Certain complimentary alcoholic beverages are exempt from Rhode Island Division of Taxation.
Restaurants, bars, and similar establishments periodically give complimentary alcoholic beverages to customers. So long as the customer has “purchased and paid consideration” for either a meal or an additional alcoholic drink at that sitting, the complimentary drink is not subject to sales tax. It is “considered to be a discounted item and is part of the overall purchase of the meal or additional alcoholic beverage.”
However, Rhode Island use tax is owed on any complimentary alcoholic drink that is not accompanied by a purchased meal or additional drinks. In such instances, “use tax is due on the cost of the alcohol to the Person offering the complimentary alcoholic beverage.” In other words, the business providing the drink is liable for the use tax.
However, in the event that an entire meal and/or beverage are provided free of charge “due to certain circumstances,” neither sales tax nor use tax is due. An example would be when the meal or drink is offered free of charge because a client is dissatisfied with it. Use tax is not owed “because the patron ordered a meal and/or alcoholic beverage with the intention of paying for them.”
Sales tax may be owed on a free meal provided in exchange for a coupon. Additional information on how tax applies to discounted items is available in Rhode Island Regulation SU 07-140. Please see this notice for record keeping requirements for businesses that offer complimentary alcoholic beverages.
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