)

(90,860,000)

additions

5,000

50,000

10,000,000

10,055,000

Adjusted taxable income

(5,000)

300,000

100,000,000

100,295,000

5.Although the income of all of the members of the combined group must be combined for Rhode Island corporate income tax purposes, not all of that income will be taxed by Rhode Island; only a portion will be.

6.Under Rhode Island combined reporting rules, a series of calculations must be performed to determine the amount of the combined group’s pool of income to be apportioned to Rhode Island and subjected to Rhode Island tax. The calculation is based on a single factor – sales, also known as gross receipts or total receipts.

7.The apportionment formula includes a numerator and a denominator:

a. For purposes of the numerator, all Rhode Island receipts are counted – including receipts of corporations that do not have Rhode Island nexus. (Please see table below.)

b.For purposes of the denominator, all gross receipts – including, in this example, all overseas sales of all taxable members of the group – are included. (Please see table below.)

Apportionment:

Victor Corp.

Whiskey Corp.

X-ray Corp.

Combined

Rhode Island receipts

$5,000,000

$10,000,000

$15,000,000

Everywhere receipts

10,000,000

100,000,000

200,000,000

310,000,000

Apportionment ratio

0.500000

0.100000

0.000000

0.04838710

c.As the table above shows, the combined Rhode Island receipts of the group are divided by the combined everywhere receipts of the group. The result is an apportionment factor of 0.0483871.

d.To determine the amount of the combined group’s combined income that is apportioned to Rhode Island, the combined group’s apportionment factor of 0.0483871 is applied to the combined group’s Rhode Island adjusted taxable income of $100,295,000.

e.The result is the combined group’s apportioned Rhode Island taxable income. The income (after any applicable adjustments) is then subject to Rhode Island’s corporate income tax rate. (For tax year 2015, the Rhode Island corporate income tax rate is seven percent (7%), down from nine percent (9%) for tax year 2014.) In this example, the combined group’s Rhode Island apportioned taxable income of $4,852,984 is multiplied by the tax rate of seven percent (7%) for tax year 2015 to arrive at the tentative Rhode Island corporate income tax of $339,709. (Please see table below.) Any allowable credits, subject to Rhode Island combined reporting rules, would then be applied to arrive at Rhode Island tax.

Tax computation for tax year 2015:

Combined group

Federal taxable income

$181,100,000

deductions

(90,860,000)

additions

10,055,000

Adjusted taxable income

100,295,000

x apportionment factor

0.04838710

Apportioned taxable income

4,852,984

x tax rate

0.07

Tentative Rhode Island tax

339,709

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2018-06-18 to 06/18/2018
Adoption — effective from 2016-03-30 to 06/18/2018

280-RICR-20-25-11 Ability to Apportion Net Income

280-RICR-20-25-11 § 11.1 Ability to Apportion Net Income

A.In accordance with R.I. Gen. Laws § 44-11-13, the following types of corporate activity will require that a corporation apportion 100% of its net income to Rhode Island:

1.Deriving all its income sources within Rhode Island; or

2.Engaging in activities or transactions wholly within Rhode Island for the purpose of profit or gain; or

3.Not maintaining a regular place of business outside Rhode Island other than a statutory office.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 12/20/2001
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-25-11 § 11.2 Definitions

The term "place of business" means a regular place of business, which, in turn, means any bona fide office (other than a statutory office), factory, warehouse, or other space which is regularly used by the taxpayer in carrying on its business. Where, as a regular course of business, property of the taxpayer is stored by it in a public warehouse until it is shipped to customers, such warehouse is considered a regular place of business of the taxpayer and where, as a regular course of business, raw material or partially finished goods of a taxpayer are delivered to an independent contractor to be converted, processed, finished or improved, and the finished goods remain in the possession of the independent contractor until shipped to customers, the plant of such independent contractor is considered a regular place of business of the taxpayer. The mere consignment of goods by the taxpayer to an independent factor outside this state for sale at the consignee's discretion does not constitute the taxpayer as having a regular place of business outside this state.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 12/20/2001
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-25-12 Consolidated Returns

280-RICR-20-25-12 § 12.1 Conditions for Filing

A.An affiliated group of corporations may file a consolidated return for the taxable year provided that each member corporation:

1.is not a Foreign Sales Corporation (FSC), Domestic International Sales Corporation (DISC), a Subchapter S corporation, or is not a corporation as described in R.I. Gen. Laws §§ 44-11-2(2)(a) or 44-11-2(2)(b), and

2.is subject to taxation under R.I. Gen. Laws Chapter 44-11, and

3.has the same fiscal period, and

4.was affiliated at any time during the taxable year, and

5.consents to such filing and gives written notice thereof to the Tax Administrator no later than the 15th day of the third month following the close of the fiscal year, and joins in the filing of such consolidated return.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/01/2018

280-RICR-20-25-12 § 12.2 Definitions

A."Affiliated group" mean two or more corporations connected through stock ownership with a common parent corporation, if

1.at least ninety-five percent of the stock of each of the corporations (except the common parent corporation) is owned directly by one or more of the other corporations; and

2.the common parent corporation owns directly at least ninety-five percent of the stock of at least one of the other corporations. The term "stock" does not include nonvoting stock which is limited and preferred as to dividends.

B."Consolidated return period" means any taxable year for which a consolidated return is made.

C."Subsidiary" means a corporation (other than the common parent) which is a member of the affiliated group during any part of the consolidated return period.

D."Tax" Means tax imposed under R.I. Gen. Laws Chapter 44-11 and includes any interest, penalties, additional amount, or addition to the tax payable in respect thereof.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/01/2018

280-RICR-20-25-12 § 12.3 Liability for Tax

A.Several liability of members of affiliated group: Except as provided in § 12.3(B) of this Part each member of the affiliated group during any part of a consolidated return period, shall be severally liable for the tax (including any deficiency in respect thereof) computed on the basis of a consolidated return of the group.

B.Liability of subsidiary after withdrawal: If a subsidiary by reason of a bona fide sale of stock for fair value has ceased to be a member of the affiliated group its liability under § 12.3(A) of this Part shall remain unchanged. However, if such cessation occurred prior to the date on which the deficiency is assessed, the former subsidiary's deficiency shall be reduced to an amount equal to the part allocable to the former subsidiary on the basis of the consolidated net income properly allocated to it.

C.Effect of intercompany agreements: Any agreement entered into by one or more members of the affiliated group with any other members of the group or with any other person shall in no case, reduce the liability prescribed under §§ 12.3(A) and (B) of this Part.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/01/2018

280-RICR-20-25-12 § 12.4 Parent-Agent for Subsidiaries

A.The parent corporation shall be for all purposes, in respect of the tax for the taxable year for which a consolidated return is made, the agent of each corporation which during any part of the year was a member of the affiliated group, duly authorized in the name of the parent to act for and represent each such corporation in all matters relating to such tax; the parent corporation shall be the sole agent for such corporations in such matters; and such corporations shall not have authority to act for or to represent themselves in any such matter. As examples but not limited to:

1.All correspondence will be carried on directly with the parent corporation and deficiency notices will be mailed only to the parent corporation in the affiliated group.

2.The parent corporation will file petitions and conduct proceedings before the Tax Administrator, and any such petitions shall be considered as also having been filed by each other member of the group.

3.The parent corporation will file claims for refund or credit; the refunds will be made directly to and in the name of the parent corporation and will discharge any liability of the state in respect thereof to any other member.

4.The parent corporation will, in its name, execute agreements and all other documents. Any agreement or other documents so executed, shall be considered as having been also executed by each other member of the group. However, notwithstanding other provisions under §§ 12.4(A)(1), (2) and (3) of this Part, any matter of deficiency of tax for a consolidated return will name each corporation which was a member of the affiliated group during any part of such period, and any assessment (whether of the original tax or of the deficiency) will be made in the name of each such corporation. A failure to include the name of any such corporation will not affect the validity of the deficiency notice or the assessments as to the other corporations. After the assessment has been made, any notice or demand for payment or any proceeding to collect the amount of any assessment, will name the corporation from which such collection is to be made. The provisions under §§ 12.4(A)(1), (2) and (3) of this Part shall apply whether or not one or more members have become or have ceased to be members of the group at any time.

B.Effect of dissolution of parent: In the event that the parent corporation is contemplating dissolution, or is about to be dissolved, or if for any other reason its existence is about to terminate, it shall be the parent's duty to notify the Tax Administrator of such act and to designate another agent to act as agent in the parent's place to the same extent and subject to the same conditions and limitations as are applicable to the parent corporation.

1.Until this notice (in writing with the designation of another agent) has been received by the Tax Administrator, any notice or deficiency letter mailed to the parent corporation shall be considered as having been mailed to the agent of the group. If the Tax Administrator has reason to believe that the existence of the parent corporation has terminated, is about to terminate or has been notified of the designation of another agent to act in the parent's place, he may (if he deems it advisable) deal directly with any member of the affiliated group with respect to its liability.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/01/2018

280-RICR-20-25-12 § 12.5 Failure to Include Income of Subsidiary

If the income of any subsidiary liable for tax under R.I. Gen. Laws Chapter 44-11 has not been included in the consolidated return, notice may be given by the Tax Administrator to the parent corporation at the Tax Administrator's discretion. The tax liability may be determined on the basis of separate returns for all members of the affiliation: or on a separate return for the subsidiary whose income is omitted from the consolidated return, or on the inclusion of the income of such subsidiary in the consolidated return.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/01/2018

280-RICR-20-25-12 § 12.6 Consolidated Net Income and Net Worth

A.Consolidated net income: The consolidated net income of the affiliated group making a consolidated return for any taxable year, shall be the aggregate of the taxable income or loss apportioned to this state of each of the members of such group, without eliminations for any kinds of transactions between members or nonmembers of the group. This computation is as follows: each member's taxable income or loss is separately apportioned to this state and then these apportioned income or loss amounts are aggregated.

B.Consolidated net worth: The consolidated net worth of the affiliated group making a consolidated return for any taxable year, shall be the aggregate of the net worth apportioned to this state of each of the members of such group, computed without eliminations of any kind between members or nonmembers of the group. This computation is as follows: Each member's net worth is separately apportioned to this state and then their apportioned net worth amounts are aggregated.

C.Separate statements of income and separate balance sheets for each corporation must accompany the return. The minimum tax for the group is the aggregate of the franchise tax for each member joining in the consolidated filing.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/01/2018

280-RICR-20-25-12 § 12.7 Bad Debts

A.Resulting from transactions during consolidated return period: Intercompany accounts receivable shall not be deducted as bad debts during a consolidated return period.

B.Resulting from transactions prior to the consolidated return period: No deduction shall be allowed during a consolidated return period for intercompany accounts receivable or other obligations resulting from intercompany transactions during the period of filing separate returns.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/01/2018

280-RICR-20-25-12 § 12.8 Net Operating Loss

See Net Operating Loss Deduction Regulation (Part 13 of this Subchapter)

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/01/2018

280-RICR-20-25-12 § 12.9 Existence and Termination of Affiliated Group

A.When an affiliated group remains in existence: For the purpose of these regulations, an affiliated group is considered as remaining in existence if the common parent corporation remains as a common parent and at least one subsidiary remains affiliated with it, whether or not that subsidiary was a member of the group at the time the group was formed and whether or not one or more corporations have become subsidiaries or have ceased to be subsidiaries at any time after the group was formed.

B.When an affiliated group terminates: For the purpose of these regulations, an affiliated group shall be considered as terminated if the common parent corporation ceases to be the common parent or if there is no subsidiary affiliated with it.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/01/2018

280-RICR-20-25-12 § 12.10 Sunset Provision

For tax years beginning after December 31, 2014, C-corporations will no longer file on a consolidated return basis; rather, they will file on a "Combined Report" basis. See Combined Reporting Regulation (§ 10.6 of this Subchapter).

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/01/2018

280-RICR-20-25-13 Net Operating Loss Deductions

280-RICR-20-25-13 § 13.1 Purpose

These rules and regulations implement R.I. Gen. Laws § 44-11-11(b) which provide a Net Operating Loss Deduction.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/01/2018

280-RICR-20-25-13 § 13.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws §§ 44-1-4 and 44-11-9. The rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws §§ 42-35-1 et. seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/01/2018

280-RICR-20-25-13 § 13.3 Application

These rules and regulations shall be liberally construed to permit the Division of Taxation to administrator R.I. Gen. Laws § 44-11-11(b) regarding Net Operating Losses.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/01/2018

280-RICR-20-25-13 § 13.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/01/2018

280-RICR-20-25-13 § 13.5 Net Operating Loss Deduction Allowed

A.A deduction similar to that allowed under 26 U.S.C. § 172, except as provided in §§ 13.5(A)(1), (2) and (3) of this Part, may be allowable in computing entire net income for the purposes of R.I. Gen. Laws § 44-11-11. The Rhode Island net operating loss deduction is the same as that allowed for federal tax purposes subject to limitations:

1.One of these limitations is that any net operating loss which may be carried forward for federal tax purposes must be adjusted to reflect the inclusions and exclusions from entire net income required by R.I. Gen. Laws §§ 44-11-11(a) and 44-11-11.1.

a.Example 1 - For the calendar year 2013, a taxpayer has federal gross income of $400,000, including $100,000 dividends from corporations qualifying for the 85% dividend exclusion and has deductible operating expenses of $400,000, including $5,000 Rhode Island corporation tax. Its federal net operating loss is $85,000 and its Rhode Island net operating loss is $80,000, computed as follows:

(1)Federal Filing

Gross Income

$400,000

Less Operating Expense

($400,000)

Taxable Income Before Special Deduction

Less Special Dividend Received Deduction

($85,000)

Net Operating Loss

($85,000)

(2)Rhode Island Filing

Federal Taxable Income

($85,000)

Add: Amount of Federal Deduction for Rhode Island Business Corporation Tax

$5,000

Rhode Island Net Operating Loss

($80,000)

2.The second limitation is that in any year the Rhode Island net operating loss deduction may not exceed the deduction allowable for that year for federal tax purposes under 26 U.S.C. § 172.

a.Example 2 - If the dividends in the example 1 were from corporations subject to tax under R.I. Gen. Laws Chapter 44-11, the Rhode Island net operating loss would be $95,000 computed as follows:

Federal Taxable Income Before Special Deductions

Less: Special Deductions

($85,000)

Less: Exempt Dividends & Interest

($15,000)

Subtotal

($100,000)

Add: Amount of Federal Deduction for Rhode Island Business Corporation Tax

$5,000

Rhode Island Operating Loss

($95,000)

Maximum Rhode Island Operating Loss (Limitation 13.5(A)(2) of this Part)

($85,000)

b.Example 3 - If the taxpayer in the example 2 in 2014 had federal gross income of $300,000, including $100,000 of dividends from corporations subject to Rhode Island corporation tax and expenses of $100,000 including Rhode Island corporation taxes of $5,000, its federal and state net operating loss deduction will be computed as follows:

(1)Federal Filing

Gross Income

$300,000

Expenses

($100,000)

Subtotal

$200,000

Net Operating Loss Deduction from 1983 (See example 2 Assume only as a carryforward)

($85,000)

Federal Taxable Income Before Special Deduction

$115,000

Less: Special Dividends Received Deduction (Current Year)

($85,000)

Federal Taxable Income

$30,000

(2)Rhode Island Filing

Federal Taxable Income Before Special Deduction

$115,000

Add: Amount of Federal Deduction for Rhode Island Business Corporation Tax

$5,000

Less: Special Dividends Received Deduction

($85,000)

Less: Exempt Dividends & Interest

($15,000)

Rhode Island Taxable Income

$20,000

3.The third limitation is that no deduction is allowable for a loss sustained during any taxable year in which a taxpayer was not subject to tax under R.I. Gen. Laws Chapter 44-11.

a.Example 4 - A corporation incorporated in Pennsylvania in January 2012. During the taxable year 2012 it sustained an operating loss of $10,000. In January 2013, it began to do business in Rhode Island. For the taxable year it had entire net income of $10,000. No deduction is allowed for any part of the loss sustained in 2012, since the corporation was not subject to Rhode Island business corporation tax in 2012.

4.The fourth limitation is that such deduction for a taxable year may not be carried back to any other taxable year for Rhode Island purposes but shall only be allowable on a carry forward basis for the five (5) succeeding taxable years.

a.Example 5

(1)Federal Filing

Gross Income

$100,000

Expenses

($125,000)

Federal Taxable Income (NOL)

($25,000)

(2)Rhode Island Filing

Federal Taxable Income (NOL)

($25,000)

Add: Amount of Federal Deduction for Rhode Island Business Corporation Tax

$1,000

Rhode Island taxable Income

($24,000)

(3)If the $25,000 Federal Net Operating Loss is carried forward, then the Rhode Island Net Operating Loss of $24,000 would also be allowed to be carried forward.

(4)If the Federal carry forward remains to be used for a sixth year then there would be no further Rhode Island carryforward because of the limitation of Rhode Island carryforward for five (5) succeeding taxable years.

(5)If the Federal Net Operating Loss is carried back, there is no Rhode Island Net Operating Loss (except to the extent any unused Federal NOL is carried forward) to be used as either a carryback or carryforward since the Rhode Island NOL is limited to a carryforward only and may not exceed the deduction allowable for that year for federal tax purposes.

B.Consolidated Net Operating Losses – for tax years beginning on or before 12/31/2014

1.Each corporation within the consolidated return shall compute its own net operating loss as outlined in § 13.5(A) of this Part, except that:

a.A corporation which reports as part of a consolidated group for federal income tax purposes but on a separate basis for purposes of Rhode Island, computes its net operating loss deduction as if it were filing on a separate basis for federal income tax purposes.

b.Any carryforward for a year for which a Rhode Island consolidated return was filed must be based upon the combined net operating loss of the group of companies filing such return.

2.The portion of the combined loss attributable to any member of the group which files a separate return for a preceding or succeeding taxable year will be an amount bearing the same relation to the combined loss as the net operating loss of such corporation bears to the total net operating losses of all members of the group having such losses, to the extent that they are taken into account in computing consolidated net operating losses.

a.Example 6 – In the taxable year 2012, the X corporation filed a separate Rhode Island return showing net income of $20,000 and also filed a separate federal return showing federal taxable income in the same amount. In 2014, it filed a separate federal return showing a net operating loss of $10,000 but joined with W Corporation, Y Corporation and Z Corporation in filing a consolidated Rhode Island return showing the following:

W Corporation-Net Income

$7,500

X Corporation- Net Operating Loss

($10,000)

Y Corporation-Net Income

($20,000)

Z Corporation-Net Income

$7,500

Combined Net Operating Loss

($15,000)

3.For Rhode Island purposes the deduction allowable to X Corporation against its 2012 income must be based upon the combined net operating loss shown above. The portion of the combined loss attributable to X Corporation is one-third $10,000/($10,000 + $20,000). Therefore, the deduction allowable to X Corporation against its 2012 income would be ($5,000), i.e., 1/3 x ($15,000).

C.Net Operation Loss on Combined Reporting Tax Returns

1.For tax years beginning on or after January 1, 2015 see Regulation Business Corporation Tax - Combined Reporting (§ 10.13 of this Subchapter).

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/01/2018

280-RICR-20-25-14 Qualified Sub Chapter S Subsidiary Corporations

280-RICR-20-25-14 § 14.1 Purpose

The purpose of this regulation is to implement R.I. Gen. Laws Chapter 44-11. This amendment requires a Sub Chapter S Corporation parent and its Qualified Sub Chapter S Subsidiaries to each obtain a federal employer identification number.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/01/2018

280-RICR-20-25-14 § 14.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws § 44-1-4. The rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws §§ 42-35-1 et. seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/01/2018

280-RICR-20-25-14 § 14.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation to effectuate the purpose of R.I. Gen. Laws Chapter 44-11 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/01/2018

280-RICR-20-25-14 § 14.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/01/2018

280-RICR-20-25-14 § 14.5 Filing of Returns

A.Combined Returns

A Sub Chapter S Corporation parent and its Qualified Sub Chapter S Subsidiaries ("QSSS") may file a combined return for the taxable year provided that such corporations:

a.Meet the requirements as set forth in 26 U.S.C. § 1361(b) and files on a combined basis for federal purposes, and

b.Apportion one hundred percent (100%) of their business activity and income to Rhode Island and are included in the combined return for federal purposes, and

c.Submit a copy of the federal election to be a Qualified Sub Chapter S Subsidiary, and

d.Make a separate Rhode Island election to file on a combined basis by the original due date of the return by either attaching a letter of intent to a valid extension request or by checking the “Q-Sub included” check box on the tax return if it is filed by the original due date.

2.A combined return filed pursuant to this regulation shall bear the Federal identification number of the Parent S Corporation.

3.The minimum tax for the group is the aggregate of the minimum tax for each member joining in the filing of the combined return.

4.Each member of the combined group during any part of the combined return period shall be severally liable for the tax (including any deficiency in respect thereof) computed on the basis of the combined return of the group.

5.A copy of the Federal Form 1120S must accompany the filing of the Form RI-1120.

B.Separate Returns

A Sub Chapter S Corporation parent and its qualified Sub Chapter S Subsidiaries may not file a combined return if all member corporations do not apportion one hundred percent (100%) of their business activity and income to Rhode Island.

C.Special Rule

1.The members of a combined group within the Sub Chapter S Parent and Qualified Sub Chapter S Subsidiary which apportion all of their business to Rhode Island and are part of a federal combined return may file a combined return with Rhode Island; however, those members which do not apportion 100% of their business activity and income to Rhode Island may not be included in the combined return and must file on a separate basis.

2.Combined filers must have a common parent. Brother/sister corporations without a common parent may not file on a combined basis.

3.Separate filers must file their returns with their own Federal identification number as required in § 14.1 of this Part.

4.If a corporation is a separate filer in Rhode Island but files a combined return for federal purposes, a full copy of the Federal Form 1120S, plus a pro-forma basis federal return must accompany each separate Rhode Island corporate return filed.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-01 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/01/2018

280-RICR-20-25-15 Treatment of Repatriated Income 2017

280-RICR-20-25-15 § 15.1 Purpose

These rules and regulations implement various provisions of R.I. Gen. Laws Title 44 as they relate to the treatment of accumulated foreign income deemed repatriated under the federal law commonly known as the Tax Cuts and Jobs Act (Pub. Laws 115-97) and as implemented in new 26 U.S.C. § 965. These sections outline the inclusion of 965 Income for Rhode Island purposes, the apportionment of 965 Income, and the application of certain deductions for purposes of the Rhode Island Business Corporation Tax.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-08-22 to 01/04/2022

280-RICR-20-25-15 § 15.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws §§ 44-11-9 and 44-1-4. These rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws § 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-08-22 to 01/04/2022

280-RICR-20-25-15 § 15.3 Application

These rules and regulations shall be liberally construed to permit the Division of Taxation the authority to effectuate the purpose of R.I. Gen. Laws § 44-11-1 et seq. and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-08-22 to 01/04/2022

280-RICR-20-25-15 § 15.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-08-22 to 01/04/2022

280-RICR-20-25-15 § 15.5 Findings of Fact

A.The Tax Administrator makes the following findings of fact that support the promulgation of this regulation:

1.The United States Congress passed legislation commonly known as the Tax Cuts and Jobs Act (“TCJA”) (Pub. Laws 115-97) on December 20, 2017. The President of the United States signed the TCJA into law on December 22, 2017.

2.The TCJA includes a number of significant tax updates, including changes that affect individuals, businesses, and international entities.

3.The TCJA, under 26 U.S.C. § 965(a), imposes a one-time transition tax on the accumulated post-1986 deferred foreign income (deemed dividend) of certain deferred foreign income corporations earned before the end of calendar year 2017. This transition tax is established for tax year 2017.

4.R.I. Gen. Laws § 44-11-11(a) defines “net income” as federal taxable income subject to certain adjustments. R.I. Gen. Laws § 44-11-12 states what type of income is not included in Rhode Island net income.

5.26 U.S.C. § 965(c) provides for a deduction that reduces the tax liability on 965 Income. 26 U.S.C. § 965(h) allows taxpayers the option to pay the 965 Income tax liability over eight (8) years. However, Rhode Island has no authority to defer payment on recognized income without adding interest and penalty.

6.26 U.S.C. § 965 provides S corporation shareholders the option to make an election for deferred recognition of Section 965 net tax liability at the federal level until certain “triggering events”. Rhode Island recognizes income for Rhode Island purposes at the time it is recognized for federal income tax purposes.

7.Rhode Island law currently contains no statutory requirement to provide a dividend received deduction (“DRD”) for Subpart F income. Nor does Rhode Island law allow for any increased Rhode Island income tax liability arising from 965 Income to be paid in installments over the course of several years.

8.In response to federal and Rhode Island case law, since Rhode Island does not have statutory authority to provide a DRD for dividend income provided by corporations not subject to the Business Corporation Tax, Rhode Island has historically administratively allowed corporate taxpayers to take a DRD for certain types of foreign-source income such as non-U.S. source dividends and Subpart F income received by a C corporation. The amount of the Rhode Island DRDs in the context of foreign source income has been equivalent to the level of DRD provided to corporations under prior federal income tax law for dividends paid by domestic corporate subsidiaries to parent C corporations as disclosed on their Federal Corporate Income Tax Return.

9.The TCJA is imposing a one-time repatriation tax on 965 Income subject to a special and additional Section 965(c) deduction amount, and Rhode Island now employs combined reporting for C corporations. These facts distinguish the prior case law and urge against Rhode Island providing a DRD for 965 Income amounts included as net income at the Rhode Island level.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-08-22 to 01/04/2022

280-RICR-20-25-15 § 15.6 Definitions

A.“965 Income” means the accumulated post-1986 deferred foreign income of deferred foreign income corporations earned before the end of calendar year 2017 that is included as gross income by a U.S. shareholder under 26 U.S.C. § 951(a)(1) pursuant to 26 U.S.C. § 965(a).

B.“Apportionment” means the same as its definition set forth in the Division’s Combined Reporting regulation (Part 10 of this Subchapter).

C.“Combined reporting” means the same as its definition set forth in the Division’s Combined Reporting regulation (Part 10 of this Subchapter).

D.“Common ownership” means the same as its definition set forth in the Division’s Combined Reporting regulation (Part 10 of this Subchapter).

E.“Corporation” means the same as its definition set forth in the Division’s Combined Reporting regulation (Part 10 of this Subchapter) and Apportionment of Net Income regulation (Part 9 of this Subchapter).

F.“Deferred foreign income corporation” means the same as its definition set forth in 26 U.S.C. § 965(d).

G.“Dividend received deduction” or “DRD” means a Rhode Island tax deduction not provided by the Internal Revenue Code that a C corporation may claim that is equal to a percentage of the dividends that it receives from, or the Subpart F Income attributable to, foreign corporations whose stock it owns, as defined by the Internal Revenue Code prior to the enactment of the TCJA and as prescribed by the RI-1120C.

H.“Division of Taxation” means the Rhode Island Department of Revenue, Division of Taxation. The Division may also be referred to in this regulation as the “Division of Taxation”, “Tax Division”, or “Division”.

I.“Foreign corporation” means the same as its definition set forth in the Division’s Combined Reporting regulation (Part 10 of this Subchapter).

J.“Internal Revenue Code” or “IRC” means the most current edition of Title 26 of the United States Code.

K.“Member” means the same as its definition set forth in the Division’s Combined Reporting regulation (Part 10 of this Subchapter).

L.“Net income” means Rhode Island net income as defined in R.I. Gen. Laws § 44-11-11, as amended. This includes Net 965 Income since Rhode Island net income is broadly defined as a taxpayer’s taxable income under the laws of the United States, and no exclusions under R.I. Gen. Laws § 44-11-11, as amended, apply to Net 965 Income.

M.“Net 965 income” means 965 Income less any federal deductions provided by 26 U.S.C. § 965.

N.“Nonunitary foreign corporation subsidiary” means any foreign corporation subsidiary that both:

1.is not a combined group member with the corporation that recognizes such income; and

2.would not be a combined group member with the corporation that recognizes the income if the water’s edge rules did not apply.

3.The preceding principles apply whether the corporation that recognizes the Net 965 Income files as part of a combined group or files a separate return.

O.“Partnership” means the same as its definition set forth in the Division’s Combined Reporting regulation (Part 10 of this Subchapter).

P.“Pass-through entity” means the same as its definition set forth in the Division’s Combined Reporting regulation (Part 10 of this Subchapter).

Q.“Rhode Island combined group” means the same as the definition of “combined group” set forth in the Division’s Combined Reporting regulation (Part 10 of this Subchapter).

R.“Single sales factor” means the same as its definition set forth in the Division’s Combined Reporting regulation (Part 10 of this Subchapter).

S.“Subpart F income” means the same as its definition set forth in 26 U.S.C. § 952.

T.“Tax administrator” means the same as its definition set forth in the Division’s Combined Reporting regulation (Part 10 of this Subchapter).

U.“Three-factor apportionment” means the same as its definition set forth in the Division’s Combined Reporting regulation (Part 10 of this Subchapter).

V.“Transition tax” means any one-time increase in Rhode Island income tax arising from the recognition of 965 Income.

W.“Unitary business” means the same as its definition set forth in the Division’s Combined Reporting regulation (Part 10 of this Subchapter).

X.“Unitary foreign corporation subsidiary” means any foreign corporation subsidiary that both:

1.is not a combined group member with the corporation that recognizes such income; and

2.would be a combined group member with the corporation that recognizes the income if the water’s edge rules did not apply. The preceding principles apply whether the corporation that recognizes the Net 965 Income files as part of a combined group or files a separate return.

3.The preceding principles apply whether the corporation that recognizes the Net 965 Income files as part of a combined group or files a separate return.

Y.“Water’s edge rules” means the same as its definition set forth in the Division’s Combined Reporting regulation (Part 10 of this Subchapter).

Z.Any term used in this Regulation and not defined herein shall have the same meaning as when used in a comparable context in other Rhode Island regulations relating to corporate income tax, unless a different meaning is clearly required.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-08-22 to 01/04/2022

280-RICR-20-25-15 § 15.7 Dividend Received Deduction

A.C Corporations

1.Rhode Island Net Income. A C-corporation that receives Net 965 Income attributable to a foreign corporation subsidiary must include such income in Rhode Island income, subject to the provisions of this regulation regarding DRDs, intercompany eliminations, apportionment, and other matters.

2.Other Includible Income. Net 965 Income is includible in income and no DRD applies if the Net 965 Income is attributable to a foreign corporation subsidiary that is treated as a member of a combined group with the corporation that recognizes such income only to the extent of such foreign corporation subsidiary’s U.S. source income and factors as discussed in § 10.7(H)(2)(a) of this Subchapter.

a.Example: Alpha Corp is a domestic C corporation member of a Rhode Island combined group that also includes the U.S.-source items of Alpha Corp’s 100% owned subsidiary Bravo Corp, a foreign corporation, pursuant to § 10.7(H)(2)(a) of this Subchapter. Alpha Corp recognizes $350,000 in Net 965 Income attributable to Bravo Corp. Alpha Corp would include in Rhode Island taxable income the entire $350,000 Net 965 Income with no DRD offset, and the combined group return would not eliminate as an intercompany item any portion of the $350,000.

3.Intercompany Eliminations. Under the Division’s Combined Reporting regulation (Part 10 of this Subchapter), Net 965 Income includible in Rhode Island income that is attributable to any foreign corporation subsidiary that is a member of a combined group with the corporation that recognizes such Net 965 Income should be eliminated from a combined return as an item of intercompany income only to the extent such Net 965 Income is attributable to accumulated deferred foreign income earned by the foreign corporation subsidiary during periods in which it was a combined group member. Accordingly, to the extent such Net 965 Income is attributable to accumulated deferred foreign income earned by the foreign corporation subsidiary during periods in which it was not a combined group member, the US corporation recognizing such income will include the income in Rhode Island taxable income.

a.Example: Hotel Corp is a domestic C corporation member of a Rhode Island combined group that also includes its 100% owned subsidiary India Corp, a foreign corporation. Hotel Corp and India Corp became Rhode Island combined group members together commencing on January 1, 2015, and were not Rhode Island combined group members with each other prior to that date. Hotel Corp recognizes $300,000 in Net 965 Income. $25,000 of such Net 965 Income is attributable to accumulated deferred foreign income earned by India Corp on or after January 1, 2015. Hotel Corp and the combined group would include $275,000 of the Net 965 Income in Rhode Island taxable income with no elimination or DRD offset, and the combined group would eliminate $25,000 of the Net 965 Income as an intercompany item.

4.Unitary Foreign Corporation Subsidiary. No DRD applies to Net 965 Income includible in Rhode Island income that is attributable to an Unitary Foreign Corporation Subsidiary.

a.Example: Charlie Corp and Delta Corp are C corporation members of a Rhode Island combined group. Echo Corp is a foreign corporation that is not a member of the combined group due to the water’s edge rules, is owned 80% by Charlie Corp, and is engaged in a unitary business with Charlie Corp and Delta Corp. Charlie Corp in tax year 2017 for federal income tax purposes recognizes $100,000 in 965 Income attributable to Echo Corp, offset by 26 U.S.C. § 965(c) deductions totaling $30,000, resulting in Net 965 Income of $70,000. Charlie Corp makes a 26 U.S.C. § 965(h) election to pay the 965 net tax liability in installments for federal tax purposes. Because Echo Corp is more than 50% owned by group member Charlie Corp and is engaged in a unitary business with the group, it would be a member of the Rhode Island combined group but for the water’s edge rules. Therefore, the combined group return would include as an item of income $70,000 in Net 965 Income, and no DRD would apply. Despite Charlie Corp’s election under 26 U.S.C. § 965(h), the entire $70,000 must be included in the 2017 combined return and any additional Rhode Island tax due as a result of the $70,000 income item is not deferred.

5.Nonunitary Foreign Corporation Subsidiary. If a corporation recognizes Net 965 Income includible in Rhode Island income, attributable to a Nonunitary Foreign Corporation Subsidiary, such Net 965 Income is entitled to a DRD equal to the DRD that would be available under federal income tax law as incorporated into Rhode Island tax computations if such subsidiary were a domestic rather than a foreign entity and the includible Net 965 Income was a dividend.

a.Example: Foxtrot Corp and Golf Corp are C corporation members of a Rhode Island combined group. Hotel Corp is a foreign corporation that is not a member of the combined group, is owned 70% by Foxtrot Corp, and is not engaged in a unitary business with Foxtrot Corp and Golf Corp. Foxtrot Corp in tax year 2017 for federal income tax purposes recognizes $200,000 in 965 Income attributable to Hotel Corp, offset by 26 U.S.C. § 965(c) deductions totaling $70,000, resulting in Net 965 Income of $130,000. Even though Hotel Corp is more than 50% owned by group member Foxtrot Corp, Hotel Corp is not engaged in a unitary business with the group members and therefore would not be a member of the Rhode Island combined group even if the water’s edge rules did not apply. As a result, the combined group return would include as an item of income $130,000 in Net 965 Income but a DRD of $104,000 would be available on the group return (80% of the Net 965 Income). If the facts are the same except that Hotel Corp is owned 10% by Foxtrot Corp, the combined group return would include as an item of income $130,000 in Net 965 Income but a DRD of $91,000 would be available on the group return (70% of the Net 965 Income).

6.Dividend Income from Pass-Through Entity. A corporation may recognize Net 965 Income as a result of an allocation of such income from a pass-through entity that directly or through tiers of other pass-through entities owns the deferred foreign income corporation giving rise to such Net 965 Income. The corporation must include any such allocation of Net 965 Income in Rhode Island income. The availability of a DRD to such corporation shall be determined by applying the principles of § 15.7(A) of this Part to the relationship between the corporation and the foreign corporation under the Division’s Combined Reporting regulation (Part 10 of this Subchapter).

a. Example: Juliett Corp is a C corporation that files a separate Rhode Island return. Juliett Corp owns an 80% interest in limited partnership Kilo, LP, which owns a 70% interest in foreign corporation Lima Corp. Kilo, LP recognizes $150,000 in 965 income attributable to Lima Corp, offset by 26 U.S.C. § 965(c) deductions totaling $30,000, resulting in Net 965 Income of $120,000. Kilo, LP issues to Juliett Corp a Form K-1 allocating 80% x $120,000 = $96,000 in Net 965 Income. Juliett Corp and Lima Corp are not engaged in a unitary business and therefore if the water’s edge rules did not apply would not file a combined return, irrespective of what percentage of Lima Corp is deemed to be owned by Juliett Corp for purposes of the combined return common ownership test. Juliett Corp would include in Rhode Island Income $96,000 in allocated Net 965 Income, offset by a DRD of $96,000 x 80% = $76,800.

B.DRD rules not otherwise addressed in this regulation shall remain intact.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-08-22 to 01/04/2022

280-RICR-20-25-15 § 15.8 Apportionment

A.Apportionment shall be governed by the Division’s Combined Reporting (Part 10 of this Subchapter) and Apportionment of Net Income (Part 9 of this Subchapter) regulations, which shall treat the Net 965 Income like dividend income and apply as follows:

1.A taxpayer that recognizes Net 965 Income and uses a single sales factor to apportion income shall include in receipts for apportionment purposes the Net 965 Income amount, as reduced by any DRD granted under this regulation. The taxpayer shall treat the entirety of such amount as receipts from the taxpayer's activities or transactions outside of Rhode Island and therefore shall include such amount in the denominator but not numerator of the single sales factor.

a.Example: Mike Corp and November Corp are C corporation members of a Rhode Island combined group. Oscar Corp is a foreign corporation that is not a member of the combined group, is owned 70% by Mike Corp, and is not engaged in a unitary business with Mike Corp and November Corp. In tax year 2017 Mike Corp recognizes for federal tax purposes $200,000 in 965 Income and $50,000 in 26 U.S.C. § 965(c) deductions attributable to Oscar Corp, resulting in Net 965 Income of $150,000. For Rhode Island tax purposes, the $150,000 of 965 Net Income is included in the combined return of Mike Corp and November Corp which the combined group properly offsets with an 80% DRD of 80% x $150,000 = $120,000, such that the income attributable to 26 U.S.C. § 965 included in the Rhode Island apportioned tax base is $150,000 - $120,000 = $30,000. Mike Corp, and thus the combined group, include in the single sales factor $30,000 as a non-Rhode Island receipt, included in the denominator but not the numerator of the factor.

2.A taxpayer that recognizes Net 965 Income and uses three-factor apportionment shall include as receipts in the sales factor of the apportionment factor the Net 965 Income amount, reduced by any DRD granted under this regulation. The taxpayer shall treat the entirety of such amount as receipts from the taxpayer's activities or transactions outside of Rhode Island and therefore shall include such amount in the denominator but not numerator of the sales factor. The Net 965 Income shall not affect the taxpayer’s computation of the payroll factor or the property factor, subject to the taxpayer’s right to request alternative apportionment under R.I. Gen. Laws § 44-11-15.

a.Example: Domestic limited partnership Papa, LP owns a 35% interest in foreign corporation Quebec Corp. Papa LP in tax year 2017 for federal income tax purposes recognizes $250,000 in 965 Income attributable to Quebec Corp, offset by 26 U.S.C. § 965(c) deductions totaling $100,000, resulting in Net 965 Income of $150,000. Papa, LP includes $150,000 with no DRD offset in its Rhode Island income subject to apportionment. Papa, LP receives no DRD because it is a pass-through entity that is not entitled to a DRD under Rhode Island law. Papa, LP in the sales factor of its three-factor apportionment factor includes $150,000 as a non-Rhode Island receipt included in the denominator but not the numerator, but Papa, LP’s payroll and property factors are unaffected by the 965 Income or its ownership interest in Quebec Corp.

3.No portion of Net 965 Income may be included in sales factor receipts for purposes of single sales factor apportionment or three-factor apportionment unless it is included in apportionable Rhode Island taxable income and is not eliminated by a combined return intercompany elimination or offset by a DRD.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-08-22 to 01/04/2022

280-RICR-20-25-15 § 15.9 Deferral of Tax Payment

A taxpayer shall not be allowed to defer any payment of the Transition Tax. However, a taxpayer may request a payment plan that would be based on the taxpayer’s ability to pay the liability.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-08-22 to 01/04/2022

280-RICR-20-25-15 § 15.10 Filing Procedures

Taxpayers must file a RI Schedule 965 with their 2017 Rhode Island return if the return has not yet been filed. If a 2017 Rhode Island return has already been filed, an amended return must be filed that includes RI Schedule 965. The federal “IRC 965 Transition Tax Statement” must be included with the RI Schedule 965. Upon request, the taxpayer must provide additional documentation to verify 965 Income and other relevant information. Please see the RI Schedule 965’s instructions for additional information related to filing the schedule.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-08-22 to 01/04/2022

280-RICR-20-25-15 § 15.11 Penalty Relief

The Tax Administrator will consider requests to waive tax penalties to the extent they are attributable to 965 Income. To request penalty relief, taxpayers must submit a written penalty waiver request to the Tax Administrator.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-08-22 to 01/04/2022

Subchapter 30 Filing

280-RICR-20-30-1 Payment of Taxes by Electronic Funds Transfer

280-RICR-20-30-1 § 1.1 Purpose

This Regulation implements R.I. Gen. Laws §§ 44-1-31.2, 44-19-10.3, 44-30-71, and 44 30-85.1. These Sections require certain taxpayers file returns electronically and/or to make payments by Electronic Funds Transfer with the Division of Taxation.

History

Technical Revision — effective from 2023-02-26 to current
Amendment — effective from 2023-02-26 to 02/26/2023
Periodic Refile — effective from 2022-01-04 to 02/26/2023
Technical Revision — effective from 2020-03-02 to 01/04/2022
Amendment — effective from 2020-03-02 to 03/02/2020
Technical Revision — effective from 2010-01-01 to 03/02/2020
Adoption — effective from 2010-01-01 to 01/01/2010

280-RICR-20-30-1 § 1.2 Authority

This Regulation is promulgated pursuant to R.I. Gen. Laws §§ 44-1-4, 44-1-31, 44-1-31.2, 44-19-33, and 44-30-95(a), as amended. These Rules have been prepared in accordance with the requirements of R.I. Gen. Laws § 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Technical Revision — effective from 2023-02-26 to current
Amendment — effective from 2023-02-26 to 02/26/2023
Periodic Refile — effective from 2022-01-04 to 02/26/2023
Technical Revision — effective from 2020-03-02 to 01/04/2022
Amendment — effective from 2020-03-02 to 03/02/2020
Technical Revision — effective from 2010-01-01 to 03/02/2020
Adoption — effective from 2010-01-01 to 01/01/2010

280-RICR-20-30-1 § 1.3 Application

The terms and provisions of these Rules and Regulations shall be liberally construed to permit the Division of Taxation to effectuate the purposes of R.I. Gen. Laws §§ 44-1-31, 44-1-31.2, 44-19-33, and 44-30-95(a) and other applicable State laws and Regulations.

History

Technical Revision — effective from 2023-02-26 to current
Amendment — effective from 2023-02-26 to 02/26/2023
Periodic Refile — effective from 2022-01-04 to 02/26/2023
Technical Revision — effective from 2020-03-02 to 01/04/2022
Amendment — effective from 2020-03-02 to 03/02/2020
Technical Revision — effective from 2010-01-01 to 03/02/2020
Adoption — effective from 2010-01-01 to 01/01/2010

280-RICR-20-30-1 § 1.4 Severability

If any provision of this Regulation, or the application thereof to any person or circumstances, is held invalid by a court of competent jurisdiction, the validity of the remainder of this Regulation shall not be affected thereby.

History

Technical Revision — effective from 2023-02-26 to current
Amendment — effective from 2023-02-26 to 02/26/2023
Periodic Refile — effective from 2022-01-04 to 02/26/2023
Technical Revision — effective from 2020-03-02 to 01/04/2022
Amendment — effective from 2020-03-02 to 03/02/2020
Technical Revision — effective from 2010-01-01 to 03/02/2020
Adoption — effective from 2010-01-01 to 01/01/2010

280-RICR-20-30-1 § 1.5 Definitions

A.“ACH” or “Automated clearing house” means a central distribution and settlement point for the electronic clearing of debits and credits between financial institutions. An automated clearing house may be a Federal Reserve Bank or any organization with an operating agreement with Nacha that operates as a processing agent for ACH transactions between financial institutions.

B.“ACH credit” means an electronic transfer of funds using the ACH network that is originated by a taxpayer through its financial institution to credit (deposit) funds to a designated State of Rhode Island bank account and debit (withdraw) funds from the taxpayer's bank account for a specified payment amount.

C.“ACH debit” means an electronic transfer of funds initiated by Rhode Island Division of Taxation, upon taxpayer instruction, to debit a taxpayer's designated bank account and credit funds to a designated State of Rhode Island bank account.

1.Note: Any payment initiated through the Division of Taxation taxpayer portal, Modernized Electronic Filing (MEF) system, or remitted in bulk through a preauthorized method is deemed to be filed by an electronic method.

D.“Addenda record” means an ACH record type that carries the supplemental data needed to completely identify a taxpayer's tax payment.

E.“Effective date” means the date in which the originator submits payment in good faith to the Division of Taxation in a manner prescribed by the Division. When unknown, the effective date will be the settlement date.

F.“EFT” or “Electronic funds transfer” means a standard ACH funds transfer to credit or debit a bank account or wire transfer. Electronic funds transfer does not include payments by check, draft, or similar paper instrument.

G."Electronic filing" means the submission of a tax return through the Division of Taxation online taxpayer portal, the Modernized Electronic Filing (MEF) system administered by the Internal Revenue Service (IRS), streamline sales tax return, and bulk electronic filings by third party providers.

H."Electronic payment" means submission of payments through the Division of Taxation online taxpayer portal, payments through MEF, single or bulk electronic payments by third party providers, payments made by EFT, and payments through an authorized credit card processor.

I.“Electronic transmission” means either Electronic Filing or Electronic Payment as applicable.

J."Larger business registrant" means a person who:

1.Operates as a business whose combined annual liability for all taxes administered by the Division of Taxation for the entity is or exceeds five thousand dollars ($5,000.00); or

2.Operated as a business whose annual gross income is over one hundred thousand dollars ($100,000.00) for the entity.

K.“Look back period” means the previous calendar year used by the Rhode Island Division of Taxation in order to determine whether electronic transmission thresholds, based on reported tax liability and/or reported gross income, are met or exceeded.

L.“MEF” means the Modernized Electronic Filing system through a tax preparation software preapproved by the Division of Taxation.

M.“Nacha” means the national regulatory body that establishes the standards, Rules, and procedures governing the ACH Network.

N."Person" as used in this Regulation means, but is not limited to, any individual, firm, partnership, general partner of a partnership, limited liability company, registered limited liability partnership, foreign limited liability partnership, association, or corporation responsible to file and/or pay a tax liability to the State of Rhode Island.

O.“Settlement date” means the date an electronic payment is deposited in a bank account designated by the State of Rhode Island for deposit of electronic tax payments.

P.“Wire transfer” or “Bank wire” means the same day transfer of funds from a depositor's account to a State of Rhode Island bank account. Fed-wires do not contain a standard addenda record and may be used only in an emergency situation with prior approval from the Division of Taxation.

History

Technical Revision — effective from 2023-02-26 to current
Amendment — effective from 2023-02-26 to 02/26/2023
Periodic Refile — effective from 2022-01-04 to 02/26/2023
Technical Revision — effective from 2020-03-02 to 01/04/2022
Amendment — effective from 2020-03-02 to 03/02/2020
Technical Revision — effective from 2010-01-01 to 03/02/2020
Adoption — effective from 2010-01-01 to 01/01/2010

280-RICR-20-30-1 § 1.6 Electronic Transmission Mandate

A.Electronic Payment Requirements.

1.Effective January 1, 2010, any person with an average monthly sales and use tax liability of two hundred dollars ($200.00) or more per month for the look back period must submit electronic payment in accordance with R.I. Gen. Laws § 44-19-10.3.

2.Any person with ten (10) or more employees required to withhold and remit tax must submit electronic payment in accordance with R.I. Gen. Laws § 44-30-71.

3.Effective January 1, 2020, any employer that withheld two hundred dollars ($200.00) or more per month on average for the look back period must submit by electronic payment in accordance with R.I. Gen. Laws § 44-30-85.1.

4.Any person who has a liability of ten thousand dollars ($10,000.00) or more in connection with the filing of any return, report or other document with the Division of Taxation is required to submit electronic payment in accordance with R.I. Gen. Laws § 44-1-31. Provided, however, payment of personal income taxes by individuals shall not be subject to the requirement for electronic payment except that employer’s withholding of taxes shall be subject to electronic payment.

5.Beginning on January 1, 2023, any larger business registrant must submit electronic payment in accordance with R.I. Gen. Laws § 44-1-31.2. Individuals and trusts filing personal or fiduciary income tax returns are not larger business registrants for the purposes of R.I. Gen. Laws § 44-1-31.2.

B.Electronic Filing Requirements

1.Effective January 1, 2020, pursuant to R.I. Gen. Laws § 44-30-85.1, any employer that withheld two hundred dollars ($200.00) or more per month on average for the look back period must submit an electronic filing.

2.Beginning on January 1, 2023, any larger business registrant must submit electronic filings in accordance with R.I. Gen. Laws § 44-1-31.2. Individuals and trusts filing personal or fiduciary income tax returns are not larger business registrants for the purposes of § 44-1-31.2.

C.Notification by Rhode Island Division of Taxation

1.The Division of Taxation periodically will review taxpayers' payment histories, employing the look back period, to determine if taxpayers are required to make electronic filings and payments as set forth herein and under applicable laws. In situations where a taxpayer reaches the threshold during a partial year, that period of time may be used as the look back period.

a.When the Division of Taxation determines that a person is liable for making payments electronically, the person will be notified of their electronic filing and payment mandate with the Division of Taxation.

b.The taxpayer has thirty (30) days after such notification to comply with the requirements after which a taxpayer may be subject to the penalties in § 1.8 of this Regulation.

History

Technical Revision — effective from 2023-02-26 to current
Amendment — effective from 2023-02-26 to 02/26/2023
Periodic Refile — effective from 2022-01-04 to 02/26/2023
Technical Revision — effective from 2020-03-02 to 01/04/2022
Amendment — effective from 2020-03-02 to 03/02/2020
Technical Revision — effective from 2010-01-01 to 03/02/2020
Adoption — effective from 2010-01-01 to 01/01/2010

280-RICR-20-30-1 § 1.7 ACH Credit Details

A.An ACH credit submission is required to meet the following criteria:

1.The addenda record must include all information and be in the format as provided in the Authorization Agreement form (RI-EFT-1).

2.Arrangements must be made through the taxpayer’s bank to set up the process for submitting the ACH credit payments.

3.For a payment to be timely, the effective date must be on or before the due date for the liability. That is, payment must be completed by the taxpayer's bank in time to be received by the payment due date. All payments received after the due date are late payments and will accrue interest and penalty as applicable.

4.Submission of an ACH credit payment does not constitute the filing of a tax return. All tax returns subject to the electronic filing mandate must be filed electronically. Failure to file such returns electronically will result in the assessment of a penalty.

History

Technical Revision — effective from 2023-02-26 to current
Amendment — effective from 2023-02-26 to 02/26/2023
Periodic Refile — effective from 2022-01-04 to 02/26/2023
Technical Revision — effective from 2020-03-02 to 01/04/2022
Amendment — effective from 2020-03-02 to 03/02/2020
Technical Revision — effective from 2010-01-01 to 03/02/2020
Adoption — effective from 2010-01-01 to 01/01/2010

280-RICR-20-30-1 § 1.8 Penalty for Non-compliance

A.Insufficient Funds and Other Bank Reversals

Payments towards tax liability made by electronic funds transfer are subject to the interest and penalty provisions if the payment is deemed late. EFT deposits to a designated State of Rhode Island bank account that are reversed by the State's depository bank due to insufficient funds in the originator's account, or for other reasons, are subject to the late filing and late payment penalties in accordance with the applicable statutes.

B.Failure to Pay Electronically.

1.R.I. Gen. Laws §§ 44-1-31.2(c), 44-19-10.3, 44-30-71, and 44-30-85.1 provide that if any person fails to remit said taxes by electronic funds transfer or other electronic means defined by the tax administrator as required hereunder, the amount of tax required to have been electronically transferred shall be increased by the lesser of:

a.Five percent (5%) of the amount that was not so transferred, or;

b.Five hundred dollars ($500.00), whichever is less, unless there was reasonable cause for the failure and such failure was not due to negligence or willful neglect.

C.Failure to File Electronically.

R.I. Gen. Laws §§ 44-1-31.2(d) and 44-30-85.1(3) provide that any person subject to the electronic filing requirements that fails to file a return by electronic transmission shall have added to the tax an amount equal to fifty dollars ($50.00) unless there was reasonable cause for the failure and such failure was not due to negligence or willful neglect.

History

Technical Revision — effective from 2023-02-26 to current
Amendment — effective from 2023-02-26 to 02/26/2023
Periodic Refile — effective from 2022-01-04 to 02/26/2023
Technical Revision — effective from 2020-03-02 to 01/04/2022
Amendment — effective from 2020-03-02 to 03/02/2020
Technical Revision — effective from 2010-01-01 to 03/02/2020
Adoption — effective from 2010-01-01 to 01/01/2010

280-RICR-20-30-1 § 1.9 Authority to Waive the Electronic Transmission Mandate

A.A taxpayer may make a written request to the Division of Taxation for waiver from mandatory electronic transmission requirements for good cause. Good cause determinations will be made on a case-by-case basis. The following will generally be considered by the Tax Administrator to constitute good cause:

1.The taxpayer's current tax liability and reporting trend shows a decline in the amount of reported tax liability. If projected into the future, the tax liability will not meet or exceed the applicable mandatory threshold amount.

2.The taxpayer's tax liability or gross income amount during the look back period no longer meets or exceeds the applicable mandatory threshold amount.

3.The taxpayer's tax liability or gross income amount meets or exceeds the applicable mandatory threshold amount only because of uncharacteristically high tax amounts or income amounts reported in three (3) or fewer months of the look back period. However, good cause does not exist under this paragraph in the case of a person reporting withholding tax on a quarterly basis.

4.The taxpayer is under the payroll administration of the federal government.

5.The imposition of the electronic transmission mandate causes an undue hardship on the person.

B.Waiver requests may be sent to the following address:

Rhode Island Division of Taxation

Electronic Mandate Waiver Request

One Capitol Hill

Providence, RI 02908

1.The waiver request must include a detailed explanation as to why the mandate should not apply.

History

Technical Revision — effective from 2023-02-26 to current
Amendment — effective from 2023-02-26 to 02/26/2023
Periodic Refile — effective from 2022-01-04 to 02/26/2023
Technical Revision — effective from 2020-03-02 to 01/04/2022
Amendment — effective from 2020-03-02 to 03/02/2020
Technical Revision — effective from 2010-01-01 to 03/02/2020
Adoption — effective from 2010-01-01 to 01/01/2010

280-RICR-20-30-2 Electronic Filing for Paid Preparers

280-RICR-20-30-2 § 2.1 Purpose

This regulation implements R.I. Gen. Laws § 44-1-31.1. This Chapter grants the Tax Administrator the authority to require paid preparers to file personal and business tax returns electronically with the Division of Taxation.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2008-12-28 to 01/04/2022
Adoption — effective from 2008-12-28 to 12/28/2008

280-RICR-20-30-2 § 2.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws Chapter 44-1 as amended. These rules have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 44-1 and § 44-1-31.1.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2008-12-28 to 01/04/2022
Adoption — effective from 2008-12-28 to 12/28/2008

280-RICR-20-30-2 § 2.3 Application

The terms and provisions of these rules and regulations shall be liberally construed to permit the Division of Taxation to effectuate the purposes of R.I. Gen. Laws § 44-1-31.1 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2008-12-28 to 01/04/2022
Adoption — effective from 2008-12-28 to 12/28/2008

280-RICR-20-30-2 § 2.4 Severability

If any provision of this regulation or the application thereof to any person or circumstances, is held invalid by a court of competent jurisdiction, the validity of the remainder of this regulation shall not be affected thereby.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2008-12-28 to 01/04/2022
Adoption — effective from 2008-12-28 to 12/28/2008

280-RICR-20-30-2 § 2.5 Definitions

A.“Electronically” means, with respect to a Rhode Island Tax Return, filing that return by computer transmission or by employing other technology specified by the Tax Division.

B.“Eligible tax return” means any Rhode Island Tax Return outlined in the most recent version of Publication RI-1345.

C.“Paid preparer” means any person who prepares for compensation, or who employs one or more persons to prepare for compensation, any Rhode Island Tax Return required by R.I. Gen. Laws Title 44 or any claim for refund of tax imposed by R.I. Gen. Laws Title 44.

D.“Rhode Island tax return” means any tax return (and any application for extension of time to file such return) required under the Rhode Island General Laws to be filed with the Tax Division.

E.“Tax division” means the Rhode Island Division of Taxation.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2008-12-28 to 01/04/2022
Adoption — effective from 2008-12-28 to 12/28/2008

280-RICR-20-30-2 § 2.6 Electronic Filing Mandate

A.Effective January 1, 2009 any Paid Preparer who filed more than one hundred (100) Rhode Island Tax Returns during the previous calendar year must file all eligible Tax Returns electronically.

B.If a person employed by a Paid Preparer or a single office of a Paid Preparer files one hundred (100) returns or less, but the total of all tax returns filed from multiple offices is more than one hundred (100), all eligible Tax Returns prepared by that Paid Preparer are required to be filed electronically.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2008-12-28 to 01/04/2022
Adoption — effective from 2008-12-28 to 12/28/2008

280-RICR-20-30-2 § 2.7 Preparer Penalty

If a Paid Preparer fails to abide by the Electronic Filing Mandate in accordance with R.I. Gen. Laws in accordance with § 2.6 of this Part, or otherwise causes clients Rhode Island Tax Returns to be filed falsely or improperly, the Tax Administrator may, after a hearing to show cause, preclude such preparer from preparing and filing Rhode Island Tax Returns with the Tax Division.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2008-12-28 to 01/04/2022
Adoption — effective from 2008-12-28 to 12/28/2008

280-RICR-20-30-2 § 2.8 Authority to Waive the Electronic filing Mandate

A.The Tax Administrator is authorized to waive the electronic filing mandate in § 2.6 of this Part, in a given year, for a Paid Preparer who can show that filing electronically will cause undue hardship. Waiver requests should be sent to the following address:

Rhode Island Division of Taxation

Tax Administrator

One Capitol Hill

Providence, RI 02908

B.The waiver request must include the name of the paid preparer and a detailed explanation why filing electronically will cause undue hardship. The waiver shall be valid for a single tax year.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2008-12-28 to 01/04/2022
Adoption — effective from 2008-12-28 to 12/28/2008

Subchapter 35 Estate Tax

280-RICR-20-35-1 Computation of Estate Tax

280-RICR-20-35-1 § 1.1 Purpose

This regulation implements R.I. Gen. Laws Chapters 44-22 and 44-23. These chapters provide for Estate and Transfer Taxes Liability and Computation, and Estate and Transfer Taxes Enforcement and Collection, in regards to the calculation of the estate tax.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-10 to 01/04/2022
Adoption — effective from 2010-01-01 to 07/10/2018

280-RICR-20-35-1 § 1.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws Chapters 44-22 and 44-23, as amended. These rules have been prepared in accordance with the requirements of R.I. Gen. Laws §§ 44-1-4 and 44-23-45.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-10 to 01/04/2022
Adoption — effective from 2010-01-01 to 07/10/2018

280-RICR-20-35-1 § 1.3 Application

The terms and provisions of these rules and regulations shall be liberally construed to permit the Division of Taxation to effectuate the purposes of R.I. Gen. Laws Chapters 44-22 and 44-23 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-10 to 01/04/2022
Adoption — effective from 2010-01-01 to 07/10/2018

280-RICR-20-35-1 § 1.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-10 to 01/04/2022
Adoption — effective from 2010-01-01 to 07/10/2018

280-RICR-20-35-1 § 1.5 General

A.The Rhode Island estate tax is imposed upon the transfer of the net estate of every resident or nonresident decedent as a tax upon the right to transfer.

B. For decedents whose death occurs on or after January 1, 2002, but prior to January 1, 2010, the tax is a sum equal to the maximum credit for state death taxes allowed by 26 U.S.C. § 2011 as it was in effect as of January 1, 2001.

1.Any scheduled increase in the unified credit provided in 26 U.S.C. § 2010 in effect on January 1, 2001, or thereafter, shall not apply. The tax shall only be imposed if the net taxable estate shall exceed six hundred seventy-five thousand dollars ($675,000). Exempting net taxable estates of six hundred seventy-five thousand or less requires a unified credit of two hundred twenty thousand five hundred fifty dollars ($220,550). See Form RI-100A, Rhode Island Estate Tax Return - Date of death January 1, 2002 through December 31, 2014 – Tax Computation Schedule.

2.For decedents whose death occurs on or after January 1, 2010, and prior to January 1, 2015 the tax is a sum equal to the maximum credit for state death taxes allowed by 26 U.S.C. § 2011 as it was in effect as of January 1, 2001. Any scheduled increase in the unified credit provided in 26 U.S.C. § 2010 in effect on January 1, 2003, or thereafter, shall not apply. The tax shall only be imposed if the net taxable estate shall exceed eight hundred fifty thousand dollars ($850,000). Exempting net taxable estates of eight hundred fifty thousand or less requires a unified credit of two hundred eighty-seven thousand three hundred dollars ($287,300). See Form RI-100A, Rhode Island Estate Tax Return - Date of death January 1, 2002 through December 31, 2014 table “B”.

3.For decedents whose death occurs on or after January 1, 2015, the tax is a sum equal to the maximum credit for state death taxes allowed by 26 U.S.C. § 2011, in effect as of January 1, 2001. Any scheduled increase in the unified credit provided in 26 U.S.C. § 2010 in effect on January 1, 2003, or thereafter, shall not apply. A Rhode Island credit shall be allowed against any tax so determined in the amount of sixty-four thousand four hundred dollars ($64,400).

4.Beginning on January 1, 2011 and each January 1 thereafter, the threshold of eight hundred fifty thousand dollars ($850,000) in § 1.5(B)(2) of this Part shall be adjusted by the percentage of increase in the Consumer Price Index for all Urban Consumers as of September 30 of the prior calendar year compounded annually and rounded up to the nearest five dollars ($5.00) increment. Exempting net taxable estates from the annually revised amount will require an annual adjustment to the unified credit (line 3 of the computation schedule). The revised taxable threshold and unified credit amounts will be published annually on the tax division website www.tax.ri.gov along with a revised computation schedule.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-10 to 01/04/2022
Adoption — effective from 2010-01-01 to 07/10/2018

Subchapter 40 Forms

280-RICR-20-40-1 Forms Reproduction

280-RICR-20-40-1 § 1.1 Purpose

These rules and regulations provide guidelines to companies/individuals who wish to create/use forms other than original Rhode Island tax forms.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-18 to 01/04/2022
Adoption — effective from 2003-01-01 to 06/18/2018
EMERGENCY RULE Adoption — effective from 2002-09-20 to 01/01/2003

280-RICR-20-40-1 § 1.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws § 44-1-4, which authorizes and empowers the Rhode Island Tax Administrator to make rules and regulations, as he or she may deem necessary, for the proper administration and enforcement of the tax laws of this state.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-18 to 01/04/2022
Adoption — effective from 2003-01-01 to 06/18/2018
EMERGENCY RULE Adoption — effective from 2002-09-20 to 01/01/2003

280-RICR-20-40-1 § 1.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation to provide standard forms to be used for all Rhode Island tax filings.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-18 to 01/04/2022
Adoption — effective from 2003-01-01 to 06/18/2018
EMERGENCY RULE Adoption — effective from 2002-09-20 to 01/01/2003

280-RICR-20-40-1 § 1.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-18 to 01/04/2022
Adoption — effective from 2003-01-01 to 06/18/2018
EMERGENCY RULE Adoption — effective from 2002-09-20 to 01/01/2003

280-RICR-20-40-1 § 1.5 Types of Substitute Forms:

A.Photocopied - RI forms may be photocopied without prior approval of Division of Taxation provided that there is no variation from the original form, including but not limited to, reduction and enlargement of the form.

B.Computer Generated - Computer generated are forms that are recreated in their entirety by a computer, including layout. These forms must be exact facsimiles of the original forms created by the Division of Taxation. Computer generated forms must have prior approval from RI Division of Taxation before they will be accepted for processing.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-18 to 01/04/2022
Adoption — effective from 2003-01-01 to 06/18/2018
EMERGENCY RULE Adoption — effective from 2002-09-20 to 01/01/2003

280-RICR-20-40-1 § 1.6 General Information

A.The following general information applies to all reproduced or computer-generated forms. All forms must:

1.Be a facsimile of the original form;

2.Be on paper of substantially the same weight and texture, and of quality at least as good as that used for the original form;

3.Be of the same size as the original form, both as to the overall dimensions of the paper and image reproduced;

4.Have a high standard of legibility, both as to the original form and to the filled in data;

5.For computer generated coupon size tax returns and vouchers, forms must meet all specifications as required by the RI Division of Taxation. Specifications may be downloaded from the division web site www.tax.ri.gov under the software developers page; and

6.Any software developer/provider marketing tax return preparation software must utilize 2D barcoding technology in the final printed version of the completed tax form and support electronic filing for the available tax forms. The specific tax forms and file layouts are listed on the division web site www.tax.ri.gov under the software developers page.

7.Any software developer/provider marketing tax return preparation software must utilize 1D barcoding technology in the final printed version of all tax forms. The tax forms and 1D barcodes listed on the division web site www.tax.ri.gov under the software developers page.

B.The Tax Administrator may return any form received by the Division of Taxation processing section which does not meet the specifications listed above.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-18 to 01/04/2022
Adoption — effective from 2003-01-01 to 06/18/2018
EMERGENCY RULE Adoption — effective from 2002-09-20 to 01/01/2003

280-RICR-20-40-1 § 1.7 Approval of Computer Generated Forms

A.Prior to distribution to users/customers, all computer-generated forms must be approved by RI Division of Taxation.

1.Coupon sized tax returns and vouchers that contain an Optical Character Recognition (OCR) scanline must be submitted for approval by sending the tax returns and vouchers to:

Rhode Island Division of Taxation

Attn: Forms, Credits & Incentives Section

One Capitol Hill

Providence, RI 02908

2.All other forms must be submitted for approval by emailing a portable document format (PDF) to [email protected]

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-18 to 01/04/2022
Adoption — effective from 2003-01-01 to 06/18/2018
EMERGENCY RULE Adoption — effective from 2002-09-20 to 01/01/2003

Subchapter 45 Litter Control

280-RICR-20-45-1 Application & Payment of Litter Control Participation Permit

280-RICR-20-45-1 § 1.1 Filing Requirement

All Rhode Island sales tax permit holders whose sales relate in whole or in part to the taxable sales of food and/or beverages must apply for a litter control participation permit on or before August 1 of each year. When issued, the permit will run on a calendar year basis, January 1 through December 31. A litter control participation permit is required for each place of business in which the retailer makes taxable sales of food and/or beverages.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-45-1 § 1.2 Computation of Fee

A.The permits are issued in different classes (A, B, C, D, E) depending upon the retailer's gross receipts at each location for the prior calendar year. The applicable fee for each class of permit is shown in the table below.

B."Gross receipts" means those receipts reported for each location to the tax administrator under the sales tax law without deduction for any retail sales except for interstate sales deductions and sales to the United States Government. If a retailer operates at multiple locations under different sales tax permit numbers, gross receipts shall be determined by each individual sales tax permit number.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-45-1 § 1.3 Gross Receipts Table

A.Table

Gross Receipts

Class

Fee

$0 to less than $50,000

$ 25

$50,000 to less than $100,000

$ 35

$100,000 to less than $400,000

$ 75

$400,000 to less than $1,000,00

$100

$1,000,000 or more

$125 Per million dollars or fraction thereof

B.If the gross receipts for the prior calendar year exceed $1,000,000, the permit fee is $125 per million and fraction thereof.

C.Examples

1.If gross receipts (less interstate and U.S. deductions, if any) are $1,450,000, the applicable fee is $125.

2.If gross receipts (less interstate and U.S. deductions, if any) are $3,800,000, the applicable fee is $375.

3.An applicant applying for a Class E permit shall pay a fee of no more than $1,000 provided taxable sales of food and/or beverage and the sale of food products (whether subject to sales tax or not) do not exceed ten percent (10%) of the gross receipts for such permit location.

4.Fee for Purchaser of an Ongoing Business

a.A person who purchases an ongoing business and continues to operate the business from the same location without interruption in a calendar year for which the prior permit holder has paid the applicable fee may obtain a permit for the remainder of that calendar year upon payment of a twenty-five dollar ($25) fee. In the event that the prior permit holder did not pay the applicable fee for the current calendar year, the purchaser must pay a fee based upon the prior permittee's gross receipts for the applicable calendar year at that location.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-45-1 § 1.4 Vending Machine Option

A.In those cases where the only sale of food and/or beverage is the operation of a vending machine(s), the retailer may obtain at its option a permit for each vending machine owned or obtain a permit based on total gross receipts. If the election is made to pay on vending machine(s), a class V permit may be applied for by multiplying the number of qualifying (food and/or beverage machines) vending machines by $25 to arrive at the correct fee.

1.EXAMPLE:

a.ABC Company's only sale of taxable food and/or beverages is through the operation of two (2) vending machines owned. Total gross receipts for the prior calendar year were $1,100,000, which would mean a fee of $125 under the gross receipts method. ABC may elect to apply for a class V permit and pay a fee of $50 (2 vending machines x $25).

B.A retailer is not considered the owner/operator of a food or beverage vending machine(s) if he or she is not responsible for the reporting of the sales tax on the items dispensed from the machines.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-45-2 Hard-to-Dispose Materials and Beverage Container Tax

280-RICR-20-45-2 § 2.1 Definitions

A."Hard-to-dispose material" means and encompasses the following: Petroleum-based or synthetic lubricating oils, including, but not limited to, lubricants in internal combustion engines, tires (including retreads) used on motorized vehicles and trailers, including cars, trucks, buses and heavy construction equipment, glycol-based antifreeze and organic solvents. Petroleum based or synthetic lubricating oil which is recycled and/or re-refined is not nor shall it be considered a hard-to-dispose material.

B."Recycled oil" means used petroleum-based or synthetic lubricating oil that is used as a substitute for a petroleum product made from new oil; provided, that the use is operationally safe, environmentally sound, and complies with all laws and regulations. Recycled oil that is blended with virgin oil prior to reuse, however, is not considered recycled oil.

C."Re-refined oil" means used lubricating oil from which the physical and chemical contaminants acquired through previous use have been removed through the refining process. For purposes of the Hard-to-Dispose Material Law, this term refers to lubricating oils that are one hundred percent (100%) re-refined, exclusive of additives.

D."Organic solvents" means any compounds of carbon which are liquids at standard conditions and which are used as dissolvers, viscosity reducers, dilutents, thinners, reagents or cleaning agents (excluding carbon monoxide, carbon dioxide, carbonic acid, metallic carbides, metallic carbonates and ammonium carbonate) and which are listed as hazardous waste pursuant to the State Hazardous Waste Program pursuant to R.I. Gen. Laws Chapter 23-19.1.

E."Person" means any natural person, political subdivision, government agency, public or private corporation, partnership, joint venture, association, firm, individual proprietorship, or other entity whatsoever.

F."Hard-to-dispose material wholesaler" means any person wherever located who engages in the sale of hard-to-dispose material to customers for sale in this state (including manufacturers, refiners, distributors and retailers), and to other persons as defined above.

G."Hard-to-dispose material retailer" means any person who engages in the retail sale of hard-to-dispose material in this state.

H."New vehicle" means any mode of transportation for which a certificate of title is required pursuant to R.I. Gen. Laws Title 31 and for which a certificate issued is subject to a fee of six dollars ($6.00) per vehicle and shall be paid to the Division of Motor Vehicles in conjunction with titling of the vehicle.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2020-03-12 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 03/12/2020
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-45-2 § 2.2 Responsibility of Hard-to-Dispose Material Wholesaler

A.Collection of Tax. Every hard-to-dispose material wholesaler, whether located in Rhode Island or not, is required to charge and collect a tax upon the sale of hard-to-dispose materials to retailers who are engaged in the retail sale of hard-to-dispose material in this state. The tax shall be determined in accordance with the rates specified in the table below.

1.Table

Hard to Dispose Material

Tax Rate

Lubrication Oils

Ten cents ($0.10) per quart or ten and 6/10th cents ($0.106) per liter

Antifreeze

Twenty cents ($0.20) per gallon or five and 28/100th cents ($0.0528) per liter

Organic Solvents

One half cent ($0.005) per gallon or one hundred thirty-two thousandths ($0.00132) per liter

Tires

One dollar ($1.00) per tire

B.The hard-to-dispose material wholesaler shall separately state the amount of the tax on the invoice.

C.Certain Sales not Subject to Tax – No tax need be collected by the hard-to-dispose material wholesaler where the hard-to-dispose material is sold:

1.To a retailer for resale or use outside this state and the wholesaler is obligated to deliver such materials to a point outside the state or to deliver them to a common carrier for transportation outside this state, or

2.To a retailer not engaged in the sale of hard-to-dispose material in this state who then transports the material outside the state for the sole purpose of reselling such materials outside this state, or

3.Directly to the United States Government or its agencies, or

4.To another Rhode Island hard-to-dispose material wholesale tax permittee. In such case the seller must obtain a copy of the purchaser's Rhode Island hard-to-dispose material wholesale tax permit.

5.Under § 2.2(C)(2) of this Part above, the hard-to-dispose wholesaler must obtain a Rhode Island exemption certificate from the purchaser.

6.The wholesaler must collect the tax from retailers engaged in the sale of hard-to-dispose materials in this state on all purchases picked up by or delivered to retailers in this state, including purchases of materials earmarked by the retailer for subsequent transportation out of state for resale or use out of state.

7.If a wholesaler sells hard-to-dispose materials directly to a consumer (i.e., to a manufacturer or other person using lubricating oils in its own machinery and equipment and not for resale) that sale is a retail sale of hard-to-dispose material. The wholesaler therefore becomes a "hard-to-dispose material retailer" and subject to tax for that sale. When making such sale, the wholesaler cannot charge the tax to its customer and/or separately state the tax on its customer's invoice since the law provides for the tax to be separately stated on the invoice only in the case of a sale to a hard-to-dispose material retailer.

D.Application to Collect Tax

1.Each hard-to-dispose material wholesaler must apply to the tax administrator for authorization to collect the tax upon a form provided by the tax administrator. No application fee is required. Once the application is approved and processed, the wholesaler will be issued a certificate with a number which will authorize it to collect the tax.

E.Returns

1.On or before the twenty-fifth (25th) day of the month, the hard-to-dispose material wholesaler must file a return along with payment for all taxes imposed under the law for the previous calendar month. Where the wholesaler has a liability for tax as a hard-to-dispose material retailer under the law, there will be no requirement to file a separate hard-to-dispose material retail tax return. In such case, the direct retail sales are to be added to the sales to retailers and entered as a total quantity on the return.

2.An extension for filing a return may be granted (up to 30 days) for reasonable cause upon written request to the tax administrator.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2020-03-12 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 03/12/2020
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-45-2 § 2.3 Responsibility of Hard-to-Dispose Material Retailer

A.Liability for Tax

1.Every hard-to-dispose material retailer selling, using or otherwise consuming hard-to-dispose material in this state is liable for the tax. Liability for the tax arises at the time such hard-to-dispose material is purchased for sale, use or consumption in this state. The tax, if not paid to a hard-to-dispose material wholesaler authorized to collect the tax, must be paid directly to the Division of Taxation based upon the rates set forth in the table under §§ 2.1(H) and 2.2(A) of this part.

2.The hard-to-dispose material tax is a tax imposed on the retailer, accordingly retailers are not permitted to charge a tax to their customers and/or separately state the tax on their customer's invoices.

3.Liability of a hard-to-dispose retailer is not extinguished until the tax has been paid to the state, except that a receipt from a hard-to-dispose material wholesaler engaging in business in this state or authorized by the tax administrator to collect the tax is sufficient to relieve the hard-to-dispose retailer from further liability for the tax to which the receipt refers.

4.Where a retailer has paid the tax to a hard-to-dispose material wholesaler or directly to the state on materials which are subsequently transported out of state for sale or use solely outside the state the retailer may apply for a credit or refund (see credit and refund provision, § 2.3(C) of this Part. Proper documentation supporting subsequent out-of-state transportation must be established by the retailer.

B.Returns

1.Whenever the hard-to-dispose material retailer is required to file a return, it must do so on or before the twenty-fifth (25th) day of the month. Payment for all taxes imposed under the law for the previous calendar month must accompany the return.

2.An extension for filing a return may be granted (up to 30 days) for reasonable cause upon written request to the tax administrator.

C.Credits and Refunds

1.Every hard-to-dispose material retailer engaging in business in this state who has purchased and paid tax to a hard-to-dispose material wholesaler or directly to the state is entitled to a credit or refund on the hard-to-dispose material subsequently transported out of state for resale or use solely outside the state. The credit may be applied against the tax due on the monthly return, but only to the extent of the amount of tax for which the retailer is liable. Any excess credit may be carried forward to the next succeeding month.

2.Penalties - A penalty of ten percent (10%) of the tax due will be added to delinquent payments and deficiency determinations made, due the negligence or intentional disregard.

3.If any part of the deficiency made is due to fraud or intent to evade the provisions of the law, a penalty of fifty percent (50%) of the tax amount of the determination will be imposed.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2020-03-12 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 03/12/2020
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-45-2 § 2.4 Imposition of tax on beverage containers

Pursuant to R.I. Gen. Laws § 44-44-3 there is imposed a tax of eight cents ($0.08) on each case of beverage container sold by a beverage wholesaler to a beverage or retailer or consumer within this state. The tax shall be collected by the beverage wholesaler. The tax provided for in R.I. Gen. Laws § 44-44-3 shall not be levied, imposed, or collected on reusable and refillable beverage containers.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2020-03-12 to 01/04/2022
Technical Revision — effective from 2001-12-20 to 03/12/2020
Periodic Refile — effective from 2001-12-20 to 12/20/2001

Subchapter 50 Motor Fuel Tax

280-RICR-20-50-1 Motor Fuel Tax

280-RICR-20-50-1 § 1.1 Purpose

The purpose of this regulation is to implement R.I. Gen. Laws Chapter 31-36, which provides for a tax on motor fuels.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-01-04 to 01/04/2022

280-RICR-20-50-1 § 1.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws §§ 44-1-4 and 31-36-22. The rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws §§ 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-01-04 to 01/04/2022

280-RICR-20-50-1 § 1.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation the authority to effectuate the purpose of R.I. Gen. Laws Chapter 31-36 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-01-04 to 01/04/2022

280-RICR-20-50-1 § 1.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-01-04 to 01/04/2022

280-RICR-20-50-1 § 1.5 Definitions

A."Administrator" means the tax administrator.

B."Distributor" means any person, association of persons, firm, or corporation, wherever resident or located, who shall import or cause to be imported into this state, for use or for sale, fuels, and also any person, association of persons, firm or corporation who shall produce, refine, manufacture, or compound fuels within this state.

C."Filling station" means any place, location, or station where fuels are offered for sale at retail.

D."Fuels" means gasoline, benzol, naphtha, and other volatile and inflammable liquids (other than lubricating oils, diesel fuel for the propulsion of marine craft, fuels used for the propulsion of airplanes, oils used for heating purposes), manufactured biodiesel fuel as defined in regulation 280-RICR-20-50-2, used or suitable for use for operating or propelling motor vehicles with internal combustion engines. This does not include benzol and naphtha sold or used for a purpose other than for the operation or propulsion of motor vehicles. Any article or product represented as gasoline for use in internal combustion type engines, used in motor vehicles, shall be equal to or better in quality and specification than that known as "United States government motor gasoline."

E.“Peddlers” means any person, association of persons, firm or corporation, except a distributor as defined in R.I. Gen. Laws § 31-36-1(8), who shall distribute gasoline by tank wagon in this state.

F.“Public highways” means any state or other highway and any public street, avenue, alley, park, parkway, driveway, or public place in any city or town.

G."Purchaser" means any person, association of persons, firm, or corporation, wherever resident or located, who purchases fuels from a distributor, for use or resale, and any person, association of persons, firm or corporation who purchases from a distributor, gasoline or other volatile and inflammable liquids (other than lubricating oils and oils used for heating purposes) for use other than for propelling motor vehicles.

H.“State highways” means only those public highways or those parts of them that shall be constructed or maintained by the department of transportation.

I."United States government motor gasoline" means that gasoline which is or may be prescribed by the federal specification board of the United States government for use as a fuel for motor vehicle, motor boat, and similar engines.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-01-04 to 01/04/2022

280-RICR-20-50-1 § 1.6 Registration of Distributors

Every distributor shall, before continuing or commencing to transact the business of a distributor, apply for registration as a distributor at the office of the tax administrator upon a form to be obtained from the administrator. The administrator, if satisfied as to the facts stated in application, shall register the distributor and issue a certificate of the registration without charge, which registration shall entitle the distributor to continue or to commence to engage in the business within this state.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-01-04 to 01/04/2022

280-RICR-20-50-1 § 1.7 Reports and Payments

A.Every distributor shall, on or before the twentieth (20th) day of each month, render a report to the tax administrator, upon forms to be obtained from the tax administrator, of the amount (number of gallons) of fuels purchased, sold, or used by the distributor within this state and the amount of fuels sold by the distributor without this state from fuels within this state during the preceding calendar month, and, if required by the tax administrator as to purchases, the name or names of the person or persons from whom purchased and the date and amount of each purchase, and as to sales, the name or names of the person or persons to whom sold and the amount of each sale, and shall pay at the same time to the administrator tax at the current rate per gallon on all taxable gallons of fuel sold or used in this state.

B.Beginning July 1, 2015 and every other year thereafter, the gasoline tax shall be adjusted by the percentage of increase in the Consumer Price Index for all Urban Consumers (CPI-U) as published by the United States Bureau of Labor Statistics determined as of September 30 of the prior calendar year; said adjustment shall be rounded to the nearest one cent ($.01) increment, provided that the total tax shall not be less than provided for in R.I. Gen. Laws § 31-36-7(a).

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-01-04 to 01/04/2022

280-RICR-20-50-1 § 1.8 Exporters

A.A distributor who is licensed in another state but unlicensed in Rhode Island may apply for a permit to purchase fuels for export tax free. Anyone applying for an export permit must file a surety bond with the Division of Taxation. The application and bond form are available from the Division of Taxation.

B.The amount of the bond is based on twice the average monthly gallonage to be exported, using only those months in which there is activity. Each additional 100,000 monthly gallons or fraction thereof will require an additional $10,000 bond.

Average for Two Months

Amount of Bond

100,000 Gallons

$10,000

200,000 Gallons

$15,000

400,000 Gallons

$30,000

600,000 Gallons

$40,000

800,000 Gallons

$50,000

1,000,000 Gallons

$70,000

C.Change in Business Organization: Once issued, an export permit remains in effect until suspended, revoked or otherwise terminated. A permittee must advise the tax administrator of any change in type of business organization or its status as a licensee in the state of import.

D.Purchases can be made from any supplier. It will be the responsibility of the permittee to identify to the supplier on all papers such as manifests, bills of lading, loading tickets, etc., that each load is for export and to show the ultimate destination outside Rhode Island. All receipts not clearly identified to the supplier as for export will be taxable, the tax payable to the supplier. Split loads are not permitted.

E.Each exporter must make a report on its own letterhead to the Division of Taxation prior to the 15th day of each month. This report must show all acquisitions of motor fuel in Rhode Island for the prior month. The report must identify the type of fuel, supplier, number of gallons, point of acceptance (in Rhode Island) and the point of delivery (destination). Where tax paid fuel is acquired, the information on the acquisition is to be shown separately in the report.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-01-04 to 01/04/2022

280-RICR-20-50-1 § 1.9 Taxability of Special Fuels

The definition of fuel includes all volatile and inflammable liquids (other than lubricating oils, diesel fuel for the propulsion of marine craft, and oils used for heating purposes) used or suitable for use for operating or propelling motor vehicles using internal combustion type engines. The tax applies to all liquid fuels sold for use or used in motor vehicles (except as provided in the definition relating to diesel marine craft) and it is not confined to sales for use or used on the highways of this state. Filling stations, peddlers or other vendors acquiring fuels such as No. 2 fuel, LPG and other gasoline substitutes without having paid the tax to their supplier must include the tax at the time of sale or delivery for use in internal combustion engines and must report the sales and pay the tax to the tax administrator. Any person, firm or corporation acquiring fuel upon which the tax has not been paid and who subsequently sells or uses such fuel for propelling an internal combustion engine immediately becomes liable for the tax and must arrange with the tax administrator to report sales or use and pay the tax due.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-01-04 to 01/04/2022

280-RICR-20-50-1 § 1.10 Taxability of Consignments, Loans and Transfer of Fuels

The words "sold or used" in R.I. Gen. Laws § 31-36-7 include all consignments, consignment-sales, loans and any other transfer of fuels by the distributor to any other person, partnership, association or corporation. These transactions must be included on the regular return for the period in which they occur.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-01-04 to 01/04/2022

280-RICR-20-50-1 § 1.11 Gallonage Adjustment to 60 Degrees Temperature

In the case of a tanker, barge or tank car delivery or receipt, distributors may adjust the quantity for report purposes to 60 degrees Fahrenheit temperature. Tank truck deliveries are required to be recorded and reported at actual measured gallons and the tax applies to actual measured gallons.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-01-04 to 01/04/2022

280-RICR-20-50-1 § 1.12 Marine Diesel

A.Diesel fuel used for the propulsion of marine craft is not considered a motor fuel under the Rhode Island gasoline tax law. Any Rhode Island licensed distributor or special distributor selling marine diesel must obtain a "Marine Diesel Purchase Certificate" from the purchaser in order to exempt a sale from the Rhode Island motor fuel tax.

B.Use of Exemption Certificate in making marine diesels purchases a purchaser must furnish a Rhode Island licensed distributor or special distributor with a "Marine Diesel Purchase Certificate" (form attached) for each purchase in order to be exempt from the Rhode Island motor fuel taxes. This certificate must contain the required information and signature. In the event that all purchases will be for marine purposes on an on-going basis, one "Marine Diesel Purchase Certificate" may be issued marked "blanket" in the date of purchase area of the form.

1.The certification may be furnished only in the case where the purchaser intends to sell or use the marine diesel for marine purposes. If a purchaser gives an exemption certificate and thereafter sells or uses all or a portion of the marine diesel purchased for purposes other than "marine" he or she must report and pay on the taxable gallons as a distributor or special distributor.

2.The acceptance of a properly executed certificate relieves the distributor from the burden of proof only if accepted in good faith from a person engaged in an activity which is for sale or use of fuel for marine purposes. If a "Marine Diesel Purchase Certificate" is not furnished by the purchaser, the distributor must collect and report the applicable Rhode Island motor fuel taxes for that sale event though the invoice indicates "marine diesel."

3.In order that the Division of Taxation may verify a distributor's marine diesel sales upon audit, it is necessary that distributors retain executed "Marine Diesel Purchase Certificates." If a distributor lists marine diesel sales for which he or she has no certificates, the Division of Taxation will presume such sales as taxable and make an assessment of the tax against the distributor.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-01-04 to 01/04/2022

280-RICR-20-50-1 § 1.13 Purchase of Motor Fuels in Rhode Island by Nonregistered Distributors or Exporters

A.A nonregistered distributor or exporter purchasing motor fuel in Rhode Island for shipment within or outside this state must pay the Rhode Island motor fuel tax to the Rhode Island distributor. The tax applies whether the seller or purchaser is obligated to deliver to a common carrier or the purchaser picks up with his or her own vehicle.

B.The nonregistered person or company may file a claim for refund with the tax administrator for Rhode Island tax paid fuel purchases of fuels which have been sold outside this state or to the U.S. Government. The refund must be filed within two hundred forty (240) days from the date of the Rhode Island tax paid fuel purchases.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-01-04 to 01/04/2022

280-RICR-20-50-2 Manufactured Biodiesel Fuel

280-RICR-20-50-2 § 2.1 PURPOSE

These rules and regulations implement R.I. Gen. Laws Chapter 31-36 of the Rhode General Laws, which defines manufactured biodiesel fuel. These rules govern the interpretation and application of motor fuel tax as it applies to biodiesel fuel.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2010-01-01 to 01/04/2022
Technical Revision — effective from 2010-01-01 to 01/01/2010
Adoption — effective from 2010-01-01 to 01/01/2010

280-RICR-20-50-2 § 2.2 AUTHORITY

These rules and regulations are promulgated pursuant to R.I. Gen. Laws §§ 44-1-4 and 31-36-22 as amended. The rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws §§ 42-35-1 et. seq. (Rhode Island Administrative Procedures Act).

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2010-01-01 to 01/04/2022
Technical Revision — effective from 2010-01-01 to 01/01/2010
Adoption — effective from 2010-01-01 to 01/01/2010

280-RICR-20-50-2 § 2.3 APPLICATION

These rules and regulations shall be liberally construed so as to permit the Division of Taxation to effectuate the purpose of R.I. Gen. Laws Chapter 31-36 and other Applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2010-01-01 to 01/04/2022
Technical Revision — effective from 2010-01-01 to 01/01/2010
Adoption — effective from 2010-01-01 to 01/01/2010

280-RICR-20-50-2 § 2.4 SEVERABILITY

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2010-01-01 to 01/04/2022
Technical Revision — effective from 2010-01-01 to 01/01/2010
Adoption — effective from 2010-01-01 to 01/01/2010

280-RICR-20-50-2 § 2.5 DEFINITIONS

A."Fuels” means and includes gasoline and other volatile and inflammable liquids (other than lubricating oils, diesel fuel for the propulsion of marine craft, fuels used for the propulsion of airplanes, oils used for heating purposes, and manufactured biodiesel fuels as defined below) used or suitable for use for operating or propelling motor vehicles with internal combustion engines. This term does not include benzol and naphtha sold or used for a purposed other than for the operation or propulsion of motor vehicles. Any article or product represented as gasoline for use in internal combustion type engines, used in motor vehicles, shall be equal to or better in quality and specification than that known as “United States government motor gasoline”.

B."Manufactured biodiesel fuel" means

1.mono-alkyl esters of long chain fatty acids derived from vegetable oils or animal fats which conform to ASTM D6751 specifications for use in diesel engines;

2.that results in employment in Rhode Island at a fixed location at a manufacturing facility for biodiesel fuel; and

3.any volume of biodiesel fuel that is subsequently blended with other fuels and is used for heating purposes or for operating or propelling motor vehicles.

C.“Manufacturing facility” is a factory at a fixed location in Rhode Island primarily engaged in the manufacturing of biodiesel fuel.

D.“Processing” means a series of actions or occurrences or a continuous operation, whereby a result or effect is produced.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2010-01-01 to 01/04/2022
Technical Revision — effective from 2010-01-01 to 01/01/2010
Adoption — effective from 2010-01-01 to 01/01/2010

280-RICR-20-50-2 § 2.6 GENERAL

A.Biodiesel fuel refers to pure fuel that has not been blended with petroleum diesel fuel. Biodiesel fuels that are processed and blended with petroleum fuels are denoted as “BXX” with “XX” representing the percentage of biodiesel contained in the blend (ex: B20 is 20% biodiesel and 80% petroleum diesel).

B.Biodiesel fuel that is processed and then blended with other fuels and meets the definition of manufactured biodiesel fuel in § 2.5 of this Part is exempt from motor fuel tax; however, to qualify for the exemption, the biodiesel fuel must be produced at a manufacturing facility in Rhode Island and sold as blended product B99 (blended so manufacturer can receive federal blending credit). A biodiesel manufacturer must receive as a raw material mono-alkyl esters of long chain fatty acids derived from vegetable oils or animal fats and process these raw materials so they conform to ASTM D6751 specifications for use in diesel engines. The mere blending of biodiesel with petroleum diesel does not meet the manufacturing requirement.

C.If a manufacturer of biodiesel fuel does not meet either the specifications in accordance with ASTM D6751 or; does not result in employment in Rhode Island at a fixed location at a manufacturing facility for biodiesel fuel, the product is not considered “manufactured biodiesel fuel” and would be subject to the motor fuel tax.

D.Motor fuel tax is due on the sale of fuels as defined in § 2.5 of this Part and R.I. Gen. Laws § 31-36-1(4). It is noted that to the extent biodiesel is blended into any fuel, only the biodiesel portion of the fuel shall be exempt from taxation under R.I. Gen. Laws Chapter 31-36.

E.Manufacturers must apply for a permit to sell biodiesel fuel that is exempt from the motor fuel tax by submitting a Biodiesel Permit Application to the Rhode Island Division of Taxation. A qualifying manufacturer will be issued a certificate with a permit number and will be required to file a monthly Biodiesel Manufacturing Tax Report on a form prescribed by the Tax Administrator. When filing the monthly Biodiesel Manufacturing Tax Report, a biodiesel fuel manufacturer is required to attach the most current certification from a certified biodiesel testing laboratory verifying that the product meets the ASTM D6751 specifications.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2010-01-01 to 01/04/2022
Technical Revision — effective from 2010-01-01 to 01/01/2010
Adoption — effective from 2010-01-01 to 01/01/2010

280-RICR-20-50-2 § 2.7 EXAMPLES

A.Only the biodiesel percentage of the blend with petroleum diesel is exempt from motor fuel tax.

1.Example 1

a.A licensed distributor blends 200 gallons of biodiesel fuel (which is exempt from motor fuel tax) with 800 gallons of petroleum diesel (subject to motor fuel tax). The tax on this blended product is calculated as follows:

(1)200 gallons of biodiesel / 1,000 total gallons (200 + 800) = 20% (B20)

(2)1,000 gallons x .80 (80% is the taxable percentage of a B20 blend) = 800 gallons X $0.32 (the current motor fuel tax rate).

2.Example 2

a.A licensed distributor blends 200 gallons of B20 (only 20% of this blend is biodiesel fuel and is exempt from motor fuel tax) with 800 gallons of petroleum diesel (which is subject to motor fuel tax). The tax on the blended product is calculated as follows:

(1)200 gallons of B20 = 40 gallons (200 x .20 = 40) which is exempt from the motor fuel tax.

(2)160 gallons of this blend of product is petroleum diesel and subject to motor fuel tax

(3)800 gallons of petroleum diesel fuel to be blended with the B20 blend above is subject to motor fuel tax (160 gallons + 800 gallons = 960 gallons subject to motor fuel tax).

(4)40 gallons biodiesel / 1,000 total gallons = B4

(5)1,000 gallons x .96 (96% is the taxable percentage of a B4 blend) = 960 gallons X .32 (the current motor fuel tax rate).

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2010-01-01 to 01/04/2022
Technical Revision — effective from 2010-01-01 to 01/01/2010
Adoption — effective from 2010-01-01 to 01/01/2010

Subchapter 55 Personal Income Tax

280-RICR-20-55-1 Estimated Payments

280-RICR-20-55-1 § 1.1 Purpose

These rules and regulations implement R.I. Gen. Laws §§ 44-30-55 and 44-30-56. Those sections outline declarations and payments of estimated tax.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-11 to 01/04/2022

280-RICR-20-55-1 § 1.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws §§ 44-30-95(a) and 44-1-4. These rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws § 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-11 to 01/04/2022

280-RICR-20-55-1 § 1.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation the authority to effectuate the purpose of R.I. Gen. Laws §§ 44-30-55, 44-30-56, and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-11 to 01/04/2022

280-RICR-20-55-1 § 1.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-11 to 01/04/2022

280-RICR-20-55-1 § 1.5 Estimated Payments

A.Resident and nonresident individuals, estates and trusts are required to make declarations of estimated personal income taxes and pay the proper amounts due for each taxable year if the tax can reasonably be expected to be $250 or more in excess of any credits allowable against the tax. This is true whether or not the person or estate or trust is required to file a Federal declaration and/or to make any Federal estimated payments.

B.Estimated payments for individuals may be made jointly or separately (singularly) but should be made in the same filing status as the return to which they will be applied. If a joint filing is to be made, payment should be made using the Social Security Number which appears first on the tax return.

C.If individual taxpayers make joint estimated payments, and/or if they have a credit from a year for which a joint filing was made, and the individual taxpayers elect to file using the married, filing separately status, the two parties must decide on how the estimates and credits are to be divided between them.

1.The taxpayers should notify the Division of Taxation of the method to be used to divide the estimated payments or credit on both tax returns filed. If the individuals do not so notify the Division, the first party to file and claim credit for the overpayment and/or estimated payments may be given the credit and estimated payments.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-11 to 01/04/2022

280-RICR-20-55-1 § 1.6 Underpayment of Estimated Tax Charges - Exceptions and Waiver

A.Exceptions

1.In general, the Federal exceptions under which taxpayers will not be charged for underpayment of estimated tax may be followed in relation to the underpayment of estimated Rhode Island personal income tax.

2.Taxpayers should follow the instructions to complete and submit a RI-2210 form, if necessary, and should attach it to their Rhode Island personal income tax return to make it an integral part of the filing. If a taxpayer has received a billing for the underpayment of estimated taxes, a completed RI-2210 form should be attached to the remittance portion of the billing and sent to the Division of Taxation with any required payment.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-11 to 01/04/2022

280-RICR-20-55-2 Extension of Time to File

280-RICR-20-55-2 § 2.1 Purpose

These rules and regulations implement R.I. Gen. Laws § 44-30-57 regarding the Tax Administrator’s right to grant a reasonable extension of time to file a personal income tax return.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-2 § 2.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws §§ 44-30-57, 44-30-95(a), and 44-1-4. These rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws § 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-2 § 2.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation the authority to effectuate the purpose of R.I. Gen. Laws § 44-30-57 and other applicable state laws and regulations including, but not limited to, R.I. Gen. Laws §§ 44-30-55, 44-30-56, 44-30-84, and 44-30-85.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-2 § 2.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-2 § 2.5 Definitions

A.“Proper estimate” means a Rhode Island extension form filed by the regular due date which declares at least eighty percent (80%) of the tax due for the taxable year.

B.“Reasonable cause” means a taxpayer exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time.

C.“Regular due date” means the fifteenth day of the fourth month following the close of a taxable year (for calendar year filers this would be April 15th).

D.“Rhode Island extension,” for purposes of this regulation, means Form RI-4868 or Form RI-8736, whichever is applicable.

E.“Willful neglect” means a conscious, intentional failure or reckless indifference or failure to exercise ordinary business care and prudence.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-2 § 2.6 Extension of Time

A.An individual, partnership or fiduciary required to file a Rhode Island income tax return may be granted an extension of time to file any return, declaration, statement, or other required document for Rhode Island income tax purposes. Pursuant to R.I. Gen. Laws § 44-30-57, as amended, no extension for filing shall exceed six (6) months, except for taxpayers outside of the United States.

B. If a taxpayer (individual, fiduciary or partnership) meets all the following tests, the Rhode Island extension form RI-4868 (individual income tax returns) or RI-8736 (fiduciary income tax returns) need not be filed:

The taxpayer is not required to make payment with Rhode Island extension form; and
The taxpayer files a proper Federal extension form; and
The taxpayer's request for extension covers the same time period for both Rhode Island and Federal purposes.

C. If the taxpayer meets the criteria above, the taxpayer must attach a copy of either the Federal form 4868 or the Federal form 7004 to the Rhode Island return when it is filed.

D. If a taxpayer does not meet the test in § 2.6(B) of this Part and is required to file a Rhode Island request for extension, the taxpayer shall:

1.Prepare the Rhode Island extension form (either RI-4868 or RI-8736); and

Show the full amount properly estimated as Rhode Island tax for that tax year;

a.Example: A taxpayer files an extension form on April 15th reporting a tax liability of $15,000 and prepayment of employer withholding tax in the amount of $12,000 and a payment with the extension of $3,000. The taxpayer files a return on the extended due date reporting a tax in the amount of $20,000. Since the amount reported on the application for extension of time to file was less than 80% of the total liability, there is no presumption of a proper estimate. The extension will be void and the addition to the tax (penalty) will be assessed unless the taxpayer can demonstrate reasonable cause.

File the extension form with the Rhode Island Division of Taxation on or before the due date for filing Rhode Island income tax returns; and
Pay the amount of Rhode Island tax due as calculated on the RI-4868 or RI-8736 form.
Be sure to attach a copy of the RI-4868 or RI-8736 to the Rhode Island return when it is filed.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-2 § 2.7 Taxpayers Outside the United States

A.Taxpayers outside the United States on the due date for filing will be accorded special status for extension of time for filing their Rhode Island personal income tax returns only if they have applied for and been granted the special federal extension; and further, only if the taxpayer complies with other state and federal requirements for extension.

B.Taxpayers claiming the special federal extension for being outside the United States on the due date must attach all state and federal extension documents in support of their claim.

C. Extensions for members of the armed services and other individuals serving in a combat zone will be allowed in accordance with the federal provisions.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-2 § 2.8 Payment

A.The filing or granting of an extension of time to file does not extend the time for payment of tax due on the return.

B.Pursuant to R.I. Gen. Laws § 44-30-84, if you do not pay the amount due by the regular due date, you will owe interest on the amount of tax due.

In accordance with R.I. Gen. Laws § 44-1-7, as amended, interest is assessed at 18% per annum and accrues until the date you pay the tax. Interest may not be abated.

C. Pursuant to R.I. Gen. Laws § 44-30-85, you may also be assessed a late filing addition to the tax (penalty) and/or a late payment addition to the tax (penalty).

The late filing addition to the tax is generally 5% (.05) of the amount of tax due for each month or part of a month your return is late.
The late payment addition to the tax is generally ½ of 1% (.005) of the amount of tax due for each month or part of the month your payment is late.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-2 § 2.9 Waiver of Late Filing Addition to the Tax

A.Showing of Reasonable Cause

1.Pursuant to R.I. Gen. Laws § 44-30-85, a taxpayer who wishes to avoid the addition to the tax for failure to file a tax return or pay tax must make an affirmative showing of all facts alleged as reasonable cause for his failure to file such return or pay such tax on time in the form of a written statement containing a declaration that is made under the penalties of perjury. This statement should be filed with the tax administrator.

2.If the tax administrator determines that the delinquency was due to reasonable cause and not willful neglect, the addition to the tax will not be assessed.

B.Reasonable cause will be presumed for the period of the extension of time to file with respect to any underpayment of tax if:

1.The amount of tax shown on the individual income tax return minus the amount of tax paid on or before the regular due date of the return (by virtue of the tax withheld by the employer, estimated tax payments, and any payment with an application for extension of time to file pursuant to R.I. Gen. Laws § 44-30-57) is less than or equal to twenty percent (20%) of the amount of tax shown on the individual income tax return; and

Any balance due shown on the individual income tax return is remitted with the return.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-3 Credit for Income Taxes of Other States

280-RICR-20-55-3 § 3.1 Purpose

These rules and regulations implement R.I. Gen. Laws § 44-30-18, as amended. That section outlines credits for income taxes of other states.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-11 to 01/04/2022

280-RICR-20-55-3 § 3.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws § 44-1-4. The rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws § 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-11 to 01/04/2022

280-RICR-20-55-3 § 3.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation the authority to effectuate the purpose of R.I. Gen. Laws § 44-30-18, as amended, and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-11 to 01/04/2022

280-RICR-20-55-3 § 3.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-11 to 01/04/2022

280-RICR-20-55-3 § 3.5 Credit for Income Taxes of other States

A.General

1.Credit and Limitation

a.Rhode Island personal income tax law, in R.I. Gen. Laws § 44-30-18, generally provides that a resident will be allowed a credit against his/her Rhode Island personal income tax due for the taxable year for the aggregate of the net income taxes imposed on him/her for the taxable year by other states (including the District of Columbia) of the United States. In other words, any resident of Rhode Island required to report and pay personal income taxes to another state(s) would be allowed a credit on his/her Rhode Island personal income tax return.

b.This credit cannot exceed the proportion of the taxpayer's Rhode Island personal income tax that the taxpayer's Rhode Island income derived from the other taxing states bears to his or her entire Rhode Island income for the same taxable year.

2.Terminology

a.R.I. Gen. Laws § 44-30-6, as amended, generally provides that any term used in Rhode Island personal income tax law shall have the same meaning as when used in a comparable context in the laws of the United States relating to Federal income taxes, unless a different meaning is clearly required.

B.Out of State Adjusted Gross Income

1.General

a.Regardless of terminology used by the statutes of the other taxing state(s), the adjusted gross income for another state to be used in the calculation of the credit is determined in the same manner as adjusted gross income used on the taxpayer's Federal income tax return and includes computation of gross income less any adjustments that would be comparable to Federal adjustments available to the taxpayer for the same tax year.

Gross Income

a.Out-of-state gross income is determined in the same manner as that which would be used for Federal purposes and generally include the net amounts of income that appear on the face of the other state's return or what would be comparable to the face of the Federal Income Tax Return.

b.When income is first reported on a supporting schedule and a lesser or different amount is carried forward to the face of the return, the amount on the face (or comparable to the face) of the return is what is used to arrive at the adjusted gross income.

C.Rhode Island Adjusted Gross Income

1.General Definition

a.The Rhode Island income of a resident individual is his/her adjusted gross income for Federal income tax purposes for the tax year plus or minus any allowable modifications.

2.Zero or Negative Amounts

a.A Rhode Island resident who has a zero or negative Federal adjusted gross income, after any allowable modifications, and a positive Federal income tax liability (such as would result from an alternative minimum tax) and is required to report and pay a personal income tax to another state would not be entitled to any Rhode Island out-of-state tax credit since the proper computation of the credit would result in zero or a number less than zero.

D. Calculation of Out-of-State Tax Credit with More Than One State

1.General

a.A taxpayer who has properly allowable credits for personal income taxes paid by him or her to more than one state shall calculate each out-of-state credit separately (including the limitations provided by law) and then total the credits. This total is then applied as credit for out-of-state taxes paid.

b.Taxpayers calculating the out-of-state credit for personal income taxes for more than one state should do so using form RI 1040MU and must attach a signed copy of each out-of-state tax return for which credit is claimed.

2.Computation

a.As an example of the computation of out-of-state credit for personal income taxes properly paid to more than one state, the following facts are assumed:

(1)The taxpayer:

(AA) is a full-year resident of Rhode Island

(BB) has federal adjusted gross income of $34,469

(CC) has no modifications either increasing or decreasing federal adjusted gross income for Rhode Island purposes; and

(DD) has Rhode Island personal income tax of $626.

(2)Additionally, the taxpayer has adjusted gross income from State A of $15,983 on which personal income taxes of $653 were paid; and

(3)Adjusted gross income from State B of $12,919 on which personal income taxes of $99 were paid.

(4)Calculation of out-of-state credit for State A:

Federal AGI (RIAGI)

$34,469.

RI Tax

$626.

State 'A' AGI

$15,983.

Percentage:

State 'A' AGI/Federal AGI

0.4637

Limitation:

Percentage x RI Tax

0.4637 X $626 = $291

Personal Income Tax - State 'A'

$653.

Out-of-State Credit - State 'A'

Smallest of RI tax, limitation, or tax paid to State A

$291.

(5)Calculation of out-of-state credit for State B:

Federal AGI (RIAGI)

$34,469.

RI Tax

$626.

State 'B' AGI

$12,919.

Percentage:

State 'B' AGI/Federal AGI

0.3748

Limitation:

Percentage x RI Tax

0.3748 X $626. = $235.

Personal Income Tax - State 'B'

$99.

Out-of-State Credit - State 'B'

Smallest of RI tax, limitation, or tax paid to State B

$99.

(6)In the example cited above, the out-of-state credit to be applied is $390 ($291 from State A and $99 from State B).

E.Partial Year Resident with a Rhode Island Out-of-State Tax Credit

1.General

a.Those taxpayers who are filing as a partial year resident and have to report and pay taxes to another state for the period of time they were (or are) residents of Rhode Island are entitled to the out-of-state tax credit.

2.Computation

a.In order to compute the out-of-state credit in this case, refer to the instructions for the RI-1040NR form.

F.The Tax Due and Payable from the Other State

1.The net amount of taxes as shown on the other state's return shall be comparable to the net tax after credits as shown on the Rhode Island return and/or on the Federal return.

G.Recomputation of an Out-of-State Tax Credit

1.The Rhode Island taxpayer should file an amended Rhode Island return claiming an increase or decrease in the out-of-state tax credit regardless of any other applicable Rhode Island statute of limitations which would appear to limit or prevent filing of the amended Rhode Island return:

a.When the other taxing state audits, corrects or changes the personal income tax return filed with that state; or

b.When the other taxing state changes or corrects the tax due and payable on that state's tax return; or

c.When the other taxing state notifies the Rhode Island taxpayer of a personal income tax due and payable to that state where no return had been previously filed.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-11 to 01/04/2022

280-RICR-20-55-3 § 3.6 Double Resident

A. General

1.A Rhode Island resident may be allowed a credit for taxes due and paid to another state. Taxpayers claiming this credit must file the RI-1040 Rhode Island resident return.

B.Double Resident

1.A person may be considered a resident of this state for tax purposes even though maintaining a domicile in another state.

2.A person acquires "double residence" status when he/she is not domiciled in Rhode Island and is living in a home they maintain in this state for more than 183 days of the tax year and, therefore, meets the residency requirements of this state.

3.Rules for days within and without Rhode Island:

a.In counting the number of days spent within and without Rhode Island, a day spent within Rhode Island includes any part of a day, except for a part of a day during which an individual is present solely while in transit to a destination outside Rhode Island.

b.An individual claiming to be a nonresident who is not domiciled in Rhode Island but who has a permanent place of abode in this state shall have records available for examination by the Division of Taxation to substantiate the fact that such individual spent 183 days or less within Rhode Island.

C.Out-of-State Tax Credit for "Double Resident"

1.A taxpayer who meets the qualifications above and is therefore a "double resident" for both Rhode Island and another state should complete computations of both states' tax liabilities (before credits) and then follow these steps to determine the out-of-state credit to be used on the Rhode Island return:

a. Add together the Rhode Island tax liability (before withholding and credits) and the other state tax liability (before withholding and credits).

b. Divide the Rhode Island tax liability by the total tax liability from § 3.6(C)(1)(a) of this Part above.

c. Multiply the percentage from § 3.6(C)(1)(b) of this Part by the lower state's tax. The resulting amount is the limitation of the out-of-state credit.

d. The actual amount of out-of-state tax credit will then be the smaller of the tax liability of the other state or the amount of credit for taxes due and paid to the other state as calculated in § 3.6(C)(1)(c) of this Part above.

2.This special treatment and calculation of out-of-state tax credit for "double residents" is only allowed if the other state also allows a similar reduction in its tax for "double residents."

3.Example:

a.A person is domiciled outside Rhode Island but is living in a home maintained by him in Rhode Island for more than 183 days of the tax year and, therefore, is considered a resident for the personal income tax purposes of this state. The Rhode Island tax liability before any withholding or credits is $800 and his tax liability to State X before withholding or credits is $500. Computation of the credit to be allowed on the Rhode Island filing for out-of-state taxes due and paid is as follows:

Rhode Island Tax Liability

State X Tax Liability

$800.00

Total Tax Liability

$500.00

Rhode Island Tax Liability

$1,300.00

Total Tax Liability

$ 800.00

$1,300.00 =

61.5%

61.5% x $500 (the lower tax amount)=

$307.50

This is the limitation on out-of-state credit.

The out-of-state credit = the smaller of $307.50 (calculated above) or $500 (the tax liability to State X). In this case the actual out-of-state credit to be used by the taxpayer is $307.50.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-11 to 01/04/2022

280-RICR-20-55-4 Tax Preparer Penalties

280-RICR-20-55-4 § 4.1 Purpose

These rules and regulations implement R.I. Gen. Laws § 44-68-1 et seq. That chapter outlines civil and criminal penalties which may be imposed on a paid tax preparer who fails to comply with due diligence requirements.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Adoption — effective from 2015-01-01 to 06/11/2018

280-RICR-20-55-4 § 4.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws §§ 11-18-1, 44-1-4 and 44-68-6. The rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws § 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Adoption — effective from 2015-01-01 to 06/11/2018

280-RICR-20-55-4 § 4.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation the authority to effectuate the purpose of R.I. Gen. Laws § 44-68-1 et seq. and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Adoption — effective from 2015-01-01 to 06/11/2018

280-RICR-20-55-4 § 4.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Adoption — effective from 2015-01-01 to 06/11/2018

280-RICR-20-55-4 § 4.5 Definitions

A. “Adjusted gross income” or “AGI” means gross income minus adjustments to income as defined in 26 U.S.C. § 62;

B. “Administrator” or “Tax administrator” means the tax administrator of the State of Rhode Island, and head of the Rhode Island Division of Taxation;

C. “Claimant” means a homeowner or renter, sixty-five (65) years of age or older and/or disabled, who has filed a claim under R.I. Gen. Laws Chapter 44-33 and was domiciled in Rhode Island for the entire calendar year for which he or she files a claim for relief under R.I. Gen. Laws Chapter 44-33. In the case of a claim for rent constituting property taxes accrued, the claimant shall have rented property during the preceding year for which he or she files for relief under R.I. Gen. Laws Chapter 44-33. Claimant shall not mean or include any person claimed as a dependent by any taxpayer under 26 U.S.C. § 1 et seq. When two (2) individuals of a household are able to meet the qualifications for a claimant, they may determine between themselves as to who the claimant is. If they are unable to agree, the matter is referred to the tax administrator and his or her determination is final. If a homestead is occupied by two (2) or more individuals, and more than one individual is able to qualify as a claimant and some or all of the qualified individuals are not related, the individuals may determine among themselves as to who the claimant is. If they are unable to agree, the matter is referred to the tax administrator, and his or her decision is final.

D. “Dependent” means any person living in the household who is either a qualifying child or a qualifying relative pursuant to the Internal Revenue Code, 26 U.S.C. § 152(a);

E. “Disabled” means those persons who are receiving a social security disability benefit;

F. “Division” means the Rhode Island Division of Taxation;

G. “Due diligence” means the measure of prudence and care that a reasonable person exercises in the preparation of tax returns that are to be filed with the Division;

H. “Dwelling unit” means a single unit providing complete independent living facilities for one or more persons, including permanent provisions for living, sleeping, eating, cooking, and sanitation;

I. “Earned income” means any and all income qualifying as earned income under 26 U.S.C. § 32; this includes, but is not limited to, wages, salaries, tips, and other taxable employee pay, net earnings from self-employment, and gross income received as a statutory employee;

J. “Earned income credit” or “EIC” means the federal and state tax credit under 26 U.S.C. § 32 for certain people who work and have earned income under certain threshold amounts;

K. “Homestead” means your Rhode Island dwelling, whether owned or rented, and so much of the land around it as is reasonably necessary for the use of the dwelling as a home, but not exceeding one acre. It may consist of a part of a multi-dwelling or a multi-purpose building. It may be an apartment, a houseboat, a mobile home, or a farm;

L. “Household” means one or more persons occupying a dwelling unit and living as a single nonprofit housekeeping unit. Household does not mean bona fide lessees, tenants, or roomers and boarders on contract;

M. “Household income” means all income, both taxable and nontaxable, received by all persons of a household in a calendar year while members of the household;

N. “Preparer tax identification number” or “PTIN” means the number issued by the Internal Revenue Service (IRS) to paid preparers to use on all the returns they prepare;

O. “Public assistance” means cash assistance from government assistance programs informally known as welfare assistance, and more commonly known as “temporary assistance for needy families” (TANF);

P. “Return” means any tax report, return, claim for refund, or attachment to any report, return, and/or claim for refund filed with the Tax Administrator pursuant to the Rhode Island tax laws;

Q. “Tax return preparer” means an individual who prepares a substantial portion of any Return for compensation. This includes preparers who sign the Return, preparers who prepare the EIC or Property Tax Relief Credit portions of the Return but do not sign the Return, or the employers of these preparers. Tax Return Preparers include individuals required to register with the Internal Revenue Service as a tax return preparer and who have a Preparer Tax Identification Number (PTIN). The following are NOT considered Tax Return Preparers:

Volunteer tax return preparers; or
Employees of a tax return preparer or employees of a commercial tax return preparation business who provide only clerical, administrative, or other similar services.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Adoption — effective from 2015-01-01 to 06/11/2018

280-RICR-20-55-4 § 4.6 Earned Income Credit (EIC)

A. Any resident or non-resident with Earned Income from Rhode Island who claims the Federal Earned Income Credit is eligible for Rhode Island’s EIC.

B. The Rhode Island EIC is determined in accordance with R.I. Gen. Laws § 44-30-2.6(c)(2)(N) and by using the RI Schedule EIC on the RI–1040 or RI–1040NR.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Adoption — effective from 2015-01-01 to 06/11/2018

280-RICR-20-55-4 § 4.7 Due Diligence Regarding Earned Income Credit

A. It is the responsibility of the Tax Return Preparer to be knowledgeable about the law with regard to EIC, make reasonable inquiries of the taxpayer, and review supporting documentation provided by the taxpayer to validate the assertions made in preparing a Return that claims EIC.

B. The purposes for a Tax Return Preparer to question the taxpayer regarding EIC Due Diligence are:

To reasonably conclude that the taxpayer is reporting the proper amount of income that contributes to their total Earned Income and AGI;
To reasonably conclude that no other person is eligible to claim EIC or any other child-related benefits for the dependent(s) being claimed; and
To reasonably conclude that the dependent(s) being claimed is actually a qualifying dependent(s) for EIC purposes.

C.Due Diligence for a Tax Return Preparer includes, but is not limited to:

Have reasonable knowledge or verification of the identity of the taxpayer presenting the information (such as requesting a photo ID and social security card);
Applying a prudent man standard to the information provided by the taxpayer;
Evaluating whether that information is complete and gathering any missing facts;
Determining if the information is consistent and recognizing contradictory statements;
Conducting a thorough, in-depth interview with each taxpayer each year that the taxpayer claims the EIC;
Asking enough questions to reasonably know the taxpayer’s eligibility for EIC and the amount of credit is correct and complete; and
Documenting in the file any questions asked and the taxpayer’s responses.

D. To meet the federal and Rhode Island Due Diligence requirements regarding the EIC, a Tax Return Preparer shall:

Complete the Paid Preparer’s Earned Income Credit Checklist (U.S. Form 8867 for the IRS). This form must be submitted to the IRS. The Division does not require the 8867 Form to be submitted along with every EIC claim; however, a Tax Return Preparer shall have a copy of this document in his or her records for every EIC claim;
Complete the EIC worksheet in the U.S. Form 1040 instructions, Publication 596, Earned Income Credit, for the IRS. A Tax Return Preparer shall have a copy of this document in his or her records for every EIC claim;
Keep copies of any and all documentation provided by the taxpayer that was relied upon by the Tax Return Preparer to complete U.S. Form 8867 or the EIC worksheet;
Keep a record of when and how (including from whom) the Tax Return Preparer received the information used to prepare the Return. This includes documentation of what questions were asked by the Tax Return Preparer and the taxpayer’s responses;

a. If a reasonable and well informed Tax Return Preparer would conclude that any information used to determine if the taxpayer is eligible for EIC is incorrect, inconsistent, or incomplete, the Tax Return Preparer shall ask the taxpayer additional questions, as well as maintain additional records consistent with these additional questions.

b. These records may include, but are not limited to:

(1) Verification of dependents such as copies of birth certificates, school records, medical records, court placement records, guardianship records, social security cards;

(2) Verification of filing status such as marriage license, divorce settlement, bank statements, lease and/or mortgage agreement;

(3) Verification as to whether or not the taxpayer was required to file a U.S. Form 8862 (Information to Claim Earned Income Credit After Disallowance) with the IRS;

(4) For U.S. Schedule C Filers, verification of Earned Income such as a Form 1099 Misc., business license, client and/or customer lists, taxpayer prepared records or log book of income, bank statements, and any income documents other than W-2 forms;

(5) Verification of deductions such as a mileage deduction log, business receipts, rent receipts, and client prepared records or log book of business expenses, and bank statements; and

Copies of documents or records required by this section to be kept on file by a Tax Return Preparer shall be produced within seventy two (72) hours upon request by the Division for said documents or records. However, additional time may be granted based on the Tax Return Preparer’s written request to the Tax Administrator.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Adoption — effective from 2015-01-01 to 06/11/2018

280-RICR-20-55-4 § 4.8 Property Tax Relief Credit

A. Pursuant to R.I. Gen. Laws Chapter 44-33, Property Tax Relief Credit provides relief to Rhode Island taxpayers paying property tax who own or rent their homes.

B. In order to qualify for Property Tax Relief Credit a Claimant shall meet all of the following conditions:

The Claimant shall be domiciled in Rhode Island for the entire calendar year;
The Claimant’s total Household Income shall have been $30,000 or less;
The Claimant’s Homestead shall be subject to property taxes;
The Claimant shall be current on all property tax or rent/lease payments due on the Homestead for all prior years and on any current installments;
The Claimant shall timely file Form RI–1040H by April 15 of the following year; and
Only one (1) property tax relief claim is allowed per household.

C. Under R.I. Gen. Laws § 44-33-16, a claim for property tax relief shall exclude all taxes or rent paid with public assistance;

D. The right to file a claim for Property Tax Relief does not survive a person’s death; therefore, a claim filed on behalf of a deceased person cannot be allowed. If the Claimant dies after having filed a timely claim, the amount thereof will be disbursed to another member of the Household as determined by the Tax Administrator.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Adoption — effective from 2015-01-01 to 06/11/2018

280-RICR-20-55-4 § 4.9 Due Diligence Regarding Property Tax Relief Credit

A. It is the responsibility of the Tax Return Preparer to be knowledgeable about the law with regard to Property Tax Relief, make reasonable inquiries of the Claimant, and review supporting documentation provided by the Claimant to validate the assertions made in preparing a Return that claims Property Tax Relief Credit.

B. The purposes for a Tax Return Preparer to question the Claimant for Property Tax Relief Due Diligence analysis are:

To reasonably conclude that the Claimant is reporting all income that contributes to their total Household Income; and
To reasonably conclude that only one Claimant per Household claims the Property Tax Relief Credit.

C. Due Diligence for a Tax Return Preparer includes, but is not limited to:

Have reasonable knowledge or verification of the identity of the Claimant presenting the information (such as requesting a photo ID and social security card);
Applying a prudent man standard to the information provided by the Claimant;

3.Evaluating whether that information is complete and gathering any missing facts;

Determining if the information is consistent and recognizing contradictory statements;
Conducting a thorough, in-depth interview with each Claimant each year;
Asking enough questions to have reasonable knowledge the Property Tax Relief Claim is correct and complete; and
Documenting in the file any questions asked and the Claimant’s responses.

D. To meet the Rhode Island Due Diligence requirements for Property Tax Relief Credit, a Tax Return Preparer shall:

Keep copies of any and all documentation provided by the Claimant that was relied upon by the Tax Return Preparer to complete the Return claiming Property Tax Relief Credit;
Keep a record of when and how (including from whom) the Tax Return Preparer received the information used to prepare the Return. This includes documentation of what questions were asked by the Tax Return Preparer and the Claimant’s responses.

a. If a reasonable and well informed Tax Return Preparer would conclude that any information used to determine if the Claimant is eligible for Property Tax Relief Credit is incorrect, inconsistent, or incomplete, the Tax Return Preparer shall ask the Claimant additional questions as well as maintain additional records consistent with these additional questions.

b. These records may include, but are not limited to:

(1) Verification that Household Income is $30,000 or less such as bank statements, W-2 forms for any persons living in the Household, social security award letters, disability award letters, 1099-C Cancellation of Debt, unemployment benefits, worker’s compensation benefits, Public Assistance, child support received, cash assistance from friends/family, gambling winnings, non-taxable military compensation, gross amounts of pensions and annuities; and

(2) Verification that Homestead is subject to property tax such as rent receipts, cancelled rent checks, proof of mortgage payments, proof of paid property tax bill, HUD Lease Form 50059 or lease agreement, and landlord’s name, address, and phone number;

Copies of documents or records required by this section to be kept on file by a Tax Return Preparer shall be produced within seventy two (72) hours upon request by the Division for said documents or records. However, additional time may be granted based on the Tax Return Preparer’s written request to the Tax Administrator.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Adoption — effective from 2015-01-01 to 06/11/2018

280-RICR-20-55-4 § 4.10 Record Retention Requirements

A. Records kept under §§ 4.7 and 4.9 of this Part shall be kept for three (3) years from the later of:

The due date of the Return;
The date the Return was electronically filed;
For a paper Return, the date the Return was presented to the taxpayer for signature; or
If you are a non-signing Tax Return Preparer, the date you give the part for which you are responsible to the signing Tax Return Preparer.

B. Records may be kept in either paper or electronic format, but shall be capable of being produced within seventy two (72) hours if requested by the Division. However, additional time may be granted based on the tax return preparer’s written request to the Tax Administrator. Every Tax Return Preparer shall keep a back-up of these records in a separate, secure location.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Adoption — effective from 2015-01-01 to 06/11/2018

280-RICR-20-55-4 § 4.11 Inspections

A. The Tax Administrator, and his or her agents, may conduct audit inspections to ensure compliance with all provisions of R.I. Gen. Laws Chapter 44-68. Audit inspections of Tax Return Preparers shall be conducted during normal business hours.

B. Failure to allow such inspection(s) of records kept under §§ 4.7 and 4.9 of this Part may result in civil penalties and/or suspension or revocation of a Tax Return Preparer’s privilege to file Returns with the Division.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Adoption — effective from 2015-01-01 to 06/11/2018

280-RICR-20-55-4 § 4.12 Civil and Administrative Penalties

A. Failure to exercise Due Diligence Regarding Earned Income Credit - Upon a determination by the Tax Administrator that a Tax Return Preparer prepared a Return(s) and failed to comply with the Due Diligence requirements imposed by § 4.7 of this Part with respect to determining eligibility for, or the amount of, the EIC allowable by the State pursuant to R.I. Gen. Laws § 44-30-2.6(c)(2)(N), the Tax Return Preparer shall pay a penalty of five hundred dollars ($500) for each such return.

B. Failure to exercise Due Diligence Regarding Property Tax Relief Credit – Upon a determination by the Tax Administrator that a Tax Return Preparer prepared a Return(s) and failed to comply with the due diligence requirements imposed by § 4.9 of this Part with respect to determining eligibility for, or the amount of, the Property Tax Relief Credit allowable by the State pursuant to R.I. Gen. Laws Chapter 44-33, the Tax Return Preparer shall pay a penalty of five hundred dollars ($500) for each such return.

C. Willful Intent - Upon a determination by the Tax Administrator that a Tax Return Preparer willfully prepared, assisted in preparing, or caused the preparation of a Return(s) with intent to wrongfully obtain a Property Tax Relief credit, or with the intent to evade or reduce a tax obligation, the Tax Return Preparer shall be liable for a penalty of one thousand dollars ($1,000), or five hundred dollars ($500) for each return so filed during any calendar year, whichever is greater.

D. Warning - The Tax Administrator, in his or her sole discretion, may provide a warning to any Tax Return Preparer who fails to exercise Due Diligence in preparing a return(s) that negligently claim(s) EIC or Property Tax Relief Credit or who intends to wrongfully evade or reduce a tax obligation.

E. Suspension or Revocation - The Tax Administrator may suspend or revoke the privilege of a Tax Return Preparer to prepare and/or file Returns with the Division upon a determination that the Tax Return Preparer has failed to comply with or violated any provision of R.I. Gen. Laws Chapter 44-68, these regulations, or any provision of any other laws relative to the preparation of tax Returns.

F. Criminal Offenses - If a Tax Return Preparer has been convicted of a crime involving identity theft, fraud, or tax evasion in any court of competent jurisdiction, the Tax Administrator may, in his or her sole discretion, suspend or revoke the privilege of the Tax Return Preparer to file tax returns with the Division without analyzing whether or not the Tax Return Preparer met the Due Diligence requirements.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Adoption — effective from 2015-01-01 to 06/11/2018

280-RICR-20-55-4 § 4.13 Criminal Penalties

Any Tax Return Preparer who has previously been assessed a penalty by the Tax Administrator under R.I. Gen. Laws § 44-68-4(c), who is found by a court of competent jurisdiction to have thereafter willfully prepared, assisted in preparing, or caused a preparation of a subsequent false tax Return or claim for refund which was filed with the Division with the intent to wrongfully obtain a Property Tax Relief credit or the intent to wrongfully evade or reduce a tax obligation shall be guilty of a felony and, upon conviction, shall be subject to a fine not exceeding fifty thousand dollars ($50,000), or imprisonment not exceeding five (5) years, or both.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Adoption — effective from 2015-01-01 to 06/11/2018

280-RICR-20-55-4 § 4.14 Appeals

A. Any Tax Return Preparer receiving notice of the Tax Administrator’s intent to impose civil and administrative penalties, including suspension or revocation of the privilege to file Returns with the Division may request an administrative hearing on the notice of intent to suspend or revoke.

B. In order to request this hearing, the Tax Return Preparer shall notify the Tax Administrator in writing within thirty (30) days from the date of the notice to suspend or revoke. The Tax Administrator shall, as soon as is practicable, set a time and place for hearing, and shall render a final decision. The administrative hearing is the Tax Return Preparer’s opportunity to present evidence regarding Due Diligence including checklists and documentation provided by the taxpayer to the Tax Return Preparer as detailed in §§ 4.7 and 4.9 of this Part.

C. Pursuant to R.I. Gen Laws § 8-8-24, appeals from a final decision of the Tax Administrator shall be to the Rhode Island Sixth (6th) Division District Court within thirty (30) of the final decision.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Adoption — effective from 2015-01-01 to 06/11/2018

280-RICR-20-55-5 Filing Status of Spouses – Nonresident Military Personnel and Partial-Year Residents

280-RICR-20-55-5 § 5.1 Purpose

These rules and regulations implement R.I. Gen. Laws §§ 44-30-5, 44-30-31, 44-30-51, and 44-30-52. Those sections outline the filing status of nonresident spouses.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-05-24 to 01/04/2022

280-RICR-20-55-5 § 5.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-05-24 to 01/04/2022

280-RICR-20-55-5 § 5.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation the authority to effectuate the purpose of R.I. Gen. Laws §§ 44-30-5, 44-30-31, 44-30-51, and 44-30-52, and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-05-24 to 01/04/2022

280-RICR-20-55-5 § 5.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-05-24 to 01/04/2022

280-RICR-20-55-5 § 5.5 General

A. R.I. Gen. Laws § 44-30-5 defines a resident of this state as:

One who is domiciled in this state.
One who is not domiciled in this state but maintains a permanent place of abode in this state and spends more than 183 days of the taxable year in this state, unless he/she is in the armed forces of the United States.

B. R.I. Gen. Laws § 44-30-51 requires a Rhode Island personal income tax return to be filed by or for:

Every resident individual required to file a Federal income tax return.
Every nonresident individual having Rhode Island source income.

C. R.I. Gen. Laws § 44-30-31 requires that, in part:

If the Federal income tax liability of a husband and wife, both of whom are nonresidents, is determined on a joint Federal return, their Rhode Island tax shall be determined on a joint Rhode Island return.
If either husband or wife is a resident and the other is a nonresident, separate Rhode Island taxes shall be determined on their separate Rhode Island source income, unless both elect to determine their joint Rhode Island taxes on their joint income as if both were residents.

a.If separate returns are filed, Rhode Island personal income tax shall be determined as if they had filed separate Federal income tax returns.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-05-24 to 01/04/2022

280-RICR-20-55-5 § 5.6 Filing Status of a Single Nonresident Military Person

A.A person who is a nonresident of Rhode Island and is in the United States military service and is stationed in Rhode Island on military orders is required to file a Rhode Island nonresident personal income tax return (RI-1040NR) if he/she has Rhode Island source income other than his/her military wages.

B.Compensation paid to a nonresident service member of the United States uniformed services for active duty military service can be claimed as a modification to reduce federal adjusted gross income for tax years 2003 and thereafter.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-05-24 to 01/04/2022

280-RICR-20-55-5 § 5.7 Filing Status of a Married Nonresident Military Person and His/her Spouse When a Joint Federal Income Tax Has Been Filed

A. Both spouses may elect to file a resident Rhode Island personal income tax return as married filing jointly on their joint income.

B.If one or both of the spouses must file and pay personal income taxes in another state, then a special computation has to be made for any allowable out-of-state tax credit on the Rhode Island return.

C. If either spouse claims Rhode Island as his/her legal residence, then separate Rhode Island personal income tax returns have to be filed.

The spouse claiming Rhode Island residency is required to file a resident Rhode Island personal income tax return (RI-1040A or RI-1040).
The spouse claiming nonresident status files a Rhode Island nonresident personal income tax return (RI-1040NR) if that person had any Rhode Island source income other than military wages.

a. By using the Rhode Island nonresident allocation schedule of the RI-1040NR, the portion of the Federal income tax liability to be used for Rhode Island purposes will be computed.

When separate Rhode Island returns are filed, the Federal married filing separate status has to be used to compute the Federal income tax liability for Rhode Island purposes.

a.The Federal married filing separately requirements have to be followed as they pertain to income reporting, itemized deductions, personal exemptions and dependents.

Nonresident service members filing to report income earned from a separate job in Rhode Island or the income of a spouse living in Rhode Island may subtract active duty military wages as a modification decreasing Federal adjusted gross income in determining the tax due to Rhode Island.

a.Residents of Rhode Island serving in the United States military on active duty, regardless of where they are stationed, are not affected by the modification in § 5.7(C)(4) of this Part above.

b.Example: A nonresident member of the United States armed forces who is stationed in Rhode Island earns $50,000 in active duty military wages. She also works part-time earning $20,000 in a field that is unrelated to her military duties. The nonresident would not be taxed on the $50,000 in military wages but would report the $20,000 on the allocation. She would take a decreasing modification of her military pay and would owe tax on the remainder of the unrelated part-time earnings after being reduced by the standard deduction and any personal exemption(s).

5.Income for services performed by the service member's spouse in Rhode Island would be exempt from Rhode Island income tax only if the service member's spouse moves to Rhode Island solely to be with the service member complying with military orders sending him/her to Rhode Island. The service member and the service member's spouse must also share the same non-Rhode Island domicile.

a.Other income derived from Rhode Island sources such as business income, ownership or disposition of any interest in real or tangible personal property and gambling winnings are still subject to Rhode Island income tax.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-05-24 to 01/04/2022

280-RICR-20-55-5 § 5.8 Filing Status of Husband and Wife Where One is a Partial-Year Resident

A.This section applies when one of the spouses is a partial-year Rhode Island resident, the other spouse is a full-year Rhode Island resident, and the couple files a joint Federal income tax return.

1.For example, a couple gets married and either the husband or the wife did not live in Rhode Island for all of the months during the year prior to marriage.

B.R.I. Gen. Laws §§ 44-30-31(c) and 44-30-51(b)(4) require that separate Federal liabilities be computed for Rhode Island purposes using the married filing separately status. If one spouse itemizes, then the other spouse must also itemize his/her deductions.

C.The resident spouse then should file the appropriate resident return form and the partial-year resident spouse should file the appropriate partial-year resident form with special attention to proper allocations and modifications.

D.The couple may elect to file a joint Rhode Island return as if both were residents of Rhode Island for the full year. If one of the spouses is required to report income to another state as a resident of that state, then R.I. Gen. Laws § 44-30-18(d) must be used in determining any allowable credit for taxes paid to that state.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-05-24 to 01/04/2022

280-RICR-20-55-6 Fiscal Year Taxpayers’ Method of Computing Rhode Island Tax

280-RICR-20-55-6 § 6.1 Purpose

These rules and regulations implement R.I. Gen. Laws §§ 44-30-2 and 44-30-60. Those sections outline the rate of Rhode Island personal income tax owed and elections regarding tax payment.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-6 § 6.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-6 § 6.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation the authority to effectuate the purpose of R.I. Gen. Laws §§ 44-30-2, 44-30-60, and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-6 § 6.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-6 § 6.5 In General

Fiscal year taxpayers are those taxpayers who, for Federal income tax purposes as well as for Rhode Island income tax purposes, have tax years other than calendar years. Fiscal year taxpayers may include estates and trusts as well as individuals.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-6 § 6.6 Election

When a taxpayer makes a fiscal year election for Federal purposes, he/she is considered to have made the election for Rhode Island income tax purposes. A Rhode Island taxpayer may not elect a Rhode Island fiscal year different from the taxpayer's Federal fiscal year; nor may the taxpayer elect a fiscal year for Federal purposes and a calendar year for Rhode Island purposes or a calendar year for Federal purposes and a fiscal year for Rhode Island purposes.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-6 § 6.7 Computation

A. A fiscal year taxpayer whose tax years involve calendar periods for which there was no change in the Rhode Island personal income tax rate need only determine the proper Federal income tax liability with any appropriate Rhode Island modifications.

B. A fiscal year taxpayer whose tax years involve calendar periods for which the Rhode Island personal income tax rate changed should compute the Rhode Island personal income tax in the following manner:

Determine the proper Federal income tax liability with any appropriate Rhode Island modifications.
Determine the rates for the Rhode Island personal income tax in effect during the taxpayer's fiscal year and the number of months for which the rates were in effect.
Calculate the fiscal period rates for each rate change: (Number of Months Rate was in Effect x Rate)/12
Multiply each fiscal period rate by the Federal income tax liability and add the resulting amounts to determine the proper Rhode Island personal income tax liability.
Fiscal year taxpayers should then show this amount as the Rhode Island tax liability on the appropriate line of the Rhode Island return and attach a schedule showing the computation details. Taxpayers should not enter any amount in the space provided for Federal tax liability on the Rhode Island Return.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-6 § 6.8 Example

Assume that a fiscal year taxpayer's filing period (7/1 to 6/30) had two Rhode Island rates. The first rate was 20% from 1/1/20XX to 12/31/20XX; the second rate was 25% from 1/1/20AB to 12/31/20AB. The Federal income tax liability was $5,000.

Step #1: Fiscal period rates:

6/12 x 20% =

10.0%

6/12 x 25% =

12.5%

Step #2: Tax:

10.0% x $5,000.00 =

$ 500.00

12.5% x $5,000.00 =

$ 625.00

RHODE ISLAND INCOME TAX =

$1,125.00

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-7 Trust Distributions

280-RICR-20-55-7 § 7.1 Purpose

These rules and regulations implement R.I. Gen. Laws §§ 44-30-5(c) and 44-30-19. Those sections outline the tax treatment of trust distributions.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-11 to 01/04/2022

280-RICR-20-55-7 § 7.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws §§ 44-30-5(c) and 44-1-4. The rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws § 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-11 to 01/04/2022

280-RICR-20-55-7 § 7.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation the authority to effectuate the purpose of R.I. Gen. Laws §§ 44-30-5(c), 44-30-19, and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-11 to 01/04/2022

280-RICR-20-55-7 § 7.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-11 to 01/04/2022

280-RICR-20-55-7 § 7.5 Reference and Definitions

A. "Accumulation distribution" has the meaning set out in 26 U.S. Code § 665(b), as amended.

B. "Discretionary trust" means a trust where the fiduciary has a discretionary power to distribute income or to accumulate income.

C. "Income" has the meaning set out in 26 U.S.C. § 643(b), as amended.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-11 to 01/04/2022

280-RICR-20-55-7 § 7.6 Residency Status of Beneficiaries

A. The status of a beneficiary as a "resident individual" or as a "nonresident individual" is his or her status for personal income tax purposes but determined at the close of the trust's taxable year rather than at the close of the beneficiary's taxable year.

B. For those children born after the execution of the trust, children of a resident individual are deemed to be resident individuals and; likewise, children of a nonresident individual are deemed to be nonresident individuals.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-11 to 01/04/2022

280-RICR-20-55-7 § 7.7 Residency Status of the Trust

A.If income is accumulated in a discretionary trust in any year and the trustee has a discretionary power to distribute the income or the accumulated income among a group of people, any one of whom is a resident individual, the trust is deemed to be a resident trust with regard to the accumulated income pertaining to the resident beneficiary or beneficiaries.

B. If income is accumulated in a trust in any year, the trust is deemed to be a resident trust for the purposes of the accumulated income to the extent that the income is accumulated for future distribution only to a person who is a (or to persons who are) resident(s) at the close of the trust's taxable year; and is deemed to be a nonresident trust to the extent that the income is accumulated for future distribution to a person(s) who is a nonresident at the close of the trust's tax year.

C. Capital gains realized and deemed retained for future distribution to the remaindermen are undistributed gains and the trust is deemed to be a resident trust in the same ratio that the interests of all resident individual remaindermen bear to the interests of all remaindermen.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-11 to 01/04/2022

280-RICR-20-55-7 § 7.8 Examples

A.Situation A: The will of a resident individual establishes a discretionary trust. During the lifetime of the wife (W), income (except capital gains) may, in the discretion of the trustee, be paid to W, the son (S), the daughter (D) or any issue of S or D, or the income may be accumulated. On W's death, the principal is to be distributed in equal shares to S and D or to the issue of either if S and/or D are not living at that time. Thus, the trustee has a discretionary power to distribute accumulated income or principal to W, S, D or to any issue of S or of D.

1.During the year all of the income except capital gains is currently paid to W. The trust realizes $1,000 of long-term capital gains and retains those gains.

a.WHAT IF: W and S are Rhode Island residents and D resides in another state and is not a Rhode Island individual?

b.ANSWER: Since presumptively the principal will ultimately pass in equal parts to S and D (one of whom is a resident individual and the other is not), the capital gains are therefore being accumulated one-half for a resident and one-half for a nonresident. Thus, one-half of the retained income (capital gains) is subject to Rhode Island personal income tax and a RI-1041 Form is required to be filed. The fact that W is a resident individual is immaterial concerning the capital gains because the principal will eventually go to S and D.

c.WHAT IF: W resides in another state and is not a Rhode Island resident; S and D are both Rhode Island resident individuals?

d.ANSWER: Since all of the capital gains are being accumulated for future distribution to persons who are Rhode Island resident individuals, the trust is therefore considered a resident trust with respect to the capital gains and a RI-1041 Form is required to be filed as it pertains to the retained income (capital gains).

During the year the trust receives $10,000 of income and realizes $1,000 in long term capital gains. The trustee pays $8,000 of income to W; accumulates the remaining $2,000; and makes no principal distributions.

a.WHAT IF: S is a Rhode Island resident individual and W and D both reside in another state and are not Rhode Island resident individuals?

b.ANSWER: Since one of the beneficiaries S (who, in the discretion of the trustee) may receive the entire accumulated income, is a resident individual, the trust is considered a resident trust with respect to the income retained. Because one of the two remaindermen is a resident individual, one-half of the capital gains retained are subject to Rhode Island personal income tax.

c.WHAT IF: W is a resident of another state and S and D are both Rhode Island resident individuals?

d.ANSWER: The trust is a resident trust and must report and pay Rhode Island taxes on all the retained income.

B.Situation B: The will of a resident individual establishes a discretionary trust. During W's lifetime, the trustee is authorized, but not required, to pay income (except capital gains) and/or principal in its discretion among a group consisting of W, S, D, the issue of S and the issue of D. On W's death, the trust divides into two separate trusts with S receiving a life income from one with the principal passing to his issue at his death; and D receiving a life income from the other with the principal passing to her issue at her death.

1.WHAT IF: During the year the trustee distributes all income and realizes $2,000 of long term capital gains. W is a Rhode Island resident individual. S is a Rhode Island resident individual as are his minor children. D resides in another state and has two children, a son (GS) who is 22 and a Rhode Island resident individual and a daughter (GD) who resides in the other state.

2.ANSWER: Because capital gains are presumptively accumulated for future distribution, the trust is therefore a resident trust with respect to 3/4 of the capital gains. The reasoning behind this is that one half is being accumulated for the benefit of S's issue (all of whom are Rhode Island residents) and one quarter (one half of one half) are being accumulated for GS who is also a Rhode Island resident.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-11 to 01/04/2022

280-RICR-20-55-7 § 7.9 Resident Beneficiaries' Treatment of Accumulation Distribution by a Trust

A. Rhode Island Income Tax Liability

1.The Rhode Island income tax liability for the year in which an accumulation distribution is received is the greater of:

a. The Rhode Island income tax liability computed based on the exclusion of the accumulated distribution from Federal taxable income. Rhode Island taxable income would then be calculated using this adjusted Federal Taxable Income, or

b. The Rhode Island income tax liability computed based on the Federal taxable income including the amount of accumulation distribution less the beneficiary's allocable portion of the Rhode Island income previously included in RI taxable income of the trust.

B. The Rhode Island Tax Adjustment

1.The Rhode Island tax adjustment is computed as follows:

a. Based upon Federal "throw back" rules, determine the preceding years to which the accumulation distribution shall be carried;

b. Recompute the Rhode Island personal income tax liability for each year including the accumulation distribution by computing the Federal income tax liability and applying the appropriate Rhode Island rate for that year;

c. From the amounts determined in § 7.9(B)(1)(b) of this Part, subtract the original Rhode Island personal income tax liability for the beneficiary for each year to arrive at the difference in Rhode Island income tax attributable to the distribution (not less than zero);

d. From the amounts determined in § 7.9(B)(1)(c) of this Part, subtract the Rhode Island income tax previously paid by the trust for each year applicable to the accumulation distribution (not less than zero). If all of the previously taxed income is not distributed, the amount of Rhode Island tax to be subtracted should be in the same proportion as the amount of actual distribution bears to the total accumulated income for that year.

(1) If more than one beneficiary is involved, the amount of Rhode Island tax paid to be subtracted shall be that portion of the tax paid that the accumulation distribution received by the beneficiary bears to the total accumulation distribution made to all beneficiaries for that year;

e. Add the amounts determined in § 7.9(B)(1)(d) of this Part above to arrive at the Rhode Island tax adjustment.

C. Rhode Island Tax Credit

1.To calculate the credit allowable under R.I. Gen. Laws § 44-30-19(a), add together the amount of Rhode Island tax paid by the trust for each applicable year as they appear in § 7.9(B)(1)(d) of this Part.

D. Rhode Island Tax Payable

1.To determine the Rhode Island tax payable for the year, subtract the credit computed in § 7.9(C) of this Part from the tax payable as computed in § 7.9(B) of this Part.

2.This computation is necessary to conform with the limitation discussed in R.I. Gen. Laws § 44-30-19(b).

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-11 to 01/04/2022

280-RICR-20-55-8 Lottery and Pari-Mutuel Winnings and Prizes

280-RICR-20-55-8 § 8.1 Purpose

These rules and regulations implement R.I. Gen. Laws § 44-30-71.2. This section outlines the withholding of tax from lottery and pari-mutuel winnings and prizes.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-8 § 8.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws §§ 44-30-71.2, 44-30-95(a), and 44-1-4. These rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws § 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-8 § 8.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation the authority to effectuate the purpose of R.I. Gen. Laws § 44-30-71.2 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-8 § 8.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-8 § 8.5 General

A.Effective on and after July 1, 1989, amounts received from or paid on behalf of the Rhode Island Lottery as winnings and prizes are taxable under the provisions of the Rhode Island personal income tax (R.I. Gen. Laws § 44-30-1 et seq., as amended).

B.Additionally, subject to provisions of this regulation, these amounts and winnings received from pari-mutuel betting licenses in Rhode Island are subject to withholding taxes similar to the Internal Revenue provisions for gambling winnings.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-8 § 8.6 Effective Date Explained

A. The taxability of Rhode Island Lottery winnings and prizes and the withholding requirements applied to the Rhode Island Lottery and to pari-mutuel betting licensees in Rhode Island are applied according to the date on which the winnings and prizes are received after the effective date above.

B. Winnings and prizes received means amounts received by the taxpayer on or after July 1, 1989 regardless of the date of the Lottery drawing, the date of the winner determination or the date of the pari-mutuel betting event and regardless of whether the prize or winnings are paid to the winner in installments over a period of time by the Director of Lotteries, pari-mutuel betting licensee or by a third party annuity or other contractual payor.

C.Examples

George found a winning Rhode Island Lottery ticket he'd forgotten. Although the drawing was held eight (8) months earlier, George claimed his prize on July 15, 1989. For George's Rhode Island income tax purposes, his winnings are taxable as part of his 1989 Rhode Island income. Depending on the amount of his winnings, Rhode Island withholding may be deducted by the Lottery prior to his receipt.
Joan won the Rhode Island Lottery in 1987 and is receiving her winnings in a check each August over a ten year period. Beginning with the August 1989 check, Joan's winnings are taxable as part of her Rhode Island income. Depending on the amount of her winnings, Rhode Island withholding may be deducted by the Lottery or its third-party payor, prior to receipt.
David bet, won and received his winnings at the Rhode Island Lottery in a single check in February 1989. Because he received his winnings before July 1, 1989, they are exempt from Rhode Island personal income tax and regardless of the amount, no Rhode Island withholding was deducted by the Lottery.
Denise won and received a large sum from a Rhode Island casino in August 1989. Her winnings are part of her Rhode Island income (they were never exempted); however, since she received her winnings after July 1, 1989, and depending on the amount of her winnings, Rhode Island withholding may be deducted by the payor prior to receipt.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-8 § 8.7 Treatment by Taxpayers

A. Lottery Winnings

1.Effective July 1, 1989, winnings and prizes received from the Rhode Island Lottery are taxable under the provisions of the Rhode Island personal income tax (R.I. Gen. Laws § 44-30-1 et seq., as amended) and are includable in the income of both residents and nonresidents alike. Prior to that act, these winnings and prizes were exempt under R.I. Gen. Laws § 42-61-17.

B. Nonresidents

1.Winnings and prizes from the Rhode Island Lottery and pari-mutuel betting events conducted or operated by a licensee in Rhode Island are specifically set out as parts of the Rhode Island income of a nonresident individual in R.I. Gen. Laws § 44-30-32(b)(1)(iii).

a.As such, a nonresident must include them as items of income and deductions from Rhode Island sources in his or her calculation of Rhode Island personal income tax due.

b.Nonresidents must take these amounts of Rhode Island source income and deductions into consideration when determining if a Rhode Island nonresident income tax return is required to be filed.

c.If Rhode Island income tax has been withheld from the taxpayer's winnings and prizes and if, after calculation, the taxpayer has no Rhode Island tax liability, he or she must file a Rhode Island tax return to get a refund of the taxes withheld or to have the tax overpayment credited to the following year.

C. Withholding

1.Effective July 1, 1989, winnings and prizes received from the Rhode Island Lottery and from pari-mutuel betting licensees in Rhode Island are subject to withholding provisions similar to 26 C.F.R. § 31.3402(q)-1 (2018).

2.In order to receive a credit for Rhode Island taxes withheld, a taxpayer will be required to attach a copy of the W-2G to the Rhode Island tax return beginning with filings for any tax year ending on or after July 1, 1989.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-8 § 8.8 Payors' Responsibilities

A. Payor

1.For the purpose of this regulation, a "payor" means and includes the Director of Lotteries (R.I. Gen. Laws § 42-61-1 et seq.), a third-party annuity or other contractual payor for the Rhode Island Lottery and every Rhode Island licensee conducting or operating events upon which parimutuel betting is allowed.

B. Reference to Federal Provisions

1.Whenever Federal income tax withholding and/or notification is required by 26 C.F.R. § 31.3402(q)-1 (2018), a corresponding withholding and/or notification is required for Rhode Island personal income tax purposes.

2.Additionally, provisions for remittance and reconciliation by the payor similar to those required for Federal purposes are required for Rhode Island purposes.

C. Rhode Island Withholding Method and Rate

1.If Federal income tax is withheld from a payment, then the payor must withhold an amount of Rhode Island income tax equal to the amount of Federal tax withheld multiplied by the Rhode Island personal income tax withholding rate in effect on the date of the payment.

D. Payor Remittance

1.Payors withholding Rhode Island income tax from winners' payments must remit the Rhode Island withholdings to the Division of Taxation at the same time as, but separate from, remittance for the payors' employees' withholdings.

2.If the payor has no employees for whom Rhode Island withholding is made, the payor will remit to the Division of Taxation on the same basis as other remittance of income taxes withheld then in effect.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-9 W-2 Informational Returns

280-RICR-20-55-9 § 9.1 Purpose

These rules and regulations implement R.I. Gen. Laws § 44-30-73. This section outlines the requirement for employers to file W-2 informational returns.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-9 § 9.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-9 § 9.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation the authority to effectuate the purpose of R.I. Gen. Laws § 44-30-73 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-9 § 9.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-9 § 9.5 W-2 Informational Returns

A. Who Must Electronically File Returns

1.Every employer that is required to electronically file annual W-2 information to the Social Security Administration, and having a minimum of 25 employees in the State of Rhode Island, is required to electronically file W-2 informational returns with the State.

2.Every employer that applies for or receives one or more Rhode Island tax credit(s) is required to electronically file W-2 informational returns with the State.

B.Electronic Filing Procedure

Please refer to the "W-2 Electronic Filing Requirements" document that is available on the Division of Taxation’s website for additional information on how to electronically file W-2 documents.

2.The required format is also described in SAA Publication No. 42-007 (Specifications for Filing Forms W-2 Electronically) and any amendments or revisions thereto.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-10 Employers' Withholding

280-RICR-20-55-10 § 10.1 Purpose

These rules and regulations implement R.I. Gen. Laws §§ 44-30-71, 44-30-75, 44-30-78, and 44-30-85.1. These sections outline employers’ withholdings.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2020-03-02 to 01/04/2022
Amendment — effective from 2020-03-02 to 03/02/2020
Amendment — effective from 2018-06-11 to 03/02/2020
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-10 § 10.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws §§ 44- 30-95(a) and 44-1-4. These rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws § 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2020-03-02 to 01/04/2022
Amendment — effective from 2020-03-02 to 03/02/2020
Amendment — effective from 2018-06-11 to 03/02/2020
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-10 § 10.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation the authority to effectuate the purpose of R.I. Gen. Laws §§ 44-30-71, 44-30-75, 44-30-78, 44-30-85.1, and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2020-03-02 to 01/04/2022
Amendment — effective from 2020-03-02 to 03/02/2020
Amendment — effective from 2018-06-11 to 03/02/2020
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-10 § 10.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2020-03-02 to 01/04/2022
Amendment — effective from 2020-03-02 to 03/02/2020
Amendment — effective from 2018-06-11 to 03/02/2020
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-10 § 10.5 General Information

A.Under the Rhode Island personal income tax system, as under the Federal system, employers are required to withhold a portion of each employee's wages and to periodically remit these funds withheld to the Division of Taxation.

B.Withholding Registration and Number

1.A special registration of employers may be required for Rhode Island purposes.

2.The employer's identification number used for Rhode Island income tax is the same identification number currently issued to the employer by the Internal Revenue Service.

3.If an employer has not applied for or received a Federal employer's identification number, the employer should apply to the Division of Taxation for a special, assigned number.

C.Employees' Exemptions

1.Employers must have employees complete the RI-W4 to determine each employee’s number of dependents, other personal exemptions, and additional Rhode Island withholding.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2020-03-02 to 01/04/2022
Amendment — effective from 2020-03-02 to 03/02/2020
Amendment — effective from 2018-06-11 to 03/02/2020
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-10 § 10.6 Employees' Wages and Withholding

A.Generally, Rhode Island withholding is required to be withheld from the wages of an employee by a Rhode Island employer.

B."Rhode Island employer" means an employer maintaining an office or transacting business within this state.

C.Withholding Required

1.A Rhode Island employer must withhold Rhode Island income tax from the wages of an employee if:

a.The employees' wages are subject to Federal income tax withholding, and

b.Any part of the wages were for services performed in Rhode Island.

D.Convenience Withholding

1.An employer may withhold Rhode Island personal income tax at the request of the employee even though the employee's wages are not subject to Federal income tax withholding.

2.Additionally, employers in other states may wish to withhold Rhode Island personal income tax from wages of their Rhode Island employees as a convenience to those employees.

3.Additional information regarding convenience withholding may be requested from the Division of Taxation.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2020-03-02 to 01/04/2022
Amendment — effective from 2020-03-02 to 03/02/2020
Amendment — effective from 2018-06-11 to 03/02/2020
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-10 § 10.7 Computation of Withholding

A.An employer shall withhold using the current Rhode Island withholding rate which is set by the Tax Administrator and apply it to the employee's wages for each payroll period.

1.A table or percentage method of withholding similar to that allowed by Federal law may be periodically provided by the Division of Taxation for the employers wishing to use such a method.

B.Bonuses, Commissions and Special Situations.

If supplemental wages, such as bonuses, commissions, overtime pay or back pay are paid, the employer should follow the Federal method for determining the additional withholding tax.

2.The employer should apply the current Rhode Island withholding rate to the employee's additional wages for each payroll period.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2020-03-02 to 01/04/2022
Amendment — effective from 2020-03-02 to 03/02/2020
Amendment — effective from 2018-06-11 to 03/02/2020
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-10 § 10.8 Reporting and Remitting Taxes Withheld

A.Employers withholding Rhode Island personal income tax from employees' wages must electronically file and/or pay the taxes withheld to the Division of Taxation on a periodic basis in the following situations:

1.Per R.I. Gen. Laws § 44-30-71(c), electronic payment of withholding tax is required for employers who are required to withhold and remit the tax by law and the employer has ten (10) or more employees.

2.Per R.I. Gen. Laws § 44-30-85.1, electronic submission of withholding tax and tax return(s) is required for employers who withheld $200 or more per month on average for the prior calendar year.

B.The following bases are those on which the employer must file and pay to the Division of Taxation:

1.Weekly: If the employer withholds $600 or more for any calendar month during the year from employees' wages, the employer must remit the taxes withheld on a weekly basis. The submission is due on the next banking day following the end of the week. The due date would generally be Monday unless Monday is a banking holiday or state holiday, in which case the due date would be Tuesday.

a.The term "weekly basis" means the week that begins on Sunday and ends on Saturday.

b.If there was no payroll for a given week, a payment filing is not required.

c.In addition to the weekly payment filing requirement above, a reconciliation form, Form RI-941 is due on or before the last day of the month following the close of the quarter.

d.Change from a weekly basis to another payment frequency may be permitted only at the beginning of a calendar year.

2.Monthly: If an employer withholds $50 or more but less than $600 for any calendar month from employees' wages, the employer must remit the taxes withheld on a monthly basis. The submission is due within twenty (20) days after the close of the month.

a.If there was no payroll for a given month, a payment filing is not required.

b.In addition to the monthly payment filing requirement above, a reconciliation form, Form RI-941 is due on or before the last day of the month following the close of the quarter.

c.Change from a monthly return to another payment frequency may be permitted only at the beginning of a calendar year.

3.Quarterly: If an employer withholds less than $50 for any calendar month from employees' wages, the employer must report and remit taxes withheld on a quarterly basis. A form RI-941 must accompany the payment and the form and payment are due on or before the last day of the month following the close of the quarter.

a.Consecutive returns for each calendar quarter accounting for all taxes withheld during the year must be filed by an employer required to report quarterly.

b.Change from a quarterly return to another payment frequency will be permitted only at the beginning of a calendar year.

4.Error Correction: If an error has been made on a withholding tax return and that error results in an overpayment or underpayment of tax for that period, then the employer should make the necessary adjustment on the subsequent withholding tax report. Forms are available on the Division of Taxation's website.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2020-03-02 to 01/04/2022
Amendment — effective from 2020-03-02 to 03/02/2020
Amendment — effective from 2018-06-11 to 03/02/2020
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-10 § 10.9 Annual Reconciliation

A.On or before January 31 of each year (or at the termination of business), each employer must file a Rhode Island reconciliation return (RI W-3) for the preceding year of Rhode Island income tax withheld with all individuals and tax statements.

1.The total income tax withheld shown on the reconciliation return should equal the total payments made to the Division of Taxation for that year and should also equal the total amount of Rhode Island income tax withheld as shown on all the W-2 forms the employer furnished to its employees and submitted with the W-3 form.

B.The state copy of the W-2 form(s) must accompany the reconciliation form (RI W-3). Information concerning electronic reporting is available in the "W-2 Electronic Filing Requirements" document on the Division of Taxation's website.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2020-03-02 to 01/04/2022
Amendment — effective from 2020-03-02 to 03/02/2020
Amendment — effective from 2018-06-11 to 03/02/2020
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-10 § 10.10 Forms

A.The Division of Taxation does not supply Federal forms W-2 or W-4. These forms must be obtained from the Internal Revenue Service.

1.Rhode Island form W-4 is available on the Division of Taxation's website.

B.Insofar as possible, forms (other than W-2 and W-4 forms) needed for compliance with the withholding provisions of Rhode Island personal income tax may be automatically mailed to employers prior to due dates. However, employers who file electronically, or are required to file electronically, will not receive withholding forms. Employers who do not receive any necessary forms should contact the Division of Taxation for any appropriate requests.

C.Wage and Tax Statements (Optional W-2)

1.Compliance with Federal requirements for furnishing W-2 forms to employees will satisfy state requirements. Employers should be sure to use the six-part optional Federal form or any other form which has been previously approved by the Division of Taxation for this purpose.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2020-03-02 to 01/04/2022
Amendment — effective from 2020-03-02 to 03/02/2020
Amendment — effective from 2018-06-11 to 03/02/2020
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-11 Taxation of Nonresident Professional Athletes

280-RICR-20-55-11 § 11.1 Purpose

These rules and regulations implement R.I. Gen. Laws § 44-30-1 et seq. This section outlines the taxation of nonresident professional athletes.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-11 § 11.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-11 § 11.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation the authority to effectuate the purpose of R.I. Gen. Laws § 44-30-1 et seq. and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-11 § 11.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-11 § 11.5 Definitions

A."Bonuses" includes performance bonuses received during the season, including bonuses paid for championship, playoff or "bowl" games played by a team, or for selection to all-star league or other honorary positions, and signing bonuses, unless:

1.the payment of the signing bonus is not conditional upon the signee playing any games for the team, or performing any subsequent services for the teams, or even making the team;

2.the signing bonus is payable separately from the salary and any other compensation; and

3.the signing bonus is nonrefundable.

B."Duty days" include:

All days during the taxable year from the beginning of the professional athletic team's official pre-season training period through the last game in which the team competes or is scheduled to compete;
Days that do not fall within § 11.5(B)(1) of this Part on which the team member renders services for a team (e.g., participation in instructional leagues, the "Pro Bowl" or promotional "caravans"). "Renders services" includes conducting training and rehabilitation activities, but only if conducted at the facilities of the team; and
Game days, practice days, days spent at team meetings, promotional caravans and preseason training camps, and days served with the team through all post-season games in which the team competes or is scheduled to compete.

4.Example 1: Player A, a member of a professional athletic team, is a nonresident of Rhode Island. Player A's contract for such team requires A to report to such team's training camp and to participate in all exhibition, regular season, and playoff games. Player A has a contract which covers seasons that occur during yr.1/yr.2 and yr.2/yr.3. Player A's contract provides that A receive $500,000 for the yr.1/yr.2 season and $600,000 for the yr.2/yr.3 season. Assuming player A receives $550,000 from such contract during taxable year 2 ($250,000 for one-half the yr.1/yr.2 season and $300,000 for one-half the yr.2/yr.3 season), the portion of such compensation received by player A for taxable year 2, attributable to Rhode Island, is determined by multiplying the compensation player A receives during the taxable year ($550,000) by a fraction, the numerator of which is the total number of duty days player A spends rendering services for the team in Rhode Island during taxable year 2 (attributable to both the yr.1/yr.2 season and the yr.2/yr.3 season) and the denominator of which is the total number of player A's duty days spent both within and without Rhode Island for the entire taxable year.

5.Example 2: Player D, a member of a professional athletic team, is a nonresident of Rhode Island. During the season, D travels to Rhode Island to participate in the annual all-star game as a representative of D's team. The number of days D spends in Rhode Island for practice, the game, meetings, etc., shall be considered to be duty days spent in Rhode Island for player D for that taxable year, as well as included within total duty days spent both within and without Rhode Island.

a.Travel days that do not involve a game, practice, team meeting, promotional caravan or other similar team event are not considered duty days spent in Rhode Island, but are included in the total duty days spent both within and without Rhode Island.

6.Example 3: Assume the same facts as given in the prior example, except that player D is not participating in the all-star game and is not rendering services for D's team in any manner. Player D is instead traveling to and attending such game solely as a spectator. The number of days player D spends in Rhode Island for such game shall not be considered to be duty days spent in Rhode Island. However, such days are considered to be included within total duty days spent both within and without Rhode Island.

a.Duty days for a person who joins a team between the beginning of the team's official pre-season training period and the last game in which the team competes, or is scheduled to compete, begin on the day that he or she joins the team. Duty days for a person who leaves a team during the same period end on the day that he or she leaves the team. Separate duty day calculation must be made if a person switches teams during the taxable year.

b.Days on which a team member is not compensated and does not render services for the team in any manner (for example, days during which a team member is suspended without pay and prohibited from performing team services) are not treated as duty days.

c.Days on which a team member voluntarily participates in an exhibition game against a farm team affiliate located in this state and does not receive compensation for participation in the exhibition game against the farm team affiliate are not treated as duty days.

d.Days during which a team member is on the disabled list, and does not (a) conduct rehabilitation activities at facilities of the team or (b) otherwise render services for the team in Rhode Island, are not considered duty days spent in Rhode Island. However, days on the disability list are included in total duty days spent both within and without Rhode Island.

7.Example 4: Player B, a member of a professional athletic team, is a nonresident of Rhode Island. During the season, B is injured and is unable to render services for B's team. While B is undergoing medical treatment at a clinic, which is not a facility of the team, but is located in Rhode Island, B's team travels to Rhode Island for a game. The number of days B's team spends in Rhode Island for practice, games, meetings, etc., while B is present at such clinic, shall not be considered duty days spent in Rhode Island for player B for that taxable year, but such days are considered to be included within total duty days spent both within and without Rhode Island.

8.Example 5: Player C, a member of a professional athletic team, is a nonresident of Rhode Island. During the season, C is injured and is unable to render services for C's team. C performs rehabilitation exercises at the facilities of C's team in Rhode Island as well as at personal facilities in Rhode Island. The days C performs rehabilitation exercises in the facilities of C's team are considered duty days spent in Rhode Island for player C for that taxable year. However, days player C spends at personal facilities in Rhode Island shall not be considered duty days spent in Rhode Island for player C for that taxable year, but such days are considered to be included within total duty days spent both within and without Rhode Island.

a.Days on which a team member is sent from a parent club to a farm team affiliate located in this state for rehabilitation for a period of thirty (30) days or less are not considered duty days.

C."Member of a professional athletic team" includes employees who are active players, players on the disabled list, and any other persons required to travel and who travel with and perform services on behalf of the team on a regular basis (e.g., coaches, managers, trainers, etc.).

D."Professional athletic team" includes, but is not limited to, any professional baseball, basketball, football, soccer or hockey team.

E."Total compensation for services rendered as a member of a professional athletic team" means the total compensation received during the taxable year for services rendered from the beginning of the official pre-season training period through the last game in which the team competes or is scheduled to compete during the taxable year and during the taxable year on a date which does not fall within the aforementioned period (e.g., participation in instructional leagues, the "Pro Bowl" or promotional "caravans"). Compensation includes salaries, wages, and bonuses for services performed during the year, but does not include strike benefits, severance pay, termination pay, contract or option year buy-out payments, expansion or relocation payments, or any other payments not related to services rendered for the team.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-11 § 11.6 General

For taxable years beginning on or after January 1, 1997, the Rhode Island source income of nonresident members of professional athletic teams includes their total compensation for services rendered as team members during the taxable year, multiplied by a fraction, the numerator of which is the number of "duty days" spent within Rhode Island rendering services for the team in any manner during the taxable year, and the denominator of which is the total number of duty days spent both within and without Rhode Island during the taxable year.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-11 § 11.7 Alternative Method of Apportionment

A. This regulation is designed to apportion to Rhode Island, in a fair and equitable manner, a nonresident member of a professional athletic team's total compensation for services rendered as a member of a professional athletic team.

1.It is presumed that application of the foregoing provisions of this section will result in a fair and equitable apportionment of such compensation.

2.Where it is demonstrated that the method provided under this section does not fairly and equitably apportion such compensation, the Tax Administrator may require such member of a professional athletic team to apportion such compensation under such method as the Tax Administrator prescribes, as long as the prescribed method results in a fair and equitable apportionment.

3.A nonresident member of a professional athletic team may submit a proposal for an alternative method to apportion such compensation, where they demonstrate that the method provided under this section does not fairly and equitably apportion such compensation.

a.If approved, the proposed method must be fully explained in the nonresident member of a professional athletic team's nonresident personal income tax return for Rhode Island.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-11 § 11.8 Withholding/Composite Returns

A.Any "professional athletic team" as defined in § 11.5 of this Part which pays compensation to a nonresident member of a professional athletic team for services rendered to the team within Rhode Island shall be deemed to be an "employer" and is required to withhold a portion of such members' compensation attributable to "duty days" spent in Rhode Island, as defined in § 11.5 of this Part.

B.Every professional athletic team whose members have played games or performed services in this state (as defined under "Duty Days") may file an annual composite Rhode Island personal income tax return on behalf of nonresident team members.

1.The composite return shall contain such information required by the Tax Administrator including the total income of each team member, the amount of income subject to tax under the apportionment formula, and the amount of tax due.

2.The team must obtain approval from the tax administrator before filing a composite return and it shall obtain written authorization on a year-to-year basis from each team member who elects to participate in the composite return.

3.The team must maintain powers of attorney from participating team members that authorize the team to represent them in the event of a protest or other appeal; the team and participating team members must agree that the team is responsible for any deficiencies, including penalties.

4.To participate in the composite return, a team member's compensation from the team must be the only source of income attributable to the state.

a.The participating team members must acknowledge through their election that the composite return constitutes an irrevocable filing and that they may not file an individual income tax return in the taxing state.

5.If the team elects to file a composite return, it shall be responsible for withholding tax from the compensation of its members and remitting said tax to this state upon the filing of the composite return.

6.In filing a composite return a team member's compensation shall be subject to withholding at the highest marginal tax rate and no deductions, exemptions or exclusions shall be permitted.

7.If in the first year of filing the composite return the team has already withheld and remitted tax on a team member's compensation, the team may take a credit for the tax remitted against the initial filing under this method.

C.If a team member leaves the team during the applicable year, the team remains responsible for remitting the appropriate tax and may either collect the tax paid from the team member or absorb the cost itself.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/11/2018

280-RICR-20-55-12 Net Operating Loss Limitation

280-RICR-20-55-12 § 12.1 Purpose

These rules and regulations implement R.I. Gen. Laws § 44-30-87.1. This section outlines the net operating loss limitation for Rhode Island purposes.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Technical Revision — effective from 2003-02-16 to 06/11/2018
Technical Revision — effective from 2003-01-16 to 02/16/2003
Adoption — effective from 2003-01-01 to 01/16/2003

280-RICR-20-55-12 § 12.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Technical Revision — effective from 2003-02-16 to 06/11/2018
Technical Revision — effective from 2003-01-16 to 02/16/2003
Adoption — effective from 2003-01-01 to 01/16/2003

280-RICR-20-55-12 § 12.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation the authority to effectuate the purpose of R.I. Gen. Laws § 44-30-87.1 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Technical Revision — effective from 2003-02-16 to 06/11/2018
Technical Revision — effective from 2003-01-16 to 02/16/2003
Adoption — effective from 2003-01-01 to 01/16/2003

280-RICR-20-55-12 § 12.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Technical Revision — effective from 2003-02-16 to 06/11/2018
Technical Revision — effective from 2003-01-16 to 02/16/2003
Adoption — effective from 2003-01-01 to 01/16/2003

280-RICR-20-55-12 § 12.5 Net Operating Loss Limitation

A.R.I. Gen. Laws § 44-30-87.1 places a limitation on refunds or credits resulting from net operating loss deductions.

B.Under Rhode Island law, a net operating loss deduction shall be allowed which shall be the same as the net operating loss deduction allowed under 26 U.S.C. § 172, except that:

any net operating loss included in determining such deduction shall be adjusted to reflect the modifications increasing and decreasing adjusted gross income required by R.I. Gen. Laws §§ 44-30-12 and 44-30-32;
such deduction shall not include any net operating loss sustained during any taxable year beginning in which the taxpayer was not subject to the tax imposed by this chapter; and
such deduction shall not exceed the deduction for the taxable year allowable under 26 U.S.C. § 172, provided, however, notwithstanding any other provision of law such deduction for a taxable year may not be carried back to any other taxable year for Rhode Island purposes but shall only be allowable on a carry forward basis for the number of succeeding taxable years allowed under 26 U.S.C. § 172.

C.Examples of the three (3) exceptions/limitations noted above are as follows:

Any net operating loss included in determining such deduction shall be adjusted to reflect the modifications increasing and decreasing adjusted gross income as required by R.I. Gen. Laws §§ 44-30-12 and 44-30-32. Examples of the modifications would be interest on US government obligations taxable on the federal level but exempt from state taxation or interest on non Rhode Island municipal bonds exempt from federal taxation but taxable on the state level.
A loss sustained in a year prior to becoming a Rhode Island resident and being carried forward for federal purposes will not be allowed for Rhode Island purposes. An example of this limitation would be an instance where a Massachusetts resident sustains a net operating loss, which is carried forward for federal purposes, and in a subsequent year changes his residents to Rhode Island. Such a loss would not be allowed for Rhode Island purposes.
A net operating loss deduction, for Rhode Island purposes, cannot exceed the deduction for the taxable year allowable under 26 U.S.C. § 172, provided, however, notwithstanding any other provision of law such deduction for a taxable year may not be carried back to any other taxable year for Rhode Island purposes. An example of this limitation would be an instance where a Rhode Island resident sustains a net operating loss and for federal purposes the allowable deduction is utilized in full by being carried back to a prior year. For Rhode Island purposes, no deduction is allowed for net loss carry back. Further, since the Rhode Island net operating loss deduction cannot exceed the federal net operating loss carry forward in this instance, there is no Rhode Island net operating loss carry forward allowed in subsequent years.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-11 to 01/04/2022
Technical Revision — effective from 2003-02-16 to 06/11/2018
Technical Revision — effective from 2003-01-16 to 02/16/2003
Adoption — effective from 2003-01-01 to 01/16/2003

280-RICR-20-55-13 Modification of Certain Income of Writers, Composers and Artists

280-RICR-20-55-13 § 13.1 General

A.The profit or gain realized by a writer, composer or artist derived from the publication, production or sale of a "work" shall be a modification reducing federal adjusted gross income under R.I. Gen. Laws § 44-30-1.1(c)(1), provided that the writer, composer or artist derived said profit or gain from a work while residing in the economic development zone ("zone"); and the profit or gain is received while the writer, composer or artist is a resident of the zone.

History

Amendment — effective from 2025-07-30 to current
Periodic Refile — effective from 2022-01-04 to 07/30/2025
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-55-13 § 13.2 Definitions

A."Consumable" means capable of being consumed.

B."Consumed" means destroyed, used up, or worn out to the degree or extent that the property cannot be repaired, reconditioned, or rendered fit for future use.

C."Economic Development Zone" or "zone" means the statutory defined area designated in R.I. Gen. Laws § 44-30-1.1.

D."Limited edition" means the creation of a solitary work, conceived and produced by the artist or author under their direction, which is intended for limited reproduction, totaling no more than three hundred (300) copies, physically signed and numbered by the artist.

E."One of a kind" means the creation of a solitary work, conceived and produced by the artist or author or under their direction, not intended for multiple or mass production.

F."Work" means:

1.An original and creative work, whether written, composed, created or executed for "one-of-a-kind" or "limited edition" production, before or after the passing of this section, which falls into one (1) of the following categories:

a.a book or other writing;

b.a play or the performance of said play;

c.a musical composition or the performance of said composition;

d.a painting or other like picture;

e.a sculpture;

f.traditional and fine crafts;

g.the creation of a film or the acting of said film;

h.the creation of a dance or the performance of said dance;

2.For purposes of this section, a "work" does not apply to any piece or performance created or executed for industry-oriented, commercial or related production, to an otherwise-qualified work sold in excess of three hundred (300) signed and numbered copies, and to any piece sold through an online marketplace.

a.Example 1. The hiring of a photographer to take photographs of a wedding.

b.Example 2. A technical manual produced for the purpose of running industrial machines.

3."Work" also includes any product generated as a result of any of the above categories. A work may qualify for the exemption regardless of whether it is fiction or nonfiction.

4."Traditional and fine crafts" means art objects, either utilitarian or decorative, that are made by hand, but are not consumable. "Traditional and fine crafts" includes textile art, woodwork, baskets, jewelry, furniture, metals, ceramics, and pottery. "Traditional and fine crafts" does not include soap, candles, and other items that are traditionally intended to be consumed.

History

Amendment — effective from 2025-07-30 to current
Periodic Refile — effective from 2022-01-04 to 07/30/2025
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-55-13 § 13.3 Residing in the Zone

A.A writer, composer or artist shall be deemed to be residing in the zone if he/she:

1.is domiciled in the state, or

2.is not domiciled in the state but maintains a permanent place of abode in this state and is in the state for an aggregate of more than one-hundred eighty-three (183) days of the taxable year, and

3.meets the requirements of either §§ 13.3(A)(1) or (2) of this Part and physically occupies a place of abode within the Economic Development Zone.

History

Amendment — effective from 2025-07-30 to current
Periodic Refile — effective from 2022-01-04 to 07/30/2025
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-55-13 § 13.4 Filing of Returns

A.Any individual seeking a modification reducing federal adjusted gross income pursuant to R.I. Gen. Laws § 44-30-1.1(c) shall file a Rhode Island personal income tax return for the year in which the modification is claimed. The individual must attach a statement to the return describing the "work," the party to whom it was sold, and the amount received for the "work". If the "work" is an item of tangible personal property for which a certificate of exemption was issued, a copy of said certificate must be attached to the individual's personal income tax return.

History

Amendment — effective from 2025-07-30 to current
Periodic Refile — effective from 2022-01-04 to 07/30/2025
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

280-RICR-20-55-13 § 13.5 Records

A.The tax administrator may require any individual seeking a modification pursuant to R.I. Gen. Laws § 44-30-1.1 to make available all books, accounts or other documents relating to the publication, production or sale of a work. In determining the amount of modification allowed, the tax administrator may make such apportionment of receipts and expenses as may be necessary.

History

Amendment — effective from 2025-07-30 to current
Periodic Refile — effective from 2022-01-04 to 07/30/2025
Technical Revision — effective from 2001-12-20 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/20/2001

Subchapter 60 Insurance Premium Tax

280-RICR-20-60-01 2017 Rulemaking Concerning Insurance Premium Tax Rate and Qualifying Job Calculation Methodology

280-RICR-20-60-01 § 1.1 Authority

This regulation is promulgated in accordance with R.I. Gen. Laws § 44-17-1, as amended, and R.I. Gen. Laws § 42-142-2.1, as amended.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2017-12-21 to 01/04/2022

280-RICR-20-60-01 § 1.2 Purpose

The purpose of this regulation is to set forth the standards by which the Premium Jobs Committee (the “Committee”) will calculate the number of jobs at qualifying insurers during its rulemakings and to identify whether the statutory criteria was met during calendar year 2016 to reduce the premium tax rate.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2017-12-21 to 01/04/2022

280-RICR-20-60-01 § 1.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation the authority to effectuate the purpose of R.I. Gen. Laws Chapter 44-17 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2017-12-21 to 01/04/2022

280-RICR-20-60-01 § 1.4 Severability

If any provision of these rules or regulations, or the application thereof to any person or circumstances, is held invalid by a court of competent jurisdiction, the validity of the remainder of the rules and regulations shall not be impaired or affected thereby.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2017-12-21 to 01/04/2022

280-RICR-20-60-01 § 1.5 Definitions

A.“Baseline” means the baseline level of employment of qualifying insurers for the calendar year 2015.

B.“Qualifying Insurer” means the same as defined in R.I. Gen. Laws § 44-17-1(b), as amended.

C.“Qualifying Job” means the same as defined in R.I. Gen. Laws § 44-17-1(d)(2), as amended.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2017-12-21 to 01/04/2022

280-RICR-20-60-01 § 1.6 Methodology for Calculating Qualifying Jobs

A.The Department of Business Regulation’s (“DBR”) Division of Insurance (“DOI”) will annually request and compile information from Qualifying Insurers regarding their employment levels in Rhode Island, including the number of Qualifying Jobs they have within Rhode Island and other associated information, related to income taxes paid to Rhode Island by those employees and/or to ensure the accuracy of the information. During the first year, and after any changes to the definition(s) of Qualifying Job and/or Qualifying Insurer, DBR will also request additional information concerning the Baseline year.

B. DBR will present the information it obtained from Qualifying Insurers to the Committee for review and questions. If necessary, DBR may seek additional information for particular insurers.

C. The Department of Revenue (“DOR”) will obtain the information reported by DBR and review the numbers against information contained within DOR files to both verify DBR’s information and ensure compliance with R.I. Gen. Laws § 44-17-1, as amended.

D. DOR will report back to the Committee on the results of its review.

E. The Committee may use additional available information compiled through other statistical bodies (such as the RI Department of Labor’s Labor Markets Information Division, which compiles information regarding employment within the state according to industrial job classification) in reviewing the reported Qualifying Jobs at Qualifying Insurers.

F. The Committee will review the information compiled by DBR and reviewed by DOR. The Committee may request that DBR and/or DOR seek additional information and/or review additional information in completing its statutory tasks.

G. The Committee will identify any sources that it used to ensure that the information in its annual rulemaking was accurate, and include the specific numbers it found during its rulemaking in a report. Any confidential information used by the Committee or its members in its rulemaking will not become public by virtue of its use in this process.

H. The Committee’s annual rulemaking will include figures it determined regarding the Qualifying Jobs at Qualifying Insurers, in addition to a comparison between insurance jobs in the Baseline year compared to the year in review.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2017-12-21 to 01/04/2022

280-RICR-20-60-01 § 1.7 2017 Rulemaking Concerning Premium Tax Rate

A.Finding of Facts

1.During the initial review, Qualifying Insurers reported to DBR 5,039 Qualifying Jobs during the 2015 baseline year and 4,841 Qualifying Jobs during 2016, reflecting a loss of 198 Qualifying Jobs. The Division of Taxation’s review of the number of total jobs at the Qualifying Insurers corroborated that trend, in showing a decrease of 293 total jobs at those Qualifying Insurers.

B. Rulemaking

1.The Committee finds that there has not been a sufficient net increase in Qualifying Jobs in the preceding calendar year to offset a material reduction in the premium tax. Thus, there will be no change in the current premium tax rate during calendar year 2018.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2017-12-21 to 01/04/2022

Subchapter 65 Public Service Corporation Tax

280-RICR-20-65-1 Public Service Corporation Tax

280-RICR-20-65-1 § 1.1 Purpose

The purpose of these rules and regulations is to implement R.I. Gen Laws Chapter 44-13, which imposes a tax on Public Service Corporations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 04/23/2018

280-RICR-20-65-1 § 1.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 04/23/2018

280-RICR-20-65-1 § 1.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation to effectuate the purpose of R.I. Gen. Laws Chapter 44-13 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 04/23/2018

280-RICR-20-65-1 § 1.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 04/23/2018

280-RICR-20-65-1 § 1.5 General

A.Every public service corporation as enumerated in R.I. Gen. Laws § 44-13-4, carrying on or authorized to carry on business within this State is required to file Form T-72, Rhode Island Public Service Corporation Gross Earnings Tax Return. Such return shall be filed on or before April 15th of the year following the close of the taxable year for calendar year end filers, or on or before the 15th day of the 4th month following the close of the tax year for fiscal year end filers, without regard to extension.

B.Pursuant to R.I. Gen Laws § 44-13-2.2, a corporation or public service company whose principal business in this state in not an activity enumerated in R.I. Gen. Laws § 44-13-4 but engages in that activity in this state, is required to report the gross earnings derived form that activity in this state on Form T-72 returns. The corporation or public service company shall also be required to file a Form RI-1120C, Rhode Island Business Corporation Tax Return, and report the net income subject to tax pursuant to R.I. Gen. Laws Chapter 44-11, excluding from the income the gross earnings already reported on Form T-72.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 04/23/2018

280-RICR-20-65-1 § 1.6 Books and Records

A.Public service corporations and/or corporation as provided in § 1.5(B) of this Part required to file annual T-72 returns and/or Form RI-1120C must maintain books and accounting records in accordance with the uniform system of accounts provided by the appropriate regulatory agency.

B.The total amount of gross earnings to be reported on Form T-72 should match gross receipts less returns and allowances on the corresponding Federal tax return.

C.In the case of telecommunications companies, the amount of uncollectible accounts excluded from gross earnings from operations must agree with the uncollectible account expense taken as the appropriate item on the corresponding Federal tax return.

D.All deductions from gross earnings must be reconcilable through the books and records of the entity.

E.All items that are a change from book to tax and vice versa must be verifiable through the books and records of the entity.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-23 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 04/23/2018

Subchapter 70 Sales and Use Tax

280-RICR-20-70-1 Streamlined Sales and Use Tax Agreement

280-RICR-20-70-1 § 1.1 Purpose

This regulation implements R.I. Gen. Laws §§ 44-18.1-1 et seq. This Chapter provides for the Adoption of the Streamlined Sales and Use Tax Agreement (“SSUTA”).

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-12 to 01/04/2022
Amendment — effective from 2013-05-01 to 03/12/2018
Adoption — effective from 2011-12-01 to 05/01/2013

280-RICR-20-70-1 § 1.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws §§ 44-18.1-1 et seq., as amended, R.I. Gen. Laws §§ 44-1-4 and 44-19-33. Additionally these regulations have been prepared in accordance with the requirements of R.I. Gen. Laws §§ 42-35-1 et seq. - Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-12 to 01/04/2022
Amendment — effective from 2013-05-01 to 03/12/2018
Adoption — effective from 2011-12-01 to 05/01/2013

280-RICR-20-70-1 § 1.3 Application

The terms and provisions of these rules and regulations shall be liberally construed to permit the Department of Revenue to effectuate the purposes of R.I. Gen. Laws §§ 44-18.1-1 et seq., and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-12 to 01/04/2022
Amendment — effective from 2013-05-01 to 03/12/2018
Adoption — effective from 2011-12-01 to 05/01/2013

280-RICR-20-70-1 § 1.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-12 to 01/04/2022
Amendment — effective from 2013-05-01 to 03/12/2018
Adoption — effective from 2011-12-01 to 05/01/2013

280-RICR-20-70-1 § 1.5 Definitions

A.“Advertising and promotional direct mail” means printed material that meets the definition of “direct mail,” in R.I. Gen. Laws § 44-18-7.1(j), the primary purpose of which is to attract public attention to a product, person, business or organization, or to attempt to sell, popularize or secure financial support for a product, person, business or organization. As used in this § 1.5(A) of this Part, the word “product” means tangible personal property, a product transferred electronically or a service.

B."Certified Service Provider (CSP)" means an agent certified under the SSUTA to perform all the seller's sales and use tax functions, other than the seller's obligation to remit tax on its own purchases.

C.“Other direct mail” means any direct mail that is not “advertising and promotional direct mail” regardless of whether “advertising and promotional direct mail” is included in the same mailing. The term includes, but is not limited to:

1.Transactional direct mail that contains personal information specific to the addressee including, but not limited to, invoices, bills, statements of account, payroll advices;

a.Any legally required mailings including, but not limited to, privacy notices, tax reports and stockholder reports; and

b.Other non-promotional direct mail delivered to existing or former shareholders, customers, employees, or agents including, but not limited to, newsletters and informational pieces. Other direct mail does not include the development of billing information or the provision of any data processing service that is more than incidental.

D."Purchaser" means a person to whom a sale of personal property is made or to whom a service is furnished.

E."Seller" means a person making sales, leases, or rentals of personal property or services.

F.“State” means the State of Rhode Island and Providence Plantations.

G.“SSUTA” means Streamlined Sales and Use Tax Agreement.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-12 to 01/04/2022
Amendment — effective from 2013-05-01 to 03/12/2018
Adoption — effective from 2011-12-01 to 05/01/2013

280-RICR-20-70-1 § 1.6 Relief from Certain Liability for Purchasers

A.A purchaser is relieved from liability for penalty for failing to pay the correct amount of sales or use tax in the following circumstances:

1.A purchaser’s seller or CSP relied on erroneous data provided by the state on tax rates, taxing jurisdiction assignments, or in the taxability matrix completed by that member state pursuant to R.I. Gen. Laws § 44-18.1-29; or

2.A purchaser holding a direct pay permit relied on erroneous data provided by the state on tax rates, taxing jurisdiction assignments, or in the taxability matrix completed by that member state pursuant to R.I. Gen. Laws § 44-18.1-29.

3.A purchaser relied on erroneous data provided by that member state in the taxability matrix completed by the state pursuant to R.I. Gen. Laws § 44-18.1-29.

B.The state shall also relieve a purchaser from liability for tax and interest to the state for having failed to pay the correct amount of sales or use tax in the circumstances described in § 1.6(A) of this Part, provided that, with respect to reliance on the taxability matrix completed by the state pursuant to R.I. Gen. Laws § 44-18.1-29, such relief is limited to the state’s erroneous classification in the taxability matrix of terms included in the Library of Definitions as “taxable” or “exempt,” “included in sales price” or “excluded from sales price” or “included in the definition” or “excluded from the definition.”

C.For purposes of this subpart, the term “penalty” means an amount imposed for noncompliance that is not fraudulent, willful, or intentional which is in addition to the correct amount of sales or use tax and interest.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-12 to 01/04/2022
Amendment — effective from 2013-05-01 to 03/12/2018
Adoption — effective from 2011-12-01 to 05/01/2013

280-RICR-20-70-1 § 1.7 Direct Mail Sourcing

A.Notwithstanding R.I. Gen. Laws § 44-18.1-11;

1.A purchaser of advertising and promotional direct mail may provide the seller with either a direct pay permit, a SSUTA certificate of exemption claiming “direct mail”, or information showing the jurisdictions to which the advertising and promotional direct mail is delivered to recipients.

2.If the purchaser provides a direct pay permit or direct mail exemption certificate referred to in paragraph A of this rule, the seller, in the absence of bad faith, is relieved of all obligations to collect, pay, or remit any tax on any transaction involving “advertising and promotional direct mail” to which the permit, certificate or statement applies. The purchaser shall source the sale to the jurisdictions to which the “advertising and promotional direct mail” is to be delivered to the recipients and shall report and pay any applicable tax due.

3.If the purchaser provides the seller information showing the jurisdictions to which the advertising and promotional direct mail is to be delivered to recipients, the seller shall source the sale to the jurisdictions to which the advertising and promotional direct mail is to be delivered and shall collect and remit the applicable tax. In the absence of bad faith, the seller is relieved of any further obligation to collect any additional tax on the sale of advertising and promotional direct mail where the seller has sourced the sale according to the delivery information provided by the purchaser.

4.If the purchaser does not provide the seller with any of the items listed in §§ 1.7(A)(1) through (3) of this Part, the sale shall be sourced to the address from which the advertising and promotional direct mail was shipped in accordance with R.I. Gen. Laws § 44-18.1-11(A)(5). Nothing in this paragraph shall limit a purchaser’s obligation for sales or use tax to any state to which the advertising and promotional direct mail is delivered.

B.If a purchaser of direct mail provides the seller with a direct pay permit, the purchaser shall not be required to provide a direct mail exemption certificate or delivery information to the seller.

C.The sale of “other direct mail” as defined in § 1.5 of this Part is not subject to tax in Rhode Island.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-12 to 01/04/2022
Amendment — effective from 2013-05-01 to 03/12/2018
Adoption — effective from 2011-12-01 to 05/01/2013

280-RICR-20-70-1 § 1.8 Uniform Tax Returns

A.Notwithstanding the provisions of R.I. Gen. Laws § 44-18.1-19:

1.A seller registered under the SSUTA indicating at the time of registration that it anticipates no sales sourced to the state will be made, is not required to file a return. A seller shall lose such exemption upon making any taxable sales into this state and shall file a return in the month following such sale.

2.A seller registered under the SSUTA, having no legal requirement to register in the state, who fails to file a return, shall be granted a minimum of (30) thirty days notice to file prior to establishing a liability amount for taxes based solely on the seller’s failure to timely file a return.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-12 to 01/04/2022
Amendment — effective from 2013-05-01 to 03/12/2018
Adoption — effective from 2011-12-01 to 05/01/2013

280-RICR-20-70-1 § 1.9 Effective Date

This regulation shall take effect on September 1, 2017 and shall amend and supersede regulation SST 13-01.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-12 to 01/04/2022
Amendment — effective from 2013-05-01 to 03/12/2018
Adoption — effective from 2011-12-01 to 05/01/2013

280-RICR-20-70-2 Optional Service, Maintenance and Extended Warranty Contracts

280-RICR-20-70-2 § 2.1 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws §§ 44-1-4 and 44-19-33. The rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws §§ 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2017-12-21 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/21/2017

280-RICR-20-70-2 § 2.2 Optional Service

A.Optional service, maintenance and extended warranty contracts provide for the maintenance of property sold beyond the period set forth in a manufacturer's warranty.

B.These contracts generally provide that for a fixed charge a repairer will furnish labor and parts needed to repair property during the period set forth in the agreement. The fixed charge is payable at the time the contract is made.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2017-12-21 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/21/2017

280-RICR-20-70-2 § 2.3 Optional Contract

A.A contract is optional within the meaning of this regulation if the buyer is not required to purchase the contract from or through the seller of the property but is free to contract with anyone for the repair or maintenance of the property sold.

B.The charge for the optional service, maintenance or extended warranty contract is not subject to tax when such charge is separately stated by the retailer to the purchaser.

C.For the purpose of this regulation, a charge is deemed to be separately stated if:

1.It is itemized as a distinct line item on an invoice, statement or receipt issued by the seller to the purchaser; or

2.It is itemized as a distinct line item on internal records maintained by the seller and which upon request are made readily available to the tax administrator or his or her agents for purposes of audit.

D.A charge for a service, maintenance or extended warranty contract is taxable whether or not separately stated if it is paid to a licensor or lessor of property. In the instance of a license or lease for taxable property, the charges for any services rendered are deemed not to be optional.

E.When repair work is performed under an optional service, maintenance or extended warranty contract providing for the furnishing of parts, materials and labor necessary to maintain the property, any parts or materials used are subject to use tax. The repairer is the end user or consumer of the parts and is thus required to remit use tax on the cost of the parts.

F.When additional parts and materials not covered under an optional service, maintenance or extended warranty contract are used by the repairer, there is a retail sale of those additional parts and materials to the customer. The repairer shall charge sales tax on the price of the parts and related fees involved to the customer.

1.EXAMPLES:

a.Example 1. X sells a refrigerator for five hundred dollars ($500) and a two-year maintenance contract for an additional fifty dollars ($50). The maintenance contract is optional and is segregated on the billing from the cost of the refrigerator. Sales tax is due on the five hundred dollars ($500) but is not due on the fifty dollar ($50) maintenance contract.

b.Example 2. X makes a repair under the maintenance contract on the refrigerator which only requires parts covered under the maintenance contract. X must remit use tax on the cost of the parts.

c.Example 3. X makes a repair under the maintenance contract which requires parts which are not covered by the maintenance contract. X must collect and remit sales tax on the amount charged to the customer for the parts and related fees.

d.Example 4. A car dealer sells an automobile to a buyer for ten thousand dollars ($10,000) which includes as part of the purchase price a manufacturer's warranty. In addition, the dealer sells the buyer an optional extended warranty for five hundred dollars ($500). The purchaser would owe a use tax on the cost of the automobile which includes the cost of the manufacturer's warranty but would not owe tax on the five hundred dollar ($500) cost of the extended warranty if stated or billed separately.

e.There is no tax owed on parts used in the performance of the manufacturer's warranty. These parts are considered sold along with the car.

f.A tax is due on any parts used in the performance of the extended warranty. The dealer would owe a use tax on the cost of the parts if the dealer is responsible for the repairs under the extended warranty contract. In those instances where a warranty company or insurance company is billed for the repairs, said billing shall be subject to tax the same as any other repair billing.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2017-12-21 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/21/2017

280-RICR-20-70-2 § 2.4 Severability

If any provision of these rules and regulations, or the applications thereof to any person or circumstances, is held invalid by a court of competent jurisdiction, the validity of the remainder of the rules and regulations shall not be impaired or affected thereby.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2017-12-21 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 12/21/2017

280-RICR-20-70-3 Bibles and Other Canonized Scriptures

280-RICR-20-70-3 § 3.1 Purpose

This regulation implements R.I. Gen. Laws §§ 44-18 and 44-19 relating to Sales and Use Tax.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-29 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 04/29/2018

280-RICR-20-70-3 § 3.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws Chapter 44-18 as amended, R.I. Gen. Laws §§ 44-1-4, 44-18.1-1 and 44-19-33. Additionally, these regulations have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 42-35 – Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-29 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 04/29/2018

280-RICR-20-70-3 § 3.3 Application

The terms and provisions of these rules and regulations shall be liberally construed to permit the Department of Revenue to effectuate the purposes of R.I. Gen. Laws § 44-18.1 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-29 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 04/29/2018

280-RICR-20-70-3 § 3.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-29 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 04/29/2018

280-RICR-20-70-3 § 3.5 Bibles and Other Canonized Scriptures

The sale, storage and use or other consumption in this state of bibles or any other canonized scriptures is subject to tax notwithstanding the provisions of R.I. Gen. Laws § 44-18-30(29). Such bibles and other canonized scriptures are subject to tax in accordance with the United State Supreme Court's decision in Texas Monthly, Inc. v. Bullock, 489 US 1, 1989.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-04-29 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 04/29/2018

280-RICR-20-70-4 Local Meals and Beverage Tax

280-RICR-20-70-4 § 4.1 Purpose

These rules and regulations implement R.I. Gen. Laws § 44-18-18.1. This section imposes a Local Meals and Beverage Tax that is to be administered and collected in conjunction with the State Sales and Use Tax. These rules also govern the regulation provides for the regulation of meal services as well as food stamp purchases.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-23 to 01/04/2022
Adoption — effective from 2018-03-18 to 07/23/2018

280-RICR-20-70-4 § 4.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws §§ 44-1-4 and 44-19-33. The rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws § 42-35-1 et. seq., the Rhode Island Administrative Procedures Act. This regulation is promulgated pursuant to R.I. Gen. Laws Chapter 44-18.1 as amended.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-23 to 01/04/2022
Adoption — effective from 2018-03-18 to 07/23/2018

280-RICR-20-70-4 § 4.3 Application

These rules and regulations shall be liberally construed so as to permit the Rhode Island Division of Taxation to effectuate the purpose of R.I. Gen. Laws § 44-18-18.1 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-23 to 01/04/2022
Adoption — effective from 2018-03-18 to 07/23/2018

280-RICR-20-70-4 § 4.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-23 to 01/04/2022
Adoption — effective from 2018-03-18 to 07/23/2018

280-RICR-20-70-4 § 4.5 Definitions

A.“Alcoholic beverages” means beverages that are suitable for human consumption and contain one half of one percent (.05%) or more of alcohol by volume.

B."Beverage" means all nonalcoholic beverages, as well as alcoholic beverages, beer, lager beer, ale, porter, wine, similar fermented malt or vinous liquor.

C.“Candy” means any preparation of sugar, honey, or other natural or artificial sweeteners as an ingredients in combination with chocolate, fruits, nuts, or other ingredients or flavorings in the forms of bars, drops, or pieces. The term “candy” does not include any preparation containing flour and shall require no refrigeration.

D.“Caterer” means a person engaged in the business of providing meals, food, and/or beverages on the premises of customers but does not include employees hired by the hour or the day. The term caterer also includes a delicatessen store or deli area within a food store that sells prepared food as part of a party platter, deli tray, sandwiches etc.

E.“Dietary supplements” means any product, other than tobacco, intended to supplement the diet that:

1.Contains one or more of the following dietary ingredients:

a.A vitamin;

b.A mineral;

c.An herb or other botanical;

d.A dietary substance for use by humans to supplement the diet by increasing the total dietary intake; or

e.A concentrate, metabolite, constituent, extract, or combination of any ingredient described above; and

2.Is intended for ingestion in tablet, capsule, powder, softgel, gelcap, or liquid form, or if not intended for ingestion in such a form, is not represented as conventional food and is not represented for use as a sole item of a meal or of the diet; and

3.Is required to be labeled as a dietary supplement identifiable by the “Supplemental Facts” box found on the label and as required pursuant to 21 C.F.R. § 101.36.

F."Eating and/or drinking establishments" includes but is not limited to restaurants, bars, taverns, lounges, cafeterias, lunch counters, drive-ins, roadside ice cream and refreshments stands, fish and chip places, fried chicken places, pizzerias, food and drink concessions, or similar facilities in amusement parks, bowling alleys, clubs, caterers, drive-in theaters, industrial plants, race tracks, shore resorts or other locations, lunch carts, mobile canteens and other similar vehicles, and other like places of business which furnish or provide facilities for immediate consumption of food at tables, chairs or counters or from trays, plates, cups or other tableware or in parking facilities provided primarily for the use of patrons in consuming products purchased at the location.

G.“Food and food ingredients” means substances, whether in liquid, concentrated, solid, frozen, dried, or dehydrated form, that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value. Food and food ingredients do not include candy, soft drinks, dietary supplements, alcoholic beverages, tobacco, food sold through vending machines or prepared food.

H."Meal" means any prepared food or beverage offered or held out for sale by any eating and/or drinking establishment for the purpose of being consumed by any person to satisfy the appetite and which is ready for immediate consumption. All such food and beverage, unless otherwise specifically exempted or excluded herein shall be included, whether intended to be consumed on the seller's premises or elsewhere, whether designated as breakfast, lunch, snack, dinner, supper or by some other name, and without regard to the manner, time or place of service.

I.“Prepared food” means any one of the following:

1.Food sold in a heated state or heated by the seller;

2.Food items that are a result of the combination of two or more food ingredients by the seller to make single items except:

a.Food that is only cut, repackaged, or pasteurized by the seller; or

b.Eggs, fish, meat, poultry, and foods containing these raw animal foods requiring cooking by the consumer as recommended by the U.S. Food and Drug Administration; or

c.Food sold in an unheated state by weight or volume as a single item unless sold by the seller with utensils; or

d.Bakery items sold as such, including but not limited to bread, rolls, buns, biscuits, bagels, croissants, pastries, donuts, Danish, cakes, tortes, pie, tarts, muffins, bars, cookies, and tortillas unless sold by the seller with utensils; or

e.Food sold by a seller that is primarily manufactured in accordance with NAICS Section 311, except Bakeries (NAICS § 3118) unless sold by the seller with utensils.

3.Food sold with eating utensils (plates, cutlery items, glasses, cups, napkins or straws). Plates do not include containers for transport, refer to § 4.8 of this Part for the threshold test.

J.“Soft drinks” means nonalcoholic beverages that contain natural or artificial sweeteners. “Soft drinks” do not include beverages that contain milk or milk products (including soy, rice, or similar milk products) or greater than 50 percent (50%) vegetable or fruit juice by volume.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-23 to 01/04/2022
Adoption — effective from 2018-03-18 to 07/23/2018

280-RICR-20-70-4 § 4.6 Local Meal and Beverage Tax General

A.All eating and/or drinking establishments are required to charge and collect a one percent (1%) local meals and beverage tax on the sales of meals and/or beverages within this State, effective August 1, 2003. The tax applies whether or not the meals and/or beverages are prepared in the eating and/or drinking establishment and whether or not consumed on the premises.

B.The one percent (1%) local meals and beverage tax is to be separately stated from the seven percent (7%) state sales tax on the sales check or other proof of sale. In the event that this requirement causes a hardship to a business, that business may issue sales checks or other proof of sale with the taxes combined at an eight percent (8%) rate. Although the sales check or other proof of sale to the customer may combine rates, the business must still maintain its books and records in such a manner to segregate the two taxes in order to properly report them to the Division of Taxation.

C.The one percent (1%) local meals and beverage tax is administered and collected by the Division of Taxation and unless provided herein, all the administration, collection and other provisions of the State sales tax law (R.I. Gen. Laws Chapters 44-18 and 44-19) apply.

D.The one percent (1%) local meals and beverage tax received by the Division of Taxation will be distributed to the city or town where the meals and/or beverages were delivered. Accordingly, each eating and/or drinking establishment must report the one percent (1%) local meals and beverage tax on its monthly or quarterly meals and beverage tax returns by city or town where the meals and/or beverages were delivered. The one percent (1%) local meals and beverage tax does not apply if the meal and/or beverage is delivered outside of this state.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-23 to 01/04/2022
Adoption — effective from 2018-03-18 to 07/23/2018

280-RICR-20-70-4 § 4.7 Ancillary Changes

A.Many retailers of catered events or functions, whether the function or event is held on the retailer’s premises or off-site, list charges on their invoice or statement for services and non-food items provided in connection with the sale of meals and beverages. Certain charges are not subject to the one percent (1%) local meals and beverage tax if they are marginally related to the sale or service of a meal or beverage are reasonable in amount and are separately stated. These charges include, but are not limited to:

1.Valet parking;

2.Coat checking;

3.Fees charged or deposits forfeited for the cancellation of a function when no meal was served;

4.Slippage (parking of boats at harbor side facilities);

5.Transportation provided to or from a catered function;

6.Lodging provided in connection with a catered function or meal;

7.Entrance fees to nearby tourist attractions or sites of interest;

8.Ceremony fees if the ceremony is provided outside of the facility room where the meal is served;

9.Portable commodes or toilets furnished for an outdoor function;

10.Facility charge for lecture or instruction class when a meal is not included (incidental beverage and food provided is not considered a meal);

11.Cover charge when admittance to a facility is the only thing received (if cover charge includes a meal or beverage it is subject to tax);

12.Membership fees when member is charged an amount to comply with the minimum spending requirement for an agreed period;

13.Charges for entertainment (including bands, orchestras and disc jockeys);

14.Any minimum or attrition fees (as long as the contracted meals were not provided);

15.Decorations, ice sculpture or flowers;

16.Charges for any tents or canopies provided when a catered event or function is held outdoors; or

17.Audio visual equipment.

B.Other charges are deemed to be reasonably related to the sale or service of a meal or beverages and are taxable, regardless if separately stated or not. These charges include, but are not limited to:

1.Charges for glassware, linen, china or silverware;

2.Charges for tables or chairs;

3.Gratuities stated on an invoice or statement by the retailer;

4.Corkage or set up fees;

5.Any special labor or service charges such as bartender, chef’s station or white glove service; or

6.Charges for the public room wherein the catered event or function is held.

C.The above lists of taxable and nontaxable ancillary charges are not exhaustive and are intended to be illustrative only. Charges for items of tangible personal property provided in connection with a meal that are not subject to tax under the Meals and Beverage Tax may be taxable under the Sales & Use Tax Laws. In addition, certain charges may also be taxable under the Hotel Tax (R.I. Gen. Laws § 44-18-36.1).

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-23 to 01/04/2022
Adoption — effective from 2018-03-18 to 07/23/2018

280-RICR-20-70-4 § 4.8 Convenience & Food Stores, Delicatessens, & Bakery/Cafes

A.There are two criteria that must be met for a sale to be subject to the one percent (1%) local meals and beverage tax. The first criterion is whether or not the item sold is a meal and/or beverage as defined by § 4.5 of this Part. The second criterion is whether the meal and/or beverage is sold by an eating and/or drinking establishment as provided by § 4.5 of this Part.

B.As a general rule, eating and/or drinking establishments do not include food stores and supermarkets. However, the law defines eating and/or drinking establishments as restaurants, bars, taverns, lounges, cafeterias, lunch counters and other like places of business which furnish or provide facilities for immediate consumption of food at tables, chairs or counters or from trays, plates, cups or other tableware provided primarily for the use of patrons in consuming products purchased at the location. Since the activities of some food stores and supermarkets fall within this definition, such stores or a certain area of the stores would qualify as eating and/or drinking establishment when selling prepared food and/or beverages. Therefore, such sales would be subject to the one percent (1%) local meals and beverage tax on those receipts.

C.In the event that a food/delicatessen store or bakery/café provides facilities for immediate consumption of prepared food at tables, chairs, or counters in a general area, the entire store is considered an eating and/or drinking establishment and the one percent (1%) local meals and beverage tax, as well as the seven percent (7%) state sales tax applies to food catering sales as well as all prepared food and/or beverages purchased throughout the store, whether consumed on the premises or not.

D.If the same facts stated above exist and a separate register is maintained in a specific area to record sales of prepared and catered food from this area only, this area is considered an eating and/or drinking establishment and any prepared food and/or beverages sold from the other areas would not be subject to the one percent (1%) local meals and beverage tax.

E.Examples:

1.Example 1: A convenience or food store provides facilities for immediate consumption of prepared food and/or beverages at tables, chairs, or counters in a general area of the store. However, there is no separate cash register to ring up the prepared food nor are their employee(s) attending to customers in the area where the tables are located. Customers may purchase prepared food and/or beverages from anywhere in the store and use the tables, chairs, or counter to consume the items. In this example, the store is considered an eating and/or drinking establishment and the one percent (1%) local meals and beverage tax applies to all prepared food and/or beverages purchased throughout the store, whether consumed on the premises or not.

2.Example 2: A convenience or food store provides facilities for immediate consumption of prepared food and/or beverages at tables, chairs, or counters in a specific area of the store. The prepared food and/or beverages are purchased by customers from employee(s) or at a cash register in that specific area only. The specific area is considered an eating or drinking establishment and all sales of prepared food and/or beverages from that specific area only are subject to the one percent (1%) local meals and beverage tax., whether consumed on the premises or not. Prepared food and/or beverages sold from the grocery section of the store are not subject to the one percent (1%) local meals and beverage tax.

3.Example 3: A convenience or food store sells prepared food but does not provide facilities for immediate consumption (tables, chairs or counters); the store is not an “eating and/or drinking establishment; therefore, the one percent (1%) local meals and beverage tax does not apply.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-23 to 01/04/2022
Adoption — effective from 2018-03-18 to 07/23/2018

280-RICR-20-70-4 § 4.9 Food Stamp Purchases

A.When an individual purchases eligible food items in an order containing both taxable and nontaxable food items and presents both cash and food stamps for the order, the retailer shall apply the food stamps first to the taxable portion of the transaction.

B.Example: A food stamp recipient arrives at the check-out with a $25 order consisting entirely of eligible food items. However, eleven ($11) dollars' worth of the food is taxable under state law (i.e., soda, gum, candy) and the remainder is not taxable. The recipient pays for the order with five dollars ($5) in food stamps and twenty dollars ($20) in cash. The five dollars ($5) in food stamps must first be applied to the eleven ($11) dollars' worth of taxable items, resulting in a tax being charged for the six ($6) dollars' worth of taxable items not purchased with food stamps.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-23 to 01/04/2022
Adoption — effective from 2018-03-18 to 07/23/2018

280-RICR-20-70-4 § 4.10 Meal Services Generally

Under R.I. Gen. Laws § 44-18-30(9), the sale of food and food ingredients purchased for human consumption is exempt from sales tax.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-23 to 01/04/2022
Adoption — effective from 2018-03-18 to 07/23/2018

280-RICR-20-70-4 § 4.11 Items Not Included as Food or Food Ingredients

A.The following items are not considered food and food ingredients and are therefore subject to sales and use tax.

1.Alcoholic Beverages as defined in § 4.5(A) of this Part are subject to tax.

2.Candy as defined in § 4.5(C) of this Part is subject to sales tax, however many products commonly categorized as candy contain flour therefore packaging labels must be examined to determine which items are deemed taxable candy or exempt food products (contains flour).

a.Examples of items exempt after January 1, 2007 include KitKats, Twix, some licorice, Nestle Crunch, and Milky Way.

b.If an item that would otherwise be included in the definition of “candy” above requires refrigeration under health regulations, it would be deemed an exempt food product. Candy that does not require refrigeration is taxable even if sold as such. For example, a number of candy bars that are regularly marketed at room temperature in the candy aisle may also be found in the refrigerated section of a convenience store. These products are refrigerated for customer preference rather than as directed on the label. Therefore, these items are not exempt from sales tax.

3.Dietary Supplement as defined in § 4.5(E) of this Part is subject to tax. This means any product intended to supplement the diet required to be labeled as a dietary supplement, identifiable by the “Supplemental Facts” box found on the label and as required pursuant to Federal law. Dietary supplements sold on prescription are not subject to tax.

4.Prepared Food and Meals are subject to tax based on the definitions in § 4.5(I) of this Part and the application of the Threshold Test in § 4.13 of this Part.

5.Soft Drinks as defined in § 4.5(J) of this Part are subject to sales tax.

a.Frozen, or powdered soft drink mixes are not deemed to fall within the definition of “soft drink”, which must be in liquid form, and are therefore exempt as foods.

b.Taxable soft drinks include, but are not limited to:

(1)Naturally and artificially sweetened water,

(2)Teas containing sweeteners,

(3)Drinks labeled as containing 50 percent or less fruit or vegetable juice,

(4)Sports drinks (Gatorade, PowerAde, etc.), and

(5)Sodas (colas, root beer, artificially sweetened diet colas, ginger ales, etc.).

c.Items that are deemed exempt food products, rather than taxable soft drinks include, but are not limited to:

(1)Unsweetened Water (regardless of carbonation),

(2)Fruit or vegetable juices that contain more than 50 percent juice by volume,

(3)Nutritional drinks that contain soy (Ensure, Boost, etc.),

(4)Apple cider,

(5)Beverage powders (Kool-Aid, lemonade, sweetened iced tea), and

(6)Frozen fruit juice concentrates (product is not in liquid form).

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-23 to 01/04/2022
Adoption — effective from 2018-03-18 to 07/23/2018

280-RICR-20-70-4 § 4.12 Seed, Plants, Fertilizers

A.The following items are subject to sales and use tax:

1.Seeds and plants that ordinarily produce food for human consumption;

2.Fertilizers (including limestone); and

3.Insecticides and fungicides, seed inoculants and plant hormones.

B.The items mentioned on § 4.12(A) of this Part are exempt if sold to farmers that hold a valid exemption number with the State of RI.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-23 to 01/04/2022
Adoption — effective from 2018-03-18 to 07/23/2018

280-RICR-20-70-4 § 4.13 Threshold Test

A.The following rules have been adopted by the Streamlined Sales Tax Governing Board to determine how utensils are treated and their impact on the sale of various food items. Under the approved interpretation, a Threshold Test, which determines the percentage of sales considered to be prepared food, was created to add consistency to the meaning of the term “provided by the seller.” The Division is required to use this test in making determinations of the taxability of prepared food and beverage sales. The calculation is as follows:

1.The numerator includes sales of prepared food under §§ 4.5(I)(1) and (2) of this Part of the definition of prepared food; and food where plates, bowls, glasses or cups are necessary to receive the food (e.g., dispensed milk, fountain beverages, salad bar). Alcoholic beverages are not included in the numerator.

2.The denominator includes sales of all food and food ingredients, including prepared food, candy, dietary supplements, and soft drinks. Alcoholic beverages are not included in the denominator.

B.Application of the Threshold Test

1.For sellers with a sales percentage of (Seventy-Five Percent) 75% or less, utensils are provided by the seller if the seller’s practice for the item (as represented by the seller) is to physically give or hand the utensil to the purchaser, except that plates, bowls, glasses, or cups necessary for the purchaser to receive the food (e.g., dispensed milk, salad bar) need only be made available.

2.For sellers with a sales percentage greater than (seventy-five percent) 75%, utensils are provided by the seller if they are merely made available to purchasers. Thus, utensils at a kiosk or common area are treated as utensils “provided by the seller.”

3.For sellers with a sales percentage greater than (seventy-five percent) 75% who sell items that contain (four) 4 or more servings packaged as one item sold for a single price, an item does not become prepared food due to the seller having utensils available (e.g. ground coffee, whole cakes, loaves of bread). However, if the seller provides utensils for the item, the item is considered prepared food. Whenever available, serving sizes will be determined based on a label on an item sold. If no label is available, a seller will reasonably determine the number of servings in an item.

4.When a seller sells food items that have a utensil placed in a package by a person other than the seller, and that person’s NAICS classification code is that of a manufacturer (sector 311), the seller shall not be considered to have provided the utensil except as provided in §§ 4.13(B)(1) through (3) of this Part. For any other packager with any other NAICS classification code (e.g., sector 722 for caterers), the seller shall be considered to have provided the utensil.

5.The prepared food sales percentage will be calculated by the seller for each tax year or business fiscal year, based on the seller’s data from the prior tax year or business fiscal year, as soon as possible after accounting records are available, but not later than (ninety) 90 days after the beginning of the tax or business fiscal year.

6.A single prepared food sales percentage will be determined annually, for all of the seller’s establishments in a state. A new business will make a good faith estimate of their prepared food sales percentage for their first year. A new business should adjust its good faith estimate prospectively after the first three months of operation if actual prepared food sales percentages materially affect the (Seventy-Five percent) 75% Threshold Test.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-23 to 01/04/2022
Adoption — effective from 2018-03-18 to 07/23/2018

280-RICR-20-70-4 § 4.14 Additional Tax Applications

A.Gratuities and other charges: When a retailer bills a customer for the rental of a public room or for gratuities, service charges, cover charges, or entertainment charges (including charges for bands or orchestras) in connection with the serving of meals or soft/alcoholic drinks, the amount billed or received by the retailer will be considered as part of the gross receipts from the sale of the meal or soft/alcoholic drinks and must be included in the measure of tax. Amounts designated as service charges, added to the price of meals, are a part of the selling price of the meals and, accordingly must be included in the retailer’s gross sales subject to tax.

B.Sales by Caterers: The tax applies to the entire charge made by caterers for serving meals, food, and soft/alcoholic drinks, inclusive of charges for food, the use of dishes, silverware, glasses, chairs, tables, etc., used in connection with serving meals, and for the labor of serving the meals. Sales of meals by caterers to social clubs, fraternal organizations, or other persons are sales for resale if a valid resale certificate is issued from the retailer of the meal.

C.Social Clubs and Fraternal Organization: "Social clubs and fraternal organizations" as used herein includes any corporation, partnership, association, group, or combination acting as a unit, such as service clubs, lodge organizations, community, country and athletic clubs. The tax applies to receipts from the furnishing of meals, food, and soft/alcoholic drinks by social clubs, and fraternal organizations.

D.Meals Served to Students and Teachers: The tax does not apply to the sale of meals by public, private, or parochial schools, school districts, colleges, universities, student organizations, and parent-teacher associations to the students or teachers of a school, college, or university whether the meals are served by the said educational institution or by a food service or management entity under contract to said educational institution. This applies even though the school is operated for profit. Items sold through vending machines located in areas designated primarily for students and teachers shall be considered a meal or a portion thereof. Those designated areas include cafeterias, student unions, classroom buildings, teachers' lounges, dormitories and faculty buildings. Food items and soft/alcoholic drinks sold by college/university rathskellers or taverns located on campus are subject to tax.

E.Subsidized Employer Cafeterias and Food Service Operations: An employer who engages a caterer or food service contractor to provide food and soft drinks or service in connection therewith to employees at the employer's expense is the purchaser of food and soft drinks and must pay the sales tax thereon. Any subsidy given by an employer to a caterer or food service contractor (whether termed a management fee, guarantee of profit or other designation) is taxable as a receipt from the sale of food and soft drinks. Where the subsidy is paid by an employer in addition to a specific amount paid by the employee, both amounts are taxed as the receipt from the sale of food and soft drinks.

F.Meals Sold to Employees: The tax does not apply to meals served to employees where the compensation of such employees includes the providing of such meals without charge.

1.Example: a waitress working in a restaurant who, as compensation for services, receives her meals without charge and who, in addition thereto receives a salary. The tax does apply to meals served to employees where a separate charge or deduction is made therefore by the employer.

2.Example: where the contract of employment provides that the employer shall deduct the cost of meals served to the employee from the latter's salary, or where an actual charge is made for meals served to the employees.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-23 to 01/04/2022
Adoption — effective from 2018-03-18 to 07/23/2018

280-RICR-20-70-4 § 4.15 Cafeterias Operated by Tax Exempt Hospitals

Although, under the provisions of R.I. Gen. Laws § 44-18-30(5) of the Rhode Island sales and use tax act, hospitals not operated for profit are exempted from paying either a sales tax or a use tax on tangible personal property which is sold to them, nevertheless when such hospitals operate cafeterias where meals, food or beverages are regularly sold to employees or other persons, such sales are subject to the tax. Accordingly, the tax shall apply to the gross receipts derived from such sales.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-23 to 01/04/2022
Adoption — effective from 2018-03-18 to 07/23/2018

280-RICR-20-70-5 Pet care services (except veterinary and testing laboratories services)

280-RICR-20-70-5 § 5.1 Purpose

This regulation implements R.I. Gen. Laws Chapters 44-18 and 44-19. These Chapters provide for Sales and Use Taxes Liability and Computation, and Sales and Use Taxes Enforcement and Collection, in regard to taxation of pet care services (except veterinary and testing laboratories services).

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Adoption — effective from 2012-10-01 to 03/15/2018

280-RICR-20-70-5 § 5.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws Chapters 44-18 and 44-19, as amended. These rules have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 44-1 and § 44-19-33.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Adoption — effective from 2012-10-01 to 03/15/2018

280-RICR-20-70-5 § 5.3 Application

The terms and provisions of these rules and regulations shall be liberally construed to permit the Department of Revenue to effectuate the purposes of R.I. Gen. Laws Chapters 44-18 and 44-19 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Adoption — effective from 2012-10-01 to 03/15/2018

280-RICR-20-70-5 § 5.4 Severability

If any provision of these rules and regulations or the application thereof to any person or circumstances is held invalid by a court of competent jurisdiction, the validity of the remainder of the rules and regulations shall not be affected thereby.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Adoption — effective from 2012-10-01 to 03/15/2018

280-RICR-20-70-5 § 5.5 Definitions

A.“Person” means and includes any individual, partnership, association, corporation, estate, trust, fiduciary, limited liability company, limited liability partnership or any other legal entity.

B.“Pet care services (except veterinary and testing laboratories services)” (NAICS § 812910) means establishments engaged in providing pet care services (except veterinary and testing laboratories services), including but not limited to boarding, grooming, sitting, and training pets.

C.“Services” means all activities engaged in for other persons for a fee, retainer, commission, or other monetary charge, which activities involve the performance of a service in this state as distinguished from selling property. In determining what a service is, the intended use, principal objective or ultimate objective of the contracting parties shall not be controlling. For the purposes of this rule, services rendered by an employee for his employer are not taxable.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Adoption — effective from 2012-10-01 to 03/15/2018

280-RICR-20-70-5 § 5.6 Taxation of Pet Care Services (Except Veterinary and Testing Laboratories Services)

A.For the period commencing October 1, 2012, sales and use tax at the rate as provided in R.I. Gen. Laws §§ 44-18-18 and 44-18-20 is imposed on receipts from the sale of pet care services (except veterinary and testing laboratories services) provided in this state.

B.Any person furnishing pet care services (except veterinary and testing laboratories services) in this State is a retailer as provided in R.I. Gen. Laws § 44-18-15, and is thus required to file a Business Application and Registration form with the Tax Administrator. They must also charge, collect, and remit Rhode Island sales and use tax.

Example 1:

An individual purchases the following pet care and veterinary services:

Medical procedure for pet

$1,000.00

Overnight stay for observation in conjunction w/ medical procedure

$200.00

Shampoo

$50.00*

Nail clipping

$10.00*

Sub total

$1,260.00

Sales Tax (* items subject to sales tax)

$4.20

Total

$1,264.20

Example 2:

A family goes on vacation and purchases the following pet care services:

Overnight stay for one week

$500.00*

Shampoo

$50.00*

Nail clipping

$10.00*

Sub total

$560.00

Sales Tax (* items subject to sales tax)

$39.20

Total

$599.20

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Adoption — effective from 2012-10-01 to 03/15/2018

280-RICR-20-70-6 Clothing, Clothing Accessories, Sports or Recreational Equipment, and Protective Equipment

280-RICR-20-70-6 § 6.1 Purpose

This regulation implements R.I. Gen. Laws Chapters 44-18 and 44-19. These Chapters provide for Sales and Use Tax Liability and Computation and Sales and Use Tax Enforcement and Collection in regard to taxation of clothing and footwear.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Amendment — effective from 2012-10-01 to 03/15/2018
Amendment — effective from 2007-01-03 to 10/01/2012
Periodic Refile — effective from 2001-12-27 to 01/03/2007
Periodic Refile — effective from 2001-12-20 to 12/27/2001

280-RICR-20-70-6 § 6.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Amendment — effective from 2012-10-01 to 03/15/2018
Amendment — effective from 2007-01-03 to 10/01/2012
Periodic Refile — effective from 2001-12-27 to 01/03/2007
Periodic Refile — effective from 2001-12-20 to 12/27/2001

280-RICR-20-70-6 § 6.3 Application

The terms and provisions of these rules and regulations shall be liberally construed to permit the Division of Taxation to effectuate the purposes of R.I. Gen. Laws Chapters 44-18 and 44-19 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Amendment — effective from 2012-10-01 to 03/15/2018
Amendment — effective from 2007-01-03 to 10/01/2012
Periodic Refile — effective from 2001-12-27 to 01/03/2007
Periodic Refile — effective from 2001-12-20 to 12/27/2001

280-RICR-20-70-6 § 6.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Amendment — effective from 2012-10-01 to 03/15/2018
Amendment — effective from 2007-01-03 to 10/01/2012
Periodic Refile — effective from 2001-12-27 to 01/03/2007
Periodic Refile — effective from 2001-12-20 to 12/27/2001

280-RICR-20-70-6 § 6.5 Definitions

A.“Clothing" means all human wearing apparel suitable for general use.

1.Examples of nontaxable items include, but are not limited to: Aprons, household and shop; Athletic supporters; Baby receiving blankets; Bathing suits and caps; Beach capes and coats; Belts and suspenders; Boots; Coats and jackets; Costumes; Diapers, children and adult, including disposable diapers; Ear muffs; Footlets; Formal wear; Garters and garter belts; Girdles; Gloves and mittens for general use; Hats and caps; Hosiery; Insoles for shoes; Lab coats; Neckties; Overshoes; Pantyhose; Rainwear; Rubber pants; Sandals; Scarves; Shoes and shoe laces; Slippers; Sneakers; Socks and stockings; Steel toed shoes; Underwear; Uniforms, athletic and non-athletic; and Wedding apparel.

2.Examples of items not considered to be “Clothing” shall include, but not be limited to, the following taxable items: Belt buckles sold separately; Costume masks sold separately; Patches and emblems sold separately; Sewing equipment and supplies including, but not limited to, knitting needles, patterns, pins, scissors, sewing machines, sewing needles, tape measures, and thimbles; and Sewing materials that become part of “clothing” including, but not limited to, buttons, fabric, lace, thread, yarn, and zippers.

B."Clothing accessories or equipment" means incidental items worn on the person or in conjunction with "clothing." "Clothing accessories or equipment" does not include: "clothing," "sport or recreational equipment," or "protective equipment."

1.Examples of “Clothing accessories or equipment” includes, but is not limited to: Briefcases; Cosmetics; Hair notions, including, but not limited to, barrettes, hair bows, and hairnets; Handbags; Handkerchiefs; Jewelry; Sun glasses, non-prescription; Umbrellas; Wallets; Watches; and Wigs and hair pieces.

C.“Essential clothing” means any article of “clothing” with a sales price at or below the dollar threshold set by the state that is taxed differently from “clothing.”

D."Protective equipment" means items for human wear and designed as protection of the wearer against injury or disease or as protections against damage or injury of other persons or property but not suitable for general use. "Protective equipment" does not include "clothing," "clothing accessories or equipment," and "sport or recreational equipment."

1.Examples of “Protective equipment” shall include, but is not limited to: Breathing masks; Clean room apparel and equipment; Ear and hearing protectors; Face shields; Hard hats; Helmets; Paint or dust respirators; Protective gloves; Safety glasses and goggles; Safety belts; Tool belts; and Welders gloves and masks.

E.“Sales price” means:

1.The total amount of consideration, including cash, credit, property, and services, for which personal property or services are sold, leased, or rented, valued in money, whether received in money or otherwise, without any deduction for the following:

a.The seller's cost of the property sold;

b.The cost of materials used, labor or service cost, interest, losses, all costs of transportation to the seller, all taxes imposed on the seller, and any other expense of the seller;

c.Charges by the seller for any services necessary to complete the sale, other than delivery and installation charges;

d.Delivery charges, as defined in R.I. Gen. Laws § 44-18-7.1(i);

e.Credit for any trade-in, as determined by state law;

f.The amount charged for services, as defined in R.I. Gen. Laws § 44-18-7.3.

2.“Sales price” shall not include:

a.Discounts, including cash, term, or coupons that are not reimbursed by a third party that are allowed by a seller and taken by a purchaser on a sale;

b.The amount charged for labor or services rendered in installing or applying the property sold when the charge is separately stated by the retailer to the purchaser; provided that in transactions subject to the provisions of this chapter the retailer shall separately state such charge when requested by the purchaser and, further, the failure to separately state such charge when requested may be restrained in the same manner as other unlawful acts or practices prescribed in R.I. Gen. Laws Chapter 6-13.1.

c.Interest, financing, and carrying charges from credit extended on the sale of personal property or services, if the amount is separately stated on the invoice, bill of sale or similar document given to the purchaser; and

d.Any taxes legally imposed directly on the consumer that are separately stated on the invoice, bill of sale or similar document given to the purchaser.

e.Manufacturer rebates allowed on the sale of motor vehicles.

3."Sales price" shall include consideration received by the seller from third parties if:

a.The seller actually receives consideration from a party other than the purchaser and the consideration is directly related to a price reduction or discount on the sale;

b.The seller has an obligation to pass the price reduction or discount through to the purchaser;

c.The amount of the consideration attributable to the sale is fixed and determinable by the seller at the time of the sale of the item to the purchaser; and

d.One of the following criteria is met:

(1)The purchaser presents a coupon, certificate or other documentation to the seller to claim a price reduction or discount where the coupon, certificate or documentation is authorized, distributed or granted by a third party with the understanding that the third party will reimburse any seller to whom the coupon, certificate or documentation is presented;

(2)The purchaser identifies himself or herself to the seller as a member of a group or organization entitled to a price reduction or discount (a "preferred customer" card that is available to any patron does not constitute membership in such a group), or

(3)The price reduction or discount is identified as a third party price reduction or discount on the invoice received by the purchaser or on a coupon, certificate or other documentation presented by the purchaser.

F."Sport or recreational equipment" means items designed for human use and worn in conjunction with an athletic or recreational activity that are not suitable for general use. "Sport or recreational equipment" does not include "clothing," "clothing accessories or equipment," and "protective equipment."

1.Examples of “Sports or recreational equipment” shall include, but is not limited to: Ballet and tap shoes; Cleated or spiked athletic shoes; Gloves, including, but not limited to, baseball, bowling, boxing, hockey, and golf; Goggles; Hand and elbow guards; Life preservers and vests; Mouth guards; Roller and ice skates; Shin guards; Shoulder pads; Ski boots; Waders; and Wetsuits and fins.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Amendment — effective from 2012-10-01 to 03/15/2018
Amendment — effective from 2007-01-03 to 10/01/2012
Periodic Refile — effective from 2001-12-27 to 01/03/2007
Periodic Refile — effective from 2001-12-20 to 12/27/2001

280-RICR-20-70-6 § 6.6 Taxation of Clothing and Essential Clothing

A.For sales, leases or rentals prior to October 1, 2012, the sales in this state of articles of clothing, essential clothing, and footwear, intended to be worn or carried on or about the human body are exempt from the Rhode Island sales and use tax.

B.Effective October 1, 2012, the exemption from Rhode Island sales and use tax will apply to the sales, leases or rentals in this state of essential clothing, including footwear, intended to be worn or carried on or about the human body with a sales price of two-hundred fifty dollars ($250.00) or less per item.

1.Example: A retailer sells five (5) shirts at sixty dollars ($60) each for a total of three-hundred dollars ($300.00). Because the sale of each item is less than two-hundred fifty dollars ($250.00), the sale of all five (5) shirts are exempt from the Rhode Island sales and use tax.

C.Effective October 1, 2012, the portion of the sales price of clothing, including footwear, sold, leased or rented in this state greater than two-hundred fifty dollars ($250.00) per item is subject to the Rhode Island sales and use tax.

1.Example 1: A retailer of clothing sells a suit with a sales price of two-hundred seventy-five dollars ($275.00). The tax in this example is computed as follows:

Suit

$275.00

Sales Tax: ($275.00 - 250.00) x 7%

$1.75

Total Invoice

$276.75

2.Example 2: A retailer of clothing sells a suit with a sales price of two-hundred twenty-five dollars ($225.00). Alterations are made to the suit to adjust the length of the sleeves and pants resulting an additional charge of sixty dollars ($60.00) bringing the total sales price to two hundred eighty-five dollars ($285.00). The tax in this example is computed as follows:

Suit

$225.00

Alterations

$60.00

Subtotal

$285.00

Sales Tax: Suit and Alterations ($285.00 - 250.00) x 7%

$2.45

Total Invoice

$287.45

3.Example 3: Same facts as Example 2, and the retailer also charges twenty dollars (20.00) for delivery of the suit to the customer bringing the total sales price to three-hundred five dollars ($305.00). The tax in this example is computed as follows:

Suit

$225.00

Alterations

$60.00

Delivery Charge

$20.00

Subtotal

$305.00

Sales Tax: Suit, alterations & delivery ($305.00 – 250.00) x 7%

$3.85

Total Invoice

$308.85

4.Example 4: A retailer of clothing sells two suits; one suit with a sales price of five-hundred dollars ($500.00) and a second suit with a sales price of two-hundred fifty dollars ($250.00) and the retailer also charges seventy-five dollars ($75.00) for delivery of the suits to the customer bringing the total sales price to eight-hundred twenty-five dollars ($825.00). The tax in this example is computed as follows:

Item 1

Item 2

Total

Suit

$500.00

$250.00

$750.00

Delivery

$50.00

$25.00

$75.00**

Subtotal

$550.00

$275.00

$825.00

Less Threshold

(250.00)

(500.00)

Taxable Amount

$300.00

$25.00

$325.00

Rate

x .07

Tax

$21.00

$1.75

$22.75

5.Example 5: A customer purchases a suit with a sales price of three-hundred dollars ($300.00) and two (2) shirts with a sales price of fifty dollars ($50.00) each, and the retailer also charges twenty dollars ($20.00) for delivery of the merchandise to the customer bringing the total sales price to four-hundred twenty dollars ($420.00). The tax in this example is computed as follows:

Item 1

Item 2

Item 3

Total

Suit

$300.00

Shirts @

$50 each

$50.00

$100.00

Delivery Charge

$15.00

$2.50

$20.00**

Subtotal

$315.00

$52.50

$420.00

Less Threshold

(250.00)

Taxable Amount

$65.00

$0.00

Rate

x .07

Tax

$4.55

$0.00

$4.55

** Delivery Charge: If a shipment includes both taxable and exempt property, the seller should allocate the delivery charges by using a percentage based on the total sales prices of the taxable property compared to the total sales prices of all property in the shipment

D.Articles of clothing that are normally sold as a single unit must continue to be sold in that manner; they cannot be separated and sold as individual items to qualify for the exemption.

1.Example: A suit normally sells for four-hundred dollars ($400.00). The retailer cannot sell the pants for two-hundred dollars ($200.00) and the suit coat for two-hundred dollars ($200.00) in order to qualify for the exemption. However, if the pants and the coat are normally sold as separate items with separate price tags, the exemption may apply to each item sold.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Amendment — effective from 2012-10-01 to 03/15/2018
Amendment — effective from 2007-01-03 to 10/01/2012
Periodic Refile — effective from 2001-12-27 to 01/03/2007
Periodic Refile — effective from 2001-12-20 to 12/27/2001

280-RICR-20-70-6 § 6.7 Taxation of Clothing Accessories or Equipment

Sales of clothing accessories or equipment in this state are subject to the Rhode Island sales and use tax.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Amendment — effective from 2012-10-01 to 03/15/2018
Amendment — effective from 2007-01-03 to 10/01/2012
Periodic Refile — effective from 2001-12-27 to 01/03/2007
Periodic Refile — effective from 2001-12-20 to 12/27/2001

280-RICR-20-70-6 § 6.8 Taxation of Protective Equipment

Sales of protective equipment in this state are subject to the Rhode Island sales and use tax.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Amendment — effective from 2012-10-01 to 03/15/2018
Amendment — effective from 2007-01-03 to 10/01/2012
Periodic Refile — effective from 2001-12-27 to 01/03/2007
Periodic Refile — effective from 2001-12-20 to 12/27/2001

280-RICR-20-70-6 § 6.9 Taxation of Sports or Recreational Equipment

Sales of sports or recreational equipment in this state are subject to the Rhode Island sales and use tax.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Amendment — effective from 2012-10-01 to 03/15/2018
Amendment — effective from 2007-01-03 to 10/01/2012
Periodic Refile — effective from 2001-12-27 to 01/03/2007
Periodic Refile — effective from 2001-12-20 to 12/27/2001

280-RICR-20-70-7 § 7.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18.1. This regulation provides for Social Clubs.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-15 to 01/04/2022

280-RICR-20-70-7 § 7.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws § 44-18.1 as amended, R.I. Gen. Laws §§ 44-1-4, 44-18.1-1 and 44-19-33. Additionally these regulations have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 42-35 - Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-15 to 01/04/2022

280-RICR-20-70-7 § 7.3 Application

The terms and provisions of these rules and regulations shall be liberally construed to permit the Department of Revenue to effectuate the purposes of R.I. Gen. Laws Chapter 44-18.1 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-15 to 01/04/2022

280-RICR-20-70-7 § 7.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-15 to 01/04/2022

280-RICR-20-70-7 § 7.5 Golf and Country Clubs

A.Sales of tangible personal property, including food and beverages and rentals of golf carts and other equipment, by golf and country clubs, whether made to members or other persons are taxable and such clubs must obtain a sales tax permit.

B.Charges by the club for other than the sales of tangible personal property such as membership dues assessments are not charges for tangible personalty and, as such, are not taxable.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-15 to 01/04/2022

280-RICR-20-70-7 § 7.6 Social and Fraternal Organizations

A.Sales to

1.Generally, the sale of tangible personal property to social and fraternal organizations is taxable. Such organizations include fraternal societies, trade or professional associations, lodges, orders and their auxiliaries and other similar organizations. These organizations are not exempt under the provisions of § 44-18-30(5). The tax applies whether such sales are made to members or other persons.

B. Sales by

1.If such an organization operates a cafeteria, soda fountain or other eating or beverage facility or sells athletic equipment or other tangible personal property, it must obtain a sales tax permit and pay the tax to the state on total receipts from such sales.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-15 to 01/04/2022

280-RICR-20-70-8 Finance Charges

280-RICR-20-70-8 § 8.1 Purpose

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/15/2018

280-RICR-20-70-8 § 8.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/15/2018

280-RICR-20-70-8 § 8.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/15/2018

280-RICR-20-70-8 § 8.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/15/2018

280-RICR-20-70-8 § 8.5 Finance Charges

Finance, carrying, interest, insurance or other charges, which are in addition to the established cash selling price, in connection with credit sales of tangible personal property are not subject to the tax if separately stated on any evidence of sale.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/15/2018

280-RICR-20-70-9 Mobile and Manufactured Homes

280-RICR-20-70-9 § 9.1 Purpose

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/15/2018

280-RICR-20-70-9 § 9.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws §§ 44-1-4 and 44-19-33. The rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws § 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/15/2018

280-RICR-20-70-9 § 9.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/15/2018

280-RICR-20-70-9 § 9.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/15/2018

280-RICR-20-70-9 § 9.5 Mobile and Manufactured Homes

A."Mobile and manufactured home" means a detached residential unit designed:

1.For a long term occupancy and containing sleeping accommodations, a flush toilet, and a tub or shower bath and kitchen facilities, and having both permanent plumbing and electrical connections for attachment to outside systems;

2.To be transported on its own wheels or on a flatbed or other trailer or detachable wheels; and

3.To be placed on pads, piers, or tied down, at the site where it is to be occupied as a residence complete and ready for occupancy, except for minor and incidental unpacking and assembly operations and connection to utilities systems.

B.Mobile and manufactured homes as defined above are exempt from the sales and use tax. Mobile and manufactured homes contemplated by R.I. Gen. Laws Chapter 31-44 are of the types located in a mobile home and/or manufactured home park and therefore do not include modular homes.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/15/2018

280-RICR-20-70-10 Film Rentals

280-RICR-20-70-10 § 10.1 Purpose

This regulation implements R.I. Gen. Laws Chapters 44-18 et seq. and 44-19 et seq. These Chapters provide for Sales and Use Taxes Liability and Computation, and Sales and Use Taxes Enforcement and Collection, in regard to taxation of film rentals.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-19 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/19/2018

280-RICR-20-70-10 § 10.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws Chapters 44-18 et seq. and 44-19 et seq. as amended. These rules have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 44-1 et seq. and R.I. Gen. Laws § 44-19-33.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-19 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/19/2018

280-RICR-20-70-10 § 10.3 Application

The terms and provisions of these rules and regulations shall be liberally construed to permit the Department of Revenue to effectuate the purposes of R.I. Gen. Laws Chapters 44-18 et seq. and 44-19 et seq. and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-19 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/19/2018

280-RICR-20-70-10 § 10.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-19 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/19/2018

280-RICR-20-70-10 § 10.5 Film Rentals

The use tax does not apply to the consideration charged by out-of-state motion picture film distributors for the rentals of motion picture film made by them to a person in the business of operating a motion picture house or drive-in theatre in Rhode Island.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-19 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/19/2018

280-RICR-20-70-11 Exemption of Sales by Writers, Composers and Artists

280-RICR-20-70-11 § 11.1 Purpose

A.The purpose of this rule making is to implement R.I. Gen. Laws Chapters 44-18 and 44-19; specifically § 44-18-30(B), which provides an exemption for sales by writers, composers and artists.

History

Amendment — effective from 2025-07-30 to current
Periodic Refile — effective from 2022-01-04 to 07/30/2025
Amendment — effective from 2018-03-15 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/15/2018
Periodic Refile — effective from 2001-12-20 to 12/01/2013

280-RICR-20-70-11 § 11.2 Authority

A.These rules and regulations are promulgated pursuant to R.I. Gen Laws §§ 44-1-4 and 44-19-33. These rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 42-35, the Rhode Island Administrative Procedures Act.

History

Amendment — effective from 2025-07-30 to current
Periodic Refile — effective from 2022-01-04 to 07/30/2025
Amendment — effective from 2018-03-15 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/15/2018
Periodic Refile — effective from 2001-12-20 to 12/01/2013

280-RICR-20-70-11 § 11.3 Application

A.These rules and regulations shall be liberally construed so as to permit the Division of Taxation to effectuate the purpose of R.I. Gen. Laws Chapters 44-18 and 44-19 and other applicable state laws and regulations.

History

Amendment — effective from 2025-07-30 to current
Periodic Refile — effective from 2022-01-04 to 07/30/2025
Amendment — effective from 2018-03-15 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/15/2018
Periodic Refile — effective from 2001-12-20 to 12/01/2013

280-RICR-20-70-11 § 11.4 Severability

A.If any provision of these rules and regulations, or the application thereof to any person or circumstance, is held invalid by a court of competent jurisdiction, the validity of the remainder of the rules and regulations shall not be affected thereby.

History

Amendment — effective from 2025-07-30 to current
Periodic Refile — effective from 2022-01-04 to 07/30/2025
Amendment — effective from 2018-03-15 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/15/2018
Periodic Refile — effective from 2001-12-20 to 12/01/2013

280-RICR-20-70-11 § 11.5 Definitions

A.“Art gallery” means a room or building devoted to the exhibition of works of art, or an institution or business exhibiting or dealing in works of art. This definition also includes temporary spaces devoted to the exhibition of works of art or dealing in works of art, such as “pop-up galleries” or art festivals.

B."Consumable" means capable of being consumed.

C."Consumed" means destroyed, used up, or worn out to the degree or extent that the property cannot be repaired, reconditioned, or rendered fit for further use.

D.“Council” means the Rhode Island State Council on the Arts.

E.“Individual” means any person, partnership, association, corporation, estate, trust, fiduciary, limited liability company, limited liability partnership, or any other legal entity.

F.“One of a kind” means the creation of a solitary work, conceived and produced by the artist or author or under their direction, not intended for multiple or mass production.

G.“Limited edition” means the creation of a solitary work, conceived and produced by the artist or author under their direction, which is intended for limited reproduction, totaling no more than three hundred (300) copies, physically signed and numbered by the artist.

H.“Principal place of business” means the primary location where a taxpayer's business is performed. The principal place of business is generally where the business's books and records are kept and is often where the owner/head of the firm or top management is located.

I.“Resident of” or “Residing in” means a writer, composer or artist who:

1.Is domiciled in the state, or

2.Is not domiciled in the state but maintains a permanent place of abode in this state and is in the state for an aggregate of more than one-hundred eighty-three (183) days of the taxable year.

J.“State” means within the exterior limits of the state of Rhode Island and includes all territory within these limits owned by or ceded to the United States of America.

K.“Work” means:

1.An original and creative work, whether written, composed or executed for “one of a kind" or "limited edition” production and which falls into one (1) of the following categories:

a.a book or other writing;

b.a play;

c.a musical composition;

d.a painting, print, photograph or other like picture;

e.a sculpture;

f.traditional and fine crafts;

g.the creation of a film;

h.the creation of a dance.

2.“Work” also includes any product generated as a result of any of the above categories. A work may qualify for the exemption regardless of whether it is fiction or nonfiction.

3."Work" does not apply to any piece or performance created or executed for industry-oriented, commercial or related production and does not apply to any piece sold through an online marketplace or third-party vendor except for art galleries.

a.Example 1. The hiring of a photographer to take photographs of a wedding.

b.Example 2. A technical manual produced for the purpose of running industrial machines.

History

Amendment — effective from 2025-07-30 to current
Periodic Refile — effective from 2022-01-04 to 07/30/2025
Amendment — effective from 2018-03-15 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/15/2018
Periodic Refile — effective from 2001-12-20 to 12/01/2013

280-RICR-20-70-11 § 11.6 Sales and Use Tax Exemption

A.The exemption from sales and use tax for sales of artistic works applies to sales by:

1.An individual who is a resident of and has a principal place of business situated in this state, and has been determined by the tax administrator, in consultation with the council, to have written, composed, or executed, either solely or jointly, a work or works, by the individual. Such determination shall be made after consideration of any evidence submitted by the individual.

2.A writer, composer or artist conducting their business as a legal entity organized and registered under the laws of this state and that has its principal place of business situated in this state, and has been determined by the tax administrator, in consultation with the council, to have written, composed, or executed, either solely or jointly, a work or works. Such determination shall be made after consideration of any evidence submitted by the entity.

3.Any art gallery located in the state of Rhode Island.

a.Example 1. An art gallery located in Providence, RI sells a “work” for the price of $1000. Payment is made directly to the art gallery operator. This sale is not subject to sales and use tax, provided that the operator of the art gallery has submitted an “Application for Sales Tax Exemption for Artistic Works” and received an exemption number from the Division of Taxation prior to the sale, which must be written on the customer invoice.

b.Example 2. A “pop-up gallery” located at a temporary location in Rhode Island sells a “work” for the price of $1000. Payment is made directly to the art gallery operator. This sale is not subject to sales and use tax provided that the operator of the art gallery has submitted an “Application for Sales Tax Exemption for Artistic Works” and received an exemption number from the Division of Taxation prior to the sale. The exemption number assigned by the Division of Taxation must be shown on the customer invoice.

History

Amendment — effective from 2025-07-30 to current
Periodic Refile — effective from 2022-01-04 to 07/30/2025
Amendment — effective from 2018-03-15 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/15/2018
Periodic Refile — effective from 2001-12-20 to 12/01/2013

280-RICR-20-70-11 § 11.7 Application for Exemption

A.Individuals or Legal Entities - For a sale of a work to be exempt, an eligible writer, composer or artist must prior to the sale of any “work”, apply to the tax administrator for a Certificate of Exemption on a form prescribed by the tax administrator. In determining the eligibility of the work for exemption the tax administrator will consult with the council, and may require the submission of all books, documents or other evidence relating to the creation of the work.

B.If an otherwise-qualified work is sold in excess of three hundred (300) signed and numbered copies, then the work does not qualify for the exemption and sales tax must be collected and remitted on sales of the work. All sales are considered in determining the number of works sold and includes sales outside of Rhode Island.

C.Art Galleries - For the sale of a work to be exempt by an art gallery, the operator of the art gallery must apply to the tax administrator for a sales tax exemption. The tax administrator will consult with the council to ascertain whether the applicant is eligible for the exemption under the provisions of the law.

D.The tax administrator shall require a writer, composer, artist, or the operator of an art gallery to submit an annual certified accounting of the total amount of revenue from the sale of art, the number of works sold, the type of work sold (i.e. book, painting, print, photograph, sculpture, etc.) and the date of sale. Failure to file such a report may, at the sole discretion of the tax administrator, terminate any current exemption or further eligibility for the exemption of the writer, composer, artist or art gallery.

History

Amendment — effective from 2025-07-30 to current
Periodic Refile — effective from 2022-01-04 to 07/30/2025
Amendment — effective from 2018-03-15 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/15/2018
Periodic Refile — effective from 2001-12-20 to 12/01/2013

280-RICR-20-70-11 § 11.8 Individuals, Legal Entities or Galleries with Exemption for Artistic Works Granted Prior to December 1, 2013

A.Individuals, legal entities or galleries with an exemption for artistic works granted prior to December 1, 2013, are required to re-apply as required under § 11.7 of this Part for a Certificate of Exemption on a form prescribed by the tax administrator in consultation with the council.

History

Amendment — effective from 2025-07-30 to current
Periodic Refile — effective from 2022-01-04 to 07/30/2025
Amendment — effective from 2018-03-15 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/15/2018
Periodic Refile — effective from 2001-12-20 to 12/01/2013

280-RICR-20-70-11 § 11.9 Compliance Under Sales/Use Tax Law

A.At the time of application, every writer, composer, artist or art gallery making any retail sales, whether or not such sales are exempt, shall hold a valid permit to make sales at retail and shall comply with all the administrative, collection and remittance requirements of the sales and use tax law.

B.The exemption number assigned to the artistic work by the Division of Taxation must be shown on the customer invoice. This exemption number must also be shown on the line designated as "other" deductions on Form T-204, Annual Reconciliation, to substantiate the deduction taken from the gross sales being reported.

History

Amendment — effective from 2025-07-30 to current
Periodic Refile — effective from 2022-01-04 to 07/30/2025
Amendment — effective from 2018-03-15 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/15/2018
Periodic Refile — effective from 2001-12-20 to 12/01/2013

280-RICR-20-70-11 § 11.10 Income Tax Exemption – Specified Districts 11.10 Income Tax Exemption – Specified Districts {#sec-280-ricr-20-70-11-11.10-income-tax-exemption-specified-districts omnilex-key=us-ri-regs-official--title-280--280-RICR-20-70-11#11.10 Income Tax Exemption – Specified Districts}

A.Profits or gains derived from the sale of works created within a specified district (as outlined in R.I. Gen. Laws § 44-30-1.1) by writers, composers, and artists who live and work within those districts is exempt from state personal income tax. These districts are within Providence, East Providence, Pawtucket, Woonsocket, Tiverton, Little Compton, Newport, Warwick and Warren, or the entire town of Westerly. The profits or gains derived from the sale of works created in areas other than the specified districts is taxable.

History

Amendment — effective from 2025-07-30 to current
Periodic Refile — effective from 2022-01-04 to 07/30/2025
Amendment — effective from 2018-03-15 to 01/04/2022
Amendment — effective from 2013-12-01 to 03/15/2018
Periodic Refile — effective from 2001-12-20 to 12/01/2013

280-RICR-20-70-12 Record Requirements

280-RICR-20-70-12 § 12.1 Purpose

The purpose of this regulation is to implement R.I. Gen. Laws Chapters 44-18 and 44-19, which provide for Sales and Use Taxes Liability and Computation and Sales and Use Taxes Enforcement and Collection specifically regarding records requirements.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2013-05-01 to 06/18/2018
Amendment — effective from 2011-12-01 to 05/01/2013
Periodic Refile — effective from 2001-12-20 to 12/01/2011

280-RICR-20-70-12 § 12.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws §§ 44-1-1 et seq. and 44-19-33. This regulation has been prepared in accordance with the requirements of R.I. Gen. Laws § 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2013-05-01 to 06/18/2018
Amendment — effective from 2011-12-01 to 05/01/2013
Periodic Refile — effective from 2001-12-20 to 12/01/2011

280-RICR-20-70-12 § 12.3 Application

This regulation shall be liberally construed so as to permit the Division of Taxation the authority to effectuate the purposes of R.I. Gen. Laws Chapters 44-18 and 44-19 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2013-05-01 to 06/18/2018
Amendment — effective from 2011-12-01 to 05/01/2013
Periodic Refile — effective from 2001-12-20 to 12/01/2011

280-RICR-20-70-12 § 12.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2013-05-01 to 06/18/2018
Amendment — effective from 2011-12-01 to 05/01/2013
Periodic Refile — effective from 2001-12-20 to 12/01/2011

280-RICR-20-70-12 § 12.5 Definitions

A.“Cloud computing” and/or “Cloud” means and includes any type of internet-based computing and/or remote server networking where computer services or resources such as servers, on-demand computing resources, data centers and processing tanks, centralized data storage and applications are networked and/or delivered to a business’s computers and devices through the internet.

B.“Documents of entry” means and includes all initial source documents or papers that consummate the sale such as sales or purchase invoices or journals that would then flow to the income or deduction for reported tax purposes.

C.“Legibility” means the quality of a letter or numeral that enables the observer to identify it positively and quickly to the exclusion of all other letters or numerals.

D.“Point of sale (POS) system” means and includes all hardware and software used at the point a retail sale is completed, Database Management Systems, EDI technology, Machine-sensible records and similar systems. POS systems may be integrated with accounting modules, including general ledgers, accounts receivable, accounts payable, purchasing, and inventory control systems. When using POS systems, all sales and transactions are made through a computer system. The system records what is being sold, the selling price, and the quantity sold. It then calculates the total due, including tax, and how much change is due.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2013-05-01 to 06/18/2018
Amendment — effective from 2011-12-01 to 05/01/2013
Periodic Refile — effective from 2001-12-20 to 12/01/2011

280-RICR-20-70-12 § 12.6 General Requirements

A.As stated in R.I. Gen. Laws § 44-19-27(b), as amended, every person required to collect tax shall keep records of every sale or occupancy and of all amounts paid, charged, or due and of the tax payable, in forms the Tax Administrator may require. The records shall include a true copy of each sales slip, invoice, receipt, statement, or memorandum upon which R.I. Gen. Laws § 44-19-8 requires that the tax be stated separately.

B.Each retailer as defined in R.I. Gen. Laws § 44-18-15 shall keep adequate and complete records of the business entity including but not limited to:

1.The normal books of account ordinarily maintained by the business including all bills, receipts, invoices, cash register tapes, and all data collected by means of a POS system or magnetic media, and all Documents of Original Entry supporting the entries in the books of account and/or POS system;

2.All schedules or working papers used in connection with the preparation of tax returns;

3.The gross receipts from the sales of tangible personal property and services, including both taxable and nontaxable items and any services necessary to complete a sale;

4.All deductions allowed by law and claimed in filing returns;

5.The total purchase price of all tangible personal property or services purchased for resale and the total purchase price of all such property or services purchased for use or consumption in this state.

C.These records shall be available for inspection and examination at any time, and they must be preserved for a period of at least three (3) years pursuant to R.I. Gen. Laws § 44-19-27.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2013-05-01 to 06/18/2018
Amendment — effective from 2011-12-01 to 05/01/2013
Periodic Refile — effective from 2001-12-20 to 12/01/2011

280-RICR-20-70-12 § 12.7 Magnetic and Electronic Record Requirements

A.To the extent a taxpayer maintains accounting records and information in magnetic or electronic format, through a POS system or otherwise, the taxpayer shall set forth in writing the procedures governing their magnetic or electronic system, and the individual(s) who are responsible for maintaining and operating the system with appropriate authorization from the Board of Directors, general partner(s), or owner, whichever is applicable.

1.These governing procedures shall establish:

a. Internal procedures for inspection and quality assurance of the records;

b.A method of documenting where, when, and by whom, the magnetic or electronic system was accessed at any given time including any third party involved in the maintenance and/or upkeep of said system either on or off the business’s premises by any means of access either physical or remote including Cloud Computing;

c.Procedures to account for voids, cancellations, or other discrepancies in sequential numbering;

d.Procedures to account for documenting logging functionalities of the POS system so that any and all activity related to operating modes available in the system, such as training mode, and any and all changes in the set-up of the system are recorded;

e.A detailed index of all magnetic and electronic media data that is arranged in a manner that permits the immediate location of any particular record.

B.If these governing procedures are not established, this is prima facie evidence of a lack of internal controls and may subject the taxpayer to sanctions outlined in § 12.8 of this Part.

C.All magnetic and electronic media in regards to quality control, storage, identification, and inspection shall meet industry standards as set forth by the American National Standards Institute, Association for Information and Image Management, or National Institute of Standards and Technology.

D.If a taxpayer chooses to use an electronic record keeping format such as a POS system, the POS system itself and such records must be made available for inspection and examination by the Tax Administrator and/or his or her agents in electronic format; hard copies may be requested by the Tax Administrator and/or his or her agents upon demand.

E.When a display is required on a magnetic or electronic media reader (viewer) or reproduced on paper, the material shall exhibit a high degree of Legibility and Readability.

F.Each POS system transaction record must provide enough detail to independently determine the taxability of each sale and the amount of tax due and collected. Detailed information required for each sales transaction includes, but is not limited to, the individual item(s) sold, selling price, tax due, invoice number, date of sale, method of payment, POS terminal number and POS transaction number.

G.Summary documents alone are not acceptable. A business must keep any and all underlying documents (Documents of Original Entry), such as individual invoices and vouchers, to verify a POS system’s summaries. In order to be considered complete, the electronic record must permit the direct reconciliation of receipts, invoices, and other source documents with the entries in the books and records and on the returns of a taxpayer. The records must provide the opportunity to trace a transaction back to the original source or forward to a final total.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2013-05-01 to 06/18/2018
Amendment — effective from 2011-12-01 to 05/01/2013
Periodic Refile — effective from 2001-12-20 to 12/01/2011

280-RICR-20-70-12 § 12.8 Inadequate Records and/or Lack of Internal Controls

A.In a detailed audit, the Tax Administrator and/or his or her agents must be able to ensure the accuracy and completeness of the transaction records recorded in the taxpayer’s record keeping system including magnetic or electronic POS systems.

B.A taxpayer’s records will be considered inadequate if:

1.They do not verify sales receipts;

2.They do not verify whether those receipts are subject to sales tax;

3.They do not verify the taxable status of purchases;

4.They do not show that a taxpayer’s business purchases correlate to business sales;

5.It is not possible to conduct a detailed audit using the taxpayer’s records for whatever reason;

6.The taxpayer fails to make records available to the Tax Administrator and/or his or her authorized agent(s);

7.The records are not in a form that is both legible and readable that can be audited by the Tax Division, and/or

8.An evaluation of the taxpayer’s accounting of POS system discloses that the system does not provide adequate internal control procedures which assure the accuracy and completeness of the transactions recorded in the books and records (e.g. the lack of sequentially numbered invoices or guest checks, or the lack of dates on receipts).

C.If a taxpayer’s records are considered inadequate or a taxpayer’s POS system lacks internal controls, the taxpayer may be subject to an estimated methodology, based on best available information, to determine any additional tax due, be subject to penalties and interest if additional tax is found to be due, be subject to criminal penalties, and have his or her sales tax permit suspended or revoked.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2013-05-01 to 06/18/2018
Amendment — effective from 2011-12-01 to 05/01/2013
Periodic Refile — effective from 2001-12-20 to 12/01/2011

280-RICR-20-70-12 § 12.9 Inspections and Examinations

A.Pursuant to R.I. Gen. Laws § 44-19-27(d), as amended, all records, including those kept by a magnetic or electronic system, shall be available for inspection and examination at any time upon demand by the Tax Administrator or his or her authorized agent or employee and preserved for a period of three (3) years, except that the Tax Administrator may consent to their destruction within that period or may require that they be kept longer.

B.Inspections and examinations of records may include the Tax Administrator or his or her agents viewing and copying the normal books of account ordinarily maintained by the business including all bills, receipts, invoices, cash register tapes, and all data collected by means of a POS system or magnetic media, and all Documents of Original Entry supporting the entries in the books of account and/or POS system.

C.The taxpayer shall make available upon the Division’s request a reader/printer in good working order at the examination site for reading, locating, and reproducing any record maintained in the normal course of business.

D.The Tax Administrator or his or her agents must have access to the POS system on site or in the Cloud for the purposes of verifying or evaluating the integrity and reliability of the system.

E.The Tax administrator or his or her agents may make electronic copies of said POS system record by means of an electronic flash drive in order to review the records at the Tax Division.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2013-05-01 to 06/18/2018
Amendment — effective from 2011-12-01 to 05/01/2013
Periodic Refile — effective from 2001-12-20 to 12/01/2011

280-RICR-20-70-12 § 12.10 Requirement for Record Retention

A.Records based on any of the above media shall be maintained for a period of at least three (3) years as provided in R.I. Gen. Laws § 44-19-27, as amended, unless the destruction or other disposal of the same is authorized by the Tax Administrator or his/her authorized representative in writing.

B.Failure to maintain such records will be considered evidence of negligence or intent to evade the tax and will result in the imposition of appropriate penalties as provided by statute. See § 12.8 of this Part.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-18 to 01/04/2022
Amendment — effective from 2013-05-01 to 06/18/2018
Amendment — effective from 2011-12-01 to 05/01/2013
Periodic Refile — effective from 2001-12-20 to 12/01/2011

280-RICR-20-70-13 Materialmen - Pay When Paid Remittance Method

280-RICR-20-70-13 § 13.1 Purpose

Retailers of tangible personal property must remit tax on the entire amount of the gross receipts from a transaction on the return for the period in which the transaction takes place. The "pay when paid" provisions allows certain retailers of building materials (with respect to such materials) an exception to this general rule beginning with sales made on or after January 1, 2003.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Adoption — effective from 2002-01-07 to 03/15/2018

280-RICR-20-70-13 § 13.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Adoption — effective from 2002-01-07 to 03/15/2018

280-RICR-20-70-13 § 13.3 Definitions

A.“Materialman” means a retailer of lumber who is engaged in the business primarily of selling lumber and building supplies to contractors to be used in the construction, erection, alteration, repairing of buildings or other structures or in the making of any other improvements on land or the preparation thereof, and whose lumber and building materials comprise at least fifty percent (50%) of their total sales and who may file a notice of intention to claim a lien pursuant to R.I. Gen. Laws § 34-28-4, for the materials sold.

B.“Building materials” means materials that are incorporated as an improvement or repair to real property. The term also includes tools and other items that are used to improve real property.

C.“Contractor” means a general contractor, a subcontractor, a repairman, or a property owner acting as his or her own general contractor.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Adoption — effective from 2002-01-07 to 03/15/2018

280-RICR-20-70-13 § 13.4 Qualifying for "Pay When Paid" Status

A.A retailer seeking Division of Taxation permission to collect and remit sales tax on a qualifying transaction when actually paid by a contractor must file an application by February 1 of each year and demonstrate to the satisfaction of the Tax Administrator that for six (6) consecutive months within the most recent twelve (12) month period that:

1.The retailer is primarily engaged in selling lumber and building materials to contractors, subcontractors, or repairmen; and

2.At least 50% of the retailer's total sales were sales of lumber and building materials to contractors; and

3.The retailer is authorized under R.I. Gen. Laws Chapter 34-28 to file mechanic's lien on real property for material sold.

B.A retailer seeking to qualify for "Pay When Paid" must file Form AMP by February 1 of each year.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Adoption — effective from 2002-01-07 to 03/15/2018

280-RICR-20-70-13 § 13.5 In-House Credit Only

The provisions of the "pay when paid" method relate only to the in-house credit extended by the materialman. In the event that a materialman finances any portion of the receipts or consideration from a sale, including any tax due thereon, directly or indirectly, with any person (other than a contractor, subcontractor or repairman) whether by factoring or any other means, then the materialman shall be deemed to have received payment of such receipts from such contractor, subcontractor or repairman and shall be required to pay over tax on such sales with the next return due.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Adoption — effective from 2002-01-07 to 03/15/2018

280-RICR-20-70-13 § 13.6 Record-Keeping

A.In addition to the usual record-keeping requirements for retailers, a materialman using the "pay when paid" method must keep the following records for each sale made:

1.The date of the sale;

2.Proof that the sale meets the qualifications for the "pay when paid" method;

3.The amount of credit, if any, extended by the materialman to the contractor for each sale;

4.The terms for payment of the purchase price or repayment of any credit; and

5.The date or dates on which the purchase price is paid or the credit is repaid, in whole or in part, and the amount of each payment or repayment.

B.The records, along with the approval letter from the Tax Division for each year the materialman qualifies to use this method, must be kept for three years from the date the tax on each sale is paid over to the Tax Division in full; provided, however, that the Tax Administrator may require they be kept for a longer period.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Adoption — effective from 2002-01-07 to 03/15/2018

280-RICR-20-70-13 § 13.7 Tax Due Within One Year After Sale

If a materialman does not collect the full tax on a transaction qualifying for "pay when paid" treatment within a year from the date of the transaction, the materialman must remit any remaining tax due on the full gross receipts (whether or not full payment for the tangible personal property has been received) with the return for the period that includes the date that is the one year anniversary of the transaction.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Adoption — effective from 2002-01-07 to 03/15/2018

280-RICR-20-70-14 Billboards and Signs

280-RICR-20-70-14 § 14.1 Purpose

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-12 to 01/04/2022
Amendment — effective from 2002-01-07 to 03/12/2018
Periodic Refile — effective from 2001-12-20 to 01/07/2002

280-RICR-20-70-14 § 14.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-12 to 01/04/2022
Amendment — effective from 2002-01-07 to 03/12/2018
Periodic Refile — effective from 2001-12-20 to 01/07/2002

280-RICR-20-70-14 § 14.3 Application

The terms and provisions of these rules and regulations shall be liberally construed to permit the Division of Taxation to effectuate the purposes of R.I. Gen. Laws §§ 44-18 et seq. and 44-19 et seq. and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-12 to 01/04/2022
Amendment — effective from 2002-01-07 to 03/12/2018
Periodic Refile — effective from 2001-12-20 to 01/07/2002

280-RICR-20-70-14 § 14.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-12 to 01/04/2022
Amendment — effective from 2002-01-07 to 03/12/2018
Periodic Refile — effective from 2001-12-20 to 01/07/2002

280-RICR-20-70-14 § 14.5 Billboards and Signs

A.Tax applies to retail sales of signs, showcards and posters, and to charges for painting signs, showcards and posters whether the materials are furnished by the painter or the customer.

B.Where a billboard or sign manufacturer fabricates a sign and delivers it to the customer, who either installs it or has someone other than the manufacturer install such sign, the sale by the manufacturer of such a completed sign constitutes the sale of tangible personal property and the tax applies. This category would also include signs that are wholly fabricated in the dealers' shops but delivered to the job site in two or three sections as a matter of convenience, provided, that either the customer or some person other than the sign fabricator affixes such sign to the building. The rental of such signs is a rental of tangible personal property and is therefore taxable.

C.All signs which are fabricated by a sign company, whether they are completely fabricated prior to reaching the job site, or whether they are fabricated at the job site, or whether they are fabricated partially in the sign company's shop and partially at the job site, are considered as improvements to real property, provided that they are affixed by the sign company to the real estate in a permanent manner. The sign company in this situation is operating as a contractor and not as a retailer and is required to pay sales or use tax as a consumer on the purchase of materials and supplies.

D.Roadside billboards and bulletins which are constructed on the site where they are to be permanently located and which rest on foundations or have their own supports anchored into the ground in a permanent manner, are considered as improvements to real property. The fact that the panels may be removable for painting or storm protection does not alter the situation.

E.Lettering on walls, floors, doors, and windows of buildings are improvements to real property. Dealers who do this type of work are the ultimate consumers of materials and supplies so used and should pay tax on the cost thereof.

F.Other signs -- All other types of signs, whether hand painted, printed or electric, are tangible personal property taxable at their selling price. Installation charges, if separately stated, are exempt.

G.Except as otherwise stated above, sign companies must charge and collect the sales tax on the full selling price.

H.Sales of signs to contractors for use on their jobs are taxable whether or not the job is for a tax-exempt organization.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-12 to 01/04/2022
Amendment — effective from 2002-01-07 to 03/12/2018
Periodic Refile — effective from 2001-12-20 to 01/07/2002

280-RICR-20-70-15 Delivery Charges

280-RICR-20-70-15 § 15.1 Purpose

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-17 to 01/04/2022
Amendment — effective from 2007-01-03 to 03/17/2018
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-15 § 15.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-17 to 01/04/2022
Amendment — effective from 2007-01-03 to 03/17/2018
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-15 § 15.3 Application

The terms and provisions of these rules and regulations shall be liberally construed to permit the Department of Revenue to effectuate the purposes of R.I. Gen. Laws Chapters 44-18 et seq. and 44-19 et seq. and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-17 to 01/04/2022
Amendment — effective from 2007-01-03 to 03/17/2018
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-15 § 15.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-17 to 01/04/2022
Amendment — effective from 2007-01-03 to 03/17/2018
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-15 § 15.5 Delivery Charges

A.“Delivery charges” are included in the “sales price” of property and therefore subject to sales tax if the property sold is taxable. If the property sold is exempt, delivery charges are not subject to sales tax.

B.“Delivery charges” means charges by the seller of personal property or services for preparation and delivery to a location designated by the purchaser of personal property or services including, but not limited to, transportation, shipping, postage, handling, crating, and packing.

C.“Delivery charges” shall not include the charges for delivery of “direct mail” if the charges are separately stated on an invoice or similar billing document given to the purchaser of “direct mail.”

D.Taxable and Exempt Property Included in Shipment: If a shipment includes both exempt property and taxable property, the seller should allocate the delivery charges by using:

1.Percentage based on the total sales prices of the taxable property compared to the total sales prices of all property in the shipment; or

2.Percentage based on the total weight of the taxable property compared to the total weight of all property in the shipment.

E.The seller must tax the percentage of the delivery charge allocated to the taxable property but does not have to tax the percentage allocated to the exempt property.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-17 to 01/04/2022
Amendment — effective from 2007-01-03 to 03/17/2018
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-16 Florists

280-RICR-20-70-16 § 16.1 Purpose

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Amendment — effective from 2007-01-03 to 03/15/2018
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-16 § 16.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws §§ 44-1-4 and 44-19-33. The rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws § 42-35-1 et seq. of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Amendment — effective from 2007-01-03 to 03/15/2018
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-16 § 16.3 Florists

A.Sales at retail by florists or other producers or sellers of flowers, wreaths, bouquets, potted plants, hospital baskets, funeral designs, and any and all other flowers, plants, or merchandise sold by them, are sales of tangible personal property to which the tax applies.

B.Where florists conduct transactions through a florist telegraphic delivery association, or otherwise by telephone, telegraph, internet, or other means of telecommunication with other florists, the following rules will apply in the computation of the tax:

1.On all orders taken by a Rhode Island florist (first florist) and transmitted to a second florist in Rhode Island or elsewhere, for delivery by the second florist either in Rhode Island or elsewhere, the first florist will be held liable for the collection and remittance of the tax on the total selling price of the flowers and other merchandise included in the sale.

2.In cases where Rhode Island florists (second florist) receive instructions from other florists located either within or outside of Rhode Island, for the delivery of flowers, the second florist will not be held liable for the tax with respect to gross sales which he may realize from the transaction. In such instances, if the order originated in Rhode Island, the tax will be payable by the first florist who first received the order and transmitted instructions to the second florist.

C.Supplies and materials purchased by florists which are used in the decoration, fabrication, creation, processing or preparation of flowers, plants, floral products, including descriptive labels, stickers and cards affixed to floral products are exempt from the sales and use tax.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-15 to 01/04/2022
Amendment — effective from 2007-01-03 to 03/15/2018
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-17 Promoters and Flea Markets

280-RICR-20-70-17 § 17.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18.1. This regulation provides for the regulations of promoters, the promotion of shows, and flea markets.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-16 to 01/04/2022

280-RICR-20-70-17 § 17.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws Chapter 44-18.1 as amended, R.I. Gen. Laws §§ 44-1-4, 44-18.1-1 and 44-19-33. Additionally these regulations have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 42-35 “Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-16 to 01/04/2022

280-RICR-20-70-17 § 17.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-16 to 01/04/2022

280-RICR-20-70-17 § 17.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-16 to 01/04/2022

280-RICR-20-70-17 § 17.5 Definitions

A."Promoter" means any person who, for consideration, rents or leases space to any person for the display and sale of tangible personal property, service, or food and drink subject to tax at a show, or who operates a show.

B."Show" means a flea market, craft show, antique show, coin show, stamp show, comic book show, baseball card show and any other show of a temporary nature, regardless of whether conducted at the same location for an extended period of time, excluding, however, trade shows sponsored or promoted by and open only to an industry, trade or professional association or society and not to the general public.

C."Flea market" means a place of business that provides space more than six (6) times a year under a single promoter's permit at the same location to two (2) or more people to make retail sales of property, usually but not exclusively second-hand property, that is not permanently displayed or stored at the flea market.

1.Excluded from this definition of flea market are shows such as art shows, card shows, antique shows, industry, trade, and professional shows.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-16 to 01/04/2022

280-RICR-20-70-17 § 17.6 Duties- Generally

A.A promoter of a show is required to file a notice of the show at least ten (10) days prior to the show, stating the location and dates of the show, in a form prescribed by the tax administrator. A permit to operate a show will be issued without charge. Said permit shall be prominently displayed at the entrance of each show. No promoter shall operate a show without obtaining a permit.

B.A promoter shall not permit any person to display or sell tangible personal property, services or food and drink at a show unless that person has a valid permit to make sales at retail issued by the tax administrator. Said permit shall be prominently displayed by the vendor.

C.A promoter is required to file a report monthly, within twenty (20) days after the end of the prior month for each show the promoter operates. Said report is to be filed on a form prescribed by the tax administrator.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-16 to 01/04/2022

280-RICR-20-70-17 § 17.7 Duties- Out-of-State-Vendors

A promoter of a show is charged with the duty of collecting the sales tax from each out-of-state person who rents or leases space from the promoter for the display and sale of tangible personal property, services, or food and drink subject to tax at a show. The promoter must collect and remit the tax collected from each out-of-state person at the close of each show. For shows of an extended duration, such as seasonal flea markets, each week or weekend, as the case may be, shall be considered a "separate show."

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-16 to 01/04/2022

280-RICR-20-70-17 § 17.8 Revocation of Promoters Permit

Any promoter who allows a person to display and sell tangible personal property, services or food at a show who is not registered or who does not display a permit or who fails to keep a record or file a monthly report shall be subject to revocation of all existing permits and to the denial of a permit to operate a show for a period of not more than two (2) years, in addition to any other penalty provisions of the sales/use tax law.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-16 to 01/04/2022

280-RICR-20-70-17 § 17.9 Flea Market

A.Generally

1.Persons making sales of tangible personal property other than refreshments (food and drinks) at flea markets are required to register with the Division of Taxation and secure a Flea market Vendor's Permit.

2.Flea market vendors shall pay an annual registration fee of $120; provided however, flea market vendors who do not operate on a permanent basis may, at their option, register on a quarterly basis for a fee of $40 or on a thirty (30) day basis for $10. A thirty (30) day permit shall only be valid at the location for which it is issued. Annual and quarterly permits shall be valid at any location.

3.Sales tax permits shall not be valid at flea markets other than for the sale of refreshments. Any other sales tax permit holder operating at a flea market must also be registered as a flea market vendor and pay the appropriate registration fee.

4.Flea market vendors selling only nontaxable items, such as clothing, are required to register for a special permit at no cost and shall display said special permit.

B.Collection of Tax

1.Flea market vendors must continue to collect a sales tax on all taxable sales but will only be required to file a sales tax return if their sales tax liability during the registration period exceeds the registration fee paid.

2.Flea market vendors registering on an annual basis whose tax liability exceeds $120 in the calendar year shall file the annual return on or before January 20 of the subsequent calendar year.

3.Flea market vendors registering on a quarterly or 30-day basis shall file quarterly returns if their tax liability exceeds the amount of registration fees paid for that registration period.

C.Purchases for Resale

Flea market vendors may not issue resale certificates. A flea market vendor holding an annual or quarterly permit may make extax purchases for resale by presenting the seller of tangible personal property with a copy of its permit. Holders of a thirty (30) day permit may not make extax purchases for resale.

D.Penalty for Failure to Register

All permits issued must be prominently displayed. In addition to the enforcement provisions set forth in Chapter 44-19, a penalty of $10 per booth, per day shall be assessed against any flea market vendor operating without proper registration.

E.Flea Market Promoters

1.Flea market promoter's responsibility under the law is to ensure that all vendors operating at the promoter's place of business are properly registered. Promoter will have the authority to accept applications for registration on a 30-day basis only from vendors not otherwise registered. Registration fees collected shall be submitted to the Division of Taxation within three (3) business days of fees on a form prepared and furnished by the Division of Taxation.

2.Promoters shall continue to be registered with the Division of Taxation and file all reports as required.

3.A penalty of $20 per booth per day, up to a maximum of $200 per day may be imposed against any flea market promoter who is negligent in allowing vendors to operate without proper registration.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-16 to 01/04/2022

280-RICR-20-70-18 Vending Machines and Operators

280-RICR-20-70-18 § 18.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18.1. This regulation provides for the regulation of Vending Machines and Vending Machine Operators.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-18 to 01/04/2022

280-RICR-20-70-18 § 18.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-18 to 01/04/2022

280-RICR-20-70-18 § 18.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-18 to 01/04/2022

280-RICR-20-70-18 § 18.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-18 to 01/04/2022

280-RICR-20-70-18 § 18.5 Vending Machines

If the owner or lessee of the premises where the vending machine is located has access to the monies in the machine and remits whatever is owed to the company owning the machine after deducting profits or commissions, he or she is considered to be the retailer. If, however, the owner has no access to the monies in the machine and the monies are collected by the distributor of the machine who then pays a percentage or commission to the owner or lessee of the premises, then the distributor is the retailer.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-18 to 01/04/2022

280-RICR-20-70-18 § 18.6 Vending Machine Operators

A.Persons operating vending machines dispensing tangible personal property of a kind the gross receipts from the retail sale of which are subject to tax must obtain permits to engage in the business of selling tangible personal property and must report and pay to the state the tax upon the gross receipts from the sales made through such machines. One permit is sufficient for all machines of one operator.

1.A statement in substantially the following form must be affixed upon each vending machine in a conspicuous place:

This vending machine is operated by:‎‎‎Name of Operator:‎‎‎Place of Business of Operator:‎‎who holds Permit No. __ issued pursuant to the Sales and Use Tax Act.

B.Adequate and complete records must be kept by the operator showing the location of each machine operated, the serial number thereof, purchases and inventories of merchandise bought for sale through all such machines, and the gross receipts derived from the operation at each location during each month.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-18 to 01/04/2022

280-RICR-20-70-19 Manufacturing, Property and Public Utilities Service Used In

280-RICR-20-70-19 § 19.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18.1. This regulation provides for the regulation of Manufacturing, property and public utility services, and sterilizing agents.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-19 to 01/04/2022

280-RICR-20-70-19 § 19.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-19 to 01/04/2022

280-RICR-20-70-19 § 19.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-19 to 01/04/2022

280-RICR-20-70-19 § 19.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-19 to 01/04/2022

280-RICR-20-70-19 § 19.5 Manufacturing, Converting, Processing, Compounding, Assembling, Preparing, and Producing

A. For the purpose of this regulation, the business of manufacturing, converting, processing, compounding, assembling, preparing, or producing shall be divided into three parts as follows:

2.Production, meaning all operations performed in the producing or processing room, shop or plant, including the production line starting with the handling and storage of raw materials in the industrial plant and continuing through the last step of production where the product is finished or completed and packaged for sale.

Distribution, meaning all operations subsequent to production such as handling, storing, selling, displaying, loading and transporting the manufactured products.

B.The sales or use tax applies to property and public utility services used in administration and distribution as defined above. The tax applies to property placed in the producing or processing room, shop, or plant if such property is used solely in administration or distribution work.

C.Retailers such as restaurants, donut shops, fast food businesses, etc., are not manufacturers as that term is commonly understood. Therefore, the manufacturing exemptions under R.I. Gen. Laws §§ 44-18-30(7) and 44-18-30(22) do not apply to such retailers.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-19 to 01/04/2022

280-RICR-20-70-19 § 19.6 Property used in Production

A.Under R.I. Gen. Laws § 44-18-30(7) the sale, (including lease or rental) and the storage, use, or other consumption in this state of the following items of tangible personal property used in the production process, as defined above, are exempt:

1.Tangible personal property which will become an ingredient, component, or integral part of the property produced to be sold.

2.Tangible personal property consumed in production of property to be resold.

Coal, fuel oil, electricity, natural gas, artificial gas, steam, refrigeration, and water consumed in the production of property to be resold.
Coal, fuel oil, electricity, natural gas, artificial gas, steam, refrigeration, and water when used to generate power or to maintain a fixed temperature necessary in the production of tangible personal property for resale.
Work clothes, safety goggles, leather or rubber aprons or similar items of work clothes.
Lubricating oils and greases used on machines that manufacture products for resale.

B."Consumed" means destroyed, used up, or worn out to the degree or extent that such property cannot be repaired, reconditioned, or rendered fit for further manufacturing use.

C."Consumed" shall also mean and/or include mere obsolescence.

D.The following tangible personal property, machinery and equipment, is taxable and not included in the scope of this exemption:

Cleaning, janitor, and first aid supplies.
Boiler compounds and water additives used in the maintenance of machinery or equipment.

3.Office equipment and supplies.

4.Equipment and supplies used in selling and distribution.

5.Equipment and supplies used in transportation activities.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-19 to 01/04/2022

280-RICR-20-70-19 § 19.7 Legal Provisions

A.R.I. Gen. Laws § 44-18-30(22) provides a further exemption from the sale (including lease or rental) and from the storage, use, or other consumption in this state of tools, dies and molds, and machinery and equipment (including replacement parts thereof) to the extent used in an industrial plant in the actual manufacture, conversion or processing of tangible personal property including computer software as that term is utilized in SIC numbers 7371, 7372 and 7373, or in the corresponding industry sectors of the North American Industry Classification System (NAICS Code), to be sold or such machinery and equipment used in the furnishing of power to an industrial manufacturing plant.

B.Under R.I. Gen. Laws § 44-18-30(22) the sales or use tax applies to the sale, (including lease or rental), storage, use, or other consumption in this state of tools, dies and molds, and machinery and equipment (including replacement parts thereof) to the extent used in administration and distribution operations.

C.The exemption provided in R.I. Gen. Laws § 44-18-30(22) applies to the sale (including lease or rental) and to the storage, use or other consumption in this state of tools, dies and molds, and machinery and equipment (including replacement parts thereof) to the extent used in the production of tangible personal property including computer software to be sold.

D.In the event that a manufacturer purchases equipment that does not qualify for exemption, it shall pay the tax due at time of purchase. Provided, however;

1.If the equipment purchased partially qualifies for exemption and the manufacturer knows the extent of the partial exemption, the manufacturer shall give the vendor a Manufacturer's Exemption Certificate and file a use tax return with the Division of Taxation and pay a use tax based on the percentage of the nonexempt use of the equipment, or

2.If the equipment purchased partially qualifies for exemption and the manufacturer does not know the extent of the partial exemption, it shall give the vendor a Manufacturer's Exemption Certificate and file a use tax return with the Division of Taxation and pay use tax on the entire cost of the equipment.

E. If a manufacturer files a use tax return under the provisions of §§ 19.7(D)(1) or (2) of this Part above, it shall, twenty-four months thereafter, analyze the machinery usage to determine the actual exempt usage for that machinery. This shall be compared to the original estimate made and any balance due or credit due the manufacturer must be reported on the next month's use tax return. Any balance due or credit due shall bear interest from time of original purchase.

F.The word machinery includes tools, dies and molds, and machinery and equipment (including replacement parts thereof).

G.Machinery used in the actual manufacture, conversion, or processing of any computer software or tangible personal property which is not to be sold and which would be exempt under this section or R.I. Gen. Laws § 44-18-30(22) if purchased from a vendor shall be exempt under this paragraph even if such operation, function or purpose is not an integral or essential part of a continuous production flow or manufacturing process. This is so even though the tangible personal property being produced by such machinery would in itself be exempt under R.I. Gen. Laws §§ 44-18-30(7) or under 44-18-30(22) if purchased from a vendor thereof.

H.Where a portion of a group of portable or mobile machinery is used in the actual manufacture, conversion or processing of tangible personal property or computer software to be sold, as heretofore defined, such portion, if otherwise qualifying, shall be exempt under this paragraph even though the machinery in said group is used interchangeably and not otherwise identifiable as to use.

I.The term "industrial plant" means a factory at a fixed location primarily engaged in the manufacture, conversion or processing of tangible personal property to be sold in the regular course of business.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-19 to 01/04/2022

280-RICR-20-70-19 § 19.8 Use of Resale or Exemption Certificate

A.In making exempt purchases for use in production, a manufacturer should furnish vendors with either a Resale Certificate, a Manufacturer's Exemption Certificate, or any certificate or statement that contains the required information and signature. However, these certificates should not be utilized in making purchases for use in administration or distribution, as defined above, and a tax must be paid on purchases for these purposes.

B.The acceptance of a properly executed certificate relieves the vendor from the burden of proof.

C.If a manufacturer, processor or convertor gives an exemption certificate and thereafter consumes some of the property purchased for purposes other than production, he or she must report, as taxable receipts, the cost price of the property consumed in administration or distribution and pay the tax thereon.

D.In order that the Division of Taxation may verify a vendor's nontaxable sales upon audit, it is necessary that vendors retain executed exemption certificates. If a vendor lists nontaxable sales or services for which he has no exemption certificates, the Division of Taxation will presume such sales are taxable and make an assessment of tax against the vendor.

E.When it is not possible at the time tangible personal property or services are purchased to know how they will be used, the manufacturer, processor or convertor may issue a certificate to his vendor and may purchase without the tax. In such a case the purchaser must report and pay directly to the Division of Taxation any tax that is due based on nonexempt use made of the purchases.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-19 to 01/04/2022

280-RICR-20-70-19 § 19.9 Guidelines Used in Determining if Exemption Exists

A. Machinery must be used by a manufacturer in manufacturing tangible personal property to be sold to be exempt. This excludes from the exemption all machinery used in the furnishing of services. For example, the machinery of a laundry or dry cleaner, since it does not manufacture tangible personal property, but rather provides a service, cannot be within the exemption.

B. Machinery used by a manufacturer before the manufacturing process has begun or after it has been completed is taxable. For example, machinery used for delivery to or from a plant, repair or maintenance of facilities, and crating or packaging for shipment are not within the exemption, except as provided in § 19.9(D) of this Part below.

C.Machinery used by a manufacturer to produce component parts which are to become an integral part of the finished product to be sold would be exempt. For example, a milling machine used to make parts which are to become a component of the finished product to be sold would be exempt.

D. Packaging machinery when used to place the property to be sold in the primary container, package or wrapping in which such property is normally sold to the ultimate consumer is exempt. For example, a primary package or container includes the bottle or cap used for a carbonated beverage, the aerosol can, the wrapper for a candy bar or the tray for frozen convenience foods. Machinery used in packaging for the purposes of transporting, displaying or merchandising the product, where such packaging is normally discarded by the wholesaler, retailer, or ultimate consumer prior to the use or consumption of the product is taxable. Such packaging includes shipping cartons, cases in which goods are placed for case lot sales, wooden cases, or six-pack containers for carbonated or alcoholic beverages.

E.Materials used in constructing a foundation to hold production machinery would be subject to the tax in that such a foundation is part of a building or structure and does not qualify for the production exemption.

F.The parts and repair service for exempt machinery also are exempt. Examples of such items would be conveyor belts, grinding wheels, grinding balls, machine drills, auger bits, milling cutters, emery wheels, jigs, saw blades, machine tool holders, reamers, dies and molds.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-19 to 01/04/2022

280-RICR-20-70-19 § 19.10 Sterilizing Agents

Sales of sterilizing agents to dairies, breweries, soft drink manufacturers and the like, are not exempt as materials which are consumed and used directly in the process of manufacture of tangible personal property for sale. The act of sterilizing containers is antecedent to the manufacture of the product.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-19 to 01/04/2022

280-RICR-20-70-20 Films Generally

280-RICR-20-70-20 § 20.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18. This regulation provides for Sales and Use Tax.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-25 to 01/04/2022

280-RICR-20-70-20 § 20.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws Chapter 44-18.1 as amended, R.I. Gen. Laws §§ 44-1-4, 44-18.1-1 and 44-19-33. Additionally, these regulations have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 42-35, Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-25 to 01/04/2022

280-RICR-20-70-20 § 20.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-25 to 01/04/2022

280-RICR-20-70-20 § 20.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-25 to 01/04/2022

280-RICR-20-70-20 § 20.5 Direct Mail, Printing and Related Industries

A. Generally - Tax applies to charges for printing, lithography, photolithography, rotogravure, gravure, silk screen printing, imprinting multilithing, multigraphing, mimeographing, photocopying, photostats, steel die engraving, and similar operations for consumers regardless of whether or not the paper and other materials are furnished by the consumer.

B. Services and Direct Mail

Services - Tax applies to charges for services that are part of the sale of tangible personal property to consumers such as overtime and set-up charges and charges for die cutting, embossing, folding and other operations except as noted in § 20.5(B)(2) of this Part below. Tax applies regardless of whether or not the materials or any part thereof are furnished by the customer.
Direct Mail

a.“Direct mail” means printed material delivered or distributed by United States mail or other delivery service to a mass audience or to addressees on a mailing list provided by the purchaser or at the direction of the purchaser when the cost of the items are not billed directly to the recipients. “Direct mail” includes tangible personal property supplied directly or indirectly by the purchaser to the direct mail seller for inclusion in the package containing the printed material.

b.“Direct mail” does not include multiple items of printed material delivered to a single address.

c.Tax does not apply to the following direct mail charges provided such charges are stated separately on invoices and in the accounting records:

(1) Postage

(2)Addressing for the purpose of mailing (by hand or by mechanical means)

(3)Folding for the purpose of mailing

(4)Enclosing

(5)Sealing Preparing for mailing

(6)Mailing letters or other printed matters

d.Tax applies, however, to charges for envelopes.

C.Printers are consumers of special printing aids such as electrotypes, stereotypes, photo engravings, silk screens, steel dies, cutting dies, lithographic plates, artwork, single color or multicolor separation negatives, flats or any other properties purchased for use in the preparation of printed matter to be sold.

1.Special printing aids purchased, or fabricated from raw materials purchased, that have a limited and sole intended function in the process of completing a specific printing order to be sold are exempt from the tax. All other printing aides are subject to the tax.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-25 to 01/04/2022

280-RICR-20-70-20 § 20.6 Processing of Films

Charges for processing of films are taxable, since under the provisions of the Rhode Island sales and use tax act, "sales" includes "the producing, fabricating, processing, printing or imprinting of tangible personal property for a consideration for consumers who furnish either directly or indirectly the materials used in the producing, fabricating, processing, printing or imprinting.”

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-25 to 01/04/2022

280-RICR-20-70-20 § 20.7 Photographers and Photostat Producers: Photofinishers and Retouchers: X-Rays

A. Photographers and Photostat Producers -- Tax applies to sales of photographs and photostat copies, whether or not produced to the special order of the customer, and to charges for the making of photographs or photostat copies out of materials furnished by the customer. No deduction is allowable on account of such expenses of the photographer as travel time, rental of equipment, or salaries or wages paid to assistants or models, whether or not such expenses are itemized in billings to customers.

1.Tax does not apply to sales to photographers and photostat producers of tangible personal property which becomes an ingredient or component part of photographs or photostat copies sold, such as mounts, framers, and sensitized paper, nor does it apply to sales to the photographer or photostat producer of materials consumed directly in the process of making the photographs or photostat copies such as chemicals, films, plates, and proof paper. However, the tax does apply to such items as trays, cameras, and other equipment and supplies used but not directly consumed in the process of making the photographs or photostat copies; and the tax on such items must be paid by the photographer or producer.

B. Photo Finishers and Retouchers -- Tax applies to charges for printing pictures or making enlargements from negatives furnished by the customer but not to charges for developing the negatives if such charges are separately stated. Tax does not apply to charges for retouching, tinting or coloring pictures furnished to the finisher by the customer.

1.Tax applies to sales to photo finishers of all tangible personal property used by them in developing negatives, finishing pictures, and retouching, coloring or tinting pictures furnished by customers, except sensitized paper upon which the prints are made, and frames and mounts sold along with the finished pictures.

C. X-Rays -- Producers of X-ray film for the purpose of diagnosis of conditions of humans are the consumers of materials and supplies used in the production thereof. Thus, the tax applies to the sale of such materials and supplies to laboratories producing X-ray film for the purpose of such diagnosis. Producers of X-ray film for any other purpose such as inspection of metals and similar purposes are retailers of the film or pictures and the tax applies to the gross receipts from the retail sale thereof.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-25 to 01/04/2022

280-RICR-20-70-20 § 20.8 Producing, Fabricating and Processing Property Furnished by Consumers

A.Tax applies to charges for producing, fabricating, processing, printing, or imprinting tangible personal property for consumers who furnish either directly or indirectly the materials used.

B."Producing," "fabricating" and "processing" include any operation which results in the creation or production of tangible personal property or which is a step in a process or series of operations resulting in the creation or production of tangible personal property.

C."Producing," "fabricating" and "processing" do not include operations which do not result in the creation or production of tangible personal property or which do not constitute a step in a process or series of operations resulting in the creation or production of tangible personal property, but which constitute merely the repair or reconditioning of tangible personal property to refit it for the use for which it was originally produced.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-06-25 to 01/04/2022

280-RICR-20-70-21 Rentals and Leases of Tangible Personal Property (Including Motor Vehicles and Lock Boxes)

280-RICR-20-70-21 § 21.1 Purpose

This regulation implements R.I. Gen. Laws Chapters 44-18, 44-18.1, and 44-19. These Chapters provide for Sales and Use Tax Liability and Computation and Sales and Use Tax Enforcement and Collection in regard to rentals and leases of tangible personal property (including motor vehicles).

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-16 to 01/04/2022

280-RICR-20-70-21 § 21.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-16 to 01/04/2022

280-RICR-20-70-21 § 21.3 Application

The terms and provisions of these rules and regulations shall be liberally construed to permit the Department of Revenue to effectuate the purposes of R.I. Gen. Laws Chapters 44-18, 44-18.1, and 44-19 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-16 to 01/04/2022

280-RICR-20-70-21 § 21.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-16 to 01/04/2022

280-RICR-20-70-21 § 21.5 Definitions

A.“Lease or Rental” means any transfer of possession or control of tangible personal property including motor vehicles for a fixed or indeterminate term for consideration. A lease or rental may include future options to purchase or extend.

1.Lease or rental includes agreements covering motor vehicles and trailers where the amount of consideration may be increased or decreased by reference to the amount realized upon sale or disposition of the property as defined in § 26 U.S.C. § 770(h)(1).

2.“Lease or rental” does not include:

a.A transfer of possession or control of property under a security agreement or deferred payment plan that requires the transfer of title upon completion of the required payments;

b.A transfer of possession or control of property under an agreement that requires the transfer of title upon completion of required payments and payment of an option price that does not exceed the greater of one hundred dollars or one percent of the total required payments;

c.Providing tangible personal property along with an operator for a fixed or indeterminate period of time. A condition of this exclusion is that the operator is necessary for the equipment to perform as designed. For the purpose of this subsection, an operator must do more than maintain, inspect, or set-up the tangible personal property.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-16 to 01/04/2022

280-RICR-20-70-21 § 21.6 General Sourcing Rules

A.The retail sale, excluding lease or rental, of a product shall be sourced as follows:

1.When the product is received by the purchaser at a business location of the seller, the sale is sourced to that business location.

2.When the product is not received by the purchaser at a business location of the seller, the sale is sourced to the location where receipt by the purchaser (or the purchaser’s donee, designated as such by the purchaser) occurs, including the location indicated by instructions for delivery to the purchaser (or donee), known to the seller.

3.When §§ 21.6(A)(1) and (2) of this Part do not apply, the sale is sourced to the location indicated by an address for the purchaser that is available from the business records of the seller that are maintained in the ordinary course of the seller’s business when use of this address does not constitute bad faith.

4.When §§ 21.6(A)(1) through (3) of this Part do not apply, the sale is sourced to the location indicated by an address for the purchaser obtained during the consummation of the sale, including the address of a purchaser’s payment instrument, if no other address is available, when use of this address does not constitute bad faith.

5.When §§ 21.6(A)(1) through (4) of this Part do not apply, including when the seller is without sufficient information to apply the previous rules, then the location will be the address:

a.from which the tangible personal property was shipped;

b.or from which the digital good or the computer software delivered electronically was first available for transmission by the seller; or

c.or from which the service was provided (disregarding for these purposes any location that merely provided the digital transfer of the product sold).

B.The lease or rental of tangible personal property, other than motor vehicles, trailers, semi-trailers or transportation equipment shall be sourced as follows:

1.For a lease or rental that requires recurring periodic payments, the first periodic payment is sourced in the same manner as a retail sale in accordance with the provisions of § 21.6(A) of this Part. Periodic payments made subsequent to the first payment are sourced to the primary location of the property during each period covered by the payment. The primary location of the property shall be the address for the property provided by the lessee that is available to the lessor from its records maintained in the ordinary course of business, when use of this address does not constitute bad faith. The property location for tax purposes shall not be altered by intermittent use at different locations, such as business property used by employees on business trips and service calls.

2.For a lease or rental that does not require recurring periodic payments, the payment is sourced in the same manner as a retail sale in accordance with the provisions of § 21.6(A) of this Part.

3.This Subpart does not affect the imposition or computation of sales or use tax on lease or rentals based on a lump sum or accelerated basis, or on the acquisition of property for lease.

C.The lease or rental of motor vehicles, trailers or semi-trailers that do not qualify as transportation equipment, as defined in § 21.6(D) of this Part, shall be sourced as follows:

1.For a lease or rental that requires recurring periodic payments, each periodic payment is sourced to the primary property location. The property location shall be as indicated by an address for the property provided by the lessee that is available to the lessor from its records maintained in the ordinary course of business, when use of this address does not constitute bad faith. This location shall not be altered by intermittent use at different locations.

2.For a lease or rental that does not require recurring periodic payments, the payment is sourced the same as a retail sale in accordance with the provisions of § 21.6(A) of this Part.

3.This subsection does not affect the imposition or computation of sales or use tax on leases or rentals based on a lump sum or accelerated basis, or on the acquisition of property for lease.

D.The retail sale, including lease or rental, of transportation equipment shall be sourced the same as a retail sale in accordance with the provisions of § 21.6(A) of this Part, notwithstanding the exclusion of rentals or leases in § 21.6(A) of this Part. "Transportation equipment" means any of the following:

1.Locomotives and railcars that are utilized for the carriage of persons or property in interstate commerce.

2.Trucks and truck-tractors with a Gross Vehicle Weight Rating (GVWR) of 10,001 pounds or greater, trailers, semi-trailers, or passenger buses that are:

a.Registered through the International Registration Plan; and

b.Operated under authority of a carrier authorized and certificated by the U.S. Department of Transportation or another federal authority to engage in the carriage of persons or property in interstate commerce.

3.Aircraft that are operated by air carriers authorized and certificated by the U.S. Department of Transportation or another federal or a foreign authority to engage in the carriage of persons or property in interstate or foreign commerce.

4.Containers designed for use on and component parts attached or secured on the items set forth in §§ 21.6(D)(1) through (3) of this Part.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-16 to 01/04/2022

280-RICR-20-70-21 § 21.7 Taxation of Rentals and Leases of Tangible Personal Property (Excluding Motor Vehicles)

A.The receipts or proceeds derived from the rental or lease of tangible personal property are subject to sales and use tax.

B.The tax shall be computed on the gross amount of the lease or rental without any allowance for service, maintenance, insurance, property taxes, etc., whether paid by the lessor or lessee.

C.Each period for which a rental or lease charge is made shall be considered a complete sale for the purpose of the imposition, collection and payment of sales or use tax. Sales tax shall be computed based on the section relating to “General Sourcing Rules”.

D.Service providers such as linen and towel suppliers are the taxable consumers of linens, towels, etc., provided to their customers, including out of state customers or exempt organizations, since the essential character of this type of business operation is the furnishing of the recurring service of laundering or cleaning such articles. No tax is due on the payments received from the customer for this service, however the sales or use tax is payable at the time of purchase of the property used in rendering the service.

E.The transactions described in §§ 27.5(C)(1) through (2) of this Part are considered financing arrangements and therefore the periodic payments shall be excluded from sales and use tax regardless of whether a transaction is characterized as a lease or rental under generally accepted accounting principles, the Internal Revenue Code, the Uniform Commercial Code, or other provisions of federal, state or local law. The tangible personal property in such transactions is subject to sales and use tax at the time of purchase.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-16 to 01/04/2022

280-RICR-20-70-21 § 21.8 Taxation of Rentals and Leases of Motor Vehicles

A.General

1.In many motor vehicle leasing transactions, the retail customer negotiates the terms and executes the lease contract with a motor vehicle dealer. In executing the lease, certain "Capitalization Cost Reductions" such as cash down payments, are factored into the lease as they reduce the amount of the monthly payments due under the term of the lease. These Capitalization Cost Reductions are part of the lease charges and are subject to tax. Other charges, such as acquisition fees, origination fees, registration and title fees are also subject to tax under a lease. Motor vehicle excise taxes are considered gross receipts and are subject to sales and use tax under a lease.

2.The dealer, acting on behalf of the leasing company, generally collects the first month's lease payment and the leasing company subsequently collects the balance of the lease payments due under the contract. The leasing company is responsible for collecting and remitting the tax on all lease charges including the initial charges collected by the dealer. If the dealer remits the tax it collects directly to the Division of Taxation and such collection or remittance is improper, the leasing company remains responsible for the remittance of the proper amount of the tax due.

B.Trade-ins: When leasing a private passenger automobile for use in this state, the amount of the trade-in allowance of a private passenger automobile given in trade to the dealer towards the lease of a private passenger automobile is excluded from the tax base.

C.Sourcing Rule for Rentals and Leases of Motor Vehicles: The rentals and leases of motor vehicles will be sourced in accordance with § 21.6(C) of this Part.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-16 to 01/04/2022

280-RICR-20-70-21 § 21.9. Election to Pay Sales or Use Tax 21.9. Election to Pay Sales or Use Tax {#sec-280-ricr-20-70-21-21.9.-election-to-pay-sales-or-use-tax omnilex-key=us-ri-regs-official--title-280--280-RICR-20-70-21#21.9. Election to Pay Sales or Use Tax}

A.A person engaged in the renting or leasing of tangible personal property may elect to pay the tax as measured by the cost of the property upon acquisition. Such election shall be exercised by the payment of the sales tax to the seller or by filing the required use tax return on or before the due date. If the lessor elects to pay the tax as measured by the cost of the property upon acquisition, then the lessor, in this instance, is not a retailer and gross receipts paid under the lease are not subject to sales and use tax.

B.If a lessor does not make the election as provided in § 21.9(A) of this Part, the lessor shall be deemed to be a retailer. The lessor is then required to obtain a sales tax permit and collect and remit sales tax in accordance with §§ 21.7 or 21.8 of this Part, whichever is applicable. Such permittee shall provide the supplier of the tangible personal property with a resale certificate at the time of purchase.

C.Payment of sales or use tax by a contractor or other lessor on equipment purchased for his /her own use and so used does not exempt a subsequent rental or lease of the equipment from the sales tax.

D.If the sole use of the property by a retailer, other than retention, demonstration or display in the regular course of business is the rental or lease of the property while holding it for sale, the retailer may elect to pay the use tax as measured by the cost of the property to the retailer. Such election shall be exercised by reporting and paying the use tax on the sales tax return for the month in which the property is first so rented or leased. Upon the subsequent sale of such property, the person making the sale shall include the full amount of the selling price in his or her gross receipts and shall pay the sales tax thereon.

E.If a lessor of tangible personal property dissolves, reorganizes or merges with another company and the transfer of tangible personal property is not subject to tax pursuant to R.I. Gen. Laws § 44-18-20(d)(2), the transferee is subject to the same rights and liabilities as the transferor with regard to the property transferred as if the transfer had not occurred.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-16 to 01/04/2022

280-RICR-20-70-21 § 21.10. Parts Purchased by Lessors 21.10. Parts Purchased by Lessors {#sec-280-ricr-20-70-21-21.10.-parts-purchased-by-lessors omnilex-key=us-ri-regs-official--title-280--280-RICR-20-70-21#21.10. Parts Purchased by Lessors}

The sales and use tax does not apply to parts or accessories purchased by lessors of tangible personal property for installation therein or thereon for the purpose of keeping such rented or leased property in usable condition, provided the sales tax is collected on the entire rental or lease charges paid by the lessees of such property.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-16 to 01/04/2022

280-RICR-20-70-21 § 21.11. Manufacturer as a Lessor 21.11. Manufacturer as a Lessor {#sec-280-ricr-20-70-21-21.11.-manufacturer-as-a-lessor omnilex-key=us-ri-regs-official--title-280--280-RICR-20-70-21#21.11. Manufacturer as a Lessor}

When tangible personal property is leased or rented by the manufacturers of the tangible personal property and the manufacturer elects to pay on the cost basis, the cost of the property to the manufacture will be the total manufactured cost consisting of materials, labor and overhead and any other costs capitalized for purposes of depreciation or amortization.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-16 to 01/04/2022

280-RICR-20-70-21 § 21.12. Safe Deposit Boxes 21.12. Safe Deposit Boxes {#sec-280-ricr-20-70-21-21.12.-safe-deposit-boxes omnilex-key=us-ri-regs-official--title-280--280-RICR-20-70-21#21.12. Safe Deposit Boxes}

The rental of a safe deposit box in a banking institution does not constitute the rental of tangible personal property and is therefore exempt.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-16 to 01/04/2022

280-RICR-20-70-22 Bad Debts

280-RICR-20-70-22 § 22.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18.1. This regulation provides for the treatment of Bad Debts.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-16 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/16/2018

280-RICR-20-70-22 § 22.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-16 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/16/2018

280-RICR-20-70-22 § 22.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-16 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/16/2018

280-RICR-20-70-22 § 22.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-16 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/16/2018

280-RICR-20-70-22 § 22.5 Bad Debts

A.A retailer is relieved from liability for sales tax to the extent to which the liability is represented by accounts which have become worthless and have been charged off for income tax purposes. If the retailer has paid the tax, the retailer is then entitled to a deduction from gross receipts for the amount of the worthless account. If the retailer subsequently collects such account in whole or in part the amount so collected must be included in the first sales tax return filed after such receipt.

B.To support claim for such deduction the retailer must maintain adequate and complete records showing:

1.Date of original sale and name and address of purchaser;

2.Amount purchaser contracted to pay;

3.Amount on which retailer paid tax;

4.All payments or other credits applied to the worthless account; and

5.Evidence that the uncollectible portion of the gross receipts on which tax was paid actually has been charged off as a bad debt for income tax purposes and the date of such ascertainment.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-16 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/16/2018

280-RICR-20-70-23 Application of Tax at Time of Billing

280-RICR-20-70-23 § 23.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18.1. This regulation provides for the taxing of products at the time of billing.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-19 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/19/2018

280-RICR-20-70-23 § 23.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-19 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/19/2018

280-RICR-20-70-23 § 23.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-19 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/19/2018

280-RICR-20-70-23 § 23.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-19 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/19/2018

280-RICR-20-70-23 § 23.5 Billing, Application of Tax at Time of

A retailer who bills customers at stated periods, (monthly, for example), for a series of purchases made during that period, may total the individual sale prices and impose the tax on the aggregate amount of the bill in lieu of imposing a tax on each sale.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-03-19 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 03/19/2018

280-RICR-20-70-24 Repairers, Reconditioners, and Recappers

280-RICR-20-70-24 § 24.1 Purpose

This regulation implements R.I. Gen. Laws § 44-18.1. This regulation provides for the regulation of Tire Repairers, Reconditioners, and Recappers.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-15 to 01/04/2022

280-RICR-20-70-24 § 24.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-15 to 01/04/2022

280-RICR-20-70-24 § 24.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-15 to 01/04/2022

280-RICR-20-70-24 § 24.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-15 to 01/04/2022

280-RICR-20-70-24 § 24.5 Tire Recapping

Tire recappers must collect the sales tax when they sell a recapped tire and when they recap an individual's tires on special order, they must collect the tax on the total amount charged, since in the first instance they are selling tangible personal property and in the second instance they are fabricating or producing tangible personal property on special order for a consideration.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-15 to 01/04/2022

280-RICR-20-70-24 § 24.6 Automobile Repairers

A.Automobile repairers or "body shops" are retailers of repair parts for motor vehicles. They should segregate on the invoices to their customers and in their records, the fair retail selling price of the parts from the charges for repair labor, installation labor and other services. If the labor and other services are not thus shown separately from the selling price of the parts it will be presumed that the entire charge represents the sale price of the parts. However, the automobile repairer or "body shop" shall separately state such charges when requested by the customer. Failure by the retailer to comply with the customer's request to separately state the labor or service charges will subject the retailer to the penalty provisions set forth in R.I. Gen. Laws § 6-13.1 entitled "Deceptive Trade Practices."

B.In such event that labor or service charges are separately stated, such charges are not subject to the imposition of the sales/use tax.

C. Repairers are the consumers of sandpaper, buffers, rags, masking tape, prime body filler, paint, tools and related supplies used by them in the repair and/or painting of motor vehicles and therefore the tax is due and payable upon the acquisition of such purchase.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-15 to 01/04/2022

280-RICR-20-70-24 § 24.7 Repairers and Reconditioners

A.Repairmen are retailers of parts and materials furnished in connection with repair work in which the value of the parts and materials is substantial in relation to the total charge. This applies, for example, to repairers of motor vehicles, bicycles, machinery, refrigerators, musical instruments, radios, boats and furniture. The repairmen should segregate on the invoices to their customers and in their records the fair retail selling price of the parts and materials from the charges for labor of repair and installation and other services. If the labor and other services are not thus shown separately from the selling price of the property furnished, it will be presumed that the entire charge represents the sale price of the property. However, the retailer shall separately state such charges when requested by the customer. Failure by the retailer to comply with the customer's request to separately state the labor or service charges will subject the retailer to the penalty provisions set forth in R.I. Gen. Laws § 6-13.1 entitled "Deceptive Trade Practices."

1.In such event that labor or service charges are separately stated, such charges are not subject to the imposition of the sales/use tax.

2.If, however, the value of the parts and materials used in repair work is small in relation to the charges for the labor or other services performed and where no separate charge is made for such property, the repairman is the consumer of the property. This applies, for example, to repairers of tires (regrooving), tubes, fishing rods, watches, and jewelry.

3.If the method of repairing or reconditioning certain tangible personal property involves commingling property delivered to a repairman or reconditioner with similar property so that the customer receives repaired or reconditioned property which may not be the identical property delivered to the repairman or reconditioner but which is exactly the same kind of property as that so delivered, tax applies to the amount charged by the repairman or reconditioner for the repaired or reconditioned property.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-15 to 01/04/2022

280-RICR-20-70-25 Use Tax Generally

280-RICR-20-70-25 § 25.1 Purpose

This regulation implements R.I. Gen. Laws § 44-18.1. This regulation provides for the application and regulation of the various use taxes of the State of Rhode Island.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-17 to 01/04/2022
Adoption — effective from 2018-03-17 to 03/17/2018

280-RICR-20-70-25 § 25.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-17 to 01/04/2022
Adoption — effective from 2018-03-17 to 03/17/2018

280-RICR-20-70-25 § 25.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-17 to 01/04/2022
Adoption — effective from 2018-03-17 to 03/17/2018

280-RICR-20-70-25 § 25.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-17 to 01/04/2022
Adoption — effective from 2018-03-17 to 03/17/2018

280-RICR-20-70-25 § 25.5 Definitions

A.“Use tax” means:

1.An excise tax imposed on the storage, use, or other consumption in this state of tangible personal property, including a motor vehicle, or a trailer, purchased from any retailer, or prewritten computer software delivered electronically or by load and leave, and/or package tour and scenic and sightseeing transportation services at the rate of tax as provided in R. I. Gen. Laws § 44-18-20.

2.An excise tax is imposed on the storage, use, or other consumption in this state of a motor vehicle, or a trailer purchased from other than a licensed motor vehicle dealer or other than a retailer of or trailers respectively, at the rate tax as provided in R. I. Gen. Laws § 44-18-20.

B."Trailer" as used in this section and in R. I. Gen. Laws § 44-18-21 means and includes those defined in R. I. Gen. Laws § 31-1-5 and also includes boat trailers, camping trailers, house trailers, and mobile homes.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-17 to 01/04/2022
Adoption — effective from 2018-03-17 to 03/17/2018

280-RICR-20-70-25 § 25.6 Taxes Imposed on Consumers

A.Gross receipts subject to sales tax and the sales price subject to use tax do not include the amount of any taxes legally imposed directly on the consumer that are separately stated on the invoice, bill of sale or similar document given to the purchaser.

B.Gross receipts subject to sales tax and the sales price subject to use tax include the amount of any manufacturer's, importer's or retailer’s excise tax included in the prices of the property sold and it is immaterial whether or not the amount of such tax is stated as a separate charge.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-17 to 01/04/2022
Adoption — effective from 2018-03-17 to 03/17/2018

280-RICR-20-70-25 § 25.7 Interstate Sales

A.Goods coming into this State: When tangible personal property is purchased in interstate commerce for use or consumption in this state and:

1.the seller is engaged in the business of selling such tangible personal property in this state for use or consumption and

2.delivery is made in this state, such sale is subject to the use tax.

3.Such sale is taxable regardless of the fact that the purchaser's order may specify that the goods are to be manufactured or procured by the seller at a point outside this state and shipped directly to the purchaser from the point of origin, and the seller is required to report all such transactions and collect and remit to this state the use tax on all taxable purchases.

B.If the conditions above are met it is immaterial:

1.that contract of sale is closed by acceptance outside the state or

2.that the contract is made before the property is brought into the state.

C.Delivery is held to have taken place in this state:

1.when physical possession of the tangible personal property is actually transferred to the buyer within this state or

2.when the tangible personal property is placed in the mails at a point outside this state directed to the buyer in this state or placed on board a carrier at a point outside this state (or otherwise) and directed to the buyer in this state.

D.Engaging in business in this state includes the following acts or methods of transacting business:

1.Maintaining directly, indirectly or through a subsidiary, an office, distribution house, sales house, warehouse or other place of business;

2.Having an agent, sales person or solicitor operating within the state under the authority of the seller or its subsidiary irrespective of whether such place of business, agent, sales person or solicitor is located in this state permanently or temporarily or whether such seller or subsidiary is qualified to do business in this state;

3.The regular or systematic solicitation of tangible personal property in this state by means of advertising in newspapers and other periodicals; billboards; brochures, catalogs and similar advertising material mailed to or distributed within the state to residents of this state; telephone; computer assisted shopping networks; television, radio or other electronic media intended to be broadcast to customers located in this state.

E.Goods Shipped from this State: When tangible personal property is sold within the state and the seller is obligated to deliver it to a point outside of the state, or to deliver it to a common carrier or to the mails for transportation to a point outside this state, the retail sales tax or use tax does not apply, provided that the property is not returned to a point within the state. Acceptable proof of transportation outside the state will be:

1.A waybill or bill of lading made out to the seller's order and calling for delivery; or

2.An insurance or other receipt or registry issued by the United States postal authorities; or

A trip sheet signed by the seller's delivery agent or agency and showing the signature and address of the person outside this state who received the goods delivered.

F.Where tangible personal property pursuant to a sale is delivered in this state to the buyer or to the buyer's agent other than a common carrier the retail sales tax applies notwithstanding that the buyer may subsequently transport the property out of the state, except in the case of property sold for resale.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-17 to 01/04/2022
Adoption — effective from 2018-03-17 to 03/17/2018

280-RICR-20-70-25 § 25.8 Payment by Purchasers

A.Business Purchases:

1.Payment of tax is made directly to the person from whom such property or taxable service is purchased if such person holds a seller’s permit, or a certificate of authority to collect tax, under the Sales and Use Tax Act; or

2.Directly to the Tax Administrator on a Consumer Use Tax Return (Form T-205) if the person from whom the tangible personal property, or prewritten computer software delivered electronically or by load and leave, and/or package tour and scenic and sightseeing transportation services is purchased does not hold a permit to make sales at retail.

B.Individual Consumer Purchases: when filing their personal income tax return by entering the amount of use tax due on the appropriate line on Form RI-1040 or Form RI-1040NR

C.Purchasers should not pay the tax to a person who does not hold a seller’s permit or a certificate of authority to collect tax. Purchasers will be liable for payment of the tax to the Tax Administrator unless receipts are obtained from sellers holding a retailer’s permit or a certificate of authority to collect tax.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-17 to 01/04/2022
Adoption — effective from 2018-03-17 to 03/17/2018

280-RICR-20-70-25 § 25.9 Use Tax on Items Purchased from Out-of-State Suppliers - Due Date of the Tax

A.Unlike liability for the sales tax, which the retailer is obliged to pay to the state on or before the 20th day of the month following the month in which the sales are made, liability for the use tax does not arise until a certain event occurs -- that is, until the property which has been purchased outside of Rhode Island is stored, used, or otherwise consumed in this state. Accordingly, in considering USE TAX liability, just how and when such property is paid for by the purchaser is not controlling.

B.Completed items (e.g. a milling machine, lathe, television set, washing machine, etc.) are used or stored in Rhode Island by the local purchaser thereof upon their delivery into this state. The use tax on such items must therefore be paid on or before the 20th day of the month following the month during which such delivery occurs.

C.When several completed items have been purchased at the same time from an out-of-state supplier, regardless of how payment therefor is made, and where the cost of each such completed item is either designated or can be determined, and where such items are delivered into Rhode Island at various times over a period of months, then the use tax must be paid by the 20th day of the month following the respective months during which such items were successively delivered into this state. Each such item is regarded as a separate unit.

D.Uncompleted items usually consist of various component parts delivered into Rhode Island and thereafter assembled before the local purchaser thereof can store, use, or otherwise consume such fully assembled item.

E.Therefore, regardless of the date of purchase and of the terms for payment, the purchaser would not be obliged to pay the use tax until the 20th day of the month following the month during which delivery into this state of the final shipment of the component parts and completion of the assembly, erection or installation of the machinery or equipment is made.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-17 to 01/04/2022
Adoption — effective from 2018-03-17 to 03/17/2018

280-RICR-20-70-25 § 25.10 Statute of Limitation

A.Where a taxpayer who is liable only for use tax files a use tax return monthly, and does not report the correct amount of the use tax due, nevertheless such filing sets the running of the statute of limitations, and an assessment for additional tax must be made and the determination mailed within three (3) years after the return is filed, excepting in case of fraud or intent to evade the provisions of the law, in which case the statute does not operate.

B.Where a retailer or permittee has filed a sales and use tax return monthly, but has reported only a sales tax and has left blank those lines on the return referring to the use tax, such filing of the return in good faith, (i.e., containing no information that is misleading or designed to prevent discovery of material facts necessary to make an assessment,) sets the running of the statute as to both the sales and use tax and an assessment for recovery of any use tax claimed to be due must be made and the determination mailed within three (3) years after the return was filed, except in case of fraud or intent to evade the provisions of the law, in which case the Statute does not operate against the State.

C.Where a taxpayer or retailer who is required to file a return under the provisions of the sales and use tax law fails to do so, the statute of limitations is inoperative against the State and an assessment covering a period of six (6) years may be made.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-17 to 01/04/2022
Adoption — effective from 2018-03-17 to 03/17/2018

280-RICR-20-70-25 § 25.11 Credit Against the Rhode Island Use Tax for Sales or Use Tax Paid in Another Taxing Jurisdiction

A.A taxpayer, when computing the use tax due on an article brought into Rhode Island for use, storage or other consumption therein, may credit the amount of the sales or use tax which he or she was lawfully obligation to pay and paid in another taxing jurisdiction on such article.

B.Liability for the use tax on tangible personal property purchased outside Rhode Island arises at the time such property is first stored, used or consumed in this state. Even though liability for the tax on such use, storage or consumption of property purchased outside Rhode Island accrues at the time aforesaid, payment of said tax is not required to be made until the 20th day of the month following the month during which such use, storage or consumption first occurred.

C.In considering the imposition of the Rhode Island use tax, the significant factor is the date the property is first used, stored or consumed in Rhode Island, and not the date of its purchase outside this state or the due date for the payment of such tax.

D.Before any person who is liable for the payment of the Rhode Island use tax can claim a credit for any sales or use tax paid in another taxing jurisdiction, he or she must produce proof of the payment of such tax in the other jurisdiction.

E.Accordingly, as evidence of such payment, the taxpayer is required to show to the Tax Administrator or to his representative either the original invoice or a duplicate copy thereof, describing the article purchased, the selling price thereof, the amount of the sales or use tax paid thereon, the date of purchase, the name and address of the seller and the seller's sales tax permit number, and the name and address of the purchaser. The invoice or copy must show that payment of the tax by the purchaser has been duly receipted for by the seller.

F.Where, due to the nature of the item purchased from a retailer (e.g. a motor vehicle) or because of a taxable casual sale having been made (e.g. an airplane, boat, trailer or motor vehicle), the purchaser is required to pay the sales or use tax imposed by another taxing jurisdiction directly to the Tax Division or other governmental agency of the jurisdiction, the receipt issued by such division or agency showing payment of the tax on the item and the bill of sale therefore must be presented to the Tax Administrator or his representative before any credit for tax payment can be claimed.

G.It is emphasized that no such credit can be claimed unless the sales or use tax imposed in another taxing jurisdiction has actually been paid by the purchaser and the purchaser was lawfully obligated to pay such tax in the other taxing jurisdiction prior to the inception of his obligation to this state.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-17 to 01/04/2022
Adoption — effective from 2018-03-17 to 03/17/2018

280-RICR-20-70-25 § 25.12 Receipts for Use Tax Paid to Retailers

A.Each retailer required or authorized to collect use tax from purchasers must give a receipt to each purchaser for the amount of tax collected. The receipt need not be in any particular form but must show the following:

1.The name and place of business of the retailer.

2.The serial number of the retailer's permit to engage in business as a seller or the serial number of the retailer's certificate of authority to collect use tax.

3.The name and address of the purchaser.

4.A description identifying the property sold to the purchaser.

5.The date on which the property was sold.

6.The sale price of the property.

7.The amount of tax collected by the retailer from the purchaser.

B.A sales invoice containing the data required above, together with evidence of payment of such sales invoice, will constitute a receipt. Purchasers will be liable for payment of the tax to the state unless they obtain and retain for inspection receipts as herein provided.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-17 to 01/04/2022
Adoption — effective from 2018-03-17 to 03/17/2018

280-RICR-20-70-26 Stone Cutters and Engravers

280-RICR-20-70-26 § 26.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18.1. This regulation provides the regulation of sterilizing agents, stone cutters and engravers.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-17 to 01/04/2022
Adoption — effective from 2018-03-17 to 03/17/2018

280-RICR-20-70-26 § 26.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-17 to 01/04/2022
Adoption — effective from 2018-03-17 to 03/17/2018

280-RICR-20-70-26 § 26.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-17 to 01/04/2022
Adoption — effective from 2018-03-17 to 03/17/2018

280-RICR-20-70-26 § 26.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-17 to 01/04/2022
Adoption — effective from 2018-03-17 to 03/17/2018

280-RICR-20-70-26 § 26.5 Stonecutters and Monument Workers

A.These industries are considered as being primarily engaged in the production of tangible personal property for retail sale. Therefore, the sales tax will apply to the total sales price of the units produced for sale.

B.The addition of a name, date or inscription on property already owned by the customer is considered to be a service and as such no tax will be passed on to the customer on the charge for such service. The monument worker should pay a tax as a consumer on materials used in performing a service of this nature.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-17 to 01/04/2022
Adoption — effective from 2018-03-17 to 03/17/2018

280-RICR-20-70-26 § 26.6 Engravers

A.Engraving performed by engravers on property owned by others that is complete in and of itself does not constitute a sale within the meaning of R.I. Gen. Laws § 44-18-7(2). The furnishing of such engraving is regarded as a service and does not constitute a sale of tangible personal property.

1.Example 1: the engraving of a wedding date on a wedding ring or the engraving on a stone monument is considered a service and not the sale of tangible personal property.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-17 to 01/04/2022
Adoption — effective from 2018-03-17 to 03/17/2018

280-RICR-20-70-27 Demonstration, Displays, and Display Containers

280-RICR-20-70-27 § 27.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18.1. This regulation provides for the regulation of Demonstration and Displays.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-17 to 01/04/2022

280-RICR-20-70-27 § 27.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-17 to 01/04/2022

280-RICR-20-70-27 § 27.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-17 to 01/04/2022

280-RICR-20-70-27 § 27.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-17 to 01/04/2022

280-RICR-20-70-27 § 27.5 Demonstration and Display

A.A purchaser of tangible personal property who gives a resale certificate, and who uses the property solely for demonstration or display while holding it for sale in the regular course of business, is not required to pay tax for such use. If the property is used for any purpose other than or in addition to demonstration or display, such as for the personal use of the retailer or of his or her employees, the purchaser must include in the measure of the tax paid the purchase price of the property.

B.Tax applies to the subsequent retail sale of the property. Tax applies to sales by dealers to their sales personnel of tangible personal property to be used for demonstration. It is presumed that any such tangible personal property will be used for purposes in addition to demonstration, and any resale certificates given for such property by sales personnel to dealers will be questioned, even if the sales personnel hold retailers' permits.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-17 to 01/04/2022

280-RICR-20-70-27 § 27.6 Display Containers

A.Some manufacturers attach items which they manufacture for resale to various types of cards. Some of these cards may contain the name of the manufacturer and/or printed advertising matter relating to the items so attached. Such cards usually have a capacity to hold six to a dozen items attached thereto; and each item is removed individually from such card when the retailer sells it to a customer.

B.For facility of shipment, these cards, with the items attached thereto, are sometimes placed in a box for delivery by the manufacturer (or by the wholesaler) to the retailer.

C.Such cards to which such items are thus attached are usually placed on a counter or shelf of the retailer in order to display the attached items of merchandise.

D.Where title to such cards (some of which may be relatively expensive depending upon the nature and quality of the card) is retained by the manufacturer, so that the retailer may attach items of merchandise to replace those previously sold, the sale of such cards by the card manufacturing company to the manufacturer of the items of merchandise thus sold is a taxable transaction.

E. Where the manufacturer of such items of merchandise (for example pens, pencils, watchbands, razor blades, etc.) attaches them to such display cards, and title to the cards passes from the manufacturer of the merchandise to the retailer along with such merchandise, and such cards are discarded or thrown away by the retailer after the items attached thereto are sold to customers, then the initial sale of such cards by the card manufacturer to the manufacturer of the pens, pencils, etc., is regarded as a sale of a nonreturnable container, and the tax does not apply.

F.Under § 27.6(B) of this Part, such type of card, even though it may contain the name of the manufacturer of the products which are attached thereto, will be regarded as constituting a means or device for packaging or containing the goods which are to be offered for sale at retail; whereas the cards of the type referred to under § 27.6(A) of this Part, will be regarded as constituting a form of "display container" to which the tax shall apply.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-17 to 01/04/2022

280-RICR-20-70-28 Motor Vehicle and Non-Motorized Vehicle Taxes

280-RICR-20-70-28 § 28.1 Purpose

The purpose of this regulations is to implement R.I. Gen. Laws Chapters 44-18 and 44-19 which provide for Tax on Motor Vehicles and Non-Motorized Vehicles which are sold, used, or stored in the State of Rhode Island.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-12-21 to 01/04/2022
Technical Revision — effective from 2017-12-21 to 12/21/2017
Technical Revision — effective from 2017-12-21 to 12/21/2017
Adoption — effective from 2017-12-21 to 12/21/2017

280-RICR-20-70-28 § 28.2 Authority

These Rules and Regulations are promulgated pursuant to R.I. Gen. Laws §§ 44-1-4 and 44-19-33. The Rules and Regulations have been prepared in accordance with the requirements of R.I. Gen. Laws § 42-35-1 et seq., of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-12-21 to 01/04/2022
Technical Revision — effective from 2017-12-21 to 12/21/2017
Technical Revision — effective from 2017-12-21 to 12/21/2017
Adoption — effective from 2017-12-21 to 12/21/2017

280-RICR-20-70-28 § 28.3 Application

These Rules and requirements shall be liberally construed so as to permit the Division of Taxation the authority to effectuate the purpose of R.I. Gen. Laws Chapters 44-18 and 44-19, as well as other applicable State Regulations and statutes.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-12-21 to 01/04/2022
Technical Revision — effective from 2017-12-21 to 12/21/2017
Technical Revision — effective from 2017-12-21 to 12/21/2017
Adoption — effective from 2017-12-21 to 12/21/2017

280-RICR-20-70-28 § 28.4 Severability

If any provision of these Rules and Regulations, or the applications thereof to any person or circumstances, is held invalid by a court of competent jurisdiction, the validity of the remainder of the Rules and Regulations shall not be impaired or affected thereby.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-12-21 to 01/04/2022
Technical Revision — effective from 2017-12-21 to 12/21/2017
Technical Revision — effective from 2017-12-21 to 12/21/2017
Adoption — effective from 2017-12-21 to 12/21/2017

280-RICR-20-70-28 § 28.5 Definitions

A.“Automobile” means, for the purposes of trade-in deductions and trade-in allowances, a private passenger vehicle not used for hire, and does not refer to any other type of motor vehicle.

B.“Truck” means every motor vehicle designed, used, or maintained primarily for the transportation of property. The Administrator of the Division of Motor Vehicles shall determine, in case of doubt, if a motor vehicle is subject to registration as a truck.

C.“Motor vehicle” means every vehicle intended primarily for use and operation on the public highways which is self-propelled, not including farm tractors and other machines and tools used in the production, harvesting, and care of farm products.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-12-21 to 01/04/2022
Technical Revision — effective from 2017-12-21 to 12/21/2017
Technical Revision — effective from 2017-12-21 to 12/21/2017
Adoption — effective from 2017-12-21 to 12/21/2017

280-RICR-20-70-28 § 28.6 Due Date and Measure of the Sales and Use Tax

A.Due Date of the Tax

The tax on the purchase of a motor vehicle, whether purchased from a dealer or on casual sale, must be paid prior to registering the vehicle or by the twentieth (20th) day of the month following the month during which such purchase was made, whichever date comes first. Although payment of the tax is a prerequisite to registering a motor vehicle, the tax must, however, be paid by said twentieth (20th) day even though the vehicle is not registered by such twentieth (20th) day.

B.Title and Documentary Fee

1.For the purpose of this Subpart, title fee and documentary fee shall mean the fee(s) charged by a motor vehicle dealer to recover reasonable costs for processing all documentation and performing of services related to the closing of a sale.

2.A motor vehicle dealer that is licensed by the Division of Motor Vehicles may, in connection with the sale of a motor vehicle, impose fees for:

a.The services of registering and titling said vehicle with the Division of Motor Vehicles on behalf of the purchaser; and/or

b.The preparation of various paperwork associated with the sale, financing, leasing, insurance, liens, warranties, Federal and State disclosures, and other procedures associated with the sale, leasing and financing of vehicles obtained or provided by the dealership.

3.Any motor vehicle dealer that charges a title preparation fee, in accordance with § 28.6(B)(2)(a) of this Part, or the documentary preparation fee, in accordance with § 28.6(B)(2)(b) of this Part, shall separately state the fee(s) on the invoice. The fee(s), where charged, shall be included in the total sales price of the motor vehicle.

4.The title and documentary fee(s) shall be included in the taxable measure regardless of whether the motor vehicle has been sold or leased. If the motor vehicle dealer charges a fee for the preparation of documents which are for the sale and/or registration of a motor vehicle, the fee shall be a part of the taxable measure.

5.A motor vehicle dealer cannot circumvent the inclusion of the above mentioned fees in the taxable measure by characterizing the fees as something other than a title or documentary fee.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-12-21 to 01/04/2022
Technical Revision — effective from 2017-12-21 to 12/21/2017
Technical Revision — effective from 2017-12-21 to 12/21/2017
Adoption — effective from 2017-12-21 to 12/21/2017

280-RICR-20-70-28 § 28.7 Motor Vehicle Trade-In Allowance

A.The Rhode Island sales and use tax law provides that the amount of the trade in allowance of a private passenger automobile when given in trade toward the purchase of a new or used private passenger automobile is excluded from the measure of the use tax.

B.A passenger automobile shall be deemed a motor vehicle carrying passengers other than for hire, if the Division of Motor Vehicles registers the vehicle as a private passenger automobile. Hearses and other automobiles used chiefly in connection with the conduct of funerals are not considered “automobiles for hire” and therefore qualify for the trade-in allowance.

C.Rhode Island motor vehicle dealers who are required to add and collect a tax on the sale of motor vehicles to nonresidents are allowed to take into consideration the law of the State of the nonresident as it relates to the trade-in of motor vehicles.

D.A separate or independent sale of an automobile to a third (3rd) party by the purchaser of a new or used private passenger automobile from a dealer is not a trade-in even if the proceeds from the third (3rd) party sale are immediately applied by the seller to the purchase of a private passenger automobile from a dealer. A sale shall be deemed a separate or independent sale if one (1) or more of the following events occur:

1.The third (3rd) party buyer of the automobile pays the seller, and not the dealer, for the automobile;

2.The dealer does not take physical possession of the automobile; or

3.Title does not pass to the dealer.

E.Notwithstanding § 28.7(D) of this Part, when a taxpayer "trades-in" a private passenger automobile that is used as a capital cost reduction on the lease of a private passenger automobile, the amount of the reduction attributable to said trade-in is not subject to the tax.

F.Any dealer or salesman who willfully misstates information on a document that is required for the proper computation of the use tax on a motor vehicle is subject to the penalty provisions set forth in R.I. Gen Laws Chapters 44-18 and 44-19 et seq., of the sales and use tax law.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-12-21 to 01/04/2022
Technical Revision — effective from 2017-12-21 to 12/21/2017
Technical Revision — effective from 2017-12-21 to 12/21/2017
Adoption — effective from 2017-12-21 to 12/21/2017

280-RICR-20-70-28 § 28.8 Payment of Tax as Prerequisite to Registration

A.Each person before obtaining an original or transfer registration for any article or commodity in this State, which article or commodity is required to be licensed or registered in the State, shall furnish evidence satisfactory to the Tax Administrator that any tax due has been paid. The sales or use tax on any motor vehicle and/or recreational vehicle requiring registration by the Registry of Motor Vehicles shall not be added by the retailer to the sale price or charge but shall be paid directly by the purchaser to the Tax Administrator.

B.Retailers making sales of vehicles not requiring registration by the Registry of Motor Vehicles are required to add and collect the tax.

1.EXAMPLE: A retailer selling farm tractors, construction vehicles, trail bikes, motor bikes, or the like, would be required to add and collect the sales tax.

C.Prior to registration the sales transaction and purported use have to be segregated into one (1) of the following three (3) categories:

1.Sales made by Rhode Island motor vehicle dealers;

2.Sales made by persons other than a Rhode Island motor vehicle dealer; or

3.Purchases of motor vehicles for exempt use irrespective of from whom it was purchased.

D.Sales made by Rhode Island Motor Vehicle Dealers

1.Registration requirements for dealers are the same as for any retailer.

2.Although the dealer cannot add the tax to the sales price except when required on a sale to a nonresident (see § 28.22 of this Part) the monthly return filing requirements are the same as any other retailer except the dealer may deduct the amount of gross receipts derived from sales of motor vehicles from the total gross receipts, provided, the dealer can substantiate these amounts as mentioned below.

3.Each dealer at the time a motor vehicle is sold prepares the details of the sales transaction on such form as the Tax Administrator may prescribe. The presently prescribed multiple four-part form is entitled "Dealer's Statement of Sale-Motor Vehicle, Purchaser's Tax Return (T-336-1)." The Tax Administrator requires the signatures of the purchaser and the dealer or his or her authorized agent.

4.The first two (2) copies are given to the purchaser by the dealer for presentation with motor vehicle registration forms at the Division of Motor Vehicles.

5.The Division of Taxation’s copy is then submitted with the dealer's quarterly reconciliation sales and use tax return. The total sales price of all individual copies submitted must equal the deduction amount taken for sales of motor vehicles. The dealer maintains the final copy with its records.

6.Forms have to be prepared for all sales including those sales to other motor vehicle dealers which are considered sales for resale and those sales to bona fide nonresidents whether taxable or not.

7.When a dealer is required to collect tax from a nonresident, refer to § 28.22 of this Part for procedures relating to §§ 28.10(D)(4) and (5) of this Part above.

E.Out-of-State Motor Vehicle Dealer Sales

1.The use tax applies to the sale price of automobiles delivered at a factory or place of business in another State for use in this State. The sale price in this case is the amount actually agreed to be paid for the goods even though such amount is less than the list price at a Rhode Island seller's place of business. If the sales contract is entered into with a Rhode Island automobile dealer, under the law the purchaser must nevertheless pay the sales or use tax due directly to the Tax Administrator or his/her agent.

2.If the automobile is purchased directly from the factory or dealer in another State or from any other person for use in this State, the purchaser must make payment of the tax to the Tax Administrator or his/her agent as a condition precedent to obtaining a registration for the motor vehicle.

3.The purchaser shall prepare a Use Tax Return-Motor Vehicles form (T-334-1) for presentation with motor vehicle registration forms at the Registry of Motor Vehicles.

4.A bill of sale or copy thereof substantiating the selling price must also be shown.

F.Purchases Exempt from the Tax

1.A Sales or Use Tax Exemption Certificate -- Motor Vehicles (Form T-333-1) shall be prepared and all reasons for claimed exemption shall be stated.

2.The Exemption Certificate with any affidavit form or other substantiating data required by the Tax Administrator must be presented with motor vehicle registration forms at the Division of Motor Vehicles.

G.Any tax form or exemption form presented at the Registry of Motor Vehicles must be approved by the Tax Administrator or his/her authorized representative prior to the issuance of a motor vehicle registration.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-12-21 to 01/04/2022
Technical Revision — effective from 2017-12-21 to 12/21/2017
Technical Revision — effective from 2017-12-21 to 12/21/2017
Adoption — effective from 2017-12-21 to 12/21/2017

280-RICR-20-70-28 § 28.9 Trade-In Deductions

A.R.I. Gen. Laws § 44-18-30(23) allows for a trade-in allowance on an automobile given by the buyer in trade to the seller of an automobile, towards the purchase of a new or used automobile. A motor home is treated as a private passenger vehicle which qualifies for the trade-in allowance.

1.EXAMPLE 1:

A customer purchases an automobile from a dealership and trades in an automobile to the dealer (seller). The trade in allowance is deducted from the sales price in determining the amount of the sale subject to tax.

2.EXAMPLE 2:

A customer purchases an automobile from a dealership and trades in a truck to the dealer (seller). A deduction for the trade allowance is not allowed from the sales price in determining the amount of the sale subject to tax, since the vehicle traded in is a truck.

3.EXAMPLE 3:

A customer purchases an automobile from a dealership and trades in an automobile to the dealer (seller). In addition, the customer receives a manufacturer’s rebate on the purchase of the automobile. Both the trade in allowance and the amount the manufacturer’s rebate are deducted from the sales price in determining the amount of the sale subject to tax.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-12-21 to 01/04/2022
Technical Revision — effective from 2017-12-21 to 12/21/2017
Technical Revision — effective from 2017-12-21 to 12/21/2017
Adoption — effective from 2017-12-21 to 12/21/2017

280-RICR-20-70-28 § 28.10 Transfer of Motor Vehicle by Conditional Vendee

Whenever a person who has purchased a motor vehicle on a conditional bill of sale or other financing arrangement transfers the vehicle thus acquired to another person who assumes liability or obligation for paying off the unpaid balance due on that vehicle, the transactions will be regarded as a casual sale of the vehicle from the vendee to the new owner and the new owner must pay the tax before he/she will be permitted to register the vehicle.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-12-21 to 01/04/2022
Technical Revision — effective from 2017-12-21 to 12/21/2017
Technical Revision — effective from 2017-12-21 to 12/21/2017
Adoption — effective from 2017-12-21 to 12/21/2017

280-RICR-20-70-28 § 28.11 Purchase of a Repossessed Vehicle

The purchase of a repossessed motor vehicle from a finance company, or other financial institution, organization or person is regarded as a taxable purchase and the purchaser thereof shall be obliged to pay the tax as a prerequisite to the registration of such vehicle.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-12-21 to 01/04/2022
Technical Revision — effective from 2017-12-21 to 12/21/2017
Technical Revision — effective from 2017-12-21 to 12/21/2017
Adoption — effective from 2017-12-21 to 12/21/2017

280-RICR-20-70-28 § 28.12 Registration of Motor Vehicles Obtained Through Property Settlements in Divorce Cases

A.Where, by agreement of the parties oral or otherwise regarding a property settlement in a divorce case, one of the parties gets an automobile, such motor vehicle may be registered without payment of tax provided:

1.A statement is submitted by the registering party or their attorney setting forth the facts in the matter and giving the:

a.Name of the case;

b.Docket number of the case;

c.Name of the court; and

d.Proof that the use tax was paid to this state.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-12-21 to 01/04/2022
Technical Revision — effective from 2017-12-21 to 12/21/2017
Technical Revision — effective from 2017-12-21 to 12/21/2017
Adoption — effective from 2017-12-21 to 12/21/2017

280-RICR-20-70-28 § 28.13 Sale of Motor Vehicles by an Administrator, Guardian, Executor, or the Like

The sale of a motor vehicle by any one (1) of the above persons is subject to the tax. Since the incidence of the tax falls on the purchaser, the purchaser is liable for the payment of the tax when he/she seeks to register the motor vehicle.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-12-21 to 01/04/2022
Technical Revision — effective from 2017-12-21 to 12/21/2017
Technical Revision — effective from 2017-12-21 to 12/21/2017
Adoption — effective from 2017-12-21 to 12/21/2017

280-RICR-20-70-28 § 28.14 Transfer of Motor Vehicles via the Merging of Corporations

A.The transfer of motor vehicles from merging corporations to the surviving corporation is not subject to the sales and use tax. The term “purchased from any retailer” (R.I. Gen. Laws § 44-18-20) as well as the term “purchased from other than licensed motor vehicle dealer” (R.I. Gen. Laws § 44-18-21) implies a contract of sale or exchange. However, in the case of mergers, the ownership of property, including motor vehicles, vests in the surviving corporation by operation of law. In such cases, there being no contract of sale or exchange relative to the motor vehicles, the tax is not applicable to such a transaction.

B.Where a vehicle is transferred through a merger, a duly certified copy of the MERGER or CONSOLIDATION AGREEMENT on file with the Secretary of State must be submitted along with the form of sales or use tax exemption certificate. A certified copy of such agreement, furnished by the Secretary of State or by his deputy, shall constitute evidence of such merger or consolidation.

C.A complete list of all motor vehicles for which registration is thus sought must also be submitted containing the make, year, model, motor or serial number and proof that the use tax was paid.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-12-21 to 01/04/2022
Technical Revision — effective from 2017-12-21 to 12/21/2017
Technical Revision — effective from 2017-12-21 to 12/21/2017
Adoption — effective from 2017-12-21 to 12/21/2017

280-RICR-20-70-28 § 28.15 Gifts of Motor Vehicles

A.Where a motor vehicle is purchased from an out of State retailer with the intent to gift it to a person that will store, use, or consume it within this State, then the tax applies. The donor will be required to pay the use tax at the current rate on the sale price charged to him or her by the out-of-State retailer, less any trade-in allowance where applicable, as a prerequisite to the donee’s right to obtain registration plates.

1.EXAMPLE:

A husband and wife go to Massachusetts (MA) together. The husband buys a car from a MA dealer and the bill of sale indicates that he is the purchaser. While in Boston he gives the vehicle to his wife as a gift. The wife then attempts to register the vehicle in Rhode Island, claiming that because the vehicle was a gift to her it is tax exempt.

a.Neither R.I. Gen. Laws § 44-18-20 nor R.I. Gen. Laws § 44-18-21 requires that the wife be the purchaser. Moreover, her use of the motor vehicle is consistent with the definition of “storage” and “use” as set forth under R.I. Gen. Laws § 44-18-9 and R.I. Gen. Laws § 44-18-10. Thus the transaction is taxable.

B.The residence of the donor and his/her relationship to the donee is immaterial in cases involving newly acquired vehicles (new or used) given to the donee for registration in Rhode Island. Any sales tax legally paid by the donor in the State of purchase may be credited against the Rhode Island use tax on such vehicle.

C.Under the provisions of R.I. Gen. Laws § 44-18-25 there is a PRESUMPTION that:

1.The use of all tangible personal property is subject to the use tax; and

2.All tangible personal property intended for delivery or that is delivered in this State is delivered for storage, use, or other consumption in Rhode Island.

D.Prior to obtaining a motor vehicle registration, the donee is required to:

1.Furnish a notarized letter indicating the name and address of donor or donee, a description of the vehicle with the Vehicle Identification Number and proof that tax was previously paid on such vehicle; i.e. receipt, use tax return, etc.

2.Complete Rhode Island Division of Taxation Affidavit of Gift or Motor Vehicle.

E.If it is a gift between immediate family blood relatives, i.e. mother/father, husband/wife, sister/brother and children thereof, a gift letter showing names, addresses, relationship and description of vehicle with the Vehicle Identification Number along with proof that the tax was previously paid is required.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-12-21 to 01/04/2022
Technical Revision — effective from 2017-12-21 to 12/21/2017
Technical Revision — effective from 2017-12-21 to 12/21/2017
Adoption — effective from 2017-12-21 to 12/21/2017

280-RICR-20-70-28 § 28.16 Bequests of Motor Vehicles

A motor vehicle which is received as a bequest or as a distributive share from the estate of a decedent may be registered without payment of the Rhode Island sales and use tax. A statement should be submitted by the attorney or other official representative setting forth the facts, including the name of the decedent, the docket number of any probate proceeding, the name of the probate court and that the vehicle constitutes either a specific bequest or a distributive share.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-12-21 to 01/04/2022
Technical Revision — effective from 2017-12-21 to 12/21/2017
Technical Revision — effective from 2017-12-21 to 12/21/2017
Adoption — effective from 2017-12-21 to 12/21/2017

280-RICR-20-70-28 § 28.17 Motor Vehicles Awarded as Prizes

A.Motor vehicles which have been awarded as prizes by organizations or associations which are operated exclusively for charitable, educational, or religious purposes (which qualify under R.I. Gen. Laws § 44-18-30(5)) may be registered tax free by the winner. The winner must present:

1.The registration application;

2.A statement appearing on the official stationery of the exempt organization awarding such prize that is signed by an authorized officer or agent showing that the vehicle sought to be registered was awarded as a prize;

3.The name and address of the winner;

4.The make, year, model and motor or serial number of such vehicle; and

5.The name of the dealer from whom such exempt organization purchased such vehicle.

B.Such official statement must contain the exemption number assigned to the exempt organization by the Rhode Island Tax Division.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-12-21 to 01/04/2022
Technical Revision — effective from 2017-12-21 to 12/21/2017
Technical Revision — effective from 2017-12-21 to 12/21/2017
Adoption — effective from 2017-12-21 to 12/21/2017

280-RICR-20-70-28 § 28.18 Use of Motor Vehicles by Dealers

A.General Rule

The purchase of a motor vehicle, trailer or other vehicle by a licensed motor vehicle dealer who purchases the vehicle for resale in the regular course of business is exempt from the sales and use tax. During the period in which the vehicle is held for resale, the dealer may use it for demonstration or display without incurring a liability for sales and use tax. If a vehicle is used by a licensed motor vehicle dealer for purposes other than demonstration or display, a tax is due on the total cost of the vehicle.

B.Use of Dealer Plates

1.A motor vehicle, trailer, or other vehicle bearing a dealer license will be subject to tax if that vehicle is used for purposes other than demonstration and display. The following uses of vehicles bearing dealer plates are held to constitute demonstration and display:

a.The motor vehicle being driven is of the type that the dealer offers for sale; and

(1)The vehicles driven by sales personnel;

(2)The vehicles driven by bona fide employees other than sales personnel whose duties include generating sales and/or assisting the sales department in selling vehicles;

(3)Vehicles driven by potential buyers for purposes of a test drive;

(4)Vehicles transported by the dealership to and from auction, car swaps, etc; or

(5)Vehicles driven by technicians for road test purposes

2.The use of vehicles in §§ 28.20(B)(1)(a)(1) and (2) of this Part, are held to constitute demonstration and display even though used on public thoroughfares and after work since the visibility of the vehicles can stimulate customer interest and the drivers of those vehicles are sales personnel or other bona fide employees of the dealer whose duties includes assisting the sales department in selling vehicles. In order for the operation of the vehicles to be deemed demonstration and display, such operation is limited to a geographical area in which potential buyers would normally be located.

C.Dealer Registered Vehicles

Franchised new car dealers holding a valid sales tax permit may register new vehicles in the name of the dealer upon payment of a tax based in one-third (1/3) of the cost of the vehicle to the dealer provided that said vehicle is acquired for resale by the dealer and the use of the vehicle is limited to demonstration and display as defined by § 28.20(B) of this Part.

D.Loaners

1.If a motor vehicle dealer which is also engaged in leasing/renting vehicles on a daily or other basis elected to collect the sales tax upon lease/rental of the rental fleet vehicles subsequently allows the use of loaners from the rental fleet, the dealer will be liable for a use tax based upon the fair market rental fee normally charged to customers for the rental of the same vehicle. In order to qualify as a lease/rental vehicle, the vehicle must be registered and titled to the dealer as part of its rental fleet.

2.A motor vehicle dealer that allows its customers the use of a vehicle from its inventory while the customer’s own vehicle is being serviced or repaired shall be liable for a use tax to be computed at a rate of .15 percent (.0015) of the list price of the vehicle for each day that the vehicle is used as a loaner.

3.This provision shall only apply to loaners that comply with the provisions of R.I. Gen. Laws § 31-3-20. The surcharge imposed under R.I. Gen. Laws Chapter 31-34.1 shall not apply to loaners taken from the dealer’s inventory.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-12-21 to 01/04/2022
Technical Revision — effective from 2017-12-21 to 12/21/2017
Technical Revision — effective from 2017-12-21 to 12/21/2017
Adoption — effective from 2017-12-21 to 12/21/2017

280-RICR-20-70-28 § 28.19 New Motor Vehicles Purchased by Used Car Dealer or Auto Body Mechanic

When a used car dealer or auto body repairer holding a motor vehicle dealer’s license and permit to make sales at retail purchases a new motor vehicle from a new car dealer such used car dealer or auto body repair shall be deemed liable for the payment of tax thereon unless such used car dealer or auto body repairer can show, by proper records, that the motor vehicle in question was actually purchased for resale in which case the tax shall not apply; provided, however, when the used car dealer or auto body repairer sells the motor vehicle in question within thirty (30) days of its purchase from the new car dealer it shall be presumed that such used car dealer or auto body repairer purchased the motor vehicle for resale.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-12-21 to 01/04/2022
Technical Revision — effective from 2017-12-21 to 12/21/2017
Technical Revision — effective from 2017-12-21 to 12/21/2017
Adoption — effective from 2017-12-21 to 12/21/2017

280-RICR-20-70-28 § 28.20 Automobile Repairers

A.Automobile repairers or “body shops” are retailers of repair parts for motor vehicles. They should segregate on the invoices to their customers and in their records, the fair retail selling price of parts from the charges for repair labor, installation labor and other services. If the labor and other services are not thus shown separately from the selling price of the parts it will be presumed that the entire charges represents the sale price of the parts. However, the automobile repairer or “body shop” shall separately state such charges when requested by the customer. Failure by the retailer to comply with the customer’s request to separately state the labor or service charges will subject the retailer to the penalty provisions set forth in R.I. Gen. Laws Chapter 6-13.1, entitled “Deceptive Trade Practices.”

B.In such event that labor or service charges are separately stated, such charges are not subject to the imposition of sales and/or use tax.

C.Repairers are the consumers of sandpaper, buffers, rags, masking tape, prime body filler, paint, tools and related supplies used by them in repair and/or painting of motor vehicles and therefore the tax is due and payable upon the acquisition of such purchase.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-12-21 to 01/04/2022
Technical Revision — effective from 2017-12-21 to 12/21/2017
Technical Revision — effective from 2017-12-21 to 12/21/2017
Adoption — effective from 2017-12-21 to 12/21/2017

280-RICR-20-70-28 § 28.21 Non-Motorized Vehicles and Trailers

A.Non-Motorized Vehicles – Nonrecreational Trailers

Retailers of boat trailers, horse trailers, storage trailers, utility trailers and other nonrecreational trailers are required to add and collect the Rhode Island sales tax to the purchase price regardless of the requirement that the trailer is subject to registration by the Division of Motor Vehicles except as provided in § 28.21(B) of this Part. The retailer must collect the tax whether or not the purchaser is a resident of Rhode Island.

B.Non-Motorized Vehicles – Recreational Trailers

1.Sold to Residents: The sales or use tax on non-motorized recreational trailers purchased by residents and used as a temporary dwelling for travel, camping, recreational and vacation uses requiring registration shall not be added by the retailer but shall be paid directly by the purchaser to the tax administrator’s representative at the time of Rhode Island registration or by the twentieth (20th) of the month next following the date of purchase, whichever is earlier.

2.Sold to Nonresident: See § 28.22 of this Part “Motor Vehicles and Non-Motorized Recreational Vehicles Sold to Nonresidents”.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-12-21 to 01/04/2022
Technical Revision — effective from 2017-12-21 to 12/21/2017
Technical Revision — effective from 2017-12-21 to 12/21/2017
Adoption — effective from 2017-12-21 to 12/21/2017

280-RICR-20-70-28 § 28.22 Motor Vehicles and Non-Motorized Recreational Vehicles Sold to Nonresidents

A.Rhode Island dealers of motor vehicles and/or non-motorized recreational vehicles are required to add and collect sales tax on the sale of a motor vehicle and/or non-motorized recreational vehicle to a bona fide nonresident of this state, whose state of residence imposes a sales tax on a motor vehicle or non-motorized recreational vehicle to its nonresidents.

B.The dealer is required to collect tax on the sale at a rate equal to the rate that would be imposed in the nonresident’s state of residence. However, the rate imposed may not exceed the Rhode Island sales and use tax rate. Taxes collected by the dealer must be remitted to the Rhode Island Division of Taxation on its monthly sales and use tax return.

C.Dealers, when required to add and collect a tax on the sale of motor vehicles or non-motorized recreational vehicles to nonresidents, shall take into consideration the law of the state of the nonresident as it relates to the trade-in of motor vehicles or non-motorized recreational vehicles.

1.EXAMPLE:

If a bona fide nonresident from State X buys a fifteen thousand dollar ($15,000.00) truck from a Rhode Island dealer less a five thousand dollar ($5,000.00) trade-in or his truck, the Rhode Island dealer must add and collect a five percent (5%) Rhode Island sales tax (the equivalent State X sales tax) on the net selling price of ten thousand dollar ($10,000.00). A trade-in of the truck is allowed because State X allows for a trade-in of trucks. The Rhode Island sales tax in the amount of five hundred dollars ($500.00) must be shown separately on the customer’s bill of sale.

D.When filling out the “Dealer’s Statement of Sale-Motor Vehicle Purchaser’s Tax Return (T-336-1)” or “Dealer’s Statement of Sale-Recreational Vehicle Purchaser’s Tax Return (T-337)” for a nonresident sale (whether taxable or not), the nonresident’s driver license number and expiration date must be indicated in the empty space at the top of the form.

E.The blue copy of the T-336-1 or the yellow copy of the T-337 is to be filed with the dealer’s monthly Rhode Island sales and use tax return, the second copy to be furnished to the nonresident and the third (3rd) copy to be kept by the dealer.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2017-12-21 to 01/04/2022
Technical Revision — effective from 2017-12-21 to 12/21/2017
Technical Revision — effective from 2017-12-21 to 12/21/2017
Adoption — effective from 2017-12-21 to 12/21/2017

280-RICR-20-70-29 Damaged Goods and Returned Merchandise

280-RICR-20-70-29 § 29.1 Purpose

This regulation implements R.I. Gen. Laws Chapters 44-18 and 44-19. This regulation provides for the regulation of damaged goods and returned merchandise.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-18 to 01/04/2022

280-RICR-20-70-29 § 29.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-18 to 01/04/2022

280-RICR-20-70-29 § 29.3 Application

The terms and provisions of these rules and regulations shall be liberally construed to permit the Department of Revenue to effectuate the purposes of R.I. Gen. Laws Chapters 44-18, 44-19 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-18 to 01/04/2022

280-RICR-20-70-29 § 29.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-18 to 01/04/2022

280-RICR-20-70-29 § 29.5 Damaged Goods

A.Sales Tax

1.If damage to goods in transit to the consumer occurs after the "sale", as defined in R. I. Gen. Laws § 44-18-7 is made, sales tax applies to the sale. If the damage occurs before the sale, sales tax applies as follows:

a.If the goods are destroyed, tax does not apply to damages paid to the retailer for their destruction.

b.If the goods are not destroyed, and are sold at retail in their damaged condition, tax applies to that portion of the total amount paid to the retailer representing the price paid for the goods in their damaged condition.

B.Use Tax

1.Use tax does not apply with respect to goods destroyed before the purchaser makes any storage or use of the goods in this state. If the goods are damaged but are nevertheless stored or used in this state by the purchaser, tax applies to the total amount paid to the retailer.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-18 to 01/04/2022

280-RICR-20-70-29 § 29.6 Returned Merchandise

A.The tax computation does not include the amount charged for merchandise returned by customers upon cancellation of the contract of sale if the full sale price, exclusive of handling charges, is refunded and returned within 120 days from the date of sale.

B.A deduction may, accordingly, be taken for returned merchandise, if the following conditions are fulfilled:

1.The sale is rescinded under the terms of the sale agreement, or pursuant to the election of the customer as in the case of a breach of warranty;

2.The full sale price, including that portion designated to be on account of "sales tax," exclusive of handling charges paid, is refunded or credited to the customer; and

3.The merchandise is returned within 120 days from the date of sale or purchase.

C.The term "returned merchandise" does not include repossession or recapture of merchandise by legal process, abandonment of contract, voluntary surrender of goods without entire refund or full credit for amount paid, or goods accepted in trade or barter.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-18 to 01/04/2022

280-RICR-20-70-30 Bottles, Containers, and Labels

280-RICR-20-70-30 § 30.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18.1. This regulation provides for the regulation of Bottles, Containers and Labels.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-18 to 01/04/2022

280-RICR-20-70-30 § 30.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-18 to 01/04/2022

280-RICR-20-70-30 § 30.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-18 to 01/04/2022

280-RICR-20-70-30 § 30.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-18 to 01/04/2022

280-RICR-20-70-30 § 30.5 Definitions

A."Containers" means the articles in or on which tangible personal property is placed for shipment and delivery such as wrapping materials, bags, can, twines, gummed tapes, barrels, boxes, bottles, drums, carboys, cartons, sacks, pallets and materials from which such containers are manufactured.

B."Returnable containers" means containers of a kind customarily returned by the buyers of the contents for reuse by the packers, bottlers, or sellers of the commodities contained therein. A container, title to which is retained by the seller of the contents, or for which a deposit is taken by such seller, is a returnable container. Examples of returnable containers are: registered dairy products containers, steel drums, beer and soft drink bottles, wine barrels, chemical carboys, cement bags, and gas cylinders.

1.All other containers are "nonreturnable containers." Examples of nonreturnable containers are: wrapping and packing materials, paper bags, twine, cartons, cans, medicine and distilled spirits' bottles.

C."Deposit" means an amount charged to the purchaser of the contents of the container with the understanding that such amount will be repaid when the container or a similar container is delivered to the seller.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-18 to 01/04/2022

280-RICR-20-70-30 § 30.6 Bottles and Other Returnable Containers

A.R.I. Gen. Laws § 44-18-30(4)(C) provides that returnable containers, when sold with the contents in connection with a retail sale of the contents, or when resold for refilling, are not subject to the tax.

1.Example: a beverage manufacturer sells products to a storekeeper at a fixed price per bottle or per case, and that price includes a charge for such bottles and cases, even though the beverage manufacturer does not reserve title thereto, the purchase of such bottles and cases by the beverage manufacturer from its bottle supplier is a taxable transaction. It is regarded as a retail sale made by the company which supplies the beverage manufacturer with bottles and cases, and is not regarded as a purchase for resale, even though the beverage manufacturer allows a credit or makes a cash refund for the empty bottles and cases when they are returned in good condition by the storekeeper, who in turn, had them returned to such storekeeper by the consumer.

2.It is to be noted that R.I. Gen. Laws § 44-18-30(4)(C) provides that the exemption shall apply to returnable containers when they are sold with the contents in connection with a retail sale.

3.It is clear that since the sale by the beverage manufacturer to the storekeeper is not a retail sale, then the exemption does not apply.

4.Accordingly, when the supplier of the bottles sells bottles to the beverage manufacturer, this does not constitute a "sale for resale" of a nature which is entitled to exemption.

B.Inasmuch as it is contemplated by the beverage manufacturer that when the storekeeper to whom the products are sold (including the returnable bottles) returns these bottles to the beverage manufacturer, the manufacturer will allow the storekeeper a credit similar or equivalent to the credit or cash refund which, in turn, the storekeeper allows or makes to the consumer. Inasmuch as R.I. Gen. Laws § 44-18-30(4)(C) provides that the sales tax is not to be collected on the amount which represents the deposit paid by the consumer to the storekeeper, and because as the law further provides that such bottles will be exempt when "resold for refilling" by the storekeeper to the beverage manufacturer; it therefore becomes clear why the legislature restricted the exemption of the bottles to apply only to the sales transaction between the storekeeper and the consumer, and did not intend to exempt the sale of returnable bottles to the beverage manufacturer because such are purchased for storage, use, or other consumption in this state.

1.To arrive at a different conclusion would mean, in effect, that these bottles would be exempt all along the line. If this is so, then the reason for the legislature making a distinction between returnable and nonreturnable containers ceases to exist.

C.When the consumer buys a product in a nonreturnable container, the consumer is deemed to be paying for the cost of such container, for it affects and adds to the price of the product sold.

1.On the other hand, where the law relieves such consumer from paying the tax on a deposit bottle or other returnable container, it is manifestly clear that the legislature was desirous of avoiding duplicate taxation which otherwise would result in increasing the ultimate sales price to the consumer.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-18 to 01/04/2022

280-RICR-20-70-30 § 30.7 Containers and Labels

A.Tax does not apply to sales of:

1.Nonreturnable containers (including boxes, paper bags, and wrapping materials) when sold without the contents to persons who place the contents in the container and sell the contents with the container.

2.Returnable containers when sold with the contents in connection with a retail sale of contents, or when resold for refilling.

3.All containers when sold with the contents, if the sale of the contents is exempt.

4.Tax applies to all other sales of containers except sales for the purpose of resale to other sellers of containers who purchase them for resale without the contents.

5.Deposits as defined herein are not taxable.

6.The purchase of returnable containers by a manufacturer or processor from a supplier is a taxable transaction.

B.Labels

1.Tax does not apply to sales of labels or nameplates if:

a.The purchaser affixes them to property to be sold and sells them along with and as a part of such property. (For example, sales of nameplates of manufacturers or producers which are permanently affixed to each unit of products sold, such as automobiles and machinery.)

b.The purchaser affixes them to nonreturnable containers of property to be sold, or to returnable containers of such property if a new label is affixed to the container each time it is refilled. Examples are sales of labels to be affixed to fruit boxes, cans, bottles and packing cases, to growers, packers, bottlers and others who place the contents in the containers.

2.Tax applies to sales of such items as price tags, shipping tags, and advertising matter used in connection with the sale of property or enclosed with the property sold.

C.Gift Wrapping

1.Tax applies to the entire charge for "gift wrapping" (i.e., furnishing the materials and labor required to wrap an item for a customer so as to be suitable for use as a gift), whether or not the person who does the gift wrapping is the seller of the contents, and whether or not a separate charge is made for the gift wrapping. The person who does the gift wrapping may purchase the materials free of tax for resale.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-03-18 to 01/04/2022

280-RICR-20-70-31 Packers, Loaders, Shippers, and Movers

280-RICR-20-70-31 § 31.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18.1. This regulation provides for the regulation of Moving companies as well as Packers, Loaders, and Shippers.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-18 to 01/04/2022
Adoption — effective from 2018-03-18 to 03/18/2018

280-RICR-20-70-31 § 31.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-18 to 01/04/2022
Adoption — effective from 2018-03-18 to 03/18/2018

280-RICR-20-70-31 § 31.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-18 to 01/04/2022
Adoption — effective from 2018-03-18 to 03/18/2018

280-RICR-20-70-31 § 31.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-18 to 01/04/2022
Adoption — effective from 2018-03-18 to 03/18/2018

280-RICR-20-70-31 § 31.5 Moving Companies – Crating Materials

Lumber and other crating, packing or packaging materials purchased by moving or hauling companies, whether purchased from local or out-of-state suppliers, and which are used in Rhode Island to make up crates or other packaging devices for moving, hauling or shipping furniture, machinery or other items, are subject to the sales or use tax, notwithstanding the fact that such crates or devices are used to move, haul, or ship such items from points within Rhode Island to points outside Rhode Island, and notwithstanding the further fact that such crates or devices are not returned to this state

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-18 to 01/04/2022
Adoption — effective from 2018-03-18 to 03/18/2018

280-RICR-20-70-31 § 31.6 Packers, Loaders, Shippers

Tax applies to sales to packers, loaders, and shippers of materials such as car strips, bracing materials, and ice used in transporting commodities or in preparing them for transportation.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2018-03-18 to 01/04/2022
Adoption — effective from 2018-03-18 to 03/18/2018

280-RICR-20-70-32 Pollution Control Facilities

280-RICR-20-70-32 § 32.1 Purpose

The Rhode Island sales and use tax law provides that tangible personal property purchased as a device, appliance or other installation (including supplies) for use in a facility primarily to aid in the control of the pollution or contamination of the waters or air of the state and which has been certified as approved for such purpose by the Department of Environmental Management is exempt from the sales or use tax.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/25/2018

280-RICR-20-70-32 § 32.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/25/2018

280-RICR-20-70-32 § 32.3 Application

The terms and provisions of these rules and regulations shall be liberally construed to permit the Department of Revenue to effectuate the purposes of R.I. Gen. Laws §§ 44-18-1 et seq. and 44-19-1 et seq. and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/25/2018

280-RICR-20-70-32 § 32.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/25/2018

280-RICR-20-70-32 § 32.5 Definitions

A."Facility" means any land, facility, device, building, machinery or equipment, the construction, reconstruction, erection, installation or acquisition of which, in furtherance of federal or state requirements or standards for the control of water or air pollution or contamination, has been made by the taxpayer primarily to control the pollution or contamination, of the waters or the air of the state as defined in R.I. Gen. Laws Titles 46 and 23, respectively, and which has been certified by the Department of Environmental Management.

B."Waters" shall have the meaning given in R.I. Gen. Laws Title 46.

C."Water pollution" shall have the meaning given in R.I. Gen. Laws Title 46.

D."Air pollution" shall have the meaning given in R.I. Gen. Laws Title 23.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/25/2018

280-RICR-20-70-32 § 32.6 Using the Exemption

A.The Director of the Department of Environmental Management may certify to a portion of the tangible personalty or supplies acquired for incorporation into the facilities or used and consumed in the operation of such facilities to the extent that such portion shall have as its primary purpose the control of the pollution or contamination of the waters or air of this state.

B.When purchasing such tangible personal property or supplies pursuant to such order for use in a facility, taxpayers must furnish their suppliers with an Exemption Certificate - Pollution Treatment Equipment and Supplies and attach thereto a copy of the DEM certification.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/25/2018

280-RICR-20-70-32 § 32.7 Refunds

In those cases where the taxpayer is unable to furnish the evidence required and outlined to support a claim for exemption at the time he or she purchases items of tangible personal property for use in a treatment facility, the taxpayer should pay the tax and thereafter, when able to properly support the claim for exemption, he or she should file a claim for refund. Such claim must indicate the items purchased, the date purchased and from whom purchased, the date installed in the facility, a statement that such items are and will continue to remain in use in such facility, satisfactory evidence that the sales or use tax on such items have been paid, the date of such payment and to whom paid, and certification by the Department of Environmental Management as indicated in in . All refund claims must be submitted no later than three (3) years from the fifteenth day after the close of the month for which the overpayment was made, or with respect to a determination, within six (6) months from the date of overpayment, whichever period expires later.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/25/2018

280-RICR-20-70-33 Hazardous Waste Recycling, Reuse and Treatment

280-RICR-20-70-33 § 33.1 Purpose

This regulation implements R.I. Gen. Laws 44-18-30(37). This regulation provides for the exemption from sales and use tax for tangible personal property and supplies used in on-site hazardous waste recycling, reuse, or treatment.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/25/2018

280-RICR-20-70-33 § 33.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws 44-18-30(37),

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/25/2018

280-RICR-20-70-33 § 33.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/25/2018

280-RICR-20-70-33 § 33.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/25/2018

280-RICR-20-70-33 § 33.5 Definitions

A."Precious metals" has meaning prescribed to it by R.I. Gen. Laws § 44-18-30(24)(ii).

B."Hazardous wastes" has meaning prescribed to it by R.I. Gen. Laws § 23-19.1-4(4).

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/25/2018

280-RICR-20-70-33 § 33.6 General

A.The Rhode Island sales and use tax law provides an exemption for the sale, storage, use or other consumption of tangible personalty or supplies which are used or consumed in the operation of equipment the exclusive function of which is the recycling, reuse or recovery of materials (other than precious metals) from, or the treatment of, hazardous wastes. The exemption applies where hazardous wastes are generated in Rhode Island solely by the same taxpayer claiming this exemption and, further, where such personal property is located at, in, or adjacent to a generating facility of the taxpayer in Rhode Island.

B.In order to qualify for this exemption the taxpayer must first procure an order from the Department of Environmental Management certifying that the equipment and/or supplies as used or consumed, qualify for the exemption.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/25/2018

280-RICR-20-70-33 § 33.7 Using the Exemption

When purchasing the above-described tangible personalty or supplies, taxpayers must furnish their suppliers with "Exemption Certificate Hazardous Waste" forms.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/25/2018

280-RICR-20-70-33 § 33.8 Refunds

In those cases where the taxpayer is unable to furnish the evidence required and outlined to support a claim for exemption at the time he or she purchases items of tangible personalty or supplies; he or she should pay the tax and, thereafter, when able to properly support the claim for exemption, he or she should file an appropriate claim for refund. Such claims must indicate the items purchased, the date purchased and from whom purchased, the date installed, a statement that such items are and will continue to be used in on-site hazardous waste recycling, reuse or treatment, satisfactory evidence that the Rhode Island sales and use tax on such items has been paid, the date of such payment and to whom paid and certification by the Department of Environmental Management as indicated in § 33.6 of this Part.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 06/25/2018

280-RICR-20-70-34 Telecommunications Service

280-RICR-20-70-34 § 34.1 Purpose

This regulation implements R.I. Gen. Laws Chapters 44-18 and 44-19. These chapters provide for sales and use taxes liability and computation and sales and use taxes enforcement and collection in regard to telecommunications service.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Amendment — effective from 2010-01-01 to 06/25/2018
Amendment — effective from 2007-01-03 to 01/01/2010
Amendment — effective from 2003-01-01 to 01/03/2007
Periodic Refile — effective from 2001-12-20 to 01/01/2003

280-RICR-20-70-34 § 34.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws Chapters 44-18 and 44-19. These rules have been prepared in accordance with the requirements of R.I. Gen. Laws §§ 44-1-1 et seq. and 44-19-33.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Amendment — effective from 2010-01-01 to 06/25/2018
Amendment — effective from 2007-01-03 to 01/01/2010
Amendment — effective from 2003-01-01 to 01/03/2007
Periodic Refile — effective from 2001-12-20 to 01/01/2003

280-RICR-20-70-34 § 34.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Amendment — effective from 2010-01-01 to 06/25/2018
Amendment — effective from 2007-01-03 to 01/01/2010
Amendment — effective from 2003-01-01 to 01/03/2007
Periodic Refile — effective from 2001-12-20 to 01/01/2003

280-RICR-20-70-34 § 34.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Amendment — effective from 2010-01-01 to 06/25/2018
Amendment — effective from 2007-01-03 to 01/01/2010
Amendment — effective from 2003-01-01 to 01/03/2007
Periodic Refile — effective from 2001-12-20 to 01/01/2003

280-RICR-20-70-34 § 34.5 Definitions

A.“Ancillary services” means services that are associated with or incidental to the provision of “telecommunications service”. They include but are not limited to conference bridging service, detailed telecommunications billing service, directory assistance, vertical service, and voice mail service as those terms are defined in R.I. Gen. Laws § 44-18-7.1(y).

B."Call-by-call basis" means any method of charging for telecommunications services where the price is measured by individual calls.

C."Customer" means the person or entity that contracts with the seller of telecommunications services. If the end user of telecommunications services is not the contracting party, the end user of the telecommunications service is the customer of the telecommunication service, but this sentence only applies for the purpose of sourcing sales of telecommunications services under R.I. Gen. Laws § 44-18.1-15. "Customer" does not include a seller of telecommunications service or for mobile telecommunications service of a serving carrier under an agreement to serve the customer outside the home service provider's licensed service area.

D.“E-911 surcharge” means the surcharge established to ensure that adequate and sustained funding of the E-911 Emergency Services Fund or the E-911 GIS Technology Fund.

E."Home service provider" means the facilities-based carrier or reseller with which the customer contracts for the provision of mobile telecommunications services.

F."Place of primary use" means the street address representative of where the customer's use of the telecommunications service primarily occurs, which must be the residential street address or the primary business street address of the customer. In the case of mobile telecommunications services, "place of primary use" must be within the licensed service area of the home service provider.

G."Prepaid telephone calling arrangement" means prepaid calling service and prepaid wireless calling service as those terms are defined under R.I. Gen. Laws §§ 44-18-7.1(y)(i)(M) and 44-18-7.1(y)(i)(N) respectively.

H."Service address" means:

1.The location of the telecommunications equipment to which a customer's call is charged and from which the call originates or terminates, regardless of where the call is billed or paid.

2.If the location in § 34.5(H)(1) of this Part is not known, service address means the origination point of the signal of the telecommunications services first identified by either the seller's telecommunications system or in information received by the seller from its service provider, where the system used to transport such signals is not that of the seller.

3.If the location in subsection §§ 34.5(H)(1) and (2) of this Part and are not known, the service address means the location of the customer's place of primary use.

I.“Telecommunications nonrecurring charges” means an amount billed for the installation, connection, change or initiation of “telecommunications service” received by the customer.

J."Telecommunications service" means the electronic transmission, conveyance, or routing of voice, data, audio, video, or any other information or signals to a point, or between or among points. The term “telecommunications service” includes such transmission, conveyance or routing in which computer processing applications are used to act on the form, code or protocol of the content for purposes of transmission, conveyance or routing without regard to whether such service is referred to as voice over Internet protocol services or is classified by the Federal Communications Commission as enhanced or value added. The term “telecommunications service” also includes the transmission of any interactive electromagnetic communications including but not limited to voice, image, data and other information, by means of but not limited to wire, cable, including fiber optical cable, microwave, radio wave or any combinations of these media.

1."Telecommunications service" includes local exchange service, intrastate toll service, interstate and international toll service, including cellular mobile telephone or telecommunications service, specialized mobile radio and pagers and paging service including any form of mobile two-way communication. “Telecommunications service” does not include service rendered using a prepaid telephone calling arrangement.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Amendment — effective from 2010-01-01 to 06/25/2018
Amendment — effective from 2007-01-03 to 01/01/2010
Amendment — effective from 2003-01-01 to 01/03/2007
Periodic Refile — effective from 2001-12-20 to 01/01/2003

280-RICR-20-70-34 § 34.6 Telecommunications Service Generally

A.The furnishing of telecommunications services for consideration is subject to the Rhode Island sales or use tax provided the service:

1.sold on a call-by-call basis:

a.originates and terminates in this state, or

b.originates or terminates in this state and the service address is located in this state.

2.sold on a basis other than call-by-call basis (as defined in R.I. Gen. Laws §§ 44-18-7.1 and 44-18.1-16) is sourced in accordance with R.I. Gen. Laws § 44-18.1-15.

B.Rhode Island law allows a credit or refund of sales taxes upon presentation of proof of payment of the sales tax to another state to which the tax was properly due for the identical telecommunication service.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Amendment — effective from 2010-01-01 to 06/25/2018
Amendment — effective from 2007-01-03 to 01/01/2010
Amendment — effective from 2003-01-01 to 01/03/2007
Periodic Refile — effective from 2001-12-20 to 01/01/2003

280-RICR-20-70-34 § 34.7 Ancillary Services

The sale of ancillary services are subject to the Rhode Island sales or use tax in accordance with R.I. Gen. Laws § 44-18-7(9)(i). Ancillary services are sourced to the customer’s place of primary use in accordance with R.I. Gen. Laws § 44-18.1-15

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Amendment — effective from 2010-01-01 to 06/25/2018
Amendment — effective from 2007-01-03 to 01/01/2010
Amendment — effective from 2003-01-01 to 01/03/2007
Periodic Refile — effective from 2001-12-20 to 01/01/2003

280-RICR-20-70-34 § 34.8 Telecommunications Nonrecurring Charges

Telecommunications nonrecurring charges are included in the sales price and are subject to sales or use tax. Such services are sourced to the customer’s place of primary use in accordance with R.I. Gen. Laws § 44-18.1-15.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Amendment — effective from 2010-01-01 to 06/25/2018
Amendment — effective from 2007-01-03 to 01/01/2010
Amendment — effective from 2003-01-01 to 01/03/2007
Periodic Refile — effective from 2001-12-20 to 01/01/2003

280-RICR-20-70-34 § 34.9 Furnishing, Rental or Leasing of Equipment

The furnishing, rental or leasing of all equipment pertaining to or incidental to the furnishing of telecommunications service is subject to the Rhode Island sales or use tax and is sourced to this state in accordance with R.I. Gen. Laws § 44-18.1-11.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Amendment — effective from 2010-01-01 to 06/25/2018
Amendment — effective from 2007-01-03 to 01/01/2010
Amendment — effective from 2003-01-01 to 01/03/2007
Periodic Refile — effective from 2001-12-20 to 01/01/2003

280-RICR-20-70-34 § 34.10 Mobile Telecommunications

Effective August 2, 2002, for purposes of Rhode Island sales and use tax, the provisions of the federal Mobile Telecommunications Sourcing Act (P.L. 106-252) are adopted. Mobile telecommunications services that are deemed to be provided by the customer’s home service provider are subject to tax if the customer’s place of primary use is in Rhode Island regardless of where the mobile telecommunications services originate, terminate, or pass through.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Amendment — effective from 2010-01-01 to 06/25/2018
Amendment — effective from 2007-01-03 to 01/01/2010
Amendment — effective from 2003-01-01 to 01/03/2007
Periodic Refile — effective from 2001-12-20 to 01/01/2003

280-RICR-20-70-34 § 34.11 E-911 Surcharge

Pursuant to R.I. Gen. Laws § 39-21.1-14(b), the E-911 surcharge imposed under R.I. Gen. Laws § 39-21.1-14(a) shall not be subject to the tax imposed under R.I. Gen. Laws Chapter 44-18. Pursuant to R.I. Gen. Laws § 39-1-62(d)(3), the E-911 surcharge imposed under R.I. Gen. Laws § 39-1-62(d)(2) shall not be subject to the tax imposed under R.I. Gen. Laws Chapter 44-18.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-06-25 to 01/04/2022
Amendment — effective from 2010-01-01 to 06/25/2018
Amendment — effective from 2007-01-03 to 01/01/2010
Amendment — effective from 2003-01-01 to 01/03/2007
Periodic Refile — effective from 2001-12-20 to 01/01/2003

280-RICR-20-70-35 Cellular Telephone – Sold in Bundled Transactions – Promotional Use by Carriers

280-RICR-20-70-35 § 35.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18. This regulation provides for Cellular Telephones, sold in Bundled Transactions and the Promotional Use of Cellular Telephones by carriers.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-12 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/12/2018

280-RICR-20-70-35 § 35.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws Chapter 44-18, and R.I. Gen. Laws §§ 44-1-4, 44-18.1-1 and 44-19-33. Additionally these regulations have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 42-35 - Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-12 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/12/2018

280-RICR-20-70-35 § 35.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-12 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/12/2018

280-RICR-20-70-35 § 35.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-12 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/12/2018

280-RICR-20-70-35 § 35.5 Bundled Transactions

A.It has become a common practice in the cellular telephone industry for dealers to sell cellular telephones to their customers in so-called "bundled" transactions. In these transactions, a dealer gives a purchaser an allowance with respect to the usual retail sales price of the cellular telephones in exchange for the purchaser's agreement to become and to remain a subscriber with a particular cellular phone service carrier for a minimum service period. The carrier, in turn, pays the dealer a set amount on behalf of each new subscriber pursuant to an agreement with the dealer.

B.For sales tax purposes, the sales price of a cellular telephone sold in a "bundled" transaction is the same as the sales price of the telephone sold in an "unbundled" transaction. Therefore, the dealer must compute the sales tax based upon its retail sales price of the cellular phone and the amount received from the carrier pursuant to the agreement with the dealer.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-12 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/12/2018

280-RICR-20-70-35 § 35.6 Promotional Use by Carriers

A.Cellular telephone carriers ("carriers") frequently use cellular telephones as promotional items in their efforts to solicit new subscribers. In a typical transaction, a carrier will offer to provide a cellular telephone to a customer at no additional charge or for a nominal consideration, if the customer agrees to become and remain a subscriber for a set minimum period, usually one or two years.

B.For example, under a promotional program a carrier may offer to sell a new cellular telephone for $19.95 to any customer who agrees to become a new subscriber for a period of one year. A customer who accepts this promotion pays the same price for cellular service as customers who do not. The telephone itself has a wholesale cost of $200.00. In the example above the carrier would be liable for the tax based upon its cost of the items. In the event the carrier collected a tax from its customer based upon the amount of nominal consideration charged from the telephones it may claim an offsetting credit for that amount.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-12 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/12/2018

280-RICR-20-70-35 Cellular Telephone – Sold in Bundled Transactions – Promotional Use by Carriers

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-12 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/12/2018

280-RICR-20-70-36 Pawnbrokers and Auctioneers

280-RICR-20-70-36 § 36.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18. This regulation provides for sales tax collection by pawnbrokers and auctioneers.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-36 § 36.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws Chapter 44-18, as amended, R.I. Gen. Laws §§ 44-1-4, 44-18.1-1 and 44-19-33. Additionally, these regulations have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 42-35 - Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-36 § 36.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-36 § 36.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-36 § 36.5 Pawnbrokers

A.Pawnbrokers are primarily engaged in the business of lending money for the repayment of which they accept as security tangible property from the owner or pledger.

B.In case the pawner or pledger does not redeem the property pledged or pawned within specified statutory time, such property is forfeited to the pawnbroker, to whom title thereto passes at such time.

C.Where pawnbrokers thereafter sell such articles at retail they are making sales within R.I. Gen. Laws Chapter 44-18, and must collect and remit the tax thereon.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-36 § 36.6 Auctioneers

A.Persons engaged in the business of making retail sales at auction of tangible personal property owned by such person or others are retailers, and are, therefore, required to hold retailers' permits and pay the tax measured by the gross receipts from such sales.

B.Auctioneers are obliged to add, collect and remit the tax even though they have been engaged by executors, administrators, trustees, receivers or other officers of a court to make sales of tangible personal property, even though such sales may be connected with liquidation or bankruptcy proceedings or made pursuant to court order.

C.Lump-sum charges. -- Real estate auctioneers selling real estate are retailers of the personal property contained therein. They must secure retailers' permits and pay tax on the selling price of the personal property included with the real property. If a lump-sum charge is made, it shall be deemed, unless established to the contrary in the manner described below, that 80% of the sales price was for personal property and 20% of the sales price was for real estate. In this case the auctioneer must collect and pay over tax on 80% of the lump-sum charge. However, if the purchaser gives to the auctioneer an affidavit (in duplicate) stating that the lump-sum charge is considered by him or her to be allocated differently than 80% personal and 20% real property, and the affidavit sets forth the different breakdown, then the auctioneer shall charge sales tax on only that amount which the purchaser's affidavit states to be personal property.

D.Such affidavit shall contain the names and addresses of the purchaser and the auctioneer, the date of the sale, a description of the property sold, the lump-sum sales price, and the percentage breakdown between real and personal property.

E.Upon receipt of such affidavit, the auctioneer shall forward the original to the Division of Taxation, Field Audit Section, and keep the duplicate for his or her files.

F.A purchaser, who for federal income tax purposes, subsequently allocates a higher amount of the sales price of the personal property than was stated in the affidavit, shall report and pay a use tax on such additional amount that was not subject to the tax at the time of the sale.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-37 Casual Sales Generally

280-RICR-20-70-37 § 37.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18. This regulation provides for sales tax collection for casual sales.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-37 § 37.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws Chapter 44-18 as amended, R.I. Gen. Laws §§ 44-1-4, 44-18-1 and 44-19-33. Additionally these regulations have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 42-35 - Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-37 § 37.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-37 § 37.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-37 § 37.5 Definitions

"Casual" means a sale made by a person other than a retailer, provided, however, that in the case of a sale of a motor vehicle, said term shall mean a sale made by a person other than a licensed motor vehicle dealer. Every person making more than five (5) retail sales of tangible personal property during any twelve-month period, including sales made in the capacity of assignee for the benefit of creditors or receiver or trustee in bankruptcy, shall be considered a retailer within the provisions of this regulation and R.I. Gen. Laws Chapter 44-18.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-37 § 37.6 Casual Sales

A.The tax does not apply to casual sales made by a person not regularly engaged in the business of selling tangible personal property. It is important to note, however, that the tax applies to the sale of a motor vehicle, or trailer even though such sale is a casual sale, and whether or not it is in fact registered or required to be registered by the purchaser with the Registry of Motor Vehicles. Casual sales of house trailers and mobile homes of the type ordinarily used for residential purposes are exempt. Casual sales of all other trailers, including camping trailers, are taxable.

B.Casual sales include a sale of tangible personal property not held or used by a seller in the course of activities for which the seller is required to hold a seller's permit(s) or would be required to hold a seller's permit(s) if the activities were conducted in this state. It is further provided such sale is not one of a series of sales sufficient in number, scope and character (more than five (5) in any twelve-month period) to constitute an activity for which the person is required to hold a seller's permit or would be required to hold a seller's permit if the activity were conducted in this state.

C.Examples of Exempt Casual Sales

1.A person selling household furniture, or an insurance agent selling a typewriter;

2.Sales by executors, administrators, trustees, receivers, other fiduciaries and other proper officers pursuant to a court order except when they continue the operation of the business of selling tangible personal property at retail;

3.Legal sales, executions, etc., under court order or by a proper officer;

4.Sales at bazaars, fairs, picnics or similar events by nonprofit organizations which are organized for charitable, educational, civic, religious, social, recreational, fraternal or literary purposes during two (2) events not to exceed a total of six (6) days during each calendar year. Such organization may, however, request of the tax administrator to have more than two (2) events in a calendar year so long as those events do not exceed, in total, six (6) days during such calendar year. Promoters of such events are required to apply to the Tax Division for a promoter's permit which permit shall be issued without cost to the applicant. All vendors at such events, including nonprofit organizations, are required to have a valid permit to make sales at retail.

a.Provided, however, where sales are made at such events by a vendor or organization holding a permit to make sales at retail which is not a nonprofit organization organized for the purposes stated above or by a vendor or organization which is not a nonprofit organization organized for the purposes stated above and which is otherwise required to hold such a permit because its selling events are in excess of the number permitted, such sales constitutes sales in the regular course of business and are not exempted as casual sales.

5.A transfer of a motor vehicle, or trailer upon which the transferor has paid the tax, in connection with the organization, reorganization, dissolution or partial liquidation of a business entity where no gain or loss is recognized for income tax purposes; or

6.Casual sales are exempt where the transferee is the spouse, mother, father, brother or sister of the transferor.

7.A bulk sale of assets. However in the case of a retailer, the sale must occur after the retail business for which the retailer had a permit has ceased.

D.Examples of Nonexempt Casual Sales

1.Retail sales by an auctioneer under any of the examples of exempt sales given above;

2.Sales of motor vehicles, or trailers (see § 37.6(C)(5) of this Part above);

3.Retail sales by manufacturers, wholesalers, processors, and jobbers even though such sales are infrequent and only comprise an insignificant fraction of their total business;

4.Sales which constitute an integral part of a business, such as the sale of repossessed fixtures, or other property by a finance company, even though the sale of tangible personal property is not the primary function of such business; or

5.A manufacturer who liquidates his or her business and sells the equipment in piecemeal fashion over a period of time to either the same or to different purchasers is regarded as a retailer within the meaning of the Rhode Island sales and use tax law. The equipment owned automatically becomes an inventory of goods held for sale at retail. The fact that such equipment might have been sold in one bulk sale without being required to charge the sales tax is beside the point. Where the facts assumed above clearly show that more than five (5) retail sales of tangible personal property during any twelve month period have been made, then the sales are not casual. Therefore, under the facts the liquidating manufacturer has become, although unwittingly, a retailer, even though he or she operates as such for a relatively short period of time.

6.A retailer who sells equipment that it uses in its business, such as a grocer who sells a cash register.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-37 § 36.7 Casual Sales of Motor Vehicles and Trailers

A.The tax applies to the total sale price of a motor vehicle or trailer, which is purchased from persons other than dealers. Total sale price means and includes not only cash paid by the purchaser to the seller, but it also includes the value of any property, tangible or intangible, taken by the seller in payment of a motor vehicle or trailer.

B.For exception on motor vehicles refer to § 28.7 of this Subchapter, Motor Vehicles Trade-In Allowance.

C.Motor Vehicles and Trailers: The state law requires that motor vehicles and trailers be registered. Where the casual sale of a motor vehicle or a trailer is made, the purchaser is obliged to pay the use tax directly to the appropriate state agency before registering for such motor vehicle or trailer.

D.Note: The basis of the tax on the casual sale of a motor vehicle shall be the actual selling price or the average retail value as shown in the current issue of the nationally recognized used vehicle guide prescribed by the Tax Administrator whichever is higher.

E.A request for redetermination of the retail dollar value may be made to the Tax Administrator within thirty days after payment of the tax.

F.The motor vehicle law requires that sales tax must be paid before title will be issued.

G.Other Motor Vehicles: Where a casual sale is made of a motorized vehicle that does not require registration under state law, the purchaser is required to file a use tax return and pay the use tax directly to the Tax Administrator on or before the 20th day of the month following the month during which such casual sale was made. Such use tax return forms may be obtained from the Division of Taxation.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-37 § 37.8 Partnership Dissolution and Distribution of Assets

Where there is a dissolution of a partnership and a distribution of the assets between the partners includes a motor vehicle or vehicles, the transfer of the interest of one partner in such vehicle or vehicles to the other partner does not constitute a taxable casual sale within the meaning of the provisions of R.I. Gen. Laws § 44-18-20, provided the last taxable sale, transfer or use of the article being transferred or sold was subjected to a sales or use tax imposed by this state, and any gain or loss to the transferor is not recognized for federal income tax purposes.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-37 § 37.9 Yard/Garage Sales

A.An individual holding a yard or garage sale will not be required to obtain a permit to make sales at retail if:

1.The individual is selling his or her own goods or property only, and

2.The sale is held at the residence of the individual and is not part of a block sale or a flea market operation.

B.Exemption is limited to one (1) such event of no more than two (2) days duration each during any calendar year

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-37 § 37.10 Notice

A.R.I. Gen. Laws § 44-19-22 requires every taxpayer selling or transferring a major part in value of its assets (real or tangible property) otherwise than in the ordinary course of trade and in the regular and usual prosecution of the taxpayer's business to notify the Tax Administrator of the proposed sale or transfer at least five (5) days before the sale or transfer. The notice must include the price, terms and conditions, and the character and location of the assets.

B.Further, whenever a taxpayer makes such a sale or transfer, the tax imposed by R.I. Gen. Laws Chapter 44-18 becomes due and payable at the time the Tax Administrator is notified, or, if he is not so notified, at the time when he should have been notified.

C.If a taxpayer fails to comply with the notification and payment provisions, the sale or transfer shall be fraudulent and void as against the state.

D.When the taxpayer complies with the provisions of R.I. Gen. Laws § 44-19-22, including the filing of any required returns and the payment of tax due, the Tax Administrator shall issue a letter of good standing to the taxpayer. Until such time as the returns are filed, the taxes are paid and the letter of good standing has been issued, the property sold or transferred shall be subject to the claims of the Tax Administrator for taxes imposed against the transferor of the property under R.I. Gen. Laws Chapter 44-18.

E.The five day notice requirement does not apply to sales by receivers, assignees under a voluntary assignment for the benefit of creditors, trustees in bankruptcy, or public officers acting under judicial process.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-38 Professional Services

280-RICR-20-70-38 § 38.1 Purpose

This regulation implements Chapter 44-18.1 of the Rhode Island General Laws (R.I. Gen. Laws). This regulation provides for Professional Services.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-13 to 01/04/2022

280-RICR-20-70-38 § 38.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws § 44-18.1, as amended, R.I. Gen. Laws §§ 44-1-4, 44-18.1-1 and 44-19-33. Additionally these regulations have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 42-35 - Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-13 to 01/04/2022

280-RICR-20-70-38 § 38.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-13 to 01/04/2022

280-RICR-20-70-38 § 38.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-13 to 01/04/2022

280-RICR-20-70-38 § 38.5 Medical Equipment, Mobility Enhancing Equipment and Prosthetic Devices, Blood and Oxygen

A.Durable Medical Equipment

1.“Durable medical equipment” means equipment including repair and replacement parts which can withstand repeated use; is primarily and customarily used to serve a medical purpose; generally not useful to a person in the absence of illness or injury; and is not worn in or on the body.

2.The tax does not apply to the sale or rental of durable medical equipment for home use only including syringe infusers, ambulatory drug delivery pumps, hospital beds, convalescent chairs, bath and shower chairs, commode chairs, and chair lifts. However, the tax applies to such items when sold to a convalescent or nursing home operated for profit. In such case, such home will be regarded as the taxable user.

3.Supplies used in connection with syringe infusers and ambulatory drug delivery pumps that are sold on prescription to individuals to be used by them to dispense or administer prescription drugs, and related ancillary dressings and supplies used to dispense or administer prescription drugs shall also be exempt from tax.

B.Mobile Enhancing Equipment

1.“Mobility enhancing equipment” means equipment including repair and replacements part which is primarily and customarily used to provide or increase the ability to move from one place to another and which is appropriate for use either in a home or a motor vehicle; is not generally used by persons with normal mobility; and does not include any motor vehicle or equipment on a motor vehicle normally provided by a motor vehicle manufacturer.

2.The tax does not apply to the sale or rental of mobility enhancing equipment including wheelchairs, crutches, canes, motorized carts, stair lifts, walkers, and lifts and controls specifically added to motor vehicles.

C.Prosthetic Devices

1.“Prosthetic device” means a replacement, corrective, or supportive device including repair and replacement parts worn on or in the body to artificially replace a missing portion of the body; prevent or correct physical deformity or malfunction; or support a weak or deformed portion of the body.

2.The tax does not apply to sale or rental of prosthetic devices, sold on prescription including artificial limbs, dentures, spectacles and eyeglasses, artificial eyes and braces. Artificial hearing devices and hearing aids are also exempt whether or not sold on prescription.

D.Standardized Devices and Supplies

1.Standardized or stock devices, braces or supports are taxable inasmuch as they are not prosthetic devices within the meaning of the exemption provisions of the Rhode Island sales and use tax law.

2.Examples of this type of property include the following:

a.Anklets

b.Bandages

c.Elbow Caps

d.Ear Correction Caps

e.Elastic Goods, Etc.

f.Eye Shades and Shields

g.Knee Caps

h.Mouth Breathing Prevention Shields

i.Thigh Pieces

j.Thumb Pieces

k.Suspensories

l.Wristlets

3.If, however, a person is required to wear or use any of the foregoing items because of a physical condition and purchases an item upon the prescription of a doctor, the tax will not apply. In such case the retailer should retain as part of the records the doctor's prescription.

E.Blood and Oxygen

1.The tax does not apply to the sale of blood, blood plasma, medical oxygen and other gases sold for medical treatment of human beings.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-13 to 01/04/2022

280-RICR-20-70-38 § 38.6 Oculists, Optometrists, Opticians and Ophthalmologists

A.The tax does not apply to the sale of corrective eye glasses or spectacles, lenses, frames or other such related ophthalmic materials.

B.Tangible personal property, other than that set forth above, purchased and used or consumed incidentally in the rendition of professional services is taxable to the person rendering the service as the ultimate consumer, and the tax is imposed on the sale of the property to such person.

C.The sale of sun glasses, except when sold on prescription, opera glasses, field glasses, telescopes, eyeglass cases when sold separately, cameras, fluids or other preparations used for cleaning lenses or other similar items when sold to consumers are taxable sales.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-13 to 01/04/2022

280-RICR-20-70-38 § 38.7 Medical Laboratories

A.Medical laboratories are the consumers of all supplies, materials and chemicals used in the testing and/or analysis of patient specimens.

B.Testing materials, supplies and chemicals whose components may or may not be listed in the pharmacopoeia as defined in R.I. Gen. Laws § 5-19-1, as amended, do not qualify for exemption as they are not deemed to be sold on prescription or to be taken internally or applied directly to the body of a patient for the cure, mitigation or prevention of disease.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-13 to 01/04/2022

280-RICR-20-70-38 § 38.8 Dentists and Dental Laboratories

A.The tax does not apply to materials and supplies which are consumed directly in the fabrication of or which become a component of a denture or other oral prostheses in replacement of a missing part, i.e., materials used in the construction and repair of dentures such as acrylics, rebasing and restoration materials, teeth, lucitone, biotone resins, jet repair acrylic, impression materials, waxes, baseplates, patent and prescription medicines, oxygen, nitrous oxide and carbon dioxide.

B.Nor does the tax apply to finished prosthetic appliances such as dental casts, inlays, onlays, crowns, fixed and removable bridges, pontics, bands, space maintainers, bars, full and partial dentures, orthodontic appliances, retainers, obdurators, custom made mouth pieces, etc.

C.However, items not used for either of the purposes mentioned in §§ 38.8(A) and (B) of this Part, but which are used incidentally in the rendition of professional or laboratory services, are not exempt from the tax.

D.Examples of such taxable items include but are not limited to:

1.Appointment Books

2.Broaches

3.Brushes, Tooth Cleaning

4.Burs

5.Cotton Rolls

6.Discs, Sandpaper

7.Examination Blanks

8.Excavators

9.Floss Silk

10.Forceps

11.Gauze

12.Handpieces and Angles

13.Instruments

14.Mandrels

15.Matrix Bands

16.Mirrors

17.Napkins

18.Paper Cups

19.Pumice

20.Scalers

21.Scissors

22.Sandpaper Strips

23.Soap

24.Towels

25.Tray, Impression

26.Trays, Aluminum

27.Trays, Plastic

28.Waste Receivers

29.X-Ray Supplies

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-13 to 01/04/2022

280-RICR-20-70-39 Tax Exempt Organizations and Areas

280-RICR-20-70-39 § 39.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18.1. This regulation provides for Exempt Organizations.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-20 to 01/04/2022

280-RICR-20-70-39 § 39.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-20 to 01/04/2022

280-RICR-20-70-39 § 39.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-20 to 01/04/2022

280-RICR-20-70-39 § 39.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-20 to 01/04/2022

280-RICR-20-70-39 § 39.5 Organized Nonprofit Golden Age and Senior Citizens Clubs

Any club or organization seeking exemption as an organized nonprofit golden age or senior citizens club for men and women in accordance with R.I. Gen. Laws § 44-18-30(5) must be exclusively comprised of membership of persons age 62 years or older and/or persons under 62 years of age who are disabled and who reside in subsidized housing.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-20 to 01/04/2022

280-RICR-20-70-39 § 39.6 Nursing, Convalescent and Homes for the Elderly

The tax does not apply to charges made by homes for aged and convalescents licensed by the State of Rhode Island, including nursing homes, assisted living facilities, rest homes and sanatoriums, which have in constant attendance at least one registered or practical nurse, for meals, rooms and other services which are comparable to services rendered by hospitals such as the furnishing of nursing care, supervision, custodial care, administering of special treatments or medications as prescribed by physicians and the supplying of special diets, etc.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-20 to 01/04/2022

280-RICR-20-70-39 § 39.7 Exempt Agencies, Organizations and Institutions - Sales To

A.Sales of tangible personal property to the Federal Government or to any of its agencies or instrumentalities, to the State of Rhode Island, or any of its cities or towns, and to any redevelopment agency created pursuant to R.I. Gen. Laws Chapter 45-31 are not subject to the tax.

1.Such governmental agencies or instrumentalities are not required to furnish exemption certificates to their suppliers. However, the seller must make appropriate notations in his/her records covering his/her sales to such governmental agencies or instrumentalities.

B.Sales to all other exempt organizations, including hospitals not operated for profit, educational institutions not operated for profit, churches, orphanages, and other institutions or organizations operated exclusively for religious or charitable purposes, interest free loan associations not operated for profit, nonprofit organized sporting leagues and associations and bands for boys and girls under the age of 19 years, the following vocational student organizations that are state chapters of national vocational students organizations: distributive education clubs of America, (DECA); future business leaders of America/Phi Beta Lambda (FBLA/PBL); future farmers of America (FFA); future homemakers of America/home economics related occupations (FHA/HERD); and organized nonprofit Golden Agers and senior citizens clubs for men and women, and parent-teacher associations are exempt from sales and use tax, but each such organization must file an application for and obtain from the Tax Administrator an exemption certificate covering such exempt organizations.

1.The exemption applies only to such purchases as are made by the organization itself for its own purposes and not to purchases by any of its members individually. An individual member or group of members belonging to such an exempt organization must pay the tax when purchasing meals, or other tangible personal property for their individual or collective use or consumption.

C.Exemption certificates issued by other states will not be recognized in this state; however, out-of-state exempt organizations of the same type may apply for an exemption certificate in the same manner as a Rhode Island organization. An application form may be obtained from the Division of Taxation. No tax exempt purchases may be made by such organizations until an exemption certificate has been approved and issued to such organization. Each such certificate shall be identified by a certificate number.

1.Sales to exempt entities, other than the Federal government, the State government and municipal governments of this State, will be deemed to be taxable unless the retailer obtains a copy of the exemption certificate (issued by the RI Division of Taxation) or obtains a properly completed exemption certificate authorized by the Streamlined Sales and Use Tax Agreement.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-20 to 01/04/2022

280-RICR-20-70-39 § 39.8 Volunteer Fire Companies

Inasmuch as incorporated volunteer fire companies are regarded as operating in a governmental capacity in the town in which they are located, the tax does not apply to sales made to such volunteer fire companies provided they have obtained a certificate of exemption from this office and furnish the vendor with their exemption number.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-20 to 01/04/2022

280-RICR-20-70-39 § 39.9 Educational Institutions

A.Definitions:

1."Educational institutions" means those institutions of learning which are engaged in giving courses of instruction to student bodies, i.e., schools, academies, colleges and universities. These, in turn, are regarded as institutions empowered by this state to confer diplomas, educational, literary or academic degrees, and which have a regular faculty, curriculum and organized body of pupils or students in attendance throughout the usual school year, and which keep and furnish to students and others records required and accepted for entrance to schools of secondary, collegiate or graduate rank.

2."Textbook" means and includes books pertaining to educational course of instruction undertaken by students or faculty at elementary or secondary schools or at post-secondary institutions of higher education. "Textbooks" do not include such items as magazines, periodicals, pamphlets, circulars, audio or video cassettes, audio or video tapes, phonograph records or video or compact disks.

3."Used textbooks" means and includes those textbooks previously purchased and/or used by students or faculty. As such "used textbooks" does not include textbooks which are damaged, shopworn or outdated or the subject matter of which may be obsolete.

B.Sales to

1.Sales of tangible personal property made to educational institutions not operated for profit are exempt from the sales or use tax.

C.Sales by

1.Educational institutions which make sales of new or used textbooks to members of their student and faculty bodies are not regarded as engaged in the business of making sales at retail within the meaning of the provisions of the Rhode Island sales and use tax act. Accordingly, sales by such institutions to students and faculty of textbooks and supplies used in connection with any of the courses offered by such institutions are not subject to the tax. However, the sale by such institutions of any other items of tangible personal property such as jewelry, china, pennants, candy and cosmetics are subject to the sales tax. The sale of such taxable items requires a permit to make sales at retail and the collection of the tax. The enumeration of the foregoing taxable items is made by way of illustration and not limitation.

2.Sales of used textbooks by any purveyor are exempt. Any vendor or purveyor selling used textbooks as exempt items must label the volumes "used textbooks" and must maintain adequate inventory and sales records to separate such items.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-20 to 01/04/2022

280-RICR-20-70-39 § 39.10 Employees and Representatives of Exempt Organizations, or Federal, State or Local Governments - Sales and Rentals to

A.Whenever exemption from tax on purchases, rental charges or room rental charges is claimed by any employee, representative or other official of the United States Government, or of the State of Rhode Island or of any of its cities, towns or other political subdivisions, or of any exempt organization, such exemption will apply only if payment is made directly by such agency or organization.

B.In case the official pays the bill (even though the bill be made out to the governmental agency or exempt organization by whom the official or employee is employed or which the official or employee represents) the tax applies. In such case, it is immaterial that such official is reimbursed or that the economic burden of the tax is passed on to the governmental agency or exempt organization.

C.THE RETAILER MUST MAINTAIN RECORDS TO SUPPORT AND IDENTIFY ALL SUCH EXEMPT SALES OR RENTALS.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-20 to 01/04/2022

280-RICR-20-70-39 § 39.11 Blind Persons -- Sales Made By -- When Exempt

A.Sales of tangible personal property sold by any blind person who conducts a retail business in a public building under the supervision of the Rhode Island Division of Services for the Blind and Visually Impaired are exempt from the Rhode Island sales tax. Included in exempt sales are sales made from vending machines located in vending facilities licensed pursuant to R.I. Gen. Laws § 40-9-11.1 whether the licensee owns the vending machines or receives a percentage or commission of such sales from the owner of the vending machines.

B.Accordingly, any such retailer shall not collect any sales tax on the amount charged by him or her for any tangible personal property which he or she sells in such a retail establishment. Moreover, the retailer is not required to file sales tax returns with the Division of Taxation.

C.It is emphasized that the exemption is limited to blind persons who operate retail businesses in the manner and under the supervision referred to in the first paragraph of this regulation.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-20 to 01/04/2022

280-RICR-20-70-39 § 39.12 Sales by Rhode Island Non Profit Eleemosynary Organizations and Schools

A.Rhode Island nonprofit eleemosynary organizations formed to sponsor and support youth activities are exempted from the requirement to charge, collect and remit the sales tax on items sold for not more twenty dollars ($20.00) each when such items are sold for the purposes of supporting such youth activities.

B.Such organizations are liable, except as otherwise provided by law, for the sales/use tax on all other items purchased by them. Similarly, such organizations are required to charge and collect the sales tax on items sold at more than twenty dollars ($20.00) each and on all items sold for purposes other than the support of youth activities which such organization is formed to sponsor and support.

C.Additionally, accredited elementary and secondary schools are relieved of the requirement to charge, collect and remit the sales tax on items sold for not more than twenty dollars ($20.00) each when such items are sold for the purpose of such schools or for the organized activities of the students enrolled therein.

D.Such schools are liable, except as otherwise provided by law, for the sales/use tax on all other items purchased by them. Similarly, such schools are required to charge and collect the sales tax on items sold at more than twenty dollars ($20.00) each and on all items sold for purposes other than the purpose of such schools or of organized activities of the students enrolled therein.

E.The special provisions described above may not be transferred, granted or delegated to other persons acting as agents for the organizations or schools or to private concessionaires.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-20 to 01/04/2022

280-RICR-20-70-40 Commercial Fisherman and Fishing Vessels

280-RICR-20-70-40 § 40.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18. This regulation provides for the application of sales and use tax to commercial fishing activities.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-40 § 40.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws Chapter 44-18 as amended, R.I. Gen. Laws §§ 44-1-4, 44-18-1 and 44-19-33. Additionally, these regulations have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 42-35 - Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-40 § 40.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-40 § 40.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-40 § 40.5 Definitions

A."Commercial fishing" means the taking or the attempting to take any fish, shellfish, crustacea, or bait species with the intent of disposing of them for profit or by sale, barter, trade, or in commercial channels.

B."Net tons" means gross tonnage, less certain deductions for space occupied by engines, crews quarters, etc., giving a rough measure of the capacity of the ship for cargo or passengers. The computation of net tonnage shall be the same as that provided on the Certificate of Registry, in pursuance of Chapter One, Title XLVIII "Regulation of Commerce and Navigation," Revised Statutes of the United States.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-40 § 40.6 Commercial Fisherman

A.The catching of fish or shellfish by commercial fishermen constitutes the production of tangible personal property for resale within the meaning of the Rhode Island sales and use tax law. Accordingly, any tangible personal property which is consumed in the production of commercial fishing will be exempt from the sales or use tax.

B.Examples of tangible personal property thus consumed in the process, and which may be purchased tax-free by commercial fishermen, are "twine items," a term customarily used to designate fish netting, ropes and similar items used in fish nets, trawls and traps.

C.Inasmuch as the freezing or chilling of the catch by the commercial fisherman is a prerequisite to commencing any operation relating to the distribution of such catch and thus constitutes part of the production process, dry or natural ice consumed in such process may also be purchased without payment of the tax.

D.When purchasing such so-called "twine items" and such ice, commercial fishermen must furnish their suppliers with a Commercial Fishermen's Exemption Certificate. The law defines "manufacturing" to mean and include production.

E.Other taxable items are those used in administration, which means all administrative work including general office operations, accounting, collection and sales promotion. Also taxable are items used in distribution, which means all operations subsequent to the production process, such as handling, storing, selling and transporting the property produced for resale.

F.This exemption herein referred to does not apply to items used by sports fishermen because they are not regularly engaged in commercial fishing.

G.The following are included in the list of exempt items which are consumed in commercial fishing operations.

1.Engine Parts: Filters, belts.

2.Fasteners: Belts

3.Fuel: Kerosene, gas, diesel oil, lube oil, grease, L.P. gas.

4.Nets and Underwater Gear: Needles.

5.Tools: Shovels, ice clippers.

6.Propulsion: Flax packing.

7.Accessories and Miscellaneous: Bands, rubber and friction tape, distilled water, knives, picks, ice, scallop bags, forks.

8.Parts of traps, nets, trawls, anchors, barrels, chairs, plastic floats, rings, shackles, swivels, wire cables and other similar items.

H.The purchase of engines and capitalized property will be subject to tax when purchased for vessels less than five (5) net tons.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-40 § 40.7 Commercial Fishing Vessels in Excess of Five (5) Net Tons

A.The Rhode Island sales and use tax does not apply to the sale of and the storage, use or other consumption in this state of vessels which are in excess of five (5) net tons and which are used exclusively for commercial fishing. The exemption also applies to the nets, cables, tackle, and other fishing equipment appurtenant to or used in connection with the commercial fishing of said vessels. Property purchased for the use of such vessels and other watercraft including provisions, supplies, and material for the maintenance and/or repair of such vessels or watercraft is also exempt.

B.In order to qualify for the exemption, the vessel and its fishing equipment as enumerated above must be used exclusively in commercial fishing as defined. Accordingly, the exemption does not apply to subsistence fishing (i.e., the taking for personal use and not for sale or barter), or sport fishing.

C.The exemption does include United States Coast Guard (U.S.C.G.) documented passenger carrying commercial fishing vessels which meet all the following criteria:

1.A U.S.C.G. license to carry passengers for hire;

2.U.S.C.G. vessel documentation in the coastwise fishery;

3.U.S.C.G. vessel documentation as to proof of Rhode Island home port status or a Rhode Island boat registration to prove Rhode Island home port status;

4.The vessel must be used as a commercial passenger carrying fishing vessel. Such vessel must be able to demonstrate that at least fifty percent (50%) of its annual gross income derives from charters or provides documentation of a minimum of one hundred (100) charter trips annually; and

5.The vessel must have a valid Rhode Island commercial fishing license.

D.The exemption herein referred to does not apply to vessels of five (5) net tons or less.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-40 § 40.8 Commercial Ships, Barges or Other Vessels of Fifty (50) Tons Burden or Over

A.The Rhode Island sales and use tax does not apply to sales made to commercial ships, barges or other vessels of fifty (50) tons burden or over, primarily engaged in interstate or foreign commerce. The exemption applies to the repairs, alterations or conversions of such vessels; it also applies to the sale of property purchased for the use of such vessels, including provisions, supplies and material for the maintenance and/or repair of the same.

B.Sales, as outlined above, continue to be taxable when made to ships, barges or other vessels of less than fifty (50) tons burden, whether or not primarily engaged in interstate or foreign commerce.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-41 Resale, Certificates, Wholesalers, Distributors, and Replacement Parts

280-RICR-20-70-41 § 41.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18. This regulation provides for sales tax liability for resale transactions.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-41 § 41.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-41 § 41.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-41 § 41.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-41 § 41.5 Resale Certificate

A.Sellers who accept a properly completed resale exemption certificate, absent fraud or collusion, are relieved of liability for improperly claimed exemptions.

B.Sellers may accept either the Streamlined Sale Tax Certificate of Exemption or a Rhode Island Resale Certificate from a purchaser who purchases property for resale.

C.The Streamlined Sales Tax Governing Board has approved a uniform Certificate of Exemption. This certificate may be obtained at: http://www.streamlinedsalestax.org/

D.If a Rhode Island certificate is used:

1.The certificate shall be substantially in the form prescribed below. It shall in all cases be signed by the purchaser, bear the purchaser's name and address, and indicate the general character of the property sold by the purchaser in the regular course of business. It shall also bear the number of the seller's permit held by the purchaser, but if the seller is not required to hold a permit because he/she sells only property of a kind the sale of which is not taxable, e.g., food products for human consumption, or because no sales are made in this State, he or she should make an appropriate notation to that effect on the certificate in lieu of his or her seller's permit number. A person selling goods at wholesale only may furnish the seller with a "Wholesaler's-Resale Certificate."

E.The following form of Rhode Island resale certificate is prescribed by the Tax Administrator pursuant to R.I. Gen. Laws § 44-18-25 and copies of the same may be made and used by any seller of tangible personal property in accordance with this regulation.

F.Under Description of property to be purchased there may appear:

1.Either an itemized list of the particular property to be purchased for resale, or

2.A general description of the kind of property to be purchased for resale. (A certificate thus describing the property is good until revoked in writing).

G.This certificate may be used for the purpose of a single purchase of commodities for resale; in such case § 41.5(F)(1) of this Part applies, or it may be used as a blanket certificate for the purpose of a continuing line of purchases of commodities for resale in the regular course of business; in the latter case § 41.5(F)(2) of this Part above applies, and the certificates should be plainly marked "Blanket Certificates."

H.Effective January 1, 1996, persons selling tangible personal property other than refreshments (food or drinks) at flea markets will no longer be issued a permit to make sales at retail but shall be issued a Flea Market Vendor's Permit instead. That permit shall be issued on an annual, quarterly, or 30-day basis.

I.Resale certificates may not be issued by flea market vendors. In lieu of a resale certificate, a flea market vendor holding an annual or quarterly permit shall issue a copy of its Flea Market Vendor's Permit to the seller of tangible personal property as proper evidence that the property being purchased is for resale. Holders of a 30-day permit may not make extax purchases of tangible personal property for resale. The seller may not accept an annual or quarterly Flea Market Vendor's Permit beyond the expiration date.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-41 § 41.6 Tax-Paid Purchases Resold

A.A retailer who resells tangible personal property before making any use thereof (other than retention, demonstration or display while holding it for sale in the regular course of business) may take a deduction of the purchase price of the property if, with respect to its purchase, he or she has reimbursed the vendor for the sales tax or has paid the use tax. If such a deduction is taken by the retailer, no refund or credit will be allowed to the vendor with respect to the sale of the property.

B.The deduction should be taken on the retailer's return in which the retailer's sale of the property is included.

C.This procedure should be used in any of the following circumstances:

1.The retailer when making the purchase intends to use the property rather than resell it but later resells it before making any use thereof.

2.The particular property is of a kind not ordinarily sold or stocked by the retailer and not customarily covered by resale certificates given to his or her vendors and is the subject of an unusual sale, such as a sale for the accommodation of a customer, employees, etc.

3.The particular property is generally for the use of the retailer, but a small portion is incidentally resold.

4.Through error, sales tax reimbursement or use tax is paid by the retailer with respect to the purchase price of property purchased for resale in the regular course of business.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-41 § 41.7 Wholesalers and Distributors - Sales Made By

A.This regulation, besides containing a restatement of the obligation which wholesalers and distributors now have as well as in the past have had, relative to obtaining certificates from certain purchasers as evidence of sales transactions claimed to be exempt from the tax, now prescribes additional requirements regarding certain notations which must appear on invoices reflecting such sales.

B.Gross receipts from sales of tangible personal property made by wholesalers and distributors shall be regarded as receipts from retail sales and therefore taxable unless it can be shown that such receipts are attributable to sales exempted by Rhode Island law.

C.Copies of all invoices reflecting exempt sales of tangible personal property made by wholesalers and distributors must be maintained, each to contain the correct name and address of the purchaser and the date of purchase.

D.It will be presumed that such portion of the seller's gross receipts which is not properly evidenced as exempt will be subject to the tax and the wholesaler or distributor will have a direct obligation to pay the tax to the state.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-41 § 41.8 Replacement Parts

If the sale of tangible personal property by a retailer includes the furnishing of replacement parts or materials pursuant to the warranty provisions of the contract of sale, sales of such property to the retailer are sales for resale with respect to which tax does not apply.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-42 Advertising Agencies and Materials

280-RICR-20-70-42 § 42.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18.1. This regulation provides for Advertising, Agencies and Materials.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-23 to 01/04/2022

280-RICR-20-70-42 § 42.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-23 to 01/04/2022

280-RICR-20-70-42 § 42.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-23 to 01/04/2022

280-RICR-20-70-42 § 42.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-23 to 01/04/2022

280-RICR-20-70-42 § 42.5 Advertising Agencies

A.Specific Applications

1.Charges for an initial consultation for discussion of ideas that do not specifically include tangible personal property are not taxable. Generally, these charges are for advising a client on advertising issues such as the means of advertising and desired markets. These charges must be reasonable and billed as an initial consultation charge by an account management or consultation division of the ad agency.

2.Account Management Service Fees and Retainers which oversee the management of client accounts only, are not considered a service in connection with a sale of tangible personal property, and therefore are not subject to tax. This is considered non creative time and includes staff time to manage client accounts throughout the agency, as well as obtaining space and time for ads to run through media outlets. In addition, fees based on an hourly billing rate or by project are not subject to tax unless they are directly related to the creation or producing of finished art or other tangible personal property.

3.Preliminary Art. “Preliminary art” means roughs, visualizations, layouts and comprehensives, title to which does not pass to the client, but which are prepared by an advertising agency, commercial artist or designer solely for the purpose of demonstrating an idea or message for acceptance by the client before a contract is entered into or before approval is given for preparation of finished art to be furnished by the agency, commercial artist or designer to its client. To determine the tax status of “preliminary art”, refer to §§ 42.5(B)(3)(c) and 42.5(C)(1)(b) of this Part.

4.Finished Art. “Finished art,” means the final art used for actual reproduction by photomechanical or other processes; or for display purposes including charts, graphs, and illustrative materials not reproduced. Tax applies to the total charges made by advertising agencies, commercial artist or designers to their clients for finished art produced by them.

5.Advertising Copy. Tax does not apply where copy is furnished to media in manuscript form.

6Commercials in the Form of Discs or Tapes. Where a local advertising agency contracts with a producer or studio for the production of a commercial (in the form of disc or tape) to be used on a radio or T.V. station, the total amount which such producer or studio charges such advertising agency for such disc or tape is subject to the tax.

7.Commissions. Media Commissions derived by agencies for placement of advertising are not taxable whether paid by the medium, by another agency, or by the client. The placing of advertising is not a service that is a part of a sale of tangible personal property. Supplier commissions paid to agencies by suppliers are not taxable receipts of the agencies. Examples of such nontaxable commissions would be commissions paid to an agency by a premium manufacturer (or distributor) or a direct-by-mail supplier.

8.Fees. The term “fee” as used herein means a general over-all fee or retainer encompassing all agency services performed for the client. Such fees may be fixed or based on agency costs and are generally in lieu of commissions, fees added to purchases, and separate time charges added to jobs or agency projects or any combination thereof.

a.Fees added by an ad agency to a total billing which includes items as to which the ad agency is a retailer and other items acquired as agent, are taxable in accordance with the ratio between the charges for the items as to which the agency is a retailer and acting as an agent (see Example in § 42.5(D) of this Part).

b.Fees added to a total billing encompassing taxable and non-taxable items is not taxable if the agency has acted as an agent for its client with respect to the acquisition of tangible personal property acquired for the client from outside sources, provided the taxable items are billed at the same amount paid to the supplier.

c.If an agency which has acted as agent for its client fails to bill the items as to which it is a retailer at their fair market selling price, the fee added to the billing is taxable in accordance with the ratio between the taxable and non-taxable charges.

9.Retouching. Retouching ordinarily constitutes a step in the process of preparing photographs or other artwork for reproduction, and is done to improve the quality of the reproductions. Tax applies to charges for photo retouching unless it can be clearly demonstrated that the retouching is done only for the purpose of repairing or restoring a photograph to its original condition.

10.Items Purchased by Agency or by Artist or Designer. An advertising agency, artist, or designer is the consumer of tangible personal property used in the operation of its business. Such property may include stationery, ink, paint, tools, drawing tables, T-squares, pens, pencils and other office supplies. Tax applies to the sale of such property to the agency, artist or designer.

a.The agency, artist, or designer is the retailer of, and may purchase for resale, any tangible personal property that it resells before use, or that becomes physically an ingredient or component part of tangible personal property sold by it prior to use. Such property may include illustration board, paint, ink, rubber cement, flap paper, and wrapping paper.

b.An advertising agency, artist, or designer is the consumer of property such as photographs and art which it uses in the preparation of tangible personal property as to which it is acting as a retailer unless, prior to any use having been made of the property, the property is sold or becomes an ingredient or component part of other tangible personal property sold. The agency, artist, or designer may purchase for resale photographs and art, which, prior to any use, are sold or become physically an ingredient or component part of other tangible personal property that is sold by the agency, artist or designer.

c.The term “ingredient or component part of other tangible personal property” includes only those items that become physically incorporated into the property sold and not those, which are merely consumed or used in the production of the property sold. A photograph, for example, does not become an ingredient or component part of property sold merely because the image of the photograph is reproduced as part of the property sold. A photograph or art is regarded as having been used when a reproduction is made from the photograph or art.

11.Electronic Media. Media furnished electronically by an agency to a client or to the agency by a supplier is not subject to a Sales or a Use Tax as it is not tangible personal property.

B.Advertising Agency as Agent of Client (Principal):

1.General. An agent is one who represents another, called the principal, in dealings with third persons. To the extent advertising agencies act as agents for their principal in acquiring tangible personal property they are neither purchasers of the property with respect to the supplier nor retailers of the property with respect to their principals.

2.To establish that a particular acquisition was made as agent for its client:

a.the agency must clearly disclose to the supplier the name of the principal for whom the agency is acting as agent.

b.the agency must obtain, prior to the acquisition, and retain written evidence of agent status with the principal and the agency must renew contracts with each principal every three (3) years or less.

c.the price billed to the principal, exclusive of any fee an advertising agency might charge, must be the same as the amount paid to the supplier. Agency fees, which include fees for management, public relations, retainers, etc. must be separately stated.

3.Application of Tax:

a.When an advertising agency purchases tangible personal property as an agent of the client, the agency shall pay the tax billed with respect to such transactions unless an exemption applies. If the vendor does not charge the sales tax, the advertising agency shall pay the use tax on behalf of the client as measured by the cost of the property billed. The agency shall retain a satisfactory record of the tax paid to the vendor and /or the applicable use tax paid by the agency with respect thereto. Additionally, the agency shall state on its invoice to the client, the applicable Rhode Island tax on the representative third party transactions that has been paid.

b.Sales/use tax is not due on the cost of tangible personal property purchased on behalf of the principal if the principal is exempt. Exempt principals include:

(1)State of Rhode Island and any city, town, or district of this State,

(2)Federal Government,

(3)Charitable, educational and religious organizations as defined under R.I. Gen. Laws § 44-18-30(5)(i) with approved exemption status from the Division of Taxation.

c.In regards to an advertising agency acting as an agent, 30% of charges for separately stated preliminary art as defined in § 42.5(A)(3) of this Part, in conjunction with the sale of tangible personal property by a third party to the agent, are also subject to sales or use tax in lieu of records that do not substantiate the taxable portion of such charges. This represents the percentage of preliminary art charges that ordinarily become physically incorporated into finished art, and would therefore be subject to tax.

d.The agency may make no use of the property for its own account, such as charging the item to the account of more than one principal.

e.The agency must maintain detailed job folders for each principal. If proper records of the agency are not maintained, tax will apply to the total charge to the principal.

4.Example 1: A client comes to an agency with poor sales and asks what can be done to increase sales. The account executive researches the issue and develops a “game plan” (advertising idea/marketing strategy) and counsels the client. This idea/strategy may be a newspaper add or brochures, TV ad (video) or other type of tangible personal property. The account executive writes a creative brief, which is turned over to the “house” (creative dept), which then creates the ad.

a.Example: Agency acting as an Agent:

Steve’s Advertising itemizes the following charges to Bill’s Kitchen:

Initial meeting

$300.00

Menu Proofs (considered finished art) from Dennis’ Design Studio

214.00*

Printing of Menus from Bob’ Print House

$535.00*

Agency Fee

$180.00

Total

$1,229.00

Note sales tax paid directly to the design studio and print house by agency. No additional sales/use tax due on this transaction.

If vendors do not charge RI Sales Tax, the agency would be required to remit use tax on these purchases.

b.Example 2:

Steve’s Advertising itemizes the following charges to Bill’s Kitchen. The proofs and menus are provided by companies located in Mass.

Initial Meeting

$300.00

Menu Proofs from Dennis Design Studio located in Mass

$214.00*

Printing of Menus from Bob’s Print House located in Mass

$500.00**

Agency Fee

$180.00

Total

$1,194.00

Note: Dennis Design Studio is registered to collect tax in RI

** Note: Bob’s Print House is not registered to collect RI tax, therefore use tax is due on the $500 printing charges by the ad agency

C.Advertising Agency Acting as Retailer

1.General. Advertising agencies are considered to be retailers when they acquire (purchase) tangible personal property for delivery to their clients or to third parties for the benefit of their clients.

a.Items Prepared by Agency. Advertising agencies are deemed to be retailers of all items of tangible personal property produced or fabricated by their own employees, and are required to obtain a sales tax permit and charge tax on all taxable sales. Accordingly, an advertising agency is not dealing with third persons and, therefore, they cannot act as agent with respect to that activity.

b.In addition, 30% of charges for separately stated preliminary art as defined in § 42.5(A)(3) of this Part, in conjunction with the sale of tangible personal property, are also subject to tax in lieu of records that do not substantiate the taxable portion of such charges. This represents the percentage of preliminary art charges that ordinarily become physically incorporated into finished art, and would therefore be subject to tax.

c.Application of Tax. Except for preliminary art discussed above and defined in § 42.5(A)(3) of this Part, sales tax applies to the total amount of the retail sale of the property.

(1)Tax applies whether the property was prepared by employees of the agency or acquired from an outside source. Whether the items of property are used for reproduction or display purposes is immaterial.

(2)Tax applies to charges for services rendered that represent services that are a part of a sale of the property, or a labor or service cost in the production of the property.

(3)Charges for such items as supervision, consultation, research, postage, express, telephone and telegraph messages, and travel expense, if involved in the rendering of such services, are likewise taxable.

(4)No deduction may be taken on account of the payment of model fees or talent fees, or for the cost of typography, or for the cost of other services involved in the producing of such items, even though such costs are itemized in the billing rendered to the client.

2.To the extent advertising agencies act on their own behalf, they are not retailers. In acquiring tangible personal property they are purchasers of the property with respect to the supplier and tax is due upon purchase.

3.Examples: A client comes to an agency with poor sales and asks what can be done to increase sales. The account executive researches the issue and develops a “game plan” (advertising idea/marketing strategy) and counsels the client. This idea/strategy may be a newspaper add or brochures, TV ad (video) or other type of tangible personal property. The account executive writes a creative brief, which is turned over to the “house” (creative dept), which then creates the ad.

a.Example 1: Agency acting as a Retailer

Steve’s Advertising Itemizes the following charges to Bill’s Kitchen

Initial meeting

$300.00

Menus proofs (designed internally & provided to Bill’s Kitchen in tangible format, in preliminary form for approval)

$400.00*

Finish Art (accepted art for reproduction)

$200.00

Printing of menus from Bob’s Print House

$700.00

Agency Fee

$180.00

Sales Tax

$84.00**

Total

$1,864.00

** $400.00 x 30% x .07 = $ 84.00

(not itemized - therefore 30% taxed)

$200.00 + $700.00 +180 x .07 = $ 75.60

Sales Tax =

$84.00

b.Example 2: Agency acting as a Retailer:

Steve’s Advertising Itemizes the following charges to Bill’s Kitchen

Initial meeting

$300.00

Menus Proofs (designed internally & provided to Bill’s Kitchen in electronic format)

$400.00*

Finish Art (accepted art for reproduction)

$200.00

Printing of Menus from Bob’s Print House

$700.00

Sales Tax

$63.00**

Total

$1,663.00

Menu Proofs – Electronic format, therefore not taxable

** Sales Tax $200 +$700.00 x .07 = $63.00

D. Advertising Agency Acting as Agent of Client and as Retailer

1.General. When an advertising agency acts as both an agent for the client in dealings with third persons and a retailer of tangible personal property purchased or fabricated for delivery to their clients, the requirements in §§ 42.5(A) through (C) of this Part apply.

a.Example: Agency acting as both an agent and retailer for client

Steve’s Advertising itemizes the following charges to Bill’s Kitchen

Initial Meeting

$300.00

Menu Proofs (designed internally, in preliminary form for approval – acting as retailer)

$400.00*

Finish Art (accepted art for reproduction–acting as retailer)

$200.00**

Printing of Menus from Bob’s Print House (acting as agent)

$749.00***

Agency Fee

$180.00****

Sales Tax

$27.94

Total

$1,856.94

$400.00 x 30% x .07 = $8.40 (not itemized – therefore taxed at 30%)

** $200.00 x .07 = $14.00

$400+ $200+ $749 = $1349 (total retail/agent charges)

$400+$200 (retail charge)/1349 = .44% x $180 = $79.20 x .07 = $5.54

**** $8.40 + $14.00 + $5.54 = $27.94 sales tax (Refer to § 42.5(A)(8) of this Part)

*** Note: Sales tax paid directly to print house by agency ($700 + 49 tax).

If vendor did not charge RI sales tax, the agency would be required to remit use tax on these purchases.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-23 to 01/04/2022

280-RICR-20-70-42 § 42.6 Advertising Materials

A."Advertising material" shall include displays, display containers, brochures not containing price lists, point of sale advertising and technical manuals or any tangible personal property which does not accompany the product to the ultimate consumer.

1.Any pamphlet, brochure or other item, the nature of which includes something besides mere advertising material, and which is enclosed with or accompanies the product when it is sold at retail, and for which no separate charge is made, is regarded as being sold along with such product and the retail selling price charged the customer is deemed to include both such product and such printed material or other item.

a.Accordingly, resale or manufacturer's exemption certificates may be issued by manufacturers, producers, packers and others who purchase such printed material or other items to be used for such purposes.

b.For example, a manufacturer encloses a pamphlet with each piece of luggage manufactured. The pamphlet consists of several pages, some of which contain instructions for the customer on the proper use of the product, some being devoted to travel information, and other pages containing illustrative pictures of its complete line of luggage and describing the merits of its products. Since such pamphlet is not exclusively advertising material, the tax does not apply.

2.Advertising material shipped by a local supplier to points outside of Rhode Island by order of a Rhode Island purchaser or which does not enter the state is not subject to the tax.

a.Advertising material purchased outside the state and delivered in the state and used herein is subject to the use tax and such tax should be paid directly to the state if not collected by a seller who holds a certificate of authority to collect the use tax.

3.A person engaged in selling to storekeepers, merchants and other consumers any direct mail advertising material, advertising pieces, circulars, hand-outs, throw-aways, and similar advertising material, is regarded as a retailer. A sales tax permit must be obtained, and the tax must be added, collected and remitted on such items sold.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-07-23 to 01/04/2022

280-RICR-20-70-43 Gift Certificates and Premiums

280-RICR-20-70-43 § 43.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18. This regulation provides for the taxability of gift certificates, gifts, and premiums under the sales tax.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-43 § 43.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws Chapter 44-18, R.I. Gen. Laws §§ 44-1-4, 44-18.1-1 and 44-19-33. Additionally these regulations have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 42-35 - Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-43 § 43.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-43 § 43.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-43 § 43.5 Gift Certificates

The sale of gift certificates is not taxable, but when the owner of a gift certificate receives tangible personal property by use of such a certificate, or a part thereof, the transaction is a sale and taxable as such. For example, if the owner of a gift certificate valued at $100 purchases a $25 item, tax computed on $25 must be collected by the retailer and remitted to the Tax Administrator.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-43 § 43.6 Gifts and Premiums

A.Tax applies to sales of tangible personal property to persons who make gifts of the property to others, as for example, property:

1.given away for advertising purposes

2.given away for sample use

3.awarded as prizes, the winning of which depends upon chance or skill.

B.Tax does not apply to sales of tangible personal property to be given as a premium, together with tangible personal property sold by the purchaser of the premium. The transaction is regarded as a sale of both articles and the sale of the premium for such purpose is therefore a sale for resale, provided the obtaining of the premium is certain and does not depend upon chance or skill. Tax applies to the entire gross receipts received by the retailer from the purchaser of the goods and the premium, except where a premium, is delivered along with another exempt item, to a purchaser thereof. In such case, tax applies to the gross receipts from the sale of the premium, which will be regarded as the cost of the premium to the retailer, in the absence of any evidence that the retailer is receiving a larger sum. If there is no such evidence, and if the retailer has paid sales tax reimbursement to his or her vendors of the premiums, or use tax to his or her vendors or to the state, measured by the sale price of the premiums to him or her, no further tax is due from him or her.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-04-21 to 01/04/2022

280-RICR-20-70-44 Nonresidents – Purchases by for use in Rhode Island

280-RICR-20-70-44 § 44.1 Purpose

This regulation implements R.I. Gen. Laws § 44-18-36. This regulation provides for the sales and use tax liability of purchases made by nonresidents outside of Rhode Island.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-44 § 44.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws §§ 44-18-36, 44-1-4, 44-18.1-1 and 44-19-33. Additionally these regulations have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 42-35 - Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-44 § 44.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-44 § 44.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-44 § 44.5 Nonresidents - Purchases by for Use in Rhode Island

A.R.I. Gen. Laws § 44-18-36(2) of the Rhode Island Sales and Use Tax Law relates to those cases where the property of a nonresident was not only purchased by him or her for his or her use outside the State of Rhode Island but also was in fact so used prior to bringing the property into this state for further use therein.

B.The mere fact that at the time the nonresident purchased the property he or she had intended to use it in some state other than Rhode Island, does not constitute, within the meaning of the law, the exercise of any rights or powers over such property incident to ownership thereof outside Rhode Island, so as to relieve the nonresident from liability for the Rhode Island use tax, where the facts show that no actual use was made outside this state prior to its delivery into Rhode Island for use therein.

C.Moreover, the mere fact that title had passed to such nonresident purchaser, and thereafter he or she had instructed the seller to make delivery to a point within Rhode Island, does not constitute either an out-of-state use or exercise of any right or power over the property incident to ownership thereof, so as to preclude liability for payment of the Rhode Island use tax on the storage, use, or other consumption made in this state of such property.

D.The fact that some intervening circumstance, arising between the date the property was purchased and the date the nonresident commenced to use the same, resulted in the purchaser substituting the use of such property within Rhode Island for the use originally intended to be made by him or her outside Rhode Island, does not constitute grounds for exemption within the meaning of R.I. Gen. Laws § 44-18-36.

E.R.I. Gen. Laws § 44-18-36(2) therefore applies to bona fide transactions involving the use of property outside this state by nonresidents who thereafter bring such property to Rhode Island for use therein. "Use" outside this state does not include the mere removal of said property from the state of purchase to this state.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-45 Out of State Retailers - Registration

280-RICR-20-70-45 § 45.1 Purpose

This regulation implements R.I. Gen. Laws Chapters 44-18 and 44-19. These Chapters provide for sales and use tax liability and computation and sales and use tax enforcement and collection in regard to registration of retailers to collect and remit Rhode Island sales and use tax.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-12-01 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 12/01/2011

280-RICR-20-70-45 § 45.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws Chapters 44-18 and 44-19 as amended. These rules have been prepared in accordance with the requirements of R.I. Gen. Laws §§ 44-1-1 et seq. and 44-19-33.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-12-01 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 12/01/2011

280-RICR-20-70-45 § 45.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-12-01 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 12/01/2011

280-RICR-20-70-45 § 45.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-12-01 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 12/01/2011

280-RICR-20-70-45 § 45.5 Definitions

A.“Engaging in business in this state” means the selling or delivering in this state, or any activity related to the selling or delivering of tangible personal property or prewritten computer software delivered electronically or by load and leave for storage, use, or other consumption in this state, as well as providing package tour and scenic and sightseeing transportation services. The term includes the following acts or methods of transacting business:

1.Maintaining, occupying, or using in this state permanently or temporarily, directly or indirectly or through a subsidiary, representative, or agent by whatever name called and whether or not qualified to do business in this state, any office, place of distribution, sales or sample room or place, warehouse or storage place, or other place of business;

2.Having any subsidiary, representative, agent, salesperson, canvasser, or solicitor permanently or temporarily, and whether or not said subsidiary, representative, or agent is qualified to do business in this state, operate in this state for the purpose of selling, delivering, or the taking of orders for any tangible personal property or taxable services;

3.The regular or systematic solicitation of sales of tangible personal property or taxable services in this state by means of advertising in newspapers and other periodicals; billboards; brochures, catalogs and similar advertising material mailed to or distributed within the state to residents of this state; telephone; computer assisted shopping networks; television, radio or other electronic media intended to be broadcast to customers located in this state.

B."Person" means any individual, partnership, association, corporation, estate, trust, fiduciary, limited liability company, limited liability partnership, or any other legal entity.

C."Retail sale" or "Sale at retail" means any sale, lease or rental of tangible personal property, prewritten computer software delivered electronically or by load and leave, and/or package tour and scenic and sightseeing transportation services for any purpose other than resale, sublease or subrent in the regular course of business. The sale of tangible personal property to be used for purposes of rental in the regular course of business is considered to be a sale for resale. In regard to telecommunications service as defined in R.I. Gen. Laws § 44-18-7(9), retail sale does not include the purchase of telecommunications service by a telecommunications provider from another telecommunication provider for resale to the ultimate consumer; provided, that the purchaser submits to the seller a certificate attesting to the applicability of this exclusion, upon receipt of which the seller is relieved of any tax liability for the sale.

D."Retailer" means:

1.Every person engaged in the business of making sales at retail as defined above.

2.Every person making sales at retail as defined above through an independent contractor or other representative, if the retailer enters into an agreement with a resident of this state, under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an Internet website or otherwise, to the retailer, provided the cumulative gross receipts from sales by the retailer to customers in the state who are referred to the retailer by all residents with this type of an agreement with the retailer, is in excess of five thousand dollars ($5,000) during the preceding four (4) quarterly periods ending on the last day of March, June, September and December. Such retailer shall be presumed to be soliciting business through such independent contractor or other representative, which presumption may be rebutted by proof that the resident with whom the retailer has an agreement did not engage in any solicitation in the state on behalf of the retailer that would satisfy the nexus requirement of the United States Constitution during such four (4) quarterly periods.

3.Every person engaged in the business of renting any living quarters in any hotel, rooming house, or tourist camp.

4.Every person maintaining a business within or outside of this state who engages in the regular or systematic solicitation of sales at retail as defined by means of:

a.Advertising in newspapers, magazines, and other periodicals published in this state, sold over the counter in this state or sold by subscription to residents of this state, billboards located in this state, airborne advertising messages produced or transported in the airspace above this state, display cards and posters on common carriers or any other means of public conveyance incorporated or operated primarily in this state, brochures, catalogs, circulars, coupons, pamphlets, samples, and similar advertising material mailed to, or distributed within this state to residents of this state;

b.Telephone;

c.Computer assisted shopping networks; and

d.Television, radio or any other electronic media, which is intended to be broadcast to consumers located in this state.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-12-01 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 12/01/2011

280-RICR-20-70-45 § 45.6 Registration and Collection of Sales and Use Tax by Retailers

A.Every retailer selling tangible personal property or prewritten computer software delivered electronically or by load and leave for storage, use, or other consumption in this state, or package tour and scenic and sightseeing transportation services, or renting living quarters in any hotel, rooming house, or tourist camp in this state, shall register with the tax administrator and give the name and address of all agents operating in this state, the location of all distribution or sales houses or offices, or of any hotel, rooming house, or tourist camp or other places of business in this state, and other information that the tax administrator may require.

B.Registration of Out-of-State Retailers – All out-of-state retailers engaging in business in this state, shall register with the Tax Administrator to collect the use tax, and have the same obligation to add, collect and remit the tax on Rhode Island sales in the same manner as a local retailer with a place of business located within this state.

C.Every Retailer, at the time of making taxable sales, shall collect and remit sales and use tax at the tax rate as provided in R.I. Gen. Laws §§ 44-18-18 and 44-18-20 from the purchaser or person renting the room and give a receipt therefore.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-12-01 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 12/01/2011

280-RICR-20-70-45 § 45.7 Statutory Agent for Process

Under the laws of Rhode Island, a nonresident seller engaging in business in this state and making sales of tangible personal property and taxable services for use or consumption in this state, automatically consents to the appointment of the Director of Business Regulation of the State of Rhode Island as statutory agent for the purpose of accepting service of process on his or her behalf in any suit or other proceeding brought by the Tax Administrator in the courts of Rhode Island for the collection of the Rhode Island use tax from such nonresident seller.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-12-01 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 12/01/2011

280-RICR-20-70-46 § 46.1 Purpose

This regulation implements R.I. Gen. Laws Chapters 44-18 and 44-19. These Chapters provide for sales and use taxes liability and computation and sales and use taxes enforcement and collection in regard to computers, software, and related systems.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-10-01 to 07/31/2018
Amendment — effective from 2010-01-01 to 10/01/2011
Periodic Refile — effective from 2001-12-20 to 01/01/2010

280-RICR-20-70-46 § 46.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws Chapter 44-18 and 44-19. These rules have been prepared in accordance with the requirements of R.I. Gen. Laws §§ 44-1-1 et. seq. and 44-19-33.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-10-01 to 07/31/2018
Amendment — effective from 2010-01-01 to 10/01/2011
Periodic Refile — effective from 2001-12-20 to 01/01/2010

280-RICR-20-70-46 § 46.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-10-01 to 07/31/2018
Amendment — effective from 2010-01-01 to 10/01/2011
Periodic Refile — effective from 2001-12-20 to 01/01/2010

280-RICR-20-70-46 § 46.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-10-01 to 07/31/2018
Amendment — effective from 2010-01-01 to 10/01/2011
Periodic Refile — effective from 2001-12-20 to 01/01/2010

280-RICR-20-70-46 § 46.5 Definitions

A.“Canned software” – See Prewritten computer software.

B.“Computer” means an electronic device that accepts information in digital or similar form and manipulates it for a result based on a sequence of instructions, and shall include but is not limited to desk top computers, laptop computers, smart phones, and other similar devices.

C.“Computer hardware” means the physical components of a computer system.

D.“Computer software” means a set of coded instructions designed to cause a computer or automatic data processing equipment to perform a task.

E.“Computer software maintenance contract” means a contract that obligates a vendor of computer software to provide a customer with future updates or upgrades to computer software, support services with respect to prewritten computer software, or both.

F.“Custom software” means a program created specifically for one user and prepared to the special order of that user.

G.“Delivered electronically” means delivered to the purchaser by means other than tangible storage media.

H.“Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.

I.“License” means the right to use, copy or access software.

J.“Load and leave” means delivery to the purchaser by use of a tangible storage media where the tangible storage media is not physically transferred to the purchaser.

K.“Prewritten computer software” means computer software, including prewritten upgrades, which is not designed and developed by the author or other creator to the specifications of a specific purchaser. The combining of two or more prewritten computer software programs or prewritten portions thereof does not cause the combination to be other than prewritten computer software. Prewritten computer software includes software designed and developed by the author or other creator to the specifications of a specific purchaser when it is sold to a person other than the specific purchaser. Where a person modifies or enhances computer software of which the person is not the author or creator, the person shall be deemed to be the author or creator only of such person’s modifications or enhancements. Prewritten computer software or a prewritten portion thereof that is modified or enhanced to any degree, where such modification or enhancement is designed and developed to the specifications of a specific purchaser, remains prewritten computer software; provided, however, that where there is a reasonable, separately stated charge or an invoice or other statement of the price given to the purchaser for such modification or enhancement, such modification or enhancement shall not constitute “prewritten computer software.”

L.“Specified digital products” means electronically transferred:

1.“Digital audio-visual works” which means a series of related images which, when shown in succession, impart an impression of motion, together with accompanying sounds, if any.

2.“Digital audio works” which means works that result from the fixation of a series of musical, spoken, or other sounds, including ringtones. For purposes of the definition of “digital audio works”, “ringtones” means digitized sound files that are downloaded onto a device and that may be used to alert the customer with respect to a communication.

3.“Digital books” which means works that are generally recognized in the ordinary and usual sense as “books”.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-10-01 to 07/31/2018
Amendment — effective from 2010-01-01 to 10/01/2011
Periodic Refile — effective from 2001-12-20 to 01/01/2010

280-RICR-20-70-46 § 46.6 Computer Hardware

The sale to a consumer of a computer and its related components is taxable when delivered to a customer in this state. The rental of a computer and its related components, including terminal equipment (hardware) which is physically located in this state, is taxable.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-10-01 to 07/31/2018
Amendment — effective from 2010-01-01 to 10/01/2011
Periodic Refile — effective from 2001-12-20 to 01/01/2010

280-RICR-20-70-46 § 46.7 Computer Software

A.Prewritten computer software - The sale of prewritten computer software (“canned”) delivered in tangible form is taxable including charges by the seller for any services (training, maintenance consultation etc.) necessary to complete the sale. However, installation labor separately stated is not subject to tax.

B.Effective October 1, 2011, the sale of prewritten computer software, including application software, delivered electronically or by load and leave, is taxable including charges by the seller for any services (training, maintenance consultation etc.) necessary to complete the sale.

C.When an agreement exists for a vendor to host software from their equipment and may be accessed by a customer, the transaction is not considered prewritten computer software delivered electronically and therefore is not subject to tax, provided there is no downloading of prewritten computer software.

D.Modifications to prewritten computer software that are designed to make the software conform to a purchaser’s specifications are not subject to tax, provided the charges are separately stated.

E.Custom Software – The sale of custom software as defined above is not subject to tax. This includes any services incidental thereto and any modifications. If custom software sold to a single purchaser is later sold to others, the later sales are considered sales of prewritten software and are subject to tax.

F.Specified digital products such as digital audio visual works, digital audio works, digital books, movies, music downloads, and ringtones which are delivered electronically, are not subject to tax, as they are not considered to be prewritten computer software.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-10-01 to 07/31/2018
Amendment — effective from 2010-01-01 to 10/01/2011
Periodic Refile — effective from 2001-12-20 to 01/01/2010

280-RICR-20-70-46 § 46.8 Maintenance Agreements

A.For periods prior to October 1, 2011, taxability as it pertains to a prewritten computer software maintenance agreement or contract is based on both tangible personal property, and how the updates/upgrades/services per the agreement are received. A computer software maintenance contract in which updates/upgrades are delivered in tangible form is taxable. Updates/upgrades delivered electronically with respect to prewritten software also received electronically are not subject to tax. Updates/upgrades delivered electronically with respect to prewritten software received in tangible format (ex: disk or CD) are subject to tax. However, a contract for mere technical support services is not subject to tax. The total sale price of tangible prewritten computer software including separately stated charges for computer software maintenance contracts whether received electronically or in tangible format is subject to tax.

B.Effective October 1, 2011, all prewritten computer software maintenance agreements or contracts delivered electronically are subject to tax regardless of whether the related prewritten computer software was purchased in tangible format or received electronically. However, a contract for mere technical support services is not subject to tax.

C.The following examples are effective October 1, 2011.

1.Example #1

A software company has the following charges to a customer:

Prewritten computer software $5,000.00

Software maintenance agreement ($100 per year for five years, paid upfront as part of purchase agreement included with software) $500.00

Sales Tax $385.00

Total $5,885.00

2.Example #2

A software company has the following charges to a customer:

Prewritten computer software $5,000.00

Software maintenance agreement ($100 paid at time of software purchase, and $100 per year for next 4 years per purchase agreement) 100.00

Sales Tax 357.00

Total $5,457.00

Remaining annual payments of $100 per the computer software maintenance contract delivered electronically or in tangible format are subject to tax.

3.Example #3

A software company has the following charges to a customer:

Prewritten computer software (tangible format or delivered electronically) $5,000.00

Sales Tax 350.00

Total $5,350.00

Software maintenance agreement (purchased after the original software purchase and received electronically) $ 500.00

Sales Tax 35.00

Total $ 535.00

Note: A computer software maintenance agreement purchased on or after October 1, 2011 delivered electronically or in tangible format is subject to tax.

4.Example #4

A software company has the following charges to a customer:

Custom computer software (tangible) $5,000.00

Computer software maintenance contract ($100 per year for five years, paid upfront as part of purchase agreement included with software) 500.00

Sales Tax -0-

Total $5,500.00

Custom software and related services are not subject to tax.

5.Example #5

An individual purchases the following:

Prewritten computer software package delivered electronically $200.00 *

E-book delivered via digital download 50.00

Music delivered via digital download 75.00

Ringtone delivered via digital download 5.00

Wireless (cellular) phone application 100.00 *

Computer game delivered via digital download 50.00 *

Sales Tax (* items subject to tax) 24.50

Total $504.50

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-10-01 to 07/31/2018
Amendment — effective from 2010-01-01 to 10/01/2011
Periodic Refile — effective from 2001-12-20 to 01/01/2010

280-RICR-20-70-46 § 46.9 Sourcing Transactions

A.Excluding the lease or rental of tangible personal property which is sourced in accordance with R.I. Gen. Laws § 44-18.1-11(B); the retail sale of a product shall be sourced in accordance with R.I. Gen. Laws § 44-18.1-11(A) as follows:

1.When the product is received by the purchaser at a business location of the seller, the sale is sourced to that business location.

2.When the product is not received by the purchaser at a business location of the seller, the sale is sourced to the location where receipt by the purchaser (or the purchaser's donee, designated as such by the purchaser) occurs, including the location indicated by instructions for delivery to the purchaser (or donee), known to the seller.

3.When §§ 46.9(A)(1) and (2) of this Part do not apply, the sale is sourced to the location indicated by an address for the purchaser that is available from the business records of the seller that are maintained in the ordinary course of the seller's business when use of this address does not constitute bad faith.

4.When §§ 46.9(A)(1), (2), and (3) of this Part do not apply, the sale is sourced to the location indicated by an address for the purchaser obtained during the consummation of the sale, including the address of a purchaser's payment instrument, if no other address is available, when use of this address does not constitute bad faith.

5.When none of the previous rules of §§ 46.9(A)(1), (2), (3), and (4) of this Part apply, including the circumstance in which the seller is without sufficient information to apply the previous rules, then the location will be determined by the address from which tangible personal property was shipped, from which the digital good or the computer software delivered electronically was first available for transmission by the seller, or from which the service was provided (disregarding for these purposes any location that merely provided the digital transfer of the product sold).

B.For the purposes of R.I. Gen. Laws § 44-18.1-11(A), the terms "receive" and "receipt" mean:

1.Taking possession of tangible personal property,

2.Making first use of services, or

3.Taking possession or making first use of digital goods, whichever comes first. The terms "receive" and "receipt" do not include possession by a shipping company on behalf of the purchaser.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-10-01 to 07/31/2018
Amendment — effective from 2010-01-01 to 10/01/2011
Periodic Refile — effective from 2001-12-20 to 01/01/2010

280-RICR-20-70-47 Drugs, Medicines, and Health Care Products

280-RICR-20-70-47 § 47.1 Purpose

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-10-01 to 07/31/2018
Amendment — effective from 2007-01-03 to 10/01/2011
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-47 § 47.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws Chapters 44-18 and 44-19. These rules have been prepared in accordance with the requirements of R.I. Gen. Laws §§ 42-35-3(b), 44-1-1 et seq. and 44-19-33.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-10-01 to 07/31/2018
Amendment — effective from 2007-01-03 to 10/01/2011
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-47 § 47.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-10-01 to 07/31/2018
Amendment — effective from 2007-01-03 to 10/01/2011
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-47 § 47.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-10-01 to 07/31/2018
Amendment — effective from 2007-01-03 to 10/01/2011
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-47 § 47.5 Definitions

A.“Dietary supplement” means any product, other than "tobacco," intended to supplement the diet that:

1.Contains one or more of the following dietary ingredients:

a.A vitamin;

b.A mineral;

c.An herb or other botanical;

d.An amino acid;

e.A dietary substance for use by humans to supplement the diet by increasing the total dietary intake; or

f.A concentrate, metabolite, constituent, extract, or combination of any ingredient described in above; and

3.Is required to be labeled as a dietary supplement, identifiable by the "Supplemental Facts" box found on the label and as required pursuant to 21 C.F.R. § 101.36.

B.“Drug” means a compound, substance or preparation, and any component of a compound, substance or preparation, other than food and food ingredients, dietary supplements or alcoholic beverages:

1.recognized in the official United States Pharmacopoeia, official Homeopathic Pharmacopoeia of the United States, or official National Formulary, and supplement to any of them; or

2.intended for use in diagnosis, cure, mitigation, treatment, or prevention of disease; or

3.intended to affect the structure of any function of the body.

C."Drug" shall also include insulin and medical oxygen whether or not sold on prescription.

D.“Grooming and hygiene products” are soaps and cleaning solutions, shampoo, toothpaste, mouthwash, antiperspirants, and suntan lotions and screens, regardless of whether the items meet the definition of “over-the-counter drugs.”

E."Marijuana" means all parts of the plant cannabis sativa L., whether growing or not; the seeds of the plant; the resin extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds or resin, but shall not include the mature stalks of the plant, fiber produced from the stalks, oil or cake made from the seeds of the plant, any other compound, manufacture, salt, derivative, mixture, or preparation of mature stalks, (except the resin extracted from it), fiber, oil or cake, or the sterilized seed from the plant which is incapable of germination.

F."Medical use" means the acquisition, possession, cultivation, manufacture, use, delivery, transfer, or transportation of marijuana or paraphernalia relating to the consumption of marijuana to alleviate a registered qualifying patient's debilitating medical condition or symptoms associated with the medical condition.

G.“Over-the-counter-drug” means a drug that contains a label that identifies the product as a drug as required by 21 C.F.R. § 201.66. The label must contain:

1.“Drugs Fact” panel; or

2.a statement of the “active ingredient(s)” with a list of those ingredients contained in the compound, substance or preparation.

H."Prescription" means an order, formula or recipe issued in any form of oral, written, electronic, or other means of transmission by a duly licensed practitioner authorized by the laws of this state.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-10-01 to 07/31/2018
Amendment — effective from 2007-01-03 to 10/01/2011
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-47 § 47.6 Taxation of Drugs

Under R.I. Gen. Laws § 44-18-30 the sale, storage, use or other consumption of “drugs”, as defined in § 47.5 of this Part, that are sold on prescriptions are exempt from sales and use tax. In addition, the sales, storage, use or other consumption, in this state, of medical oxygen and insulin; whether or not sold on prescription; and human blood are also exempt from sales and use tax.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-10-01 to 07/31/2018
Amendment — effective from 2007-01-03 to 10/01/2011
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-47 § 47.7 Taxation of Over-the-Counter Drugs

A.For the period commencing October 1, 2011, sales and use tax, at the rates as provided in R.I. Gen. Laws §§ 44-18-18 and 44-18-20, shall apply to an “over-the-counter drug” as defined in § 47.5 of this part.

B.EXAMPLE:

A customer goes to a store with a prescription to purchase an “over-the-counter drug”. The pharmacist directs the customer to an aisle where the product is located. The pharmacist does NOT process the transaction as a prescription because the product is available as an “over-the-counter drug”. Transaction is subject to sales tax as the product is not sold on prescription.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-10-01 to 07/31/2018
Amendment — effective from 2007-01-03 to 10/01/2011
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-47 § 47.8 Taxation of Grooming and Hygiene Products

“Grooming and hygiene products” as defined in § 47.5 of this Part, are subject to sales and use tax, at the rates as provided in R.I. Gen. Laws §§ 44-18-18 and 44-18-20.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-10-01 to 07/31/2018
Amendment — effective from 2007-01-03 to 10/01/2011
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-47 § 47.9 Taxation of Dietary Supplements

A.A “dietary supplement” as defined in § 47.5 of this Part, is subject to sales and use tax, at the rates as provided in R.I. Gen. Laws §§ 44-18-18 and 44-18-20. This means any product intended to supplement the diet, is required to be labeled as a dietary supplement as identifiable by the “Supplemental Facts” box found on the label and as required pursuant to Federal law. Dietary supplements sold on prescription are not subject to sales and use tax. Vitamins sold as “dietary supplements”; which usually come in tablet, capsule or pill forms are also subject to sales & use tax; however, vitamins are not subject to sales and use tax when sold on a prescription.

B.Reducing products are considered supplements and are also subject to sales and use tax. However, products that are represented for use as a sole item of a meal or of the diet are considered food products and are therefore exempt.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-10-01 to 07/31/2018
Amendment — effective from 2007-01-03 to 10/01/2011
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-47 § 47.10 Taxation of Marijuana for Medical Use

For the period commencing October 1, 2011, sales tax, at the rate as provided in R.I. Gen. Laws § 44-18-18, shall apply to the sale of “marijuana” for “medical use” as defined in § 47.5 of this Part.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2011-10-01 to 07/31/2018
Amendment — effective from 2007-01-03 to 10/01/2011
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-48 Taxicab, Limousine, Charter Bus, and Other Ground Passenger Transportation Services

280-RICR-20-70-48 § 48.1 Purpose

This regulation implements R.I. Gen. Laws Chapters 44-18 and 44-19. These Chapters provide for sales and use taxes liability and computation, and sales and use taxes enforcement and collection in regard to taxicab, limousine, charter bus, and other ground passenger transportation services.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2012-10-01 to 07/31/2018

280-RICR-20-70-48 § 48.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2012-10-01 to 07/31/2018

280-RICR-20-70-48 § 48.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2012-10-01 to 07/31/2018

280-RICR-20-70-48 § 48.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2012-10-01 to 07/31/2018

280-RICR-20-70-48 § 48.5 Definitions

A.“Charter bus services” (NAICS 485510) means establishments engaged in providing buses for charter. These establishments provide bus services to meet customers’ road transportation needs and generally do not operate over fixed routes and on regular schedules. Scenic and sightseeing transportation is not included in this definition.

B.“Gross receipts” means the total amount of the sale price, as defined in R.I. Gen. Laws § 44-18-12 or the measure subject to tax as defined in R.I. Gen. Laws § 44-18-12.1, of the retail sales of retailers.

C.“Interstate transportation” means transportation:

1.between a place in Rhode Island and a place outside of Rhode Island including a place outside the United States; or

2.between two places in Rhode Island through another state or a place outside of the United States; or

3.between two places in Rhode Island as part of transportation originating or terminating outside of Rhode Island or the United States.

D.“Limousine services” (NAICS 485320) means establishments engaged in providing an array of specialty and luxury passenger transportation services via limousine or luxury sedans generally on a reserved basis. These establishments do not operate over regular routes and on regular schedules.

E.“Other ground passenger transportation services” (NAICS 485999) means establishments engaged in providing ground passenger transportation, except:

1.urban transit systems; interurban and rural bus transportation – i.e., Rhode Island Public Transit Authority,

2.courtesy shuttle services for which no consideration is paid;

3.providing buses and other motor vehicles to transport pupils to and from school or employees to and from work:

4.special needs transportation to the infirmed, elderly or handicapped. Establishments engaged in operating shuttle services and vanpools are included in this industry. Shuttle service establishments generally provide travel on regular routes and on regular schedules between hotels, airports, or other destination points.

F.“Person” means and includes any individual, partnership, association, corporation, estate, trust, fiduciary, limited liability company, limited liability partnership or any other legal entity.

G.“Services” means all activities engaged in for other persons for a fee, retainer, commission, or other monetary charge, which activities involve the performance of a service in this state as distinguished from selling property. In determining what a service is, the intended use, principal objective or ultimate objective of the contracting parties shall not be controlling. For the purposes of this rule, services rendered by an employee for his employer are not taxable.

H.“Taxicab services including taxi dispatchers” (NAICS 485310) means establishments engaged in providing passenger transportation by automobile or van, not operated over regular routes and on regular schedules. Establishments of taxicab owner/operators, taxicab fleet operators, or taxicab organizations are included in this industry.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2012-10-01 to 07/31/2018

280-RICR-20-70-48 § 48.6 Taxicab, Limousine, Charter Bus, and Other Ground Passenger Transportation Services

A.For the period commencing October 1, 2012 sales and use tax at the rate as provided in R.I. Gen. Laws §§ 44-18-18 and 44-18-20 is imposed on gross receipts from the sale of taxicab, limousine, charter bus, and other ground passenger transportation services provided in this state.

1.Services that begin or end at a destination outside of Rhode Island (interstate service) are not subject to tax. If a round trip service starts in Rhode Island and proceeds to a destination in another state, and later returns to Rhode Island, a single charge for this round trip service would not be taxable since the trip was interstate in nature. Also, if a transportation service is between two places in Rhode Island but passes through another state, this is an interstate service and therefore would not be taxable.

2.Receipts in the form of a mandatory gratuity are subject to sales and use tax only to the extent they are part of the amount billed to the customer and included in gross receipts. Voluntary payment of a gratuity by the passenger is not included in gross receipts and therefore not subject to sales and use tax.

3.Transportation services provided in connection with funerals, or services provided in connection with ambulance or emergency service transportation are not subject to sales and use tax.

B.Purchases by exempt organizations: Sales and use tax does not apply to purchases of taxicab, limousine, charter bus, and other ground passenger transportation services by the United States Government or the State of Rhode Island or its agencies, any city or town within the State of Rhode Island, or any entity or institution otherwise exempt from sales and use tax. The exemption applies only when the cost is paid by the organization itself for its own purposes; and not to purchases by any of its members individually.

1.Example 1: A charter bus departs Providence, R.I. for its destination of Boston, Mass., and later returns back to Rhode Island. Since the charter bus goes outside of Rhode Island in providing this service, the charter bus service fee would not be subject to tax.

2.Example 2: A taxicab picks up a customer in Warwick, R.I. and transports the customer to a hotel in Providence, R.I. Since the service takes place in Rhode Island it is taxable. If the customer were transported to a hotel located in Massachusetts, the service would not be taxable as part of this service took place outside of Rhode Island.

3.Example 3: A charter bus departs Providence, R.I. for its destination of Newport, R.I. The bus travels through a portion of Massachusetts while en route to Newport. Since this charter bus leaves Rhode Island when providing this service, the charter bus service fee would not be subject to tax.

4.Example 4: A group hires and prepays a limousine service to pick them up in Providence, R.I., take them for dinner in Newport, R.I., and then bring them to a destination(s) to be determined later by the customers. Since at the time the limousine service was hired, the only known destinations were in Rhode Island and the route taken was in Rhode Island, the fees are subject to tax. Should that undetermined destination be located outside of Rhode Island, the limousine company shall refund the sales tax to the customer. The limousine company shall maintain the necessary documentation to substantiate the transaction.

5.Example 5: A non-profit hospital that has filed for and received tax-exempt status in Rhode Island enters into a contract with a taxicab company to provide transportation services to patients. The taxicab company picks up patients at their residence, transports them to the hospital for treatment, and then drives the patients back to their residence. The taxicab company invoices the hospital for this service and the invoice is paid by the hospital. Since the tax exempt hospital is the customer, this taxicab service is not subject to tax.

6.Example 6: A limousine company is hired for a wedding ceremony which includes transporting the bride from her residence in Providence to the wedding ceremony in Westport, Massachusetts and then to the wedding reception in Newport, R.I. Since the wedding ceremony was a destination point outside Rhode Island, this entire transportation service would not be subject to tax.

7.Example 7: A school bus company charters one of its buses to transport members of a social club from Cranston, R.I. to a Pawtucket Red Sox game in Pawtucket, R.I. Since the use of this charter is not for school transportation the gross receipts of this charter bus service is subject to tax.

8.Example 8: Company A hires Company B to shuttle Company A’s employees from remote parking lots to Company A’s office building. The shuttle service operates daily on a regular schedule in both the morning and afternoon. The fee charged by Company B for the shuttle service is to transport Company A’s employees to and from work and therefore is not subject to tax.

9.Example 9: A hotel in Warwick, R.I. hires a shuttle service to shuttle guests from the hotel to the airport and to destinations in Providence, R.I. The shuttle service operates daily on a regular schedule. The fee from the company providing the shuttle service to the hotel is subject to tax.

10.Example 10 Company A hires Company B to shuttle Company A’s employees from a business meeting at a hotel in Rhode Island to another location in Rhode Island (i.e.: airport, Company A office location). Since the shuttle service is not to and from work, it is not considered employee transportation to and from work, therefore the fee charged by Company B to Company A for the shuttle service is subject to tax.

11.Example 11: A cruise ship transports passengers from other states and countries to Newport, R.I. The cruise includes a charter bus that picks up the passengers arriving in Newport and then transports the passengers in a continuous route or journey to one or more Rhode Island locations. The fee for the charter bus service is not subject to tax.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2012-10-01 to 07/31/2018

280-RICR-20-70-48 § 48.7 Sales Tax Registration

Any person furnishing taxicab, limousine, charter bus, and other ground passenger transportation services in this state is a retailer as provided in R.I. Gen. Laws § 44-18-15 and is required to file a Business Application and Registration form with the Tax Administrator, and to charge, collect and remit Rhode Island sales and use tax.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Adoption — effective from 2012-10-01 to 07/31/2018

280-RICR-20-70-49 Trucks, Trailers and Buses – Interstate Carriers

280-RICR-20-70-49 § 49.1 Purpose

This regulation implements R.I. Gen. Laws Chapters 44-18 and 44-19. These Chapters provide for sales and use taxes liability and computation and sales and use taxes enforcement and Collection in regard to trucks, trailers and buses – interstate carriers.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2013-05-01 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 05/01/2013

280-RICR-20-70-49 § 49.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws §§ 44-1-1 et seq. and 44-19-33. These regulations have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 42-35 - Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2013-05-01 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 05/01/2013

280-RICR-20-70-49 § 49.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2013-05-01 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 05/01/2013

280-RICR-20-70-49 § 49.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2013-05-01 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 05/01/2013

280-RICR-20-70-49 § 49.5 Definitions

A.“Busing company” means a company that transports passengers for hire.

B.“For hire” means available for use or service in exchange for payment.

C.“Interstate commerce” means commerce:

1.between a place in Rhode Island and a place outside of Rhode Island including a place outside the United States; or

2.between two places in Rhode Island through another state or a place outside of the United States; or

3.between two places in Rhode Island as part of transportation originating or terminating outside of Rhode Island or the United States.

D."Person" includes any individual, partnership, association, corporation, estate, trust, fiduciary, limited liability company, limited liability partnership, or any other legal entity.

E.“Trucking company” means a company that carries goods of others for hire.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2013-05-01 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 05/01/2013

280-RICR-20-70-49 § 49.6 Trucks and Trailers – Interstate Carriers

A.The purchase or rental/lease of a truck or trailer by a trucking company that transports goods for hire is not subject to sales and use tax provided such vehicle is to be used exclusively in interstate commerce.

B.In order to qualify for the exemption, the purchaser is required to furnish a completed "Affidavit of Truck, Trailer or Bus Operated in Interstate Commerce" to the Registry of Motor Vehicles at the time of registration. In the case of a lease, the lessee must furnish the Affidavit form to the lessor at the time of signing the lease. A person who purchases a truck for the purpose of driving and leasing it to a trucking company to be used "exclusively in interstate commerce" qualifies for the exemption. The individual must complete the Affidavit form and furnish a signed lease from the carrier company indicating who the vehicle is being leased from, their motor carrier number and/or U.S. DOT number, and the year, make and vehicle identification number.

C.A truck or trailer used partly or wholly in intrastate operations does not qualify for the exemption.

D.If a vehicle qualifies for the exemption initially and at some later time is used for purposes other than "exclusively in interstate commerce," the purchaser will immediately be required to pay a sales/use tax to the Division of Taxation. In the case of a lease, the lessee will be required to notify the lessor that the exemption no longer applies so that lease billings from that point forward change from an exempt to a taxable status.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2013-05-01 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 05/01/2013

280-RICR-20-70-49 § 49.7 Buses – Interstate Carriers

A.The purchase or rental/lease of a bus by a busing company that transports passengers for hire is not subject to sales and use on the condition that the bus is used eighty percent (80%) or more of the time in interstate commerce and provided that the bus company shall furnish a completed "Affidavit of Truck, Trailer or Bus Operated in Interstate Commerce" to the Registry of Motor Vehicles at the time of registration attesting to the fact that the bus is used no less than eighty percent (80%) of the time in interstate commerce. In the case of a lease, the lessee must furnish the Affidavit form to the lessor at the time of signing the lease.

B.A person who purchases a bus for the purpose of driving and leasing it to a busing company to be used no less than eighty percent (80%) of the time in interstate commerce qualifies for the exemption. The individual must complete the Affidavit form and furnish a signed lease from the carrier company indicating who the vehicle is being leased from, their motor carrier number and/or U.S. DOT number, and the year, make and vehicle identification number.

C.A bus used less than eighty percent (80%) of the time in interstate commerce does not qualify for the exemption.

D.If a vehicle qualifies for the exemption initially and at some later time is used less than eighty percent (80%) of the time in interstate commerce, the purchaser will immediately be required to pay a sales/use tax to the Division of Taxation. In the case of a lease, the lessee will be required to notify the lessor that the exemption no longer applies so that lease billings from that point forward change from an exempt to a taxable status.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2013-05-01 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 05/01/2013

280-RICR-20-70-50 § 50.1 Purpose

The purpose of this rule making is to implement R.I. Gen. Laws Chapters 44-18 and 44-19. Specifically, R.I. Gen. Laws §§ 44-18-30(32), 44-18-30(44), 44-18-30(53), 44-18-30(61) and 44-18-30(63), which provides an exemption for farm equipment and farm structure construction materials – feeds, fertilizer, plants and seeds, cattle bedding, chicken litter – livestock, and poultry.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Technical Revision — effective from 2014-06-01 to 07/31/2018
Adoption — effective from 2014-06-01 to 06/01/2014

280-RICR-20-70-50 § 50.2 Authority

These rules and regulations are promulgated pursuant to R.I. Gen. Laws §§ 44-1-4 and 44-19-33. These rules and regulations have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 42-35 of the Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Technical Revision — effective from 2014-06-01 to 07/31/2018
Adoption — effective from 2014-06-01 to 06/01/2014

280-RICR-20-70-50 § 50.3 Application

These rules and regulations shall be liberally construed so as to permit the Division of Taxation to effectuate the purpose of R.I. Gen. Laws Chapters 44-18 and 44-19 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Technical Revision — effective from 2014-06-01 to 07/31/2018
Adoption — effective from 2014-06-01 to 06/01/2014

280-RICR-20-70-50 § 50.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Technical Revision — effective from 2014-06-01 to 07/31/2018
Adoption — effective from 2014-06-01 to 06/01/2014

280-RICR-20-70-50 § 50.5 Definitions

A.“Agricultural products for human consumption” means livestock and poultry of the kinds of products of which ordinarily constitute food for human consumption and of livestock of the kind the products of which ordinarily constitute fibers for human use

B."Commercial farming" means the keeping or boarding of five (5) or more horses or the production within this state of agricultural products, including, but not limited to, field or orchard crops, livestock, dairy, and poultry, or their products, where the keeping, boarding, or production provides at least two thousand five hundred dollars ($2,500) in annual gross sales to the operator, whether an individual, a group, a partnership, or a corporation for exemptions issued prior to July 1, 2002; for exemptions issued or renewed after July 1, 2002, there shall be two (2) levels. Level I shall be based on proof of annual gross sales from commercial farming of at least twenty-five hundred dollars ($2,500) and shall be valid for purchases subject to the exemption provided in this rule except for motor vehicles with an excise tax value of five thousand dollars ($5,000) or greater; Level II shall be based on proof of annual gross sales from commercial farming of at least ten thousand dollars ($10,000) or greater and shall be valid for purchases subject to the exemption provided in this subdivision including motor vehicles with an excise tax value of five thousand dollars ($5,000) or greater. For the initial issuance of the exemptions, proof of the requisite amount of annual gross sales from commercial farming shall be required for the prior year; for any renewal of an exemption granted in accordance with this subdivision at either Level I or Level II, proof of gross annual sales from commercial farming at the requisite amount shall be required for each of the prior two (2) years. Certificates of exemption issued or renewed after July 1, 2002, shall clearly indicate the level of the exemption and be valid for four (4) years after the date of issue. This exemption applies even if the same equipment is used for ancillary uses, or is temporarily used for a non-farming or a non-agricultural purpose, but shall not apply to motor vehicles acquired after July 1, 2002, unless the vehicle is a farm vehicle as defined pursuant to R.I. Gen. Laws § 31-1-8 and is eligible for registration displaying farm plates as provided for in R.I. Gen. Laws § 31-3-31.

C.“Farm equipment” means machinery and equipment used directly for commercial farming and agricultural production; including, but not limited to, tractors, ploughs, harrows, spreaders, seeders, milking machines, silage conveyors, balers, bulk milk storage tanks, trucks with farm plates, mowers, combines, irrigation equipment, greenhouses and greenhouse coverings, graders and packaging machines, tools and supplies and other farming equipment, including replacement parts, appurtenant to or used in connection with commercial farming and tools and supplies used in the repair and maintenance of farming equipment.

D.“Farm structure construction materials” means lumber, hardware and other materials used in the new construction of farm structures, including production facilities such as, but not limited to, farrowing sheds, free stall and stanchion barns, milking parlors, silos, poultry barns, laying houses, fruit and vegetable storages, rooting cellars, propagation rooms, greenhouses, packing rooms, machinery storage, seasonal farm worker housing, certified farm markets, bunker and trench silos, feed storage sheds, and any other structures used in connection with commercial farming.

E.“Horse food products” means horse food products purchased by a person engaged in the business of the boarding of horses.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Technical Revision — effective from 2014-06-01 to 07/31/2018
Adoption — effective from 2014-06-01 to 06/01/2014

280-RICR-20-70-50 § 50.6 Exemption from Sales and Use Tax - Farm Equipment and Farm Structure Construction Materials

A.There is an exemption from sales and use tax as provided by R.I. Gen. Laws §§ 44-18-30(32) and 44-18-30(44) for:

1.farm equipment used in connection with commercial farming and agricultural production, and;

2.farm equipment or machinery that is used for ancillary uses or is temporarily used for non-farming or a non-agricultural purpose. However, in order to maintain the exemption, ancillary use or temporary non-farming or non-agricultural use of any farm equipment and machinery must be less than 50% of the total use of the equipment or machinery, and;

3.farm structure construction materials used in connection with commercial farming and agricultural production.

B. Application for this exemption shall be made to the tax administrator on a Form prescribed by the tax administrator.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Technical Revision — effective from 2014-06-01 to 07/31/2018
Adoption — effective from 2014-06-01 to 06/01/2014

280-RICR-20-70-50 § 50.7 Exemption from Sales and Use Tax - Feeds, Fertilizer, Plants and Seeds, Cattle Bedding, Chicken Litter

A.There is an exemption from sales and use tax as provided by R.I. Gen. Laws §§ 44-18-30(53), 44-18-30(61) and 44-18-30(63) for:

1.feed for livestock and poultry, fertilizer (including limestone), seeds and plants, insecticides and fungicides, seed inoculants and plant hormones, cattle bedding, chicken litter, and other supplies when used in commercial farming, and;

2.horse food products purchased by a person engaged in the business of boarding five (5) or more horses.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Technical Revision — effective from 2014-06-01 to 07/31/2018
Adoption — effective from 2014-06-01 to 06/01/2014

280-RICR-20-70-50 § 50.8 Exemption from Sales and Use Tax – Livestock and Poultry

A.There is an exemption from sales and use tax as provided by R.I. Gen. Laws § 44-18-30(61) for livestock and poultry of the kinds of products of which ordinarily constitute food for human consumption and of livestock of the kind the products of which ordinarily constitute fibers for human use when used in commercial farming.

B.Horses used in commercial farming such as to plough fields where such use is in accordance with the ancillary use percentage in § 50.6(A)(2) of this Part, are considered farm equipment and are not subject tax. Horses that are not used in commercial farming such as riding horses are subject to sales and use tax.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Technical Revision — effective from 2014-06-01 to 07/31/2018
Adoption — effective from 2014-06-01 to 06/01/2014

280-RICR-20-70-51 Hotels and Other Accommodations

280-RICR-20-70-51 § 51.1 Purpose

This regulation implements R.I. Gen. Laws Chapters 44-18, 44-19, and 42-63.1. These Chapters provide for sales and use taxes liability and computation and sales and use taxes enforcement and collection in regard to room rentals – by hotels, rooming homes, tourist camps, room resellers and hosting platforms.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2016-07-01 to 07/31/2018
Amendment — effective from 2002-02-26 to 07/01/2016
Periodic Refile — effective from 2001-12-20 to 02/26/2002

280-RICR-20-70-51 § 51.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws §§ 44-1-4 and 44-19-33. These rules have been prepared in accordance with the requirements of R.I. Gen. Laws § 42-35-3.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2016-07-01 to 07/31/2018
Amendment — effective from 2002-02-26 to 07/01/2016
Periodic Refile — effective from 2001-12-20 to 02/26/2002

280-RICR-20-70-51 § 51.3 Application

These rules and regulations shall be liberally construed to permit the Department of Revenue to effectuate the purposes of R.I. Gen. Laws Chapters 44-18, 44-19, and 42-63.1 and other applicable state laws and regulations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2016-07-01 to 07/31/2018
Amendment — effective from 2002-02-26 to 07/01/2016
Periodic Refile — effective from 2001-12-20 to 02/26/2002

280-RICR-20-70-51 § 51.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2016-07-01 to 07/31/2018
Amendment — effective from 2002-02-26 to 07/01/2016
Periodic Refile — effective from 2001-12-20 to 02/26/2002

280-RICR-20-70-51 § 51.5 Definitions

A."Hotel" means any facility offering a minimum of one (1) room for which the public may, for a consideration, obtain transient lodging accommodations. The term "hotel" shall include hotels, motels, tourist homes, tourist camps, lodging houses, and inns. The term “hotel” shall also include houses, condominiums or other residential dwelling units regardless of the number of rooms, which are used and/or advertised for rent or occupancy. The term “hotel” shall not include schools, hospitals, sanitariums, nursing homes, and chronic care centers.

B.“Hosting platform” means any electronic or operating system in which a person or entity provides a means through which an owner may offer a residential unit for transient use. This service is usually provided through an online or web-based system which generally allows an owner to advertise the residential unit through a hosted website and provides a means for a person or entity to arrange transient use in exchange for payment, whether the person or entity pays rent directly to the owner or to the hosting platform. All hosting platforms are required to collect and remit the tax owed.

C.“Living quarters” means sleeping rooms, sleeping or housekeeping accommodations, or any other room or accommodation in any part of the hotel, rooming house or tourist camp which is available for or rented out for hire in the lodging of guests.

D."Occupancy" means a person, firm or corporation's use of space for transient lodging accommodations not to exceed thirty (30) days. Excluded from "occupancy" is the use of space for which the occupant has a documented agreement for the space, where such agreement covers a rental period of twelve (12) months or more. Furthermore, any house, condominium or other residential dwelling rented, for which the occupant has a documented agreement for the space covering a rental period of more than thirty (30) consecutive days or for one calendar month, is excluded from the definition of occupancy.

E.“Owner” means any person who owns real property and is the owner of record. Owner shall also include a lessee where the lessee is offering a residential unit for transient use.

F.“Residential unit, also referred to as residential dwelling” means a room or rooms, including a condominium or a room or a dwelling unit that forms part of a single, joint or shared tenant arrangement in any building, or portion thereof, which is designed, built, and leased to be occupied for non-commercial use.

G.“Room reseller” means any person except a tour operator having any right, permission, license, or other authority from or through a hotel to reserve or arrange the transfer of occupancy, such that the occupant pays all or a portion of the rental and other fees to the room reseller.

H.“Rooming house” means every house, vehicle, motor court or other structure kept, used, maintained, advertised or held out to the public to be a place where living quarters are supplied for pay to transient or permanent guests or tenants, whether in one or adjoining buildings.

I.“Tour operator” means a person that derives a majority of their revenue by providing tour operator packages.

J.“Tourist camp” means a place where tents, tent houses, camp cottages, cabins or other structures are located and offered to the public or any segment thereof for transient lodging.

K.“Travel package” means a room or rooms bundled with one or more separate components of travel such as air transportation, car rental or similar items where the travel package is charged to the customer for a single retail price. When the room occupancy is bundled for a single consideration with other property, services or other items, the entire single consideration shall be treated as the rental/fees for room occupancy.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2016-07-01 to 07/31/2018
Amendment — effective from 2002-02-26 to 07/01/2016
Periodic Refile — effective from 2001-12-20 to 02/26/2002

280-RICR-20-70-51 § 51.6 Sales Tax on Hotels and Other Accommodations (Other Than Residential Dwellings)

A.Sales Tax Liability

1.Sales and use tax is imposed on the sale, storage, use, or other consumption in this state at the rate as provided in R.I. Gen. Laws §§ 44-18-18 and 44-18-20 on the rental charges for living quarters in hotels, motels, inns, tourist/lodging houses and tourist camps. Tax is imposed on the rental charges for the first thirty (30) consecutive days of each rental period. The portion of the rental period that exceeds thirty (30) consecutive days is not subject to sales (or hotel) tax.

2.Any break in occupancy results in the creation of a new and separate rental. A break occurs when a guest terminates his occupancy by checking out or by transferring from one hotel to another hotel, even if such hotels are operated by the same owner. The tax will apply to charges for such new and separate rentals in the same manner and to the same extent as though such guest had just checked in for the first time, and the thirty (30) day taxable period starts all over.

a.However, a mere change of rooms in the same hotel, motel, rooming house or tourist camp does not constitute a break in occupancy.

3.In the event that an occupant has a documented agreement covering a rental period of twelve (12) months or more, the entire charge including the first thirty (30) consecutive days of such occupancy are not subject to sales or hotel tax. For leases covering a period of less than twelve (12) months, the first thirty (30) consecutive days are subject to both sales and hotel tax.

4.Where a hotel rents a room designed as living quarters (i.e., a bedroom, suite, etc.) and the room or suite is rented to a business for display or conference purposes, rental charges made for such accommodations will be subject to tax.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2016-07-01 to 07/31/2018
Amendment — effective from 2002-02-26 to 07/01/2016
Periodic Refile — effective from 2001-12-20 to 02/26/2002

280-RICR-20-70-51 § 51.7 Sales Tax on Residential Dwellings

A.Sales Tax Liability

1.Sales and use tax is imposed on the sale, storage, use, or other consumption in this state at the rate as provided in R.I. Gen. Laws §§ 44-18-18 and 44-18-20 on the rental charges for rooms, houses, condominiums, and other residential dwellings. Tax is imposed on the total rental charges for the first thirty (30) consecutive days of each rental period, provided that such rental period is not greater than thirty (30) consecutive days or one calendar month.

2.For any room rented, or for a house, condominium, or other residential dwelling rented in its entirety to an occupant who has a documented agreement covering a rental period of more than thirty (30) consecutive days, or for one calendar month, there is no sales (or state/local hotel) tax due on the rental charge. In this case, the rental is excluded from the definition of occupancy.

a.Example 1: A college student rents a home for the nine (9) month period September through May. Since the rental period is greater than thirty (30) consecutive days, or for one calendar month (or more), there is no sales or hotel tax due on the rental charges.

b.Example 2: A person rents their beach house in its entirety for a three (3) month period June through August and the occupant has a documented agreement. Since the rental period is greater than thirty (30) consecutive days, or for one calendar month (or more), there is no sales or hotel tax due on the rental charges.

c.Example 3: A person rents their beach house in its entirety for separate two week periods in July and August. Since no rental period exceeds thirty (30) consecutive days or one calendar month, sales tax as provided in R.I. Gen. Laws § 44-18-18 and the local hotel tax as provided in R.I. Gen. Laws § 44-18-36.1(b) must be added to the amount charged for each rental period. Since the beach house is rented in its entirety, the state hotel tax per R.I. Gen. Laws § 44-18-36.1(a) does not apply.

d.Example 4: A person rents a room in their beach house for separate two week periods in July and August. Since no rental period exceeds thirty (30) consecutive days or one calendar month, sales tax as provided in R.I. Gen. Laws § 44-18-18 and state and local hotel taxes as provided in R.I. Gen. Laws § 44-18-36.1(a) and (b) must be added to the amount charged for each rental period.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2016-07-01 to 07/31/2018
Amendment — effective from 2002-02-26 to 07/01/2016
Periodic Refile — effective from 2001-12-20 to 02/26/2002

280-RICR-20-70-51 § 51.8 Hosting Platforms, Realtors, Room Resellers and Travel Packages

A.Hosting Platform

1.A hosting platform as defined in § 51.5 of this Part is required to register, collect and remit both sales and hotel tax on the rental charge to occupants for rooms and other residential dwellings.

a.Example 1: A person rents a room in their residential home through an online hosting platform. The rentals vary from a weekend to an entire week. Since the definition of a hotel includes residential dwellings and no rental period exceeds thirty (30) consecutive days or one calendar month, both sales tax as provided in R.I. Gen. Laws § 44-18-18 and state and local hotel taxes as provided in R.I. Gen. Laws § 44-18-36.1(a) and (b) must be added to the amount charged for each rental period. The hosting platform is required to collect and remit the tax.

b.Example 2: A person rents a room in their residential house through an online hosting platform. The rental period is for one calendar month and the occupant has a documented arrangement. This rental is not subject to sales or hotel tax as the rental period is for one calendar month.

B.Realtors

1.Every person advertising, managing or operating a hotel which includes residential dwellings, motels, rooming houses or tourist camps, or who collects or receives rents on behalf of the owner or operator, is liable for the tax on such rentals. The tax shall be added to the total rental charge without an allowance for any commissions or fees received.

2.When an owner of a residential dwelling advertises it as a short term rental (thirty (30) days or less) through a real estate agency and is charged only an upfront fee for advertising by the real estate agency, and the prospective tenant after finding the advertisement deals directly with the owner and not the real estate agency, the owner is responsible for registering and collecting both sales and applicable hotel tax.

a.Example 1: A realtor collects a one week rental charge of $2000 for a home rented in its entirety. A commission of $350 is kept by the realtor. In addition, a $500 security deposit is paid by the occupant. At the end of the rental period there are damages totaling $300 and a cleaning fee of $100 deducted from the security deposit. Sales and local hotel tax is due on the total rental charges paid by the occupant calculated as follows:

(1)$2000 total rental charge (no allowance for commission) plus $300 damages plus $100 cleaning fee equals $2400 subject to both sales and local hotel tax. It is noted that only the refunded portion of the security deposit is not subject to tax.

(2)All taxes collected constitute a trust fund.

C.Room Reseller. A room reseller as defined in § 51.5 of this Part is required to register, collect and remit both sales and hotel tax on the total charge to occupants for room rentals. Sales and hotel taxes are calculated upon the amount of rental and other fees paid by the occupant to the room reseller, less the amount of tax paid by the room reseller to the hotel. The hotel shall calculate both sales and hotel taxes upon the amount of rental and other fees paid to the hotel by the room reseller and/or the occupant.

1.Example 1: Hotel charges a room reseller $100 for a room plus sales tax of $7 and hotel tax of $6. The room reseller arranges for the transfer of occupancy and charges the occupant $150 for the room, sales tax of $10.50 and hotel tax of $9. The room reseller will calculate sales tax due as follows: $10.50 collected less $7 paid to the hotel equals $3.50 sales tax due. Hotel tax is calculated in the same manner: $9 collected less $6 remitted equals $3 due.

2.Example 2: Assume the same facts as above however the occupant has additional fees of $50 charged by the hotel. The hotel is responsible for charging and remitting the applicable sales and hotel tax to the occupant for the additional fees.

D.Travel Packages. A travel package as defined in § 51.5 of this Part consisting of a single consideration for “bundled” travel charges shall be treated as the rental/fee for room occupancy and is subject to tax, even if the separate sale of certain bundled travel charges would otherwise not be subject to tax. Separately stated room occupancy charges and other travel charges are subject to tax based on the taxability of each individual item.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2016-07-01 to 07/31/2018
Amendment — effective from 2002-02-26 to 07/01/2016
Periodic Refile — effective from 2001-12-20 to 02/26/2002

280-RICR-20-70-51 § 51.9 Rental of Public Rooms in a Hotel

A.Both sales and hotel tax apply only to living quarters as defined in § 51.5 of this Part within a hotel. The hotel is not required to charge tax on the rental of public rooms (i.e., assembly rooms, ballrooms, card rooms, etc.) for group meetings, display purposes, dances, or for similar events as long as the charges for such public rooms are separately stated, except in the following cases:

1.If a customer rents a room in conjunction with the serving of a meal (wedding, banquets, retirement dinner or similar events) and the meal is provided by the operator/owner of the room, the charge for the room, whether or not separately stated, is treated as an additional charge for the furnishing, preparing or serving of the meal and is included in the sales price of the meal.

2.If a customer rents a room for purposes other than the serving of meals and there is an incidental serving of light refreshments by the operator/owner of the room for an additional charge, the sales tax applies only to the sales price of the refreshments, if the charge for the refreshments is separately stated on both the records of the vendor and the bill to the customer. If the charges are not separately stated, the entire amount charged is subject to the sales tax.

3.If more than one meeting room has been rented for use at the same function, with one room being used for the serving of meals and another room being used for the meeting; the facility's separately stated and reasonable charge (based on prevailing rates in the area) for the room not used for the serving of meals is not treated as charges for the meals, and is not subject to sales tax. If the charge for the room being used for the meeting is neither separately stated nor reasonable, the facility's total charges are treated as charges for the meals, and are subject to sales and use taxes.

B.Living Quarters Furnished for Employees: Tax will not apply in a case where living quarters are furnished by the employer to the employee, at premises controlled by the employer, and solely for the convenience of the employer; regardless of whether there is a pay differential, or pay deduction, based upon the furnishing of such quarters.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2016-07-01 to 07/31/2018
Amendment — effective from 2002-02-26 to 07/01/2016
Periodic Refile — effective from 2001-12-20 to 02/26/2002

280-RICR-20-70-51 § 51.10 Exemptions

A.The following rentals are exempt from tax:

1.Rentals charged at camps or retreat houses operated by religious, charitable and educational organizations and institutions.

2.Rentals charged by privately owned and operated summer camps for children.

3.Rentals charged for living quarters in an institution licensed by the state for the hospitalization, custodial or nursing care of human beings.

4.Rentals charged by any non-profit educational institution for living quarters to accommodate any student or teacher, if such living quarters are necessitated by attendance at such institution.

B.However, where a non-profit organization rents living quarters in the same manner as a hotel or rooming house (e.g. YMCA) it is required to register and add and collect the rental tax.

C.Other Exemptions

1.Occupancy of rooms by the United States Government or its agencies, or by an employee or representative of the United States Government or its agencies, when such occupancy is solely for official purposes and the rent is billed to and paid by the United States Government or its agencies.

2.Members of the Armed Forces are not exempt from tax upon occupancy of rooms unless acting as authorized representatives of the United States Government or one of its agencies and are otherwise entitled to exemption under the provisions of the preceding paragraph.

3.Occupancy by employees or representatives of the State of Rhode Island, its instrumentalities or political subdivisions, is exempt from the tax when such occupancy is for official purposes and the rent is billed to and paid by the State, its agencies or political subdivisions.

D.Whenever exemption from the tax on room rental charges is claimed by any employee, representative or other official of the United States Government, or of the State of Rhode Island or of any of its cities or towns or other political subdivisions, because such person is on official business, such exemption will apply only if the following two conditions are met:

1.The bill is made out to the governmental agency involved, and

2.Payment is made by such agency.

E.If the employee pays the bill (even though the bill is made out to the governmental agency by whom he or she is employed or which he or she represents), the tax applies. In such case it is immaterial that such employee is reimbursed or that the economic burden of the tax is passed on to the governmental agency.

F.Records of Exempt Rentals - The hotel/operator must maintain records to support and identify all exempt rentals.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2016-07-01 to 07/31/2018
Amendment — effective from 2002-02-26 to 07/01/2016
Periodic Refile — effective from 2001-12-20 to 02/26/2002

280-RICR-20-70-51 § 51.11 Hotel Tax on Hotels and Other Accommodations

A.Hotel Tax Liability

1.A state hotel tax is imposed at the rate provided in R.I. Gen. Laws § 44-18-36.1(a) upon the total consideration charged for occupancy of any space furnished by any hotel, travel packages, or room seller as defined in R.I. Gen. Laws § 44-18-7.3(b) in this state. A house, condominium, or other residential dwelling shall be exempt from the five percent (5%) state hotel tax under this subsection if the house, condominium, or other residential dwelling is rented in its entirety. The state hotel tax is in addition to any sales tax imposed. The state hotel tax is administered and collected by the division of taxation and unless provided to the contrary in this chapter, all the administration, collection, and other provisions of R.I. Gen. Laws Chapters 44-18 and 44-19 apply.

2.A local hotel tax is imposed at a rate as provided in R.I. Gen. Laws § 44-18-36.1(b) upon the total consideration charged for occupancy of any space furnished by any hotel in this state, in addition to all other taxes and fees now imposed by law. The local hotel tax shall be administered and collected in accordance with § 51.11(A)(3)(a) of this Part.

3.Short term rentals (consisting of a rental period of thirty (30) days or less) of a residential dwelling are subject to hotel tax as follows:

a.House/condominium or other such residential dwelling rented in its entirety is subject to the local hotel tax per § 51.11(A)(2) of this Part. The state hotel tax in § 51.11(A)(1) of this Part does not apply;

b.Room rental in a residential dwelling is subject to both the state and local hotel tax in §§ 51.11(A)(1) and (2) of this Part.

4.A residential dwelling rented for more than thirty (30) consecutive days or for one calendar month is not subject to either hotel tax (or sales tax).

5.Notwithstanding the provisions of § 51.11(A) of this Part, the city of Newport shall have the authority to collect from hotels located in the city of Newport the hotel tax imposed.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2016-07-01 to 07/31/2018
Amendment — effective from 2002-02-26 to 07/01/2016
Periodic Refile — effective from 2001-12-20 to 02/26/2002

280-RICR-20-70-52 Beer, Wine and Liquor Dealer

280-RICR-20-70-52 § 52.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18. This regulation provides for sales tax computation for beer, wine and liquor sales.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-52 § 52.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-52 § 52.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-52 § 52.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-52 § 52.5 Beer, Wine and Liquor Dealer

The measure of tax with respect to retail sales of beer, wine, and spirituous liquors is the entire amount charged therefor, inclusive of the amount of other state or federal taxes imposed with respect to the property.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-52 Beer, Wine and Liquor Dealer

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-53 Newspapers and Periodicals

280-RICR-20-70-53 § 53.1 Purpose

This regulation implements R.I. Gen. Laws § 44-18-30(2). This regulation provides for sales tax liability for sales of newspapers and periodicals.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-53 § 53.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws §§ 44-18-30(2), 44-1-4, 44-18.1-1 and 44-19-33. Additionally these regulations have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 42-35 - Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-53 § 53.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-53 § 53.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-53 § 53.5 Definitions

"Newspaper" means an unbound publication printed on newsprint which contains a news editorial comment, opinions, features, advertising matter and other matters of public interest. "Newspaper" does not include a magazine, handbill, circular, flyer, sales catalog, or similar item unless the item is printed for and distributed as part of a newspaper.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-53 § 53.6 Newspapers and Periodicals

A.The sales/use tax does not apply to the sale of or the storage, use or other consumption of newspapers in this state.

B.Magazines and other periodicals, whether sold over the counter or by subscription are subject to the sales/use tax.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-54 Contractors and Subcontractors

280-RICR-20-70-54 § 54.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18. This regulation provides for sales tax liability for purchases by contractors and subcontractors.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-54 § 54.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-54 § 54.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-54 § 54.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-54 § 54.5 Definitions

A."Contractor" means both contractors and subcontractors and including but not limited to building, electrical, plumbing, heating, painting, decorating, paper hanging, air conditioning, ventilating, insulating, sheet metal, steel, masonry, carpentry, plastering, cement, road, bridge, landscape and roofing contractors or subcontractors.

B."Construction contract" means a contract for the repair, alteration, improvement, remodeling or construction of real property.

C.“Nonresident contractor” means one who does not maintain a regular place of business in this state. A regular place of business shall be deemed to mean and include any bona fide office (other than a statutory office), factory, warehouse or other space in this state at which the taxpayer is doing business in its own name in a regular and systematic manner, and which is continuously maintained, occupied and used by the taxpayer in carrying on its business through its regular employees regularly in attendance. A temporary office at the site of construction shall not constitute a regular place of business.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-54 § 54.6 Contractors and Subcontractors - In General

A.Taxability of Sales to or by Construction Contractors

1.A contractor shall pay the tax as a consumer on the purchase of all materials, supplies, tools and equipment, including rentals thereof and all replacement parts used by him in fulfilling either a lump-sum contract, a cost-plus contract, a time and material contract with an upset or guaranteed price which may not be exceeded, or any other kind of construction contract except:

a.where the contractor contracts to sell materials or supplies at an agreed price and to render service in connection therewith, either for an additional agreed price or on the basis of time consumed, or:

b.where such contractor is engaged in the business of selling such materials or supplies at retail.

2.In the case of either §§ 54.6(A)(1)(a) or (b) of this Part, the contractor is a RETAILER and must have a permit to make sales at retail and the contractor shall give the person selling such materials or supplies a resale certificate bearing his/her permit number and collect the tax from the person to whom he/she sells the same. When such use is made of a resale certificate by a contractor, it shall be limited to the exceptions included in §§ 54.6(A)(1)(a) or (b) of this Part above and the contractor shall be held strictly and solely accountable for the collection of the sales tax involved and the payment to the state of all taxes due thereon based upon gross receipts from such retail sales and such contractor shall further be held strictly accountable for the payment of the use tax to this state in the event he/she shall make any use of such property other than retention, demonstration or display while holding it for resale or in the event the contractor shall make out-of-state purchases subject to the use tax.

B.Tangible Personal Property Fabricated by Contractors. A contractor may in certain instances fabricate part or all of the articles which he/she uses in construction work. For example, a sheet metal contractor may partly or wholly manufacture roofing, cornices, gutter pipe, furnace pipe, furnaces, ventilation or air conditioning ducts or other items from sheet metal which he or she purchases, and use these articles, pursuant to a contract for the construction or improvement of real property. In such a contract the partly or wholly manufactured articles are not made for resale as tangible personal property but for incorporation into the work to be performed. In this instance the sale of sheet metal to such contractor constitutes a sale at retail by the contractor's supplier within the meaning of the law and the contractor pays the tax as a consumer when he/she buys the same. This is so whether the articles so fabricated are used in the alteration, repair or reconstruction of an old building, or are used in new construction work.

C.Contractors Who sell Complete Units of Standard Equipment at Retail and Install Same. This regulation is not applicable to contracts whereby the contractor or subcontractor acts as a retailer selling tangible personal property in the same manner as other retailers and is required to install a complete unit of standard equipment, requiring no further fabrication but simply installation, assembling, applying or connecting services. In such instances the contract will not be regarded as one for improving, altering or repairing real property. For example, the retailer of an awning or blind agrees not only to sell it but to hang it; an electrical shop sells electrical fixtures and agrees to install them. A person performing such contracts is primarily a RETAILER of tangible personal property and must have a permit to make sales at retail and should segregate the full retail selling price of such property from the charge for installation, as the tax applies only to the retail price of the property.

D.Modular Homes

1.The following provisions of this regulation relating to modular homes, effective January 1, 1992, were issued in response to major changes in the prevalent business practices by out-of-state manufacturers in the modular home industry and set forth the Division of Taxation's sales and use tax treatment of the various methods of doing business within that industry.

2.For the purposes of this regulation, a manufacturer of modular homes in making sales of such property to builder dealers will be treated as a contractor who will owe use tax on the cost of the materials only if the following conditions are met:

a.The actual placement is accomplished solely by employees of the manufacturer or a subcontractor working under the direct supervision and control of the manufacturer. The manufacturer completes delivery and installation by affixing the modules to the foundation, by aligning the modules, bolting them together, installing support columns, and making the building weather-tight.

b.Employees or agents of the builder-dealer do not participate in transporting, transferring, attaching, erecting, or weather-proofing the building.

c.If the transaction between the manufacturer and the builder-dealer is not as enumerated above then such transaction will be considered a retail sale of tangible personal property and sales or use tax must be charged on the full retail selling price including charges for transportation which occur prior to the passage of title.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-54 § 54.7 Contracts with Exempt Agencies, Institutions and Organizations

A.Contractors performing construction contracts for the Federal Government, its agencies or instrumentalities, this state, or any other state of the United States of America, its agencies, any city, town, district, or other political subdivision of said states, hospitals not operated for profit, educational institutions not operated for profit, churches, orphanages, and other institutions or organizations operated exclusively for religious or charitable purposes, may purchase without payment of the tax, materials and supplies which are essential to the construction project and which are to be utilized in the construction thereof.

B.Exemption applies only to materials and/or supplies essential to the project which are to be utilized in the construction of the project. Therefore, items such as temporary signs, barricades, barrels, etc. do not qualify for exemption. Also, materials and supplies purchased extax which are not earmarked for a particular exempt project will be deemed taxable.

C.Exemption hereunder does not apply to tools and equipment and parts therefor and tax applies to the sale or rental of such tools and equipment to contractors.

D.In order to purchase qualifying materials and supplies without payment of the tax the contractor shall provide suppliers with a Contractor's Exemption Certificate in the form set forth herein, showing the reasons for exemption; and the contractor's records must show the disposition of all property so purchased. If any such property is then used for a nonexempt purpose, the contractor must pay the tax on the property so used.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-54 § 54.8 Nonresident Contractors

A.Any individual, partnership, joint venture, corporation, state, municipal government or exempt organization awarding a construction contract in Rhode Island to a nonresident contractor (as hereinafter defined) is required, pursuant to R.I. Gen. Laws § 44-1-6, as last amended, to withhold 3% of the contract price to secure payment of any sales and use tax or income tax withheld, or both, that may be due to the State of Rhode Island in carrying out the contract.

B.Upon completion of the contract, the nonresident contractor is required to notify the Tax Administrator in writing by certified or registered mail (in duplicate) to audit his/her records for the particular project. At such time the contractor is required to have available on the job site or within this state, sales and use tax records and employees' personal income tax withheld records.

C.Receipted copies of this request are to be furnished by the Tax Administrator to the nonresident contractor and to the person holding the funds.

D.The Tax Administrator shall, within 30 days after receipt of the request, audit the records and provide by certified mail to the person holding the funds and to the nonresident contractor, either a certificate of no tax due or a notice of taxes due.

E.The person holding the funds is required to pay over to the Tax Administrator the amount set forth in the notice of taxes due, including interest and penalties, but not in excess of 3% of the contract price. Monies withheld in excess of taxes due the Tax Administrator may be paid over to the nonresident contractor.

F.If the Tax Administrator does not furnish a certificate of no tax due or a notice of taxes due within 30 days after receipt of the request for the making of the audit, the person holding the funds may remit the full amount due to the nonresident contractor. The Tax Administrator shall not have any claim against such funds in the hand of the person holding the funds.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-55 Conveyor Systems and Elevator Installations

280-RICR-20-70-55 § 55.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18. This regulation provides for sales tax liability for the sales of conveyor systems and elevator installations.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-55 § 55.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-55 § 55.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-55 § 55.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-55 § 55.5 Conveyor Systems and Elevator Installations

A.Conveyor systems are tangible personal property with the exception of the foundations or underpinnings which are embedded, anchored or countersunk in concrete floors of a business establishment and which are used permanently therein and regarded as a structural component of the building to which they are annexed.

B.The above-mentioned foundations or underpinnings are in and of themselves improvements to real property. However, the elevated positions of the conveyor system are tangible personal property.

1.Examples of property which will be considered part of realty in conveyor installations are conduits permanently installed in the floors or walls through which the wiring is run and bolts permanently embedded in floors or walls to which the conveyor system is attached.

C.Elevators, hoists and conveying units are tangible personal property. A typical elevator installation includes a large number of components, integrated into the entire system. That portion constituting the cage or platform and its hoisting machinery is, accordingly tangible personal property. The balance of the installation, if attached to a structure or other real property, will generally constitute realty.

1.Following are examples of components constituting part of the cage or platform and its hoisting machinery, and which is tangible personal property:

a.Alarm bell, cab or car, car doors, car platform and sling, door hanger on cab, door openers, door operator on cab or car, door safety edge on cab, door sills on cab, electronic door protector, jack assembly (except oil return and outer casing), motors, power units and control boxes, pumps, pushbuttons on cab, wire and piping (if attached only to tangible personal property).

2.Following are examples of components constituting realty when attached to realty:

a.Car guides, casing section of jack assembly, guide rails, hanger supports, hoistway doors, hoistway door frames, hoistway door safety edge, hoistway door sills and jambs, hoistway door supports, hoistway entrance, pushbuttons on hoistway, rail brackets, sills, struts, sound insulating panels on realty, structural steel (unless part of cab, car, or other tangible personal property), valve strainer, wire and piping attached to realty.

b.The above examples are not intended to be all inclusive but merely to serve as guidelines in this area.

D.Measure of tax for tangible personal property. When the contract does not specify the selling price of those components constituting tangible personal property as herein defined, the selling price consists of either:

1.The purchase price paid by the installing contractor for the tangible personal property ready for installation, or

2.In the case of tangible personal property manufactured or purchased in component parts and assembled in whole or in part prior to or during installation,

a.the prevailing price at which similar tangible personal property in similar quantities ready for installation would be sold to contractors, or, if such a prevailing price cannot be ascertained;

b.the manufactured cost to the contractor-manufacturer.

E.Jobsite fabrication labor and its prorated share of manufacturing overhead must be included in the tangible personal property cost. Jobsite fabrication labor includes assembly labor performed prior to attachment of a component or of tangible personal property to a structure or other real property.

F.Measure of tax for materials incorporated into the realty. The cost of materials purchased, or their components, is the measure of the tax. Shop or jobsite fabrication labor is not taxable if the product of such labor is materials installed by the fabricator. No markup or profit shall be added to the cost of materials or their components.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 07/31/2018

280-RICR-20-70-56 Coupons – Discounted Selling Price - Buydowns

280-RICR-20-70-56 § 56.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18. This regulation provides for sales tax liability for purchases that involve coupons, discounted selling prices, or buydowns.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2007-01-03 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-56 § 56.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws Chapter 44-18 as amended, R.I. Gen. Laws §§ 44-1-4, 44-18.1-1 and 44-19-33. Additionally these regulations have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 42-35 - Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2007-01-03 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-56 § 56.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2007-01-03 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-56 § 56.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2007-01-03 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-56 § 56.5 Generally

A.Cash discounts allowed and taken at the time of sale are excluded from the sales price of tangible personal property upon which the sales tax is based. Cash discounts which are given to customers after the time of sale are not excluded from the sales price.

B.“Sales price” shall not include:

1.Discounts, including cash, term, or coupons that are not reimbursed by a third party that are allowed by a seller and taken by a purchaser on a sale.

C.The sales price shall not include manufacturer rebates allowed on the sale of motor vehicles.

D.“Sales price” shall include consideration received by the seller from third parties if:

1.The seller actually receives consideration from a party other than the purchaser and the consideration is directly related to a price reduction or discount on the sale;

2.The seller has an obligation to pass the price reduction or discount through to the purchaser;

3.The amount of the consideration attributable to the sale is fixed and determinable by the seller at the time of the sale of the item to the purchaser; and

4.One of the following criteria is met:

a. The purchaser presents a coupon, certificate or other documentation to the seller to claim a price reduction or discount where the coupon, certificate or documentation is authorized, distributed or granted by a third party with the understanding that the third party will reimburse any seller to whom the coupon, certificate or documentation is presented;

b.The purchaser identifies himself or herself to the seller as a member of a group or organization entitled to a price reduction or discount (a “preferred customer” card that is available to any patron does not constitute membership in such a group), or

c.The price reduction or discount is identified as a third party price reduction or discount on the invoice received by the purchaser or on a coupon, certificate or other documentation presented by the purchaser.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2007-01-03 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-56 § 56.6 Price Reduction Coupons

A.In general, sales tax treatment of purchases made or items obtained using coupons which result in a reduced price to the consumer is based on whether or not the retailer can be reimbursed for the coupon by a manufacturer or other third party.

B."Retailer's or Store Coupons" are coupons issued by the retailer. When a retailer issues a store coupon and receives no reimbursement for the value of the coupon from any third party the tax is computed on the discounted sales price. This type of coupon is a seller's discount which is deducted from the sale price before computing the sales tax.

C."Manufacturer's Coupons" are coupons issued by a manufacturer, distributor, promoter, or any other third party. When a retailer accepts a manufacturer's coupon for which it receives reimbursement from the product manufacturer or any third party, the sales tax is computed on the full selling price of the item, i.e., the consideration paid to the retailer plus the face value of the coupon. The reimbursement may be in any form, including cash or credit towards the purchase of additional merchandise.

D.If a retailer offers customers, upon presentation of a manufacturer's coupon, a discount on the usual sales price of tangible personal property at double or triple the value of the coupon, and the retailer receives reimbursement from any source for the coupon, the tax is computed on the sum of the discounted price and the face value of the coupon.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2007-01-03 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-56 § 56.7 Special Offers

A.If a retailer offers customers, upon presentation of a coupon, merchandise unconditionally free of charge, merchandise free of charge with the purchase of other merchandise or two items for the usual price of one, and the retailer receives reimbursement from a manufacturer, distributor, promoter or other source for the coupon, the sales tax is levied on the usual sales price of the item or items. The reimbursement may be in any form, including cash or credit towards the purchase of additional merchandise.

B.If a retailer sells an item to a customer at a discounted price and is reimbursed for the amount of the discount by a third party, the tax is computed on the discounted price of the item plus the reimbursement received whether or not a coupon is presented to the retailer.

C.If a retailer gives a customer an item unconditionally free of charge upon presentation of a coupon, and the retailer receives no reimbursement from any source for the coupon, the retailer is considered the consumer of that item and is responsible for the payment of a sales or use tax based upon the amount it paid for the item.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2007-01-03 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-56 § 56.8 "Free" Meal Coupons

A.In general, the sales tax treatment of a "free" meal furnished to a customer who purchases another meal and presents a coupon or card for the free meal depends, like other coupon items, upon whether the restaurant receives any reimbursement for the coupon or card.

B.If the restaurant issues its own coupon free of charge and does not receive any reimbursement for the coupon or card, the restaurant is regarded as selling two meals for the price of one and only one meal is subject to tax. If the restaurant accepts a coupon or card which the customer previously purchased from a third party having a contract with the restaurant to redeem the coupons or cards and the restaurant is not reimbursed for the coupon or card, the restaurant is regarded as selling two meals for the price of one and only one meal is subject to tax.

1.(If the restaurant requires a gratuity to be imposed on the value of the two meals, the entire gratuity is part of the taxable receipts.)

C.When a restaurant agrees to furnish a "free" meal to a customer who purchases another meal and presents a coupon or card, which the customer previously had purchased directly from the restaurant or through a sales promotional agency having a contract with the restaurant to redeem the coupons or cards, the restaurant is regarded as selling two meals for the price of one, plus any additional compensation from the agency or from its own sales of coupons. Any such additional compensation is a part of its taxable gross receipts for the period in which the meals are served and, as such, the tax applies only to the price of the paid meal plus any such additional compensation.

D.The sale of a "free" meal coupon, coupon booklet, or card to the ultimate consumer of meals is not subject to tax.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2007-01-03 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-56 § 56.9 Loyalty Discount Card

If a retailer offers a loyalty discount card at no cost to any customer which can be used for selected discounts and savings when presented at the register and the discounts are identified on the register tape, either on an item by item basis or as a total savings at the end of the register tape, the discounts are not included in the sales price if there is no reimbursement received from a manufacturer or other third party. In the case of the loyalty discount card, where the retailer has an agreement with the manufacturer to reimburse some of the discount, the discount is not included in the sales price unless it is identified on the register tape as a “manufacturer’s discount.”

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2007-01-03 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-56 § 56.10 Buydowns

“Cigarette Buydowns.” When a retailer sells cigarettes and pursuant to an agreement with the distributor receives a discount for every pack sold, and the discount is passed from the retailer to the customer, the buydown discount is not included in the sale price if it is not shown on the customers invoice or register receipt. If the customer’s receipt identifies the buydown discount, it is not included in the sales price unless the discount is identified on the receipt as a manufacturer’s discount.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-07-31 to 01/04/2022
Amendment — effective from 2007-01-03 to 07/31/2018
Periodic Refile — effective from 2001-12-20 to 01/03/2007

280-RICR-20-70-57 Television Service, Telegraph, Water, Gas, Electricity, and Steam

280-RICR-20-70-57 § 57.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18. This regulation provides for sales tax liability for television service, telegraph, water, gas, electricity, and steam.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-08-03 to 01/04/2022

280-RICR-20-70-57 § 57.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws Chapter 44-18, R.I. Gen. Laws §§ 44-1-4, 44-18-1 and 44-19-33. Additionally these regulations have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 42-35 - Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-08-03 to 01/04/2022

280-RICR-20-70-57 § 57.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-08-03 to 01/04/2022

280-RICR-20-70-57 § 57.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-08-03 to 01/04/2022

280-RICR-20-70-57 § 57.5 Definitions

A."Subscription television" means television programming services provided to consumers for a fee via satellite transmission or any other means.

B."Residential use" means that the exemption shall apply to multi-family residential premises including apartments, as well as single-family homes whether the heating fuel, electricity, gas or water is furnished to the landlord for all tenants or to the individual tenants.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-08-03 to 01/04/2022

280-RICR-20-70-57 § 57.6 Television Service, Telegraph, Water, Gas, Electricity, and Steam

A.Sales of natural and artificial gas, electricity, steam, water, and sales of telegraph, community antenna television, cable and subscription television services are subject to sales tax except in those cases wherein the purchaser is entitled to exemption as specifically provided in the sales and use tax law.

B. Residential Premises -- Exemptions

1.Heating fuels of every type used in the heating of homes and other residential premises.

2.Electricity, gas and water furnished for domestic use by occupants of residential premises.

3.Such exemption does not apply to motels, hotels, convalescent or nursing homes, or other commercial and industrial users.

C.Where the premises have both residential use and commercial or industrial use, and there is separate measurement of the heating fuel, electricity, gas or water, the amounts sold or used in the nonresidential premises are subject to tax.

D.However, where there is a combination of residential and other use of the premises, and there is no separate measurement of heating fuel, electricity, gas or water between the two uses, the sales tax shall apply to the full amount of the sale.

1.Examples:

a.If a three decker house has four units, one of which is a store occupying part of the first floor, and uses gas therein, and there is no separate gas meter for such store, the whole amount of the gas bill is taxable to the landlord.

b.If a resident of a one family home has a permitted hairdressing operation in one or two rooms and has no separate electric meter for the equipment used in the business operation, all electricity is taxable.

E.As stated above, the retailer must collect the sales tax in a multiple use situation where there is no separate measurement for such gas, water or electric meter or separate heating system. The owner of the premises, however, may apply to the Division of Taxation for a proportionate refund on furnishing adequate substantiation of the portion of domestic use by occupants of the residential premises.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-08-03 to 01/04/2022

280-RICR-20-70-57 § 57.7 Television Sets and Attachments

A.Where the retailer both sells the set and contracts to furnish and erect a standard television antenna including transmission lines, accessories, masts and supports, the tax applies to the sales price of the set, its appurtenances, accessories and attachments. The actual labor and services of erecting the antenna, attaching the supports, etc., if separately stated on the invoice are not taxable. Note that in this situation the dealer is imposing the tax on all the tangible personal property furnished and only the service charge in connection with the erection is not taxable. If labor and service are not separately stated, the tax applies to the total invoice.

B.Where the retailer contracts with an independent contractor to install and erect the antenna, transmission lines, etc., furnishing to that person all the necessary accessories, there is no tax on the services so rendered provided that the accessories are billed to the retailer's customer. On the other hand, if the independent contractor furnishes the masts, antenna, supports, etc., the contractor is required to register and collect the tax or take a resale certificate in lieu thereof from the retailer. If the resale certificate is taken from the retailer because the retailer is billing the customer for the masts, antenna, and supports, the retailer must collect the tax from the customer.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-08-03 to 01/04/2022

280-RICR-20-70-58 Cancellation and Amendment of Sales Tax Permit or of a Certificate of Authority to Collect the Use Tax

280-RICR-20-70-58 § 58.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18. This regulation provides for the cancellation and amendment of a sales tax permit or of a certificate of authority to collect the use tax.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-08-03 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 08/03/2018

280-RICR-20-70-58 § 58.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-08-03 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 08/03/2018

280-RICR-20-70-58 § 58.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-08-03 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 08/03/2018

280-RICR-20-70-58 § 58.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-08-03 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 08/03/2018

280-RICR-20-70-58 § 58.5 Cancellation or Surrender of the Original Permit or Certificate of Authority

A.The original permit or certificate of authority will be cancelled and must be surrendered in the following cases:

1.When a business is discontinued.

2.When a business is transferred to new owners or leased.

3.When an unincorporated business is changed to a partnership, or when a partnership changes members.

B.In the above cases, where the business is to be continued, but under a different form of ownership (under §§ 58.5(A)(1) and (2) of this Part) a new application must be made, and a new permit or certificate of authority will be issued.

C.The original permit or certificate of authority will be continued, but must be corrected in the following cases:

1.Change of business or trade name (but no change in ownership).

2.Change of business location, or of mailing address.

D.In the above cases, the original permit or certificate of authority should be returned to the Tax Division for correction, but the same registration number will be reissued, and a corrected permit or certificate will be given the registrant without further application.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-08-03 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 08/03/2018

280-RICR-20-70-59 Qualifying Research and Development Firms

280-RICR-20-70-59 § 59.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18. This regulation provides for exemption from sales tax for qualifying research and development firms' equipment.

History

Technical Revision — effective from 2022-01-04 to current
Periodic Refile — effective from 2022-01-04 to 01/04/2022
Amendment — effective from 2018-08-03 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 08/03/2018

280-RICR-20-70-59 § 59.2 Authority

History

Technical Revision — effective from 2022-01-04 to current
Periodic Refile — effective from 2022-01-04 to 01/04/2022
Amendment — effective from 2018-08-03 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 08/03/2018

280-RICR-20-70-59 § 59.3 Application

The terms and provisions of these rules and regulations shall be liberally construed to permit the Department of Revenue to effectuate the purposes of R.I. Gen. Laws § 44-18-1 and other applicable state laws and regulations.

History

Technical Revision — effective from 2022-01-04 to current
Periodic Refile — effective from 2022-01-04 to 01/04/2022
Amendment — effective from 2018-08-03 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 08/03/2018

280-RICR-20-70-59 § 59.4 Severability

History

Technical Revision — effective from 2022-01-04 to current
Periodic Refile — effective from 2022-01-04 to 01/04/2022
Amendment — effective from 2018-08-03 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 08/03/2018

280-RICR-20-70-59 § 59.5 Definitions

A."Qualifying firm" means a business for which the use of research and development equipment is an integral part of its operations.

B."Equipment" means scientific equipment, computers, software and related items.

C."Research and development" means experimental or laboratory activity that has as its ultimate goals the development of new products, the improvement of existing products, the development of new uses for existing products or the development or improvement of methods for producing products. Research and development does not include testing or inspection of materials or products for quality control purposes, efficiency surveys, management studies, consumer surveys or other market research, advertising or promotional activities, or research in connection with literary, historical or similar projects.

History

Technical Revision — effective from 2022-01-04 to current
Periodic Refile — effective from 2022-01-04 to 01/04/2022
Amendment — effective from 2018-08-03 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 08/03/2018

280-RICR-20-70-59 § 59.6 Exemption/Burden of Proof

A.The Rhode Island sales and use tax law provides an exemption from the sale, storage, use or other consumption of equipment to the extent used for research and development by a qualifying firm.

B.A taxpayer seeking exemption must establish by its records the extent to which the equipment for which it seeks exemption is used in research and development.

History

Technical Revision — effective from 2022-01-04 to current
Periodic Refile — effective from 2022-01-04 to 01/04/2022
Amendment — effective from 2018-08-03 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 08/03/2018

280-RICR-20-70-59 § 59.7 Certificate

A.A qualifying firm may purchase equipment for the purpose of being used for research and development tax free by furnishing its suppliers with a research and development exemption certificate in the format attached. Provided, however;

1.If the equipment purchased partially qualifies for exemption and the qualifying firm knows the extent of the partial exemption, the qualifying firm shall give the vendor a Research and Development Exemption Certificate and file a use tax return with the Division of Taxation and pay a use tax based on the percentage of the nonexempt use of the equipment, or

2.If the equipment purchased partially qualifies for exemption and the qualifying firm does not know the extent of the partial exemption, it shall give the vendor a Research and Development Exemption Certificate and file a use tax return with the Division of Taxation and pay use tax on the entire cost of the equipment.

B.If a qualifying firm files a use tax return under the provisions of §§ 59.7(A) or (B) of this Part above, it shall, twenty-four months thereafter, analyze the equipment usage to determine the actual exempt usage for that equipment. This shall be compared to the original estimate made and any balance due or credit due the qualifying firm must be reported on the next month's use tax return. Any balance due or credit due shall bear interest from time of original purchase.

History

Technical Revision — effective from 2022-01-04 to current
Periodic Refile — effective from 2022-01-04 to 01/04/2022
Amendment — effective from 2018-08-03 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 08/03/2018

280-RICR-20-70-60 Refundable Deposit for Disposal of Used Batteries

280-RICR-20-70-60 § 60.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18. This regulation provides for sales tax liability for the refundable deposit for disposal of used batteries.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-08-03 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 08/03/2018

280-RICR-20-70-60 § 60.2 Authority

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-08-03 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 08/03/2018

280-RICR-20-70-60 § 60.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-08-03 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 08/03/2018

280-RICR-20-70-60 § 60.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-08-03 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 08/03/2018

280-RICR-20-70-60 § 60.5 Refundable Deposit for Disposal of Used Batteries

Refundable battery deposits collected by a retailer and held in trust for the state in accordance with R.I. Gen. Laws § 23-60-3 are not part of the selling price of an item sold and therefore are not subject to the tax provided that such charge is separately stated on the invoice.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-08-03 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 08/03/2018

280-RICR-20-70-61 Reports, Payments and Penalties

280-RICR-20-70-61 § 61.1 Purpose

This regulation implements R.I. Gen. Laws Chapter 44-18. This regulation provides for reports, payments and penalties for taxpayers who remit sales and use tax.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-08-03 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 08/03/2018

280-RICR-20-70-61 § 61.2 Authority

This regulation is promulgated pursuant to R.I. Gen. Laws Chapter 44-18, as amended, R.I. Gen. Laws §§ 44-1-4, 44-18-1 and 44-19-33. Additionally these regulations have been prepared in accordance with the requirements of R.I. Gen. Laws Chapter 42-35 - Rhode Island Administrative Procedures Act.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-08-03 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 08/03/2018

280-RICR-20-70-61 § 61.3 Application

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-08-03 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 08/03/2018

280-RICR-20-70-61 § 61.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-08-03 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 08/03/2018

280-RICR-20-70-61 § 61.5 Reports, Payments and Penalties

A.Monthly reporting. Every retailer, except as noted below, shall file with the Tax Administrator on or before the 20th day of each month, a report on forms to be obtained from the Tax Division, covering sales for the previous calendar month.

B.Quarterly reporting. Any taxpayer, now required to file monthly returns under the Rhode Island Sales and Use Tax Act, may apply to the Tax Administrator for permission to file a quarterly return and remittance in lieu of a monthly return provided the taxpayer qualifies. To qualify, filing records will have to substantiate the fact that the taxpayer's sales and use tax liability, for the past six (6) consecutive months immediately preceding the date of the application, has averaged less than $200 per month. It should be clearly understood that quarterly filing cannot be commenced until official permission from the Tax Administrator is received in writing.

C.When the application for such quarterly filing has been approved, the returns will be made on or before the last day of July, October, January and April of each year for the preceding three (3) months' period. However, there are certain conditions that could cause revocation of the authorization by the Tax Administrator.

1.In the event that the taxpayer filing the return on a quarterly basis becomes delinquent in either the filing of the return or the payment of the taxes due thereon; or

2.In the event that the liability of a taxpayer, who has been authorized to file returns and to make payments on a quarterly basis, exceeds six hundred dollars ($600) in sales and use taxes for any subsequent quarter, or

3.In the event that the Tax Administrator determines that any such quarterly filing or return any payment of tax due thereon would unduly jeopardize the proper administration of the Rhode Island Sales and Use Tax Law the Tax Administrator may, at any time, revoke such authorization.

D.Seasonal reporting. Upon application to the Tax Administrator a registrant operating a seasonal business may be relieved of reporting for the month or months during which the business is inactive.

E.No extension of time for reporting shall be valid except when granted in writing by or under authority of the Tax Administrator.

F.Use tax returns shall be subject to the same provisions as to filing and as to extension of time as contained herein.

G.Payment. Remittances covering the sales or use tax liability reported shall accompany the sales or use tax return. Sales and use taxes will be considered delinquent and interest as provided by law will be charged, if payment is not received by the date the return is due.

H.Interest and penalties. Interest at the rate provided by law will be charged on all liability not paid at the time when required to be paid.

I.Omission to pay within the time noted due to negligence or intentional disregard of the law or this regulation will result in a penalty of 10% of the amount of tax found to be due. Omission to pay within the time noted due to fraud or intent to evade the tax will result in a penalty of 50% of the amount of tax found to be due. Such 50% penalty is in addition to the 10% penalty and interest noted above.

J.If the Tax Administrator decides it is necessary to revoke the authorization to file quarterly in relation to any of the above conditions then the taxpayer will be required to file returns and to pay the tax due on a monthly basis.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2018-08-03 to 01/04/2022
Periodic Refile — effective from 2001-12-20 to 08/03/2018

Chapter 40 Division of Municipal Finance

Subchapter 00

280-RICR-40-00-1 Standards and Procedures for Property Tax and Fiscal Disclosure for Rhode Island Cities and Towns

280-RICR-40-00-1 § 1.1 AUTHORITY AND PURPOSE

1.1.1AUTHORITY FOR REGULATIONS

The following rules and regulations concerning the standards and procedures for property tax and fiscal disclosure for Rhode Island cities and towns ("Rules and Regulations") are promulgated by the Division of Municipal Finance ("Division") in accordance with R.I. Gen. Laws § 44-35-4.

1.1.2PURPOSE

These Rules and Regulations are intended to provide cities and towns with standards and procedures to follow when preparing the “Proposed Property Tax Rate” and “Adjusted Current Property Tax Rate”.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2017-11-06 to 01/04/2022
Amendment — effective from 2007-06-21 to 11/06/2017
Periodic Refile — effective from 2001-12-19 to 06/21/2007

280-RICR-40-00-1 § 1.2 DEFINITIONS

A.For the purposes of these Rules and Regulations, the following terms shall have the following meaning:

1.“Adjusted Current Property Tax Rate” means the estimated property tax rate that would be necessary in the next fiscal year to raise the maximum levy authorized by R.I. Gen. Laws § 44-5-2.

2.“Chief Elected Official” means the person in the respective municipality who holds the highest elected municipal office

3.“Division” means the Division of Municipal Finance

4.“First Hearing for the Purpose of Adopting the Town or City Budget” means that hearing which presents a citizen with the last opportunity to have a recommendation for change in the proposed budget implemented. For communities, which hold a financial town meeting, the first hearing for the purpose of adopting the budget would be the financial town meeting. Where home rule charters require either one or a series of budget adoption hearings, first hearing would be the first in the series. First hearing does not apply to hearings required on proposed budgets by budget commissions, mayor, manager, city or town councils, or any other local authority. In these cases, current procedures prescribed by other state law, home rule charters or local ordinances would be followed with no additional requirements from this Act or Procedures during the process.

5.“Net Assessed Values” means the total values of real property, personal property and motor vehicles excise value, less personal property exemption.

6.“Official” means the chief executive officer who is primarily responsible for the conduct of the municipality’s governmental affairs such as a mayor, administrator, first warden, or town council president.

7.“Proposed Property Tax Levy” means the estimated revenue which is to be derived from the assessed values of real property, personal property and motor vehicle excise values, for support of the proposed municipal budget. Estimated revenue shall include adjustments for the municipality's historical rate of tax collections.

8.“Proposed Property Tax Rate” means the estimated property tax rate that is proposed by a town or city to support its operating budget for the town or city's next fiscal year. The proposed property tax rate represents the city or town’s best estimate of the actual tax rate that property owners would pay.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2017-11-06 to 01/04/2022
Amendment — effective from 2007-06-21 to 11/06/2017
Periodic Refile — effective from 2001-12-19 to 06/21/2007

280-RICR-40-00-1 § 1.3 PROCEDURES

A.Procedures for Proposed Property Tax Rate Changes

1.No later than fifteen (15) business days prior to the first hearing for the purpose of adopting the town or city budget, the Chief Elected Official of each city or town shall submit to the Chief of the Division of Municipal Finance the notice of proposed property tax rate change in the form provided for in R.I. Gen. Laws § 44-35-6.

2.At the time of filing the Notice of Proposed Property Tax Rate Change, it is likely that net assessed values for the proposed property tax levy will not have been certified by the city or town assessor. In this case, assessed values shall be estimated and the following documentation shall support the Notice of Proposed Property Tax Rate Change:

a.Estimated increase (decrease) in real property value for the assessment year

b.Estimated increase (decrease) in real property tax exemptions for the assessment year.

c.Estimated increase (decrease) in personal property value for the assessment year

d.Estimated increase (decrease) in personal property exemptions for the assessment year.

e.Estimated increase (decrease) in motor vehicle excise values for the assessment year.

f.Estimated local non-property revenue.

g.Estimated state revenue to directly offset the proposed municipal budget

h.Estimated federal revenue to directly offset the proposed municipal budget.

i.All other estimated revenue (specify) to directly offset the proposed municipal budget

j.Percentage of current year property tax collections for the three most recent years (specify which years).

3.Within five (5) business days of receipt of the Notice of Proposed Property Tax Rate Change and required documentation, the Office of Municipal Finance will advise the Chief Elected Official whether the notice complies with state statutory standards for tax rate change notification.

B.Procedures for Proposal to Amend Town or City Budgets

C.Within five (5) business days of the receipt of the Notice of Proposal to Amend (Town or City) Budget, the Office of Municipal Finance will notify the Chief Elected Official whether it agrees with the methods upon which the notice was computed. The Chief Elected Official shall arrange for the above Notice of Proposal to Amend the Town or City Budgets to be published in a newspaper of general circulation at least ten (10) calendar days prior to formal action taken by a town or city to amend its adopted budget as prescribed by R.I. Gen. Laws § 44-35-8.

D.Procedures for Publication of Town and City Budget Summaries

1.At least ten (10) calendar days prior to the financial town meeting or, for towns and cities without town meetings, the first hearing on the budget for the purpose of adopting the budget, the chief elected official in each town and city shall cause to be published a budget summary in a newspaper of general circulation in the town or city. The budget summary shall set out proposed expenditures by department or function and receipts by source for the proposed budget year, and comparisons of these with estimated expenditures and receipts for the current budget year. The published budget summary shall be in the form prescribed by R.I. Gen. Laws § 44-35-7.

E.In complying with any of the publication requirements set forth in R.I. Gen. Laws Chapter 44-35, the Chief Elected Official shall not modify any publication format which is prescribed, however, he/she may expand said format to provide additional documentation or explanation.

History

Periodic Refile — effective from 2022-01-04 to current
Amendment — effective from 2017-11-06 to 01/04/2022
Amendment — effective from 2007-06-21 to 11/06/2017
Periodic Refile — effective from 2001-12-19 to 06/21/2007

280-RICR-40-00-2 Rules and Regulations for the Implementation of the Triennial Updates and Revaluations to Commence in the Year 2000

280-RICR-40-00-2 § 2.1 General

A.These materials have been prepared by Municipal Affairs - Tax Equalization section to assist local city/town tax assessors to plan and carry out the triennial property updates required by R.I. Gen. Laws § 44-5-11. It must be noted that the enclosed rules and regulations will help to define the requirements for the property valuation updates. The rules and regulations shall include, but not be limited to the following:

1.An analysis of sales

2.A rebuilding of land value tables

3.A rebuilding of cost tables of all improvement items

4.A rebuilding of depreciation schedules

5.Market comparison approach to value

6.Income approach to value when applicable

B.In order to develop a carefully prepared plan to effectively and efficiently update property values; current assessment levels, assessment uniformity, market and cost trends should be analyzed. A proper plan is needed so the tax assessor can ascertain what exactly should be done in their city/town so that the property valuation update is completed on time, within budget and with values that are both accurate and legally defendable. This plan should evaluate and analyze:

The assessment administration system presently in use

2.Whether the level and uniformity of property assessments are within standards.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2002-09-30 to 01/04/2022
Adoption — effective from 2002-09-30 to 09/30/2002

280-RICR-40-00-2 § 2.2 Property Valuation Plan Update

A.After identifying the components of the valuation update program and the specific tasks necessary to complete those components, the assessor needs to evaluate the resources, in-house personnel and professional assistance, required to carry out the program in a timeframe consistent with the tax billing cycle. The assessor should then prepare a project plan. Every plan at a minimum should address:

1.The valuation methods being employed for each class of property: residential, commercial and industrial, utilities, and vacant land.

2.The in-house personnel and/or professional appraisal assistance required to complete the property valuation update.

3.The work schedule and projected date of completion.

4.The availability of adequate funds.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2002-09-30 to 01/04/2022
Adoption — effective from 2002-09-30 to 09/30/2002

280-RICR-40-00-2 § 2.3 Outside Professional Service Contracts

The assessor may select from a wide array of appraisal, consulting or other valuation service companies to help with the property valuation update. If the plan includes the purchase of professional assistance, an appropriate contract must be prepared and local purchasing policies must be followed. (a sample RFP is enclosed)

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2002-09-30 to 01/04/2022
Adoption — effective from 2002-09-30 to 09/30/2002

280-RICR-40-00-2 § 2.4 Submission of Plan

A.The assessor shall submit their property valuation update plan to Municipal Affairs. The review will focus on whether the overall approach is reasonable and likely to achieve full and fair market values. When planning the triennial property valuation update, a major question to be answered is whether to perform the update “in house” utilizing 100% current staff or to hire outside professional appraisal assistance. The extent to which outside services are to be used should be fully explained.

B.After the above points have been carefully analyzed, a key factor to be determined is the appropriation of adequate resources including money, personnel, timing, and supervision. At this juncture, the establishment of a realistic timetable is necessary

C.Upon completion of the property valuation update, it is essential to provide the public ample time and the necessary information to review their respective assessments, comment on them and if necessary to dispute them via an appropriate appeal process.

D.A property valuation system should have the following minimum capabilities:

1.The ability to maintain the updated data in an automated system.

2.Capability to update these values when and if necessary.

3.Ability to meet minimum standards for assessment administration

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2002-09-30 to 01/04/2022
Adoption — effective from 2002-09-30 to 09/30/2002

280-RICR-40-00-2 § 2.5 Analysis of Property Assessment Administration System

The system must have the capability to accurately collect and analyze certain property descriptive and market data that serves as the foundation for the development of value estimates

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2002-09-30 to 01/04/2022
Adoption — effective from 2002-09-30 to 09/30/2002

280-RICR-40-00-2 § 2.6 Tax Maps

Every city/town should have adequate tax maps so that the assessor has a complete parcel inventory and detailed land area information. Without adequate tax maps assessors will not be able to precisely analyze market influences on the value of land, such as size, shape, frontage and depth, nor develop a land valuation system based on accurate measures of market value such as square footage, front footage and site. Without adequate land information, the goal of uniform assessments cannot be attained.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2002-09-30 to 01/04/2022
Adoption — effective from 2002-09-30 to 09/30/2002

280-RICR-40-00-2 § 2.7 Analysis of Property Assessments

A.There are two basic ways to evaluate and/or analyze existing assessments: first, by looking at the assessment level and second, by looking at the uniformity of the assessments. Assessment level or sales ratio analysis refers to the degree to which the overall ratio of assessed value to market value approximates the full value of the property class being analyzed. Market value is basically that amount a property will sell for given a willing buyer and a willing seller both acting in their own self-interest; the property being on the market for a reasonable time; and neither party acting under duress.

B.Assessment uniformity is the degree to which properties within a class, i.e., single family homes are assessed at equal percentages of market value. By performing an assessment/sales ratio study, the assessors can measure the level and uniformity of their assessments. Assessors should refer to IAAO standards when performing this study

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2002-09-30 to 01/04/2022
Adoption — effective from 2002-09-30 to 09/30/2002

280-RICR-40-00-2 § 2.8 Monitoring Sales Activity

A.It is necessary for the validity of the assessment/sales ratio that all sales be analyzed carefully. Therefore, the assessor should first obtain as much information as possible about the circumstances of each sale. They need to ascertain if the sale was a true “arms-length” transaction, and that the price paid was the true price. If the price included anything such as discounted and/or non-market financing arrangements, personal property or other items; then the sales price should be adjusted to take these things into account. Local real estate brokers and detailed questionnaires sent to buyers and/or sellers are useful tools to help determine the true market value for a property. Whenever possible, all sold properties should be inspected. This will enable the assessor to verify existing data, monitor property renovations and identify market trends within the community.

B.Once the arms-length sales have been identified and verified, the assessor should perform a statistical analysis to determine both the assessment/sales ratio and the uniformity of assessments. During the triennial property update, all sales that have occurred since the last revaluation and/or property valuation update should be analyzed.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2002-09-30 to 01/04/2022
Adoption — effective from 2002-09-30 to 09/30/2002

280-RICR-40-00-2 § 2.9 Conducting the Ratio Study

A.The assessment/sales ratio (ASR) and the measure of uniformity better known as the coefficient of dispersion (COD) about the median should be calculated for each class of property for which there are sufficient sales; and should be calculated for the city/town as a whole. The above measure for each city/town should conform to International Association of Assessing Officers (IAAO) standards upon completion of the property valuation update.

B.A comparison of each classes’ Assessment Sales Ratio and Coefficient of Dispersion with the city/town wide ASR and COD may point out assessment inequities.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2002-09-30 to 01/04/2022
Adoption — effective from 2002-09-30 to 09/30/2002

280-RICR-40-00-2 § 2.10 Conducting the Ratio Study

The assessment/sales ratio (ASR) and the measure of uniformity better known as the coefficient of dispersion (COD) about the median should be calculated for each class of property for which there are sufficient sales; and should be calculated for the city/town as a whole. The above measure for each city/town should conform to International Association of Assessing Officers (IAAO) standards upon completion of the property valuation update.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2002-09-30 to 01/04/2022
Adoption — effective from 2002-09-30 to 09/30/2002

280-RICR-40-00-2 § 2.11 Data Analysis

A.Depending on the valuation system and methods utilized, the assessor should collect sufficient cost and market data:

1.Current cost data from firms like Marshall - Swift, etc., and local building costs where available

2.Current sales data, including any information obtainable which could influence the accuracy and validity of these sales.

3.Current income, expense and vacancy data, which may be obtained from questionnaires or by interviews with lessees, lessors or agents.

4.Data relative to the development of capitalization rates, financing terms, recapture rates, yield requirements and local debt coverage ratios.

B.Some of the data analysis methods discussed above require the full cooperation of the general public (not mandated by law) so it is unknown at this time whether those methods can or will be utilized by the assessor. The collection and maintenance of current and accurate property inventory data is critical to the development of uniform, fair market values.

C.The best time to begin such a program is immediately after a comprehensive city/town wide revaluation (full measure and list) has been completed.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2002-09-30 to 01/04/2022
Adoption — effective from 2002-09-30 to 09/30/2002

280-RICR-40-00-2 § 2.12 Commercial and Industrial Property

A.Commercial and Industrial property should be reviewed and analyzed very carefully. If possible at least 2 of the 3 approaches to value should be developed:

1.Cost - The application of a cost trending multiplier (from Marshall-Swift, etc.) may be considered for updating building and site values with proper allowances given for depreciation.

2.Income - All rent schedules, income and expense information and capitalization rates must reflect current market conditions. The necessary information (hopefully) can be obtained from a questionnaire or by interviews with taxpayers or third party sources.

3.Market - Recent Commercial and Industrial sales may be analyzed and units of value developed from comparable sales. Such unit values may then be applied to comparable non-sold properties. Sales from similar and/or surrounding communities with comparable property bases and market influences may be used for analysis purposes as well.

B.The assessor shall provide documentation to support the property update program. Such documentation should include sales ratio studies, cost and depreciation schedules, land valuation schedules, income and expense analysis (if available), field review documentation and other information necessary to provide for more accurate property values.

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2002-09-30 to 01/04/2022
Adoption — effective from 2002-09-30 to 09/30/2002

280-RICR-40-00-2 § 2.13 Public Disclosure

A.Commercial and Industrial property should be reviewed and analyzed very carefully. If possible at least 2 of the 3 approaches to value should be developed:

1.Cost - The application of a cost trending multiplier (from Marshall- Swift, etc.) may be considered for updating building and site values with proper allowances given for depreciation.

2.Current sales data, including any information obtainable which could influence the accuracy and validity of these sales.

a.Notification The assessor should provide notice of a property valuation update program to all taxpayers by a comprehensive public information plan. This information plan could use the news media, the local cable access programs and public meetings in general.

b.Review The assessor should provide adequate opportunity for taxpayers to inquire about their proposed new values. The taxpayer should be afforded the ability to review their property record information. The assessor must provide adequate opportunity prior to finalizing valuations and tax billing, either during or after regular office hours for taxpayer inquiries regarding the proposed new values. An appropriate appeal process must be available for the taxpayer

History

Periodic Refile — effective from 2022-01-04 to current
Technical Revision — effective from 2002-09-30 to 01/04/2022
Adoption — effective from 2002-09-30 to 09/30/2002

280-RICR-40-00-3 Access to Public Records Regulation

280-RICR-40-00-3 § 3.1 Purposes

A.The Purposes of this Regulation are:

1.To establish a Regulation to implement R.I. Gen. Laws §§ 38-2-1, et seq. and 42-35-2(a) relating to access to public records maintained by the Division;

2.To provide the public and Division personnel with a Regulation which sets forth the rules and procedures applicable to access to public records maintained by the Division.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-11-04 to 01/04/2022

280-RICR-40-00-3 § 3.2 Authority

This Regulation is promulgated pursuant to R.I. Gen. Laws §§ 38-2-1, et seq. (“Access to Public Records”) and 42-35-2(a).

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-11-04 to 01/04/2022

280-RICR-40-00-3 § 3.3 Application

These rules and regulations shall be liberally construed to permit the Division of Municipal Finance to effectuate the purposes of R.I. Gen. Laws §§ 38-2-1 et seq. and 42-35-2(a).

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-11-04 to 01/04/2022

280-RICR-40-00-3 § 3.4 Severability

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-11-04 to 01/04/2022

280-RICR-40-00-3 § 3.5 Policy

The Division recognizes both the public’s right to access public records and the individual’s right to dignity and privacy. It is the Division’s policy to facilitate public access to all public records that may be disclosed in accordance with R.I. Gen. Laws § 38-2-1 et seq. It is also the policy of the Division to make all public records in the Division’s possession be available for public inspection and copying consistent with applicable state or federal law, unless otherwise prohibited by a court of competent jurisdiction.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-11-04 to 01/04/2022

280-RICR-40-00-3 § 3.6 Procedure for Requesting Public Records

A.Except as provided in § 3.7 of this Part below, a written request to inspect or copy public records should be sent to the Division of Municipal Finance or, in the alternative, to the Division of Legal Services at the Department of Revenue. Written requests may be mailed, hand delivered, e-mailed or sent via facsimile. Hand delivered requests may be made during the Division’s regular business hours. It is suggested, but not required, that requests be submitted on the form provided by the Division, which is available at the Division or online at http://www.municipalfinance.ri.gov. To assure that the Division can respond to the request as efficiently and as completely as possible, the request should identify and describe the records being requested with as much specificity as possible. A written record of all requests will be maintained within the Division of Municipal Finance.

B.If the description of records being requested is not sufficient to allow the Division to identify and locate the requested records, the Division will notify the person requesting such records that additional information is needed to properly respond to the request.

C.Upon receipt of a request for records, the Division will mark on the face of a written request the date the request was received. The Division will permit the inspection or copying of the requested records within ten (10) business days after receiving the written request.

D.If the inspection or copying is not permitted within ten (10) business days of receipt, the Division shall forthwith explain in writing the need for additional time to comply with the request. In such cases the Division may have up to an additional twenty (20) business days to comply with the request if it can demonstrate that the voluminous nature of the request, the number of requests for records pending, or the difficulty in searching for and retrieving or copying the requested records, is such that additional time is necessary to avoid imposing an undue burden on the Division.

E.A written request is not required to be submitted for public information available under R.I. Gen. Laws § 42-35-2 or for other documents prepared for or readily available to the public such as:

1.rules and written statements of policy or interpretations formulated, adopted, or used by the agency; or

2.final orders, decisions, and opinions;

3.Non-written request for public records are subject to the same timelines as written requests. Reasonable time must be given to locate, copy and send the requested records.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-11-04 to 01/04/2022

280-RICR-40-00-3 § 3.7 Hours of Inspections

When a request is made to inspect public records (as opposed to obtain copies), the requester will be advised when the records are available and he/she can then make an appointment to inspect those documents at the Division between the hours of 8:30 a.m. and 3:30 p.m. Monday through Friday. The time frame for the Division to respond to requests to inspect public records is the same as the time frame applicable to responding to requests for copies of public records as set forth above in § 3.6(D) of this Part above.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-11-04 to 01/04/2022

280-RICR-40-00-3 § 3.8 Fees

A.Official publications which the Division prepares in the discharge of its duties to inform the public on matters of public interest will be furnished free of charge when available.

B.The Division will supply one (1) copy of any of its Rules and Regulations to an individual requesting them free of charge. Rules and Regulations of the Division are on file at the Office of the Secretary of State and certified copies thereof may be obtained from that office. Rules and Regulations of the Division are also available online from the Secretary of State’s website.

C.The Division charges a fee, as provided in R.I. Gen. Laws § 38-2-4, for copying and/or search and retrieval of requested documents consistent with applicable state law. The Division charges $0.15 per copied page; provided however, if the response to the request consists of twenty (20) or fewer copied pages, no fee will be charged. The Division reserves the right to require a deposit of the estimated costs if the estimated costs are $50.00 or more.

D.The cost of copying and search and retrieval as provided in § 3.8(C) of this Part above must be paid in advance of or at the time of delivery or inspection of the requested documents.

E.Division personnel or, where applicable, an outside copy service, will make copies of requested records. The Division does not have a copy machine available for use by the public to make copies.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-11-04 to 01/04/2022

280-RICR-40-00-3 § 3.9 Supervision of Inspections

A.The inspection of public records must be accomplished in a manner which will provide for general supervision by authorized Divisional staff. This is necessary to prevent the misplacement or unauthorized removal of records or any other action which may impair the integrity of the public record.

C.All personnel responsible for responding to requests for access to public records shall be made aware, by their supervisors, of the provisions of this regulation and the procedures to be followed when an access to public records request is made. Division personnel having any questions regarding the procedures to be followed should direct inquiries to:

1.The person in charge of the Division or unit within the Division responsible for the activity/function to which the public record being requested relates; or;

2.In the event that the public record cannot be readily categorized as falling under the responsibility of a specific Division or unit within the Division, the request should be directed to the Division of Legal Services which will serve as a resource in matters relating to the public's access to public records.

History

Periodic Refile — effective from 2022-01-04 to current
Adoption — effective from 2018-11-04 to 01/04/2022