In May 2000 RIPEC’s report, “A System Out of Balance – Rhode Island’s State and Local Tax System” urged that the Governor, General Assembly and private sector to support the efforts of the National Governors’ Association and others to streamline collections for state sales and use taxes in order to simplify the system and maintain revenues received from this tax by applying it to remote transactions.
In 2002, thirty-four states, including Rhode Island, approved an agreement to modernize sales tax collections and administration. Article 30 in the State Budget (see H-7120 Substitute A) brought Rhode Island sales tax statutes into conformity with the streamlined sales tax agreement statutes, including definition of taxable items, limits on the rates and payments for processing. This RIPEC report, prepared by Mary F. Bernard and Inez M. Mello of Kahn Litwin Renza and Co., Ltd. overviews the Streamlined Sales Tax Agreement and its impact for Rhode Island.
By becoming an implementing State, the Streamlined Sales Tax Agreement should allow Rhode Island to more effectively collect sales taxes on remote sales through collaboration with other states that are signatories to the agreement. However, tax reform of this magnitude may have a short-term impact on some types of businesses. This project will could substantially expand collection and remittance requirements for middle market businesses. Increased technology based investments will may be required for compliance, placing an undue additional burden on small businesses.
This project could substantially expand collection and remittance requirements for middle market businesses. Most small and mid-sized businesses have never heard of the SSTP, let alone understand the potential impact on their business. Increased technology based investments may be required for compliance, placing an additional burden on small businesses. The additional filing requirements for all affected businesses may necessitate more sophisticated software systems and manpower. Taxpayer education on this project has been extremely limited and should be increased as the state moves forward with implementation.
