Quick Answer: You need to get a sales tax permit in Rhode Island if you have a physical presence or meet economic, affiliate or click-through nexus as determined by the state. Read on for more detailed information.
What is Sales Tax Nexus Anyway?
Your business owes sales tax in any state where it has “sales tax nexus”. In short, if you have sales tax nexus you need to collect and remit sales tax. If you don’t have sales tax nexus, you generally don’t need to get a permit.
Sales tax nexus is a legal term that means you have crossed a threshold and now have a sales tax collection responsibility in the state. Nexus can be created by having a physical presence, economic presence, or by other factors. Nexus rules vary by state and retailers have specific nexus rules based on where they have people, property or inventory.
What Should You Do Once You Determine You Have Sales Tax Nexus?
Once you determine that you have sales tax nexus in Rhode Island, your next step is to register for a sales tax permit in the state. Check out our blog post on getting a sales tax permit in Rhode Island or more information about that process.
Common Ways to Have Sales Tax Nexus in Rhode Island
1. Economic nexus in Rhode Island
If you made $100,000 of sales or had 200 or more transactions in Rhode Island, then you are required to register for, collect, and pay sales tax to the state. If you meet this threshold, it does not matter if you have a physical presence in Rhode Island. Nexus has been created based on your volume of sales.
For more information see HB5278 44-18.2-3.
If you need help determining which states you have crossed economic nexus thresholds, check out our Sales Tax Starter Kit service.
2. Physical presence nexus in Rhode Island
The following creates physical presence nexus in Rhode Island. If you have any of the following in Rhode Island, you will need to get a sales tax permit:
- Maintaining an office, place of distribution, sales or sample room, warehouse or storage place, or any other place of business.
- An employee, representative, agent, salesperson, canvasser, or solicitor permanently or temporarily, operating in the state for the purpose of selling, delivering, or the taking of orders for any tangible personal property or taxable services.
- Solicitation of sales of tangible personal property or taxable services in the 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 Rhode Island; telephone; computer-assisted shopping networks; television, radio or other electronic media intended to be broadcast to customers located in the state.
For more information, see Regulation SU 11-20.
If you need help determining which states you have a physical presence in, check out our Sales Tax Starter Kit service.
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Uncommon Ways to Have Sales Tax Nexus in Rhode Island
1. Affiliate Nexus in Rhode Island
What exactly is affiliate nexus? Affiliate nexus can exist when a business has sufficient contact with a state through a separate business. If your out-of-state business has a relationship with an in-state business, then you may have affiliate nexus.
Please keep in mind that an “affiliated business” does not necessarily mean that it is a marketing “affiliate” in the typical sense of the word. Instead, “affiliate nexus” refers to the relationship between two businesses.
If your business meets any of the following criteria with regards to a business in Rhode Island, you will need a sales tax permit.
- Similar Products, Similar Name – Sells tangible personal property, pre-written computer software delivered electronically or by load and leave, and/or taxable services that are the same or substantially similar to that sold by a non-collecting retailer under a business name that is the same or substantially similar to that of the non-collecting retailer;
- Facilitates Delivery – Maintains an office, distribution facility, salesroom, warehouse, storage place, or other similar place of business in this state to facilitate the delivery of tangible personal property, pre-written computer software delivered electronically or by load and leave, and/or taxable services sold by the non-collecting retailer;
- Trademarks – Uses, with consent or knowledge of the non-collecting retailer, trademarks, service marks, or trade names in this state that are the same or substantially similar to those used by the non-collecting retailer;
- Delivery, Installation or Repairs – Delivers or has delivered (except for delivery by common carrier), installs, or assembles tangible personal property in the state, or performs maintenance or repair services on tangible personal property in the state, which tangible personal property is sold to in-state customers by the non-collecting retailer;
- Pick Up Services – Facilitates the delivery of tangible personal property purchased from a non-collecting retailer but delivered in the state by allowing an in-state customer to pick up the tangible personal property at an office distribution facility, salesroom, warehouse, storage place, or other similar place of business maintained in the state; or
- Shared Resources – Shares management, business systems, business practices, computer resources, communication systems, payroll, personnel, or other such business resources and activities with the non-collecting retailer, and/or engages in inter-company transactions with the non-collecting retailer, either or both of which relate to the activities that establish or maintain the non-collecting retailer’s market in the state.
For more information about affiliate nexus, see HB5278 7-E.
2. Click-through Nexus in Rhode Island
What is click-through nexus? Referrals from in-state entities may trigger nexus for an out-of-state company with click-through nexus. Out-of-state sellers of tangible personal property or taxable services are presumed to be engaged in business in Rhode Island if:
- The retailer contracts or otherwise agrees with an in-state retailer to list and/or advertise for sale in the state tangible personal property, pre-written computer software delivered electronically or by load and leave, vendor-hosted pre-written computer software, and/or taxable services in any forum, including, but not limited to, a catalog or internet website; and
- The referrer transfers, via in-state software, internet link, or otherwise, an in-state customer to the retailer or the retailer’s employee, affiliate, or website to complete a purchase; and
- You pay a fee, commission, and/or other consideration to the referrer for the listing and/or advertisement; and
- The referrer does not collect payments from the in-state customer for the transaction.
For more information about click-through nexus see HB5278 47-G.
Do You Need a Sales Tax Permit in Rhode Island If You Only Sell on Marketplaces?
If you are an out-of-state online retailer who ONLY sells on approved marketplaces (such as Amazon, eBay, etc), state sales tax will be remitted by the marketplace. However, as of the publishing of this blog, Rhode Island has not issued guidance on whether a retailer who sells ONLY on approved marketplaces still needs to get a sales tax permit if they meet economic nexus requirements, even though the marketplace is remitting the sales tax on their behalf. Until the state releases guidance, you may want to consider getting a permit in Rhode Island.
If you are an e-commerce seller who is unsure of where you need to get a sales tax permit, feel free to check out our Sales Tax Starter Kit service.
Disclaimer: Our attorney wanted you to know that no financial, tax, legal advice or opinion is given through this post. All information provided is general in nature and may not apply to your specific situation and is intended for informational and educational purposes only. Information is provided “as is” and without warranty.