Small business owners know it’s important to fully understand state tax codes. But for Rhode Island businesses, taxes can be tougher than in any other states. This is due in large part to the complexities of its tax code structure. In fact, in an annual ranking of tax codes by the Tax Foundation, Rhode Island landed at 44th of 50 states for what the Tax Foundation refers to as states with, “overly complex, burdensome tax codes.”
Hope may be on the way, though. A new bill proposed by State Rep. Robert Nardolillo III could simplify the state’s tax code while also dropping sales tax from seven to three percent. Citing the state’s poor showing in many business-friendliness surveys, Nardolillo says his “Taking Care of Business” package could attract businesses and residents to the state. It could provide a much-needed boost to the state’s economy.
Small businesses are vital to Rhode Island’s economy, with 90 percent of the state’s businesses employing 20 people or fewer. Yet without relief, some of those businesses may eventually choose to relocate to other areas of New England. It’s where sales tax is lower and local economies are stronger. This bill could keep Rhode Island’s cities competitive with other states as they strive to attract businesses that bring in jobs. The good news is, business development has already improved statewide, with big firms, including Johnson & Johnson, GE and Virgin Prime bringing jobs to the state within the next year.
Increase in Tourism
A reduced sales tax may encourage visitors. Nardodillo cites Rhode Island’s struggle to keep up with tourism in other New England states. It’s the state with the highest sales tax in the region. Providence, for example, has always been a popular tourism destination, but the state knows that attracting more events like conferences and festivals can increase tourism even further. A decrease in sales tax could encourage visitors from surrounding states and beyond to plan a vacation to the city. It may also keep residents in the state during their own vacation rather than cross state lines.
In addition to attracting new businesses that bring employees to the area, the bill could also have a direct impact on the state’s retirement population. As Nardodillo points out, Rhode Island’s estate tax serves as a deterrent to seniors. They relocate to states like Florida in their later years to preserve their assets. In fact, Rhode Island’s estate tax puts it on lists of worst states for retirement. Rhode Island’s 16 percent estate tax could drive seniors out of the state. Moreover, it deters seniors from choosing the state as a retirement option.
The bill is still under consideration, but in the meantime, businesses can get help with their sales tax questions from the State of Rhode Island Division of Taxation. The Small Business Administration also has several development centers in the Providence area designed to provide assistance to businesses that have 500 or fewer employees. By fully understanding sales tax laws in the state and finding ways to generate excitement about their products or services, small businesses can keep revenue flowing.