Rhode Island Sales Tax Guide
Chapter 8: Understanding Rhode Island sales tax rules for shipping & handling
Some states just make it easy for retailers to understand and comply with their rules regarding the collection of sales tax for shipping and delivery charges, and Rhode Island is one of them.
If you run an ecommerce store from the state, or have nexus in the state and sell your products to customers there, here’s what you need to know.
Is Shipping Taxable in Rhode Island?
According to the Rhode Island Department of Revenue’s Division of Taxation, retailers should always charge sales tax on the delivery of items that are considered taxable. But if the item is tax-exempt, sellers should not charge sales tax. In Rhode Island, tax-exempt items include some drugs, medicines, healthcare products, and food products for home consumption.
Impact of Delivery Methods
The State of Rhode Island defines “delivery charges” as “including, but not limited to transportation, shipping, postage, handling, crating, and packing.” Everything that falls into these categories is taxable if you charge the seller for it.
The one exception is direct mail. If you purchase direct mail services for your business, and the seller presents you with an invoice showing separately stated charges for the delivery of the direct mail, you will not be charged sales tax on that delivery.
If you are outside of Rhode Island and use any means to ship products to a Rhode Island resident, the sale — including delivery charges on qualified items — is subject to sales or use tax. However, if your business is located within the state and you sell to a buyer located outside the state, you will not be required to charge sales tax for the product or delivery charge.
Shipping Tax-Exempt Purchases
If your shipment includes both taxable and tax-exempt products, the Department of Taxation asks that you determine which portion of the shipment is taxable and which portion is not, and then assign tax to the appropriate delivery charge on the taxable portion.
You can do this by using a “percentage based on the total sales prices of the taxable property compared to the total sales prices of all the property in the shipment.” You can also allocate the charges using the package weight. For example, if you are shipping 10 pounds of groceries, and a cookbook that weighs 5 pounds, you should only charge sales tax on the one-third of the delivery charge.
Donald Englert, Chief Revenue Agent at the Rhode Island Division of Taxation says there is a statewide 7 percent sales tax and none of the local municipalities in Rhode Island charge additional sales tax, so there will never be an instance where local and state tax rates are different.
Finally, Englert says sellers should remember that since the state became a member of Streamlined Sales Tax in January 2007, it uses the streamlined definition when applying sales tax. “If it’s part of the sale, it’s subject to tax unless it’s an exempt product.”