Rhode Island Tacks on More Taxes

Starting today, Rhode Islanders will pay higher taxes for certain services and retail purchases:

• The 7 percent sales and use tax will apply to articles of clothing, including footwear, priced at more than $250 per item. Only the increment above $250 will be taxed. For example, for a suit that costs $275, the tax rate will be applied only to $25, resulting in a tax of $1.75.
• The 7 percent sales and use tax will apply to taxicab services, limousine services, charter bus services, and other transit and ground transportation services. Interstate transportation and certain other transportation services will be exempt from the tax.
•  The 7 percent sales and use tax will apply to pet care services – including boarding, grooming, sitting, and training pets. Veterinary and testing laboratories services will be exempt from the tax.

“We’ve been working closely with retailers, accountants, business groups, and others to get the word out about these changes,” said Rhode Island Tax Administrator David M. Sullivan. “We’ve received a lot of cooperation, and we anticipate that the changes will be implemented smoothly.”

The tax changes were included in a budget bill approved and enacted in June 2012. Their effective date was postponed until Oct. 1 to allow time for implementation, according to the taxation division.

As a result of the changes, some businesses will now be considered retailers under state law: They must register with the Tax Division, pay the annual $10 sales tax permit fee, and file sales and use tax returns with the Tax Division, said Peter McVay associate director of revenue services.

Anyone who has questions about the sales tax changes should call the Tax Division’s Excise Tax section at (401) 574-8955.

Do you think pet care services and transportation services should be taxed as a retail sale?