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Amazon Laws and Cigarettes in Rhode Island

  • Apr 25, 2013 | Steven Dunston

While federal debates about online sales tax rage on, states continue to grapple with the nuts-and-bolts application of remote seller laws. In Rhode Island, a consumer owes sales tax when purchasing cigarettes over the Internet from an out-of-state seller when said consumer takes possession within Rhode Island. A recent Rhode Island Administrative Hearing upheld this law, against a claim by a consumer that she didn't owe any such tax.

At issue was a taxpayer's contention that her online purchase of cigarettes did not engender a sales tax obligation. She was incorrect. In yesterday's administrative finding, the hearing examiner noted that even though the cigarettes were purchased by an out-of-state online vendor, she took delivery of said cigarettes within Rhode Island and therefore owed sales tax.

According to Rhode Island statutes, consumers in possession of unstamped cigarettes—cigarettes purchased out of state for in-state delivery—owe sales tax to the state. In this case, the tax payer purchased cigarettes without a stamp (indicating she did not pay either a sales or a use tax), and was therefore liable for tax, as well as interest, penalties and charges.

In the matter of Taxpayer v. State of Rhode Island Department of Revenue, the issue of whether the consumer was correct in refusing to pay sales tax on an online purchase of cigarettes, the administrative law judge noted the following:

  • According to existing Rhode Island laws and statutes the state imposes a 7% sales at retail  (R.I.§ 44-18-12).
  • The retailer is responsible for collection of sales tax.
  • A use tax is imposed on the storage, use or consumption of tangible personal property.
  • Cigarettes sold at retail shall be sold with a tax stamp which evidences payment of a tax.

The ruling upheld an out-of-state business' obligation to collect sales tax if a consumer takes delivery within Rhode Island, calling attention to Rhode Island's approach to online sales tax as it applies to products delivered to an in-state address.

Even without a federal law, cases such as these demonstrate that out-of-state retailers without a physical location within a state, are often required to collect sales tax.

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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.
Steven Dunston
Avalara Author
Steven Dunston
Steven Dunston
Avalara Author Steven Dunston
Steven Dunston is a marketing technologist with experience as a web developer, SEO specialist and creative director. Steven is manager of the Marketing Technology Group at Avalara.