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Rhode Island Sales Tax Up or Down

  • Feb 7, 2012 | Susan McLain

And the Rest of the Story....Rhode Island Governor Lincoln Chafee gave his state of the state speech last week, calling for modifications to the “…highest sales tax rate in New England.” According to Chafee, “…because we exempt food, clothing and numerous other items, we…have one of the narrowest sales tax bases in the country.”

Chafee proposes to apply a 1% sales tax to currently exempt items, while “…maintaining …current exemptions for food, gasoline, prescription drugs and medical devices.” He also recommends expanding the sales tax base to include “…services such as dry cleaning, beauty salons and recreational activities.”

By expanding to a broader base, Gov. Chafee feels the sales tax “…can actually lower it to a more competitive rate” with neighboring states Massachusetts and Connecticut. By reducing the rate from 7% to 6%, the Rhode Island “…rate would be lower than that of Massachusetts and the proposed rate for Connecticut, encouraging more people to shop in our state and providing a much-needed boost to our retail industry here,” says, Chafee. “It would also send a signal that Rhode Island is committed to attracting new businesses here.”

The Governor also indicated that he has sent a clear signal to Congress that he supports implementing an Internet Sales Tax bill so all states have the right to require sales tax collection duties of Internet retailers selling goods into their states. With a projected $70 million being lost to online sales, he felt the passage of the”… Main Street Fairness Act (S.1452/H.R.2701) would aid Rhode Island businesses and would also provide…enough revenue to allow [Rhode Island] to repeal the [newly proposed] 1% sales tax.”

To round things off, the Governor identified “…a clear way to pay for …[the] substantial and necessary education funding and help for…local communities,” through a “…2-percentage-point increase in the meal and beverage tax.”

Governor Chafee acknowledged that the meal and beverage tax will be “…controversial, but the money…[raised] will go to the most important investments” a state can make: “educating…young people and helping the property taxpayer.”

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Susan McLain
Avalara Author Susan McLain
Susan McLain began her career as a technical writer in technology industries such as satellite networking and medical devices. Her skills encompass technical and marketing writing, usability engineering, verification and validation testing and protocol writing, requirements development, business analysis, technical illustration/graphic design and marketing. She has owned her own business providing service to small to medium sized business and in other positions, she has been in project management, documentation and marketing. She is currently the content specialist for Avalara helping to “make sales tax less taxing.”