Register or ride out the risk? Weighty questions in Rhode Island.
Rhode Island’s own Wayfair law became effective July 1, 2019, and requires certain remote sellers, referrers, and marketplace facilitators to register in the state and collect and remit state sales and use tax of 7%. A remote seller, referrer, or marketplace facilitator that exceeds annual sales into the state of Rhode Island trip the “collect and remit” requirement at $100,000 or 200 transactions in the prior calendar year.
Penalties in the state run high. Non-compliance, for whatever reason, carries a minimum annual penalty of $10,000. Everything from simple mistakes to out-and-out negligence are treated similarly under the state’s tax policy. But the impact falls disproportionately hard on small businesses, where $10,000 can be a lot of money. If you could consider it a charitable contribution, maybe. But penalties are not tax deductible.
Sellers have two choices. Register and commit to collect and remit taxes and avoid noncompliance now. Or wait, monitor sales closely and hope you’ll have time to register as the threshold approaches.
Marketplace sellers and referrers have an equally hard call to make. Although the threshold applies to them, they are “invoicing” a customer’s credit card, not collecting revenue. It is important to decide whether to register outright or ride out the risk of noncompliance.
Registering carries a cost and administrative burden. Not registering carries the risk of noncompliance. Call your TaxOps adviser to help you negotiate the tough decision to register now or wait. If decision time has passed and you’ve become non-compliant, give us a call to help negotiate penalty relief.
Let’s talk tax
Judy Vorndran can be reached at firstname.lastname@example.org.
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