Rhode Island Adds Requirements for Remote Retailers
Rhode Island Gov. Gina Raimondo has signed the 2017-18 fiscal year budget bill, which makes various changes to the sales and use tax laws. Specifically, the legislation affects certain out-of-state retailers using in-state software, the taxation of seeds and plants used to grow food and food ingredients, tax exempt certificates, a taxpayer’s sale of assets, criminal penalties, and remote data manipulation.Out-of-State Retailers Using In-State SoftwareThe legislation states that the existence and/or presence of certain out-of-state retailer’s, referrer’s, and facilitator’s in-state software on the devices of in-state customers constitutes physical presence (and thus creates nexus) under Quill Corp. v. North Dakota, 504 U.S. 298 (1992). As a result, new requirements are established for the retailers, referrers, and facilitators that in the immediately preceding calendar year either:had gross revenue from the sale of tangible personal property, prewritten computer software delivered electronically or by load and leave, and/or taxable services delivered into Rhode Island of at least $100,000; orsold tangible personal property, prewritten computer software delivered electronically or by load and leave, and/or taxable services for delivery into Rhode Island in 200 or more separate transactions.“In-state software” is defined as software used by in-state customers on their computers, smartphones, and other electronic and/or communication devices (including information or software such as cached files, cached software, “cookies,” or other data tracking tools) that are stored on property in Rhode Island or distributed in the state for the purpose of purchasing tangible personal property, prewritten computer software delivered electronically or by load and leave, and/or taxable services.Under the new requirements, certain out-of-state retailers must either:register in Rhode Island for a retail sales permit and collect/remit sales and use tax on all taxable sales into the state, orcomply with various notice and reporting requirements.In addition, notice requirements are also created for certain referrers that receive more than $10,000 from fees, commissions, and/or other compensation paid from retailers for listing and/or advertising for sales of tangible personal property, prewritten computer software delivered electronically or by load and leave, and/or taxable services. Furthermore, certain retail sale facilitators must submit annual reports to the Rhode Island Division of Taxation concerning the retailers they did business with during the previous year.Exemptions exist for referrers and retail sale facilitators that provided eithera copy of the retailer’s Rhode Island sales tax permit or its resale certificate, orevidence of a fully completed Rhode Island or Streamlined agreement sales and use tax exemption certificate.Failure to comply with any of the new requirements will result in a penalty of $10 for each failure, but not less than a total penalty of $10,000 per calendar year. Each instance of failure to comply will constitute a separate violation for purposes of calculating the penalty. The penalty is also in addition to any other applicable penalties allowed by law.Seeds and PlantsGross receipts from the sale, storage, use or other consumption in Rhode Island of seeds and plants used to grow food and food ingredients (not including marijuana seeds or plants) is exempt from sales tax. The definition of “food and food ingredients” is also amended to include “seeds and plants used to grow food and food ingredients” and exclude “marijuana seeds or plants.”Certificates of ExemptionThe legislation clarifies that the $25 fee that must be paid by organizations applying for a certificate of exemption from the Rhode Island sales and use tax applies to charitable, educational, and religious organizations. In addition, the legislation states that certificates of exemption will be valid for four years from the date of issue. All certificates issued prior to July 1, 2017, will expire July 1, 2021.Sale of AssetsThe asset transfer or sale notice requirements are revised to:exempt debtors in possession in bankruptcy;specify that the notice must come in the form of a request for a letter of good standing from the Rhode Island Tax Division; andforce taxpayers to file any and all sales tax returns when the notice is provided.Criminal PenaltiesThe sales and use tax criminal penalties for noncompliance are increased to $25,000 and/or five years of imprisonment (previously $10,000 and/or one year of imprisonment), and made applicable to the willful failure to remit any tax to the state that was collected from a customer.Remote Data ManipulationA person may not knowingly suppress sales by engaging in remote data manipulation, either as the sender or the receiver of the information. “Remote data manipulation” means and includes, but is not limited to, sending, transmitting, transporting, or receiving through any electronic means any and all transaction data to a remote location, whether or not that location is in Rhode Island or outside the state or the United States, for the purpose of manipulating and/or altering the data in any way, whether or not the actual manipulation is performed manually or through automated means.Any person who violates is provision will be guilty of a felony and, upon conviction, subject to a fine of up to $50,000 and/or five years of imprisonment. In addition, a person who violates this provision will be liable to the state forall taxes, interest, and penalties due as the result of the person’s remote data manipulation; andall profits associated with the person’s remote data manipulation.Ch. 302 ( H.B. 5175), Laws 2017, effective July 1, 2017Login to read more tax news on CCH® AnswerConnect or CCH® Intelliconnect®.Not a subscriber? Sign up for a free trial or contact us for a representative.