Local News, News, Politics, Providence

Here’s how Rhode Island hopes to tax online purchases

PROVIDENCE, R.I. (WPRI) — As consumers move further away from retail stores and toward online sellers, Gov. Gina Raimondo is making a move to ensure the state doesn’t lose out on the sales tax revenue that would’ve been paid on products if purchased in stores.

Many online retailers, including Amazon.com, don’t currently collect any sales tax on purchases made in Rhode Island. In the governor’s budget plan unveiled Thursday, she includes a provision that would help the state collect the 7% tax on goods bought online.

“This is already a law that you have to pay this,” said Director of Revenue Robert Hull, referring to the seldom-followed law that requires Rhode Islanders to pay a use tax on their online purchases each year. “This puts the Internet retailers in the position to actually step up and do the right thing.”

The tax would result in about $35 million in revenue for the state in fiscal year 2017-18, which begins July 1. Hull said the online sales tax is expected to generate even more revenue in future years, rising to $47 million by 2021-22.

That additional money would help offset some new spending in the budget, including Raimondo’s free college tuition plan that would cost $10 million in its first year, eventually reaching $30 million in 2020-21.

Amazon has already said it will begin collecting sales tax on Rhode Island sales beginning Feb. 1. Hull said he hopes other retailers follow suit.

“Amazon’s doing the right thing,” he said. “They’re an $85-billion revenue machine … making sales historically into Rhode Island and not paying the 7% sales tax.”

Hull said the problem would just continue as more retail stores close and consumer habits move to the internet.

The legislation asks retailers to collect the 7% sales tax and remit payments to the state. But if companies choose not to collect the tax, it doesn’t mean Rhode Islanders are off the hook. Raimondo wants to require companies to send a notice to customers at tax time with information on how much they owe the state of Rhode Island.

The online sales tax plan, along with the entire budget, will be need to be approved by the General Assembly.

House Speaker Nicholas Mattiello described the proposal as “just an enforcement mechanism.”

“It’s going to be something that we will have to look at,” Mattiello said Thursday. “But I always think that you have a level playing field for everybody, and that may be good for Main Street so that they can compete more successfully with the Internet sales.”

But Republican House Minority Leader Rep. Patricia Morgan has already opposed the plan.

“It’s just another tax,” Morgan told Eyewitness News. “Another source of revenue, instead of using the money that we already take wisely and well, we’re going out to find another source.”

“All money comes out of the little guy,” she added.

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