Free guide for contractors
Do contractors charge sales tax in Rhode Island?
General information, not tax advice. Tax rules change and depend on the details of each job. Confirm how they apply to your business with your accountant or the state's revenue department before relying on them.
RI Rhode Island
Usually no tax on the invoiceUsually no. Rhode Island treats the contractor as the consumer of materials on lump-sum, cost-plus and time-and-material contracts.
Rhode Island's regulation treats a contractor as the consumer of materials used in a lump-sum, cost-plus, time-and-material or any other kind of construction contract.
The exception is a contractor who contracts to sell materials at an agreed price and charges for the service separately. That contractor is a retailer, taxes the materials but not the labor, and must hold a permit to make retail sales. The Division's example taxes $12,000 of deck materials at 7% ($840) and leaves $15,000 of labor untaxed.
Standard units are taxed on their selling price. If that price is not stated separately from the installation charge, the entire charge is taxable.
It turns on: whether the contractor contracts to sell materials at an agreed price; whether a line is a complete standard unit; whether the contractor is a nonresident.
Watch out for
- A party awarding a construction contract to a nonresident contractor must withhold 3% of the contract price (RI Contractor Guide, p.10).
- Fabricators, such as sheet metal or welded railing shops, bill tax on fabricated items; separately stated installation is not taxed (RI Contractor Guide, p.8).
“where the contractor contracts to sell materials or supplies at an agreed price and to render service in connection therewith”RI Division of Taxation, Contractor Guide