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We service multi-state stores, all invoiced to a RI corporate address, but parts/supplies are installed in various states. How should sales tax be paid?

Full Question: We service multi-state store locations that are all invoiced to a RI corporate address. All parts/supplies are purchased in RI and installed in various states. In which states should the sales tax be paid?

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Answer:

Diane Yetter photoThe determination as to which state has the right to the sales tax depends on where the property is delivered to the customer. Based on your question, it sounds like you are installing the property into equipment located at a customer location. The location of the bill to address is not relevant to making a sales tax determination. If you are considered a contractor in Rhode Island, you should generally pay sales tax on all materials purchased for incorporation into real property within Rhode Island. Contractors must pay tax as the consumer on the purchase of all materials, supplies, tools and equipment, including rentals, and all replacement parts used in fulfilling a lump-sum contract, a cost-plus contract, a time and material contract with an upset or guaranteed price which may not be exceeded, or any other kind of construction contract except:
  • where the contractor contracts to sell materials or supplies at an agreed price and to render service in connection with such materials and supplies, either for an additional agreed price or on the basis of time consumed; or
  • where such contractor is engaged in the business of selling materials or supplies at retail. In either situation, the contractor is a retailer required to have a permit. A resale certificate must be presented to the person selling the materials and supplies and the contractor must collect tax from the person to whom the materials or supplies are sold. If you are deemed a retailer of the parts, then you should be registered to collect Rhode Island sales tax and can provide a resale certificate to your suppliers. Then you should collect sales tax on the selling price of the parts. Separately stated repair and installation charges are generally not subject to sales tax in Rhode Island. If you act as both a contractor and retailer, you may be able to issue a resale certificate for the purchase of the parts and then accrue the use tax on the materials used in a construction job.
To the extent that you are only a contractor and can not issue a resale certificate but the parts are used for jobs in different states, if they are delivered to Rhode Island, it is likely that the tax will be due in Rhode Island and to the extent additional tax is due in the other states, the incremental tax will be due. This situation requires additional evaluation and review and we would be happy to assist you with this additional analysis.

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