Most businesses starting in Rhode Island selling a product or offering certain services will need to register for a sales tax permit. This is commonly referred to as a seller’s permit, sales tax license, sales tax number, or sales tax registration.
The sales tax permit is obtained through the Rhode Island Division of Taxation when applying for the Rhode Island Business Application and Registration. In addition to sales tax registration, this form is used for hiring employees.
Check out the rest of this guide to determine who needs a sales tax permit, what products and services are taxable, how to register for a permit, and reporting requirements.
Related: Guide to starting a business in Rhode Island
Who needs a Rhode Island sales tax permit?
A business must register for a sales tax permit in Rhode Island when:
- A business has an economic nexus. Economic nexus means having a physical presence in the state, such as having a physical location like a retail store or office or using a warehouse or fulfillment center to store inventory.
- Type of business entity: sole proprietorship, general partnership, corporation, Limited Liability Company (LLC).
- Selling products and taxable services in Rhode Island (includes occasionally selling items at craft shows, fairs, seminars, shows, etc.).
- Hiring employees that work in Rhode Island (including sales representatives or agents).
- An online business located in Rhode Island is selling taxable products to Rhode Island residents.
- A remote seller who sells over $100,000 in tangible personal property or ships over 200 transactions annually to residents in Rhode Island.
What products and services are taxable in Rhode Island?
Physical products
There are a few exceptions, but almost all physical products are taxable when sold at retail in the state of Rhode Island. Common examples include:
- General merchandise like furniture, appliances, and clothing
- Titled or registered items like vehicles
Certain clothing, non-prepared food, and prescriptions are tax-exempt. The Rhode Island Division of Taxation has a full list of Rhode Island tax exemptions.
In Rhode Island, labor charges are often not subject to sales tax. For example, if you take your car to a mechanic because it needs repair, the mechanic’s labor for fixing the car isn’t taxable. You would pay sales tax on any parts like a new battery or brake pads, but not for the work done to install them.
On the other hand, consider a Rhode Island business that installs custom landscaping features, like patios or garden pathways. In this case, the company would charge for the materials (stones, plants, etc.) and the labor to design and install these features. Although the labor to put these elements in place isn’t directly taxed, the total bill for the project, including both materials and labor, would be subject to sales tax. This is because the labor is part of the overall price of the completed landscaping project.
Digital Products
Digital products are tax-exempt in Rhode Island.
Services
Most services aren’t taxable in Rhode Island, however, there are a few exceptions, some of which include:
- Short-term lodging
- Pet grooming and boarding
How to register for a sales tax permit in Rhode Island
A sales tax permit can be obtained by registering for the Business Application and Registration with the Division of Taxation’s Online Registration Service or mailing in the BAR Form.
Information needed to register includes:
- Type of business entity: sole proprietorship, partnership, corporation, Limited Liability Company (LLC)
- Business name
- Federal Employer Identification Number (FEIN) with the IRS or the owner’s Social Security Number if a sole proprietorship with no employees
- Mailing address
- Name, SSN, Title, and addresses of owners/officers/members
- Description of what products or services are being sold
Sales tax reporting
How is sales tax collected?
When a business sells a taxable product or service, it charges the appropriate sales tax rate to the customer. The business collects this tax, which it then sends to the Rhode Island Division of Taxation.
How much is sales tax in Rhode Island?
The sales tax rate is 7%. There are no additional local taxes. In addition to the sales tax, there is also a 6% hotel tax on the rental of rooms in hotels, motels, or lodging houses.
When are Rhode Island sales tax returns due?
The Rhode Island Division of Taxation will determine a filing frequency based on the expected sales volume, which will be monthly, quarterly, or annually. Generally, a business collecting over $200 in sales taxes each month will file monthly.
Filings are due on the 20th day of the month following the reporting period unless the 20th falls on a weekend or federal holiday, which would move to the next business day.
Even if the business had no sales during the reporting period, a filing indicating no sales is still required.
Rhode Island Sales Tax Permit FAQs
How much does a Rhode Island sales tax permit cost?
In Rhode Island, registering for a sales tax permit requires a $10 fee. Each location must register for a permit.
How long does it take to get a Rhode Island sales tax permit?
Expect 2-3 business days to receive a sales tax permit when registering online or 2-3 weeks when applying by mail.
Do you have to renew a Rhode Island sales tax permit?
The sales tax permit needs to be renewed each year for $10.
How do I get a wholesale license in Rhode Island?
A business can purchase items to resell without paying state sales tax. The sales tax liability is passed from the wholesaler or distributor to the retailer, who will then charge sales tax to the end-user of the item.
Wholesalers and distributors will require a sales tax number and a completed Rhode Island Resale Certificate (also referred to as a wholesale license, reseller’s permit, or sales tax exemption certificate) to document that the items being purchased are for resale.
Is a business license the same thing as a sales tax permit?
No – A business license and a sales tax permit are not the same thing. Here’s how they differ:
A business license gives you the right to operate your business in a specific area, while a sales tax permit allows you to collect sales tax from your customers on behalf of the state.
In many cases, a business will need both.
If you have questions about the sales tax permit, the Rhode Island Division of Taxation has a helpful FAQ page on Rhode Island Sales and Use Taxes, or they can be contacted by calling 401-574-8700.