Article

Rhode Island Legislative Changes – What You Need to Know Now

Rhode Island recently enacted its 2020 fiscal budget bill, which made many changes to the Rhode Island tax laws.  Some of the changes will be discussed in a later article as they do not go into effect until October 1, 2019.

Contact Us
< Back to Insights
Insights  <  Rhode Island Legislative Changes – What You Need to Know Now

Rhode Island recently enacted its 2020 fiscal budget bill, which made many changes to the Rhode Island tax laws.  Some of the changes will be discussed in a later article as they do not go into effect until October 1, 2019.

Rhode Island recently enacted its 2020 fiscal budget bill, which made many changes to the Rhode Island tax laws. Some of the changes will be discussed in a later article as they do not go into effect until October 1, 2019. This article will highlight several key tax changes included in this year’s budget bill, while also addressing a number of changes included in last year’s budget bill that became effective July 1, 2019.

Rhode Island has enacted a law that requires some remote sellers, marketplace facilitators, and referrers to now register with the State of Rhode Island Division of Taxation and collect and remit sales and use taxes, provided they meet certain thresholds. The new law, effective July 1, 2019, follows South Dakota v. Wayfair, Inc., a significant U.S. Supreme Court case decided in 2018. Prior to the new legislation, certain online retailers were only required to notify the Rhode Island Division of Taxation and customers regarding certain purchases from the remote seller that might be subject to sales and use tax. The statute did not, however, impose an actual duty to collect or remit any sales or use tax that might be due.

Rhode Island now provides a process for taxpayers to report and pay Rhode Island taxes as part of the federal partnership audit regime. Federal legislation was enacted in 2015 to provide for a new centralized audit regime for partnerships. If a federal audit resulted in adjustments, state return(s) would potentially need to be corrected to reflect the federal adjustments. Tax professionals and taxpayers alike looked to the individual states for guidance on how to report federal adjustments at the state level. Under a recently enacted law, effective July 1, 2019, Rhode Island has provided a process whereby when a federal adjustment occurs, within 180 days of receiving notification of final federal changes, partners must file the required supplemental Rhode Island return and make any Rhode Island payments necessary.

Pass-through entities may now elect to pay an entity-level Rhode Island tax on net income at the highest personal income tax rate of 5.99%. The election applies to tax years beginning January 1, 2019 and later. If the election is made, the entity will show on Schedule K-1 the amount of Rhode Island tax paid at the entity level on a pro rata basis to each partner, member or shareholder. The amount of Rhode Island entity-level tax that reduced federal net income will be included by the partner, member or shareholder as a Rhode Island addback modification in calculating their respective Adjusted Rhode Island Taxable income. After the Rhode Island tax liability is determined, each partner, member or shareholder will receive a Rhode Island personal income tax credit equal to 100% of their respective share of the tax payment made by the pass-through entity. It should be noted that the Internal Revenue Service has challenged the validity of similar state statutes intended as a workaround to certain tax changes contained in the federal Tax Cuts and Jobs Act.

Beginning July 1, 2019, Rhode Island personal income tax withholding will be required on video lottery terminal game and casino winnings. The withholding rate used by the Division of State Lottery will be 5.99%. Rules will be consistent with federal rules, regulations, and procedures related to federal Form W-2G.

Current Rhode Island Law lists each service that is subject to sales and use tax, along with the applicable code (also known as the North American Industry Classification System (NAICS) code.) This list previously referred to the NAICS codes as of 2007. Newly enacted legislation will now use NAICS codes of 2017 for this section. The newly enacted legislation did not change any of the services that were previously subject to tax but made clearer which types of services are includible in the listing. It also clarifies that the following 2017 codes apply: 561611, 561612 and 561613, which are related to investigation, guard and armored car services. Previously, the 2007 code referenced 56161 for these services.

There were several changes in miscellaneous taxes and fees.  See table below for details: 

Tax Before 7/1/2019 After 7/1/2019 Special Notes
Gas Tax 33 cents/gallon 34 cents/gallon
Beverage Container Tax 4 cents/case 8 cents/case
Hard-to-Dispose Material Taxes Varies by type double the pre-7/1/2019 tax rate Applies to: Lubricating oils, per quart and per liter; antifreeze, per gallon and per liter; organic solvents, per gallon and per liter; and tires

 

Fees Before 7/1/2019 After 7/1/2019 Special Notes
Gas Station Fee $5 per retail gasoline station Eliminated, effective 7/5/2019 The licensing requirement still applies.
Airport Operator Parking Fee $10 per parking space up to $250 Eliminated, effective 7/5/2019 Requirement to obtain, hold and renew a permit still applies.
Motor Carrier License Fee $10 per carrier Eliminated, effective 7/5/2019 The licensing requirement still exists.
Motor Carrier Temporary License Fee $10 per unlicensed carrier Eliminated, effective 7/5/2019 The licensing requirement still exists.
Motor Carrier Decal Fee $10 per vehicle Eliminated, effective 7/5/2019 The device/decal requirement still applies.

 

There are other state changes resulting from this year’s legislative session. These changes will be addressed in a later article as they do not become effective until October 1, 2019 or later.

 

Disclaimer: Any written tax content, comments, or advice contained in this article is limited to the matters specifically set forth herein. Such content, comments, or advice may be based on tax statutes, regulations, and administrative and judicial interpretations thereof and we have no obligation to update any content, comments or advice for retroactive or prospective changes to such authorities. This communication is not intended to address the potential application of penalties and interest, for which the taxpayer is responsible, that may be imposed for non-compliance with tax law. 

Continue the Conversation with Our Team
Get in touch with us.

Contact Us