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Will Rhode Island Eliminate Its Sales Tax?

  • Sep 11, 2013 | Gail Cole

 Rhode Island lawmakers discuss elimination of state sales tax.

Rhode Island lawmakers did not tackle the proposal to eliminate the Rhode Island state sales tax during the 2013 General Assembly session. Yet although the Sales Tax Repeal Act of 2013 gained no traction after its introduction in February, it did not entirely disappear. This Thursday, a Special Joint Legislative Commission will meet for the first time to discuss the matter. It is tasked with making "a comprehensive study of all aspects of the current system pertaining to sales tax in the State of Rhode Island, including, but not limited to, the possibility of repealing the sales tax."

Representative Jan Malik (D-Warren), who introduced the bill, argues that the Rhode Island sales tax "is killing small businesses, especially those in border communities." Rep. Malik should know--he's the owner of a liquor store in Warren, on the Massachusetts border.

In a February 2013 press release calling for the repeal of the state sales tax, Rep. Malik said:

[I]n terms of sales tax, I cannot compete with my nearby Massachusetts competitors. I am down 20 percent in business over the past two years, and it doesn't matter if we have low prices at my liquor store or not. People just don't way (sic) to pay a sales tax when they can drive a few miles to Massachusetts where there is no sales tax on liquor."

Rep. Malik's liquor business may fare better after December 1 of this year, when Rhode Island's 16-month trial sales tax exemption for wine and spirits begins. In the meantime, he continues to campaign for "a serious conversation" on eliminating the state sales tax.

Proponents argue that Rhode Island would gain a competitive edge in the regions if the state sales tax were eliminated or significantly reduced. Opponents worry it would create "a void in revenue coming into the state" (Providence Journal).

For now, the state seems to be taking a wait and see and talk approach. Rhode Island's upcoming experimental exemption for wine and spirits may inform the matter better than any legislative commission.

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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.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.