2013 -- S 0243

=======

LC01318

=======

STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

____________

A N A C T

RELATING TO TAXATION -- SALES AND USE TAXES -- LIABILITY AND

COMPUTATION

     Introduced By: Senators Gallo, and Miller

     Date Introduced: February 13, 2013

     Referred To: Senate Finance

It is enacted by the General Assembly as follows:

1-1

     SECTION 1. Section 44-18-30 of the General Laws in Chapter 44-18 entitled "Sales and

1-2

Use Taxes - Liability and Computation" is hereby amended to read as follows:

1-3

     44-18-30. Gross receipts exempt from sales and use taxes. -- There are exempted from

1-4

the taxes imposed by this chapter the following gross receipts:

1-5

      (1) Sales and uses beyond constitutional power of state. - From the sale and from the

1-6

storage, use, or other consumption in this state of tangible personal property the gross receipts

1-7

from the sale of which, or the storage, use, or other consumption of which, this state is prohibited

1-8

from taxing under the Constitution of the United States or under the constitution of this state.

1-9

      (2) Newspapers.

1-10

      (i) From the sale and from the storage, use, or other consumption in this state of any

1-11

newspaper.

1-12

      (ii) "Newspaper" means an unbound publication printed on newsprint, which contains

1-13

news, editorial comment, opinions, features, advertising matter, and other matters of public

1-14

interest.

1-15

      (iii) "Newspaper" does not include a magazine, handbill, circular, flyer, sales catalog, or

1-16

similar item unless the item is printed for and distributed as a part of a newspaper.

1-17

      (3) School meals. - From the sale and from the storage, use, or other consumption in this

1-18

state of meals served by public, private, or parochial schools, school districts, colleges,

1-19

universities, student organizations, and parent teacher associations to the students or teachers of a

2-1

school, college, or university whether the meals are served by the educational institutions or by a

2-2

food service or management entity under contract to the educational institutions.

2-3

      (4) Containers.

2-4

      (i) From the sale and from the storage, use, or other consumption in this state of:

2-5

      (A) Non-returnable containers, including boxes, paper bags, and wrapping materials

2-6

which are biodegradable and all bags and wrapping materials utilized in the medical and healing

2-7

arts, when sold without the contents to persons who place the contents in the container and sell

2-8

the contents with the container.

2-9

      (B) Containers when sold with the contents if the sale price of the contents is not

2-10

required to be included in the measure of the taxes imposed by this chapter.

2-11

      (C) Returnable containers when sold with the contents in connection with a retail sale of

2-12

the contents or when resold for refilling.

2-13

      (ii) As used in this subdivision, the term "returnable containers" means containers of a

2-14

kind customarily returned by the buyer of the contents for reuse. All other containers are "non-

2-15

returnable containers."

2-16

      (5) (i) Charitable, educational, and religious organizations. - From the sale to as in

2-17

defined in this section, and from the storage, use, and other consumption in this state or any other

2-18

state of the United States of America of tangible personal property by hospitals not operated for a

2-19

profit, "educational institutions" as defined in subdivision (18) not operated for a profit, churches,

2-20

orphanages, and other institutions or organizations operated exclusively for religious or charitable

2-21

purposes, interest free loan associations not operated for profit, nonprofit organized sporting

2-22

leagues and associations and bands for boys and girls under the age of nineteen (19) years, the

2-23

following vocational student organizations that are state chapters of national vocational students

2-24

organizations: Distributive Education Clubs of America, (DECA); Future Business Leaders of

2-25

America, phi beta lambda (FBLA/PBL); Future Farmers of America (FFA); Future Homemakers

2-26

of America/Home Economics Related Occupations (FHA/HERD); and Vocational Industrial

2-27

Clubs of America (VICA), organized nonprofit golden age and senior citizens clubs for men and

2-28

women, and parent teacher associations.

2-29

      (ii) In the case of contracts entered into with the federal government, its agencies or

2-30

instrumentalities, this state or any other state of the United States of America, its agencies, any

2-31

city, town, district, or other political subdivision of the states, hospitals not operated for profit,

2-32

educational institutions not operated for profit, churches, orphanages, and other institutions or

2-33

organizations operated exclusively for religious or charitable purposes, the contractor may

2-34

purchase such materials and supplies (materials and/or supplies are defined as those which are

3-1

essential to the project) that are to be utilized in the construction of the projects being performed

3-2

under the contracts without payment of the tax.

3-3

      (iii) The contractor shall not charge any sales or use tax to any exempt agency,

3-4

institution, or organization but shall in that instance provide his or her suppliers with certificates

3-5

in the form as determined by the division of taxation showing the reason for exemption; and the

3-6

contractor's records must substantiate the claim for exemption by showing the disposition of all

3-7

property so purchased. If any property is then used for a nonexempt purpose, the contractor must

3-8

pay the tax on the property used.

3-9

      (6) Gasoline. - From the sale and from the storage, use, or other consumption in this state

3-10

of: (i) gasoline and other products taxed under chapter 36 of title 31, and (ii) fuels used for the

3-11

propulsion of airplanes.

3-12

      (7) Purchase for manufacturing purposes.

3-13

      (i) From the sale and from the storage, use, or other consumption in this state of

3-14

computer software, tangible personal property, electricity, natural gas, artificial gas, steam,

3-15

refrigeration, and water, when the property or service is purchased for the purpose of being

3-16

manufactured into a finished product for resale, and becomes an ingredient, component, or

3-17

integral part of the manufactured, compounded, processed, assembled, or prepared product, or if

3-18

the property or service is consumed in the process of manufacturing for resale computer software,

3-19

tangible personal property, electricity, natural gas, artificial gas, steam, refrigeration, or water.

3-20

      (ii) "Consumed" means destroyed, used up, or worn out to the degree or extent that the

3-21

property cannot be repaired, reconditioned, or rendered fit for further manufacturing use.

3-22

      (iii) "Consumed" includes mere obsolescence.

3-23

      (iv) "Manufacturing" means and includes manufacturing, compounding, processing,

3-24

assembling, preparing, or producing.

3-25

      (v) "Process of manufacturing" means and includes all production operations performed

3-26

in the producing or processing room, shop, or plant, insofar as the operations are a part of and

3-27

connected with the manufacturing for resale of tangible personal property, electricity, natural gas,

3-28

artificial gas, steam, refrigeration, or water and all production operations performed insofar as the

3-29

operations are a part of and connected with the manufacturing for resale of computer software.

3-30

      (vi) "Process of manufacturing" does not mean or include administration operations such

3-31

as general office operations, accounting, collection, sales promotion, nor does it mean or include

3-32

distribution operations which occur subsequent to production operations, such as handling,

3-33

storing, selling, and transporting the manufactured products, even though the administration and

3-34

distribution operations are performed by or in connection with a manufacturing business.

4-1

      (8) State and political subdivisions. - From the sale to, and from the storage, use, or other

4-2

consumption by, this state, any city, town, district, or other political subdivision of this state.

4-3

Every redevelopment agency created pursuant to chapter 31 of title 45 is deemed to be a

4-4

subdivision of the municipality where it is located.

4-5

      (9) Food and food ingredients. - From the sale and storage, use, or other consumption in

4-6

this state of food and food ingredients as defined in section 44-18-7.1(l).

4-7

      For the purposes of this exemption "food and food ingredients" shall not include candy,

4-8

soft drinks, dietary supplements, alcoholic beverages, tobacco, food sold through vending

4-9

machines or prepared food (as those terms are defined in section 44-18-7.1, unless the prepared

4-10

food is:

4-11

      (i) Sold by a seller whose primary NAICS classification is manufacturing in sector 311,

4-12

except sub-sector 3118 (bakeries);

4-13

      (ii) Sold in an unheated state by weight or volume as a single item;

4-14

      (iii) Bakery items, including bread, rolls, buns, biscuits, bagels, croissants, pastries,

4-15

donuts, danish, cakes, tortes, pies, tarts, muffins, bars, cookies, tortillas; and

4-16

      is not sold with utensils provided by the seller, including plates, knives, forks, spoons,

4-17

glasses, cups, napkins, or straws.

4-18

      (10) Medicines, drugs and durable medical equipment. - From the sale and from the

4-19

storage, use, or other consumption in this state, of;

4-20

      (i) "Drugs" as defined in section 44-18-7.1(h)(i), sold on prescriptions, medical oxygen,

4-21

and insulin whether or not sold on prescription. For purposes of this exemption drugs shall not

4-22

include over-the-counter drugs and grooming and hygiene products as defined in section 44-18-

4-23

7.1(h)(iii).

4-24

      (ii) Durable medical equipment as defined in section 44-18-7.1(k) for home use only,

4-25

including, but not limited to, syringe infusers, ambulatory drug delivery pumps, hospital beds,

4-26

convalescent chairs, and chair lifts. Supplies used in connection with syringe infusers and

4-27

ambulatory drug delivery pumps which are sold on prescription to individuals to be used by them

4-28

to dispense or administer prescription drugs, and related ancillary dressings and supplies used to

4-29

dispense or administer prescription drugs shall also be exempt from tax.

4-30

      (11) Prosthetic devices and mobility enhancing equipment. - From the sale and from the

4-31

storage, use, or other consumption in this state, of prosthetic devices as defined in section 44-18-

4-32

7.1(t), sold on prescription, including but not limited to, artificial limbs, dentures, spectacles and

4-33

eyeglasses, and artificial eyes; artificial hearing devices and hearing aids, whether or not sold on

4-34

prescription and mobility enhancing equipment as defined in section 44-18-7.1(p) including

5-1

wheelchairs, crutches and canes.

5-2

      (12) Coffins, caskets, and burial garments. - From the sale and from the storage, use, or

5-3

other consumption in this state of coffins or caskets, and shrouds or other burial garments which

5-4

are ordinarily sold by a funeral director as part of the business of funeral directing.

5-5

      (13) Motor vehicles sold to nonresidents.

5-6

      (i) From the sale, subsequent to June 30, 1958, of a motor vehicle to a bona fide

5-7

nonresident of this state who does not register the motor vehicle in this state, whether the sale or

5-8

delivery of the motor vehicle is made in this state or at the place of residence of the nonresident.

5-9

A motor vehicle sold to a bona fide nonresident whose state of residence does not allow a like

5-10

exemption to its nonresidents is not exempt from the tax imposed under section 44-18-20. In that

5-11

event the bona fide nonresident pays a tax to Rhode Island on the sale at a rate equal to the rate

5-12

that would be imposed in his or her state of residence not to exceed the rate that would have been

5-13

imposed under section 44-18-20. Notwithstanding any other provisions of law, a licensed motor

5-14

vehicle dealer shall add and collect the tax required under this subdivision and remit the tax to the

5-15

tax administrator under the provisions of chapters 18 and 19 of this title. When a Rhode Island

5-16

licensed motor vehicle dealer is required to add and collect the sales and use tax on the sale of a

5-17

motor vehicle to a bona fide nonresident as provided in this section, the dealer in computing the

5-18

tax takes into consideration the law of the state of the nonresident as it relates to the trade-in of

5-19

motor vehicles.

5-20

      (ii) The tax administrator, in addition to the provisions of sections 44-19-27 and 44-19-

5-21

28, may require any licensed motor vehicle dealer to keep records of sales to bona fide

5-22

nonresidents as the tax administrator deems reasonably necessary to substantiate the exemption

5-23

provided in this subdivision, including the affidavit of a licensed motor vehicle dealer that the

5-24

purchaser of the motor vehicle was the holder of, and had in his or her possession a valid out of

5-25

state motor vehicle registration or a valid out of state driver's license.

5-26

      (iii) Any nonresident who registers a motor vehicle in this state within ninety (90) days

5-27

of the date of its sale to him or her is deemed to have purchased the motor vehicle for use,

5-28

storage, or other consumption in this state, and is subject to, and liable for the use tax imposed

5-29

under the provisions of section 44-18-20.

5-30

      (14) Sales in public buildings by blind people. - From the sale and from the storage, use,

5-31

or other consumption in all public buildings in this state of all products or wares by any person

5-32

licensed under section 40-9-11.1.

5-33

      (15) Air and water pollution control facilities. - From the sale, storage, use, or other

5-34

consumption in this state of tangible personal property or supplies acquired for incorporation into

6-1

or used and consumed in the operation of a facility, the primary purpose of which is to aid in the

6-2

control of the pollution or contamination of the waters or air of the state, as defined in chapter 12

6-3

of title 46 and chapter 25 of title 23, respectively, and which has been certified as approved for

6-4

that purpose by the director of environmental management. The director of environmental

6-5

management may certify to a portion of the tangible personal property or supplies acquired for

6-6

incorporation into those facilities or used and consumed in the operation of those facilities to the

6-7

extent that that portion has as its primary purpose the control of the pollution or contamination of

6-8

the waters or air of this state. As used in this subdivision, "facility" means any land, facility,

6-9

device, building, machinery, or equipment.

6-10

      (16) Camps. - From the rental charged for living quarters, or sleeping or housekeeping

6-11

accommodations at camps or retreat houses operated by religious, charitable, educational, or

6-12

other organizations and associations mentioned in subdivision (5), or by privately owned and

6-13

operated summer camps for children.

6-14

      (17) Certain institutions. - From the rental charged for living or sleeping quarters in an

6-15

institution licensed by the state for the hospitalization, custodial, or nursing care of human beings.

6-16

      (18) Educational institutions. - From the rental charged by any educational institution for

6-17

living quarters, or sleeping or housekeeping accommodations or other rooms or accommodations

6-18

to any student or teacher necessitated by attendance at an educational institution. "Educational

6-19

institution" as used in this section means an institution of learning not operated for profit which is

6-20

empowered to confer diplomas, educational, literary, or academic degrees, which has a regular

6-21

faculty, curriculum, and organized body of pupils or students in attendance throughout the usual

6-22

school year, which keeps and furnishes to students and others records required and accepted for

6-23

entrance to schools of secondary, collegiate, or graduate rank, no part of the net earnings of which

6-24

inures to the benefit of any individual.

6-25

      (19) Motor vehicle and adaptive equipment for persons with disabilities.

6-26

      (i) From the sale of: (A) special adaptations, (B) the component parts of the special

6-27

adaptations, or (C) a specially adapted motor vehicle; provided, that the owner furnishes to the

6-28

tax administrator an affidavit of a licensed physician to the effect that the specially adapted motor

6-29

vehicle is necessary to transport a family member with a disability or where the vehicle has been

6-30

specially adapted to meet the specific needs of the person with a disability. This exemption

6-31

applies to not more than one motor vehicle owned and registered for personal, noncommercial

6-32

use.

6-33

      (ii) For the purpose of this subsection the term "special adaptations" includes, but is not

6-34

limited to: wheelchair lifts; wheelchair carriers; wheelchair ramps; wheelchair securements; hand

7-1

controls; steering devices; extensions, relocations, and crossovers of operator controls; power-

7-2

assisted controls; raised tops or dropped floors; raised entry doors; or alternative signaling

7-3

devices to auditory signals.

7-4

      (iii) From the sale of: (a) special adaptations, (b) the component parts of the special

7-5

adaptations, for a "wheelchair accessible taxicab" as defined in section 39-14-1 and/or a

7-6

"wheelchair accessible public motor vehicle" as defined in section 39-14.1-1.

7-7

      (iv) For the purpose of this subdivision the exemption for a "specially adapted motor

7-8

vehicle" means a use tax credit not to exceed the amount of use tax that would otherwise be due

7-9

on the motor vehicle, exclusive of any adaptations. The use tax credit is equal to the cost of the

7-10

special adaptations, including installation.

7-11

      (20) Heating fuels. - From the sale and from the storage, use, or other consumption in

7-12

this state of every type of fuel used in the heating of homes and residential premises.

7-13

      (21) Electricity and gas. - From the sale and from the storage, use, or other consumption

7-14

in this state of electricity and gas furnished for domestic use by occupants of residential premises.

7-15

      (22) Manufacturing machinery and equipment.

7-16

      (i) From the sale and from the storage, use, or other consumption in this state of tools,

7-17

dies, and molds, and machinery and equipment (including replacement parts), and related items to

7-18

the extent used in an industrial plant in connection with the actual manufacture, conversion, or

7-19

processing of tangible personal property, or to the extent used in connection with the actual

7-20

manufacture, conversion or processing of computer software as that term is utilized in industry

7-21

numbers 7371, 7372, and 7373 in the standard industrial classification manual prepared by the

7-22

technical committee on industrial classification, office of statistical standards, executive office of

7-23

the president, United States bureau of the budget, as revised from time to time, to be sold, or that

7-24

machinery and equipment used in the furnishing of power to an industrial manufacturing plant.

7-25

For the purposes of this subdivision, "industrial plant" means a factory at a fixed location

7-26

primarily engaged in the manufacture, conversion, or processing of tangible personal property to

7-27

be sold in the regular course of business;

7-28

      (ii) Machinery and equipment and related items are not deemed to be used in connection

7-29

with the actual manufacture, conversion, or processing of tangible personal property, or in

7-30

connection with the actual manufacture, conversion or processing of computer software as that

7-31

term is utilized in industry numbers 7371, 7372, and 7373 in the standard industrial classification

7-32

manual prepared by the technical committee on industrial classification, office of statistical

7-33

standards, executive office of the president, United States bureau of the budget, as revised from

7-34

time to time, to be sold to the extent the property is used in administration or distribution

8-1

operations;

8-2

      (iii) Machinery and equipment and related items used in connection with the actual

8-3

manufacture, conversion, or processing of any computer software or any tangible personal

8-4

property which is not to be sold and which would be exempt under subdivision (7) or this

8-5

subdivision if purchased from a vendor or machinery and equipment and related items used

8-6

during any manufacturing, converting or processing function is exempt under this subdivision

8-7

even if that operation, function, or purpose is not an integral or essential part of a continuous

8-8

production flow or manufacturing process;

8-9

      (iv) Where a portion of a group of portable or mobile machinery is used in connection

8-10

with the actual manufacture, conversion, or processing of computer software or tangible personal

8-11

property to be sold, as previously defined, that portion, if otherwise qualifying, is exempt under

8-12

this subdivision even though the machinery in that group is used interchangeably and not

8-13

otherwise identifiable as to use.

8-14

      (23) Trade-in value of motor vehicles. - From the sale and from the storage, use, or other

8-15

consumption in this state of so much of the purchase price paid for a new or used automobile as is

8-16

allocated for a trade-in allowance on the automobile of the buyer given in trade to the seller, or of

8-17

the proceeds applicable only to the automobile as are received from the manufacturer of

8-18

automobiles for the repurchase of the automobile whether the repurchase was voluntary or not

8-19

towards the purchase of a new or used automobile by the buyer. For the purpose of this

8-20

subdivision, the word "automobile" means a private passenger automobile not used for hire and

8-21

does not refer to any other type of motor vehicle.

8-22

      (24) Precious metal bullion.

8-23

      (i) From the sale and from the storage, use, or other consumption in this state of precious

8-24

metal bullion, substantially equivalent to a transaction in securities or commodities.

8-25

      (ii) For purposes of this subdivision, "precious metal bullion" means any elementary

8-26

precious metal which has been put through a process of smelting or refining, including, but not

8-27

limited to, gold, silver, platinum, rhodium, and chromium, and which is in a state or condition

8-28

that its value depends upon its content and not upon its form.

8-29

      (iii) The term does not include fabricated precious metal which has been processed or

8-30

manufactured for some one or more specific and customary industrial, professional, or artistic

8-31

uses.

8-32

      (25) Commercial vessels. - From sales made to a commercial ship, barge, or other vessel

8-33

of fifty (50) tons burden or over, primarily engaged in interstate or foreign commerce, and from

8-34

the repair, alteration, or conversion of the vessels, and from the sale of property purchased for the

9-1

use of the vessels including provisions, supplies, and material for the maintenance and/or repair

9-2

of the vessels.

9-3

      (26) Commercial fishing vessels. - From the sale and from the storage, use, or other

9-4

consumption in this state of vessels and other water craft which are in excess of five (5) net tons

9-5

and which are used exclusively for "commercial fishing", as defined in this subdivision, and from

9-6

the repair, alteration, or conversion of those vessels and other watercraft, and from the sale of

9-7

property purchased for the use of those vessels and other watercraft including provisions,

9-8

supplies, and material for the maintenance and/or repair of the vessels and other watercraft and

9-9

the boats nets, cables, tackle, and other fishing equipment appurtenant to or used in connection

9-10

with the commercial fishing of the vessels and other watercraft. "Commercial fishing" means the

9-11

taking or the attempting to take any fish, shellfish, crustacea, or bait species with the intent of

9-12

disposing of them for profit or by sale, barter, trade, or in commercial channels. The term does

9-13

not include subsistence fishing, i.e., the taking for personal use and not for sale or barter; or sport

9-14

fishing; but shall include vessels and other watercraft with a Rhode Island party and charter boat

9-15

license issued by the department of environmental management pursuant to section 20-2-27.1

9-16

which meet the following criteria: (i) the operator must have a current U.S.C.G. license to carry

9-17

passengers for hire; (ii) U.S.C.G. vessel documentation in the coast wide fishery trade; (iii)

9-18

U.S.C.G. vessel documentation as to proof of Rhode Island home port status or a Rhode Island

9-19

boat registration to prove Rhode Island home port status; (iv) the vessel must be used as a

9-20

commercial passenger carrying fishing vessel to carry passengers for fishing. The vessel must be

9-21

able to demonstrate that at least fifty percent (50%) of its annual gross income derives from

9-22

charters or provides documentation of a minimum of one hundred (100) charter trips annually; (v)

9-23

the vessel must have a valid Rhode Island party and charter boat license. The tax administrator

9-24

shall implement the provisions of this subdivision by promulgating rules and regulations relating

9-25

thereto.

9-26

      (27) Clothing and footwear. - From the sales of articles of clothing, including footwear,

9-27

intended to be worn or carried on or about the human body for sales prior to October 1, 2012.

9-28

Effective October 1, 2012, the exemption will apply to the sales of articles of clothing, including

9-29

footwear, intended to be worn or carried on or about the human body up to two hundred and fifty

9-30

dollars ($250) of the sales price per item. For the purposes of this section, "clothing or footwear"

9-31

does not include clothing accessories or equipment or special clothing or footwear primarily

9-32

designed for athletic activity or protective use as these terms are defined in section 44-18-7.1(f).

9-33

In recognition of the work being performed by the Streamlined Sales and Use Tax Governing

9-34

Board, upon any federal law which requires remote sellers to collect and remit taxes, effective the

10-1

first (1st) day of the first (1st) state fiscal quarter following the change, this exemption will apply

10-2

as it did prior to October 1, 2012.

10-3

      (28) Water for residential use. - From the sale and from the storage, use, or other

10-4

consumption in this state of water furnished for domestic use by occupants of residential

10-5

premises.

10-6

      (29) Bibles. - [Unconstitutional; see Ahlburn v. Clark, 728 A.2d 449 (R.I. 1999); see

10-7

Notes to Decisions.]From the sale and from the storage, use, or other consumption in the state of

10-8

any canonized scriptures of any tax-exempt nonprofit religious organization including, but not

10-9

limited to, the Old Testament and the New Testament versions.

10-10

      (30) Boats.

10-11

      (i) From the sale of a boat or vessel to a bona fide nonresident of this state who does not

10-12

register the boat or vessel in this state, or document the boat or vessel with the United States

10-13

government at a home port within the state, whether the sale or delivery of the boat or vessel is

10-14

made in this state or elsewhere; provided, that the nonresident transports the boat within thirty

10-15

(30) days after delivery by the seller outside the state for use thereafter solely outside the state.

10-16

      (ii) The tax administrator, in addition to the provisions of sections 44-19-17 and 44-19-

10-17

28, may require the seller of the boat or vessel to keep records of the sales to bona fide

10-18

nonresidents as the tax administrator deems reasonably necessary to substantiate the exemption

10-19

provided in this subdivision, including the affidavit of the seller that the buyer represented

10-20

himself or herself to be a bona fide nonresident of this state and of the buyer that he or she is a

10-21

nonresident of this state.

10-22

      (31) Youth activities equipment. - From the sale, storage, use, or other consumption in

10-23

this state of items for not more than twenty dollars ($20.00) each by nonprofit Rhode Island

10-24

eleemosynary organizations, for the purposes of youth activities which the organization is formed

10-25

to sponsor and support; and by accredited elementary and secondary schools for the purposes of

10-26

the schools or of organized activities of the enrolled students.

10-27

      (32) Farm equipment. - From the sale and from the storage or use of machinery and

10-28

equipment used directly for commercial farming and agricultural production; including, but not

10-29

limited to, tractors, ploughs, harrows, spreaders, seeders, milking machines, silage conveyors,

10-30

balers, bulk milk storage tanks, trucks with farm plates, mowers, combines, irrigation equipment,

10-31

greenhouses and greenhouse coverings, graders and packaging machines, tools and supplies and

10-32

other farming equipment, including replacement parts, appurtenant to or used in connection with

10-33

commercial farming and tools and supplies used in the repair and maintenance of farming

10-34

equipment. "Commercial farming" means the keeping or boarding of five (5) or more horses or

11-1

the production within this state of agricultural products, including, but not limited to, field or

11-2

orchard crops, livestock, dairy, and poultry, or their products, where the keeping, boarding, or

11-3

production provides at least two thousand five hundred dollars ($2,500) in annual gross sales to

11-4

the operator, whether an individual, a group, a partnership, or a corporation for exemptions issued

11-5

prior to July 1, 2002; for exemptions issued or renewed after July 1, 2002, there shall be two (2)

11-6

levels. Level I shall be based on proof of annual gross sales from commercial farming of at least

11-7

twenty-five hundred dollars ($2,500) and shall be valid for purchases subject to the exemption

11-8

provided in this subdivision except for motor vehicles with an excise tax value of five thousand

11-9

dollars ($5,000) or greater; Level II shall be based on proof of annual gross sales from

11-10

commercial farming of at least ten thousand dollars ($10,000) or greater and shall be valid for

11-11

purchases subject to the exemption provided in this subdivision including motor vehicles with an

11-12

excise tax value of five thousand dollars ($5,000) or greater. For the initial issuance of the

11-13

exemptions, proof of the requisite amount of annual gross sales from commercial farming shall be

11-14

required for the prior year; for any renewal of an exemption granted in accordance with this

11-15

subdivision at either Level I or Level II, proof of gross annual sales from commercial farming at

11-16

the requisite amount shall be required for each of the prior two (2) years. Certificates of

11-17

exemption issued or renewed after July 1, 2002, shall clearly indicate the level of the exemption

11-18

and be valid for four (4) years after the date of issue. This exemption applies even if the same

11-19

equipment is used for ancillary uses, or is temporarily used for a non-farming or a non-

11-20

agricultural purpose, but shall not apply to motor vehicles acquired after July 1, 2002, unless the

11-21

vehicle is a farm vehicle as defined pursuant to section 31-1-8 and is eligible for registration

11-22

displaying farm plates as provided for in section 31-3-31.

11-23

      (33) Compressed air. - From the sale and from the storage, use, or other consumption in

11-24

the state of compressed air.

11-25

      (34) Flags. - From the sale and from the storage, consumption, or other use in this state

11-26

of United States, Rhode Island or POW-MIA flags.

11-27

      (35) Motor vehicle and adaptive equipment to certain veterans. - From the sale of a

11-28

motor vehicle and adaptive equipment to and for the use of a veteran with a service-connected

11-29

loss of or the loss of use of a leg, foot, hand, or arm, or any veteran who is a double amputee,

11-30

whether service connected or not. The motor vehicle must be purchased by and especially

11-31

equipped for use by the qualifying veteran. Certificate of exemption or refunds of taxes paid is

11-32

granted under rules or regulations that the tax administrator may prescribe.

11-33

      (36) Textbooks. - From the sale and from the storage, use, or other consumption in this

11-34

state of textbooks by an "educational institution" as defined in subdivision (18) of this section and

12-1

as well as any educational institution within the purview of section 16-63-9(4) and used textbooks

12-2

by any purveyor.

12-3

      (37) Tangible personal property and supplies used in on-site hazardous waste recycling,

12-4

reuse, or treatment. - From the sale, storage, use, or other consumption in this state of tangible

12-5

personal property or supplies used or consumed in the operation of equipment, the exclusive

12-6

function of which is the recycling, reuse, or recovery of materials (other than precious metals, as

12-7

defined in subdivision (24)(ii) of this section) from the treatment of "hazardous wastes", as

12-8

defined in section 23-19.1-4, where the "hazardous wastes" are generated in Rhode Island solely

12-9

by the same taxpayer and where the personal property is located at, in, or adjacent to a generating

12-10

facility of the taxpayer in Rhode Island. The taxpayer shall procure an order from the director of

12-11

the department of environmental management certifying that the equipment and/or supplies as

12-12

used, or consumed, qualify for the exemption under this subdivision. If any information relating

12-13

to secret processes or methods of manufacture, production, or treatment is disclosed to the

12-14

department of environmental management only to procure an order, and is a "trade secret" as

12-15

defined in section 28-21-10(b), it is not open to public inspection or publicly disclosed unless

12-16

disclosure is required under chapter 21 of title 28 or chapter 24.4 of title 23.

12-17

      (38) Promotional and product literature of boat manufacturers. - From the sale and from

12-18

the storage, use, or other consumption of promotional and product literature of boat

12-19

manufacturers shipped to points outside of Rhode Island which either: (i) accompany the product

12-20

which is sold, (ii) are shipped in bulk to out of state dealers for use in the sale of the product, or

12-21

(iii) are mailed to customers at no charge.

12-22

      (39) Food items paid for by food stamps. - From the sale and from the storage, use, or

12-23

other consumption in this state of eligible food items payment for which is properly made to the

12-24

retailer in the form of U.S. government food stamps issued in accordance with the Food Stamp

12-25

Act of 1977, 7 U.S.C. section 2011 et seq.

12-26

      (40) Transportation charges. - From the sale or hiring of motor carriers as defined in

12-27

section 39-12-2(l) to haul goods, when the contract or hiring cost is charged by a motor freight

12-28

tariff filed with the Rhode Island public utilities commission on the number of miles driven or by

12-29

the number of hours spent on the job.

12-30

      (41) Trade-in value of boats. - From the sale and from the storage, use, or other

12-31

consumption in this state of so much of the purchase price paid for a new or used boat as is

12-32

allocated for a trade-in allowance on the boat of the buyer given in trade to the seller or of the

12-33

proceeds applicable only to the boat as are received from an insurance claim as a result of a stolen

12-34

or damaged boat, towards the purchase of a new or used boat by the buyer.

13-1

      (42) Equipment used for research and development. - From the sale and from the

13-2

storage, use, or other consumption of equipment to the extent used for research and development

13-3

purposes by a qualifying firm. For the purposes of this subdivision, "qualifying firm" means a

13-4

business for which the use of research and development equipment is an integral part of its

13-5

operation, and "equipment" means scientific equipment, computers, software, and related items.

13-6

      (43) Coins. - From the sale and from the other consumption in this state of coins having

13-7

numismatic or investment value.

13-8

      (44) Farm structure construction materials. - Lumber, hardware and other materials used

13-9

in the new construction of farm structures, including production facilities such as, but not limited

13-10

to, farrowing sheds, free stall and stanchion barns, milking parlors, silos, poultry barns, laying

13-11

houses, fruit and vegetable storages, rooting cellars, propagation rooms, greenhouses, packing

13-12

rooms, machinery storage, seasonal farm worker housing, certified farm markets, bunker and

13-13

trench silos, feed storage sheds, and any other structures used in connection with commercial

13-14

farming.

13-15

      (45) Telecommunications carrier access service. - Carrier access service or

13-16

telecommunications service when purchased by a telecommunications company from another

13-17

telecommunications company to facilitate the provision of telecommunications service.

13-18

      (46) Boats or vessels brought into the state exclusively for winter storage, maintenance,

13-19

repair or sale. - Notwithstanding the provisions of sections 44-18-10, 44-18-11, 44-18-20, the tax

13-20

imposed by section 44-18-20 is not applicable for the period commencing on the first day of

13-21

October in any year to and including the 30th day of April next succeeding with respect to the use

13-22

of any boat or vessel within this state exclusively for purposes of: (i) delivery of the vessel to a

13-23

facility in this state for storage, including dry storage and storage in water by means of apparatus

13-24

preventing ice damage to the hull, maintenance, or repair; (ii) the actual process of storage,

13-25

maintenance, or repair of the boat or vessel; or (iii) storage for the purpose of selling the boat or

13-26

vessel.

13-27

      (47) Jewelry display product. - From the sale and from the storage, use, or other

13-28

consumption in this state of tangible personal property used to display any jewelry product;

13-29

provided, that title to the jewelry display product is transferred by the jewelry manufacturer or

13-30

seller and that the jewelry display product is shipped out of state for use solely outside the state

13-31

and is not returned to the jewelry manufacturer or seller.

13-32

      (48) Boats or vessels generally. - Notwithstanding the provisions of this chapter, the tax

13-33

imposed by sections 44-18-20 and 44-18-18 shall not apply with respect to the sale and to the

13-34

storage, use, or other consumption in this state of any new or used boat. The exemption provided

14-1

for in this subdivision does not apply after October 1, 1993, unless prior to October 1, 1993, the

14-2

federal ten percent (10%) surcharge on luxury boats is repealed.

14-3

      (49) Banks and Regulated investment companies interstate toll-free calls. -

14-4

Notwithstanding the provisions of this chapter, the tax imposed by this chapter does not apply to

14-5

the furnishing of interstate and international, toll-free terminating telecommunication service that

14-6

is used directly and exclusively by or for the benefit of an eligible company as defined in this

14-7

subdivision; provided, that an eligible company employs on average during the calendar year no

14-8

less than five hundred (500) "full-time equivalent employees", as that term is defined in section

14-9

42-64.5-2. For purposes of this section, an "eligible company" means a "regulated investment

14-10

company" as that term is defined in the Internal Revenue Code of 1986, 26 U.S.C. section 1 et

14-11

seq., or a corporation to the extent the service is provided, directly or indirectly, to or on behalf of

14-12

a regulated investment company, an employee benefit plan, a retirement plan or a pension plan or

14-13

a state chartered bank.

14-14

      (50) Mobile and manufactured homes generally. - From the sale and from the storage,

14-15

use, or other consumption in this state of mobile and/or manufactured homes as defined and

14-16

subject to taxation pursuant to the provisions of chapter 44 of title 31.

14-17

      (51) Manufacturing business reconstruction materials.

14-18

      (i) From the sale and from the storage, use or other consumption in this state of lumber,

14-19

hardware, and other building materials used in the reconstruction of a manufacturing business

14-20

facility which suffers a disaster, as defined in this subdivision, in this state. "Disaster" means any

14-21

occurrence, natural or otherwise, which results in the destruction of sixty percent (60%) or more

14-22

of an operating manufacturing business facility within this state. "Disaster" does not include any

14-23

damage resulting from the willful act of the owner of the manufacturing business facility.

14-24

      (ii) Manufacturing business facility includes, but is not limited to, the structures housing

14-25

the production and administrative facilities.

14-26

      (iii) In the event a manufacturer has more than one manufacturing site in this state, the

14-27

sixty percent (60%) provision applies to the damages suffered at that one site.

14-28

      (iv) To the extent that the costs of the reconstruction materials are reimbursed by

14-29

insurance, this exemption does not apply.

14-30

      (52) Tangible personal property and supplies used in the processing or preparation of

14-31

floral products and floral arrangements. - From the sale, storage, use, or other consumption in this

14-32

state of tangible personal property or supplies purchased by florists, garden centers, or other like

14-33

producers or vendors of flowers, plants, floral products, and natural and artificial floral

14-34

arrangements which are ultimately sold with flowers, plants, floral products, and natural and

15-1

artificial floral arrangements or are otherwise used in the decoration, fabrication, creation,

15-2

processing, or preparation of flowers, plants, floral products, or natural and artificial floral

15-3

arrangements, including descriptive labels, stickers, and cards affixed to the flower, plant, floral

15-4

product or arrangement, artificial flowers, spray materials, floral paint and tint, plant shine, flower

15-5

food, insecticide and fertilizers.

15-6

      (53) Horse food products. - From the sale and from the storage, use, or other

15-7

consumption in this state of horse food products purchased by a person engaged in the business of

15-8

the boarding of horses.

15-9

      (54) Non-motorized recreational vehicles sold to nonresidents.

15-10

      (i) From the sale, subsequent to June 30, 2003, of a non-motorized recreational vehicle to

15-11

a bona fide nonresident of this state who does not register the non-motorized recreational vehicle

15-12

in this state, whether the sale or delivery of the non-motorized recreational vehicle is made in this

15-13

state or at the place of residence of the nonresident; provided, that a non-motorized recreational

15-14

vehicle sold to a bona fide nonresident whose state of residence does not allow a like exemption

15-15

to its nonresidents is not exempt from the tax imposed under section 44-18-20; provided, further,

15-16

that in that event the bona fide nonresident pays a tax to Rhode Island on the sale at a rate equal

15-17

to the rate that would be imposed in his or her state of residence not to exceed the rate that would

15-18

have been imposed under section 44-18-20. Notwithstanding any other provisions of law, a

15-19

licensed non-motorized recreational vehicle dealer shall add and collect the tax required under

15-20

this subdivision and remit the tax to the tax administrator under the provisions of chapters 18 and

15-21

19 of this title. Provided, that when a Rhode Island licensed non-motorized recreational vehicle

15-22

dealer is required to add and collect the sales and use tax on the sale of a non-motorized

15-23

recreational vehicle to a bona fide nonresident as provided in this section, the dealer in computing

15-24

the tax takes into consideration the law of the state of the nonresident as it relates to the trade-in

15-25

of motor vehicles.

15-26

      (ii) The tax administrator, in addition to the provisions of sections 44-19-27 and 44-19-

15-27

28, may require any licensed non-motorized recreational vehicle dealer to keep records of sales to

15-28

bona fide nonresidents as the tax administrator deems reasonably necessary to substantiate the

15-29

exemption provided in this subdivision, including the affidavit of a licensed non-motorized

15-30

recreational vehicle dealer that the purchaser of the non-motorized recreational vehicle was the

15-31

holder of, and had in his or her possession a valid out-of-state non-motorized recreational vehicle

15-32

registration or a valid out-of-state driver's license.

15-33

      (iii) Any nonresident who registers a non-motorized recreational vehicle in this state

15-34

within ninety (90) days of the date of its sale to him or her is deemed to have purchased the non-

16-1

motorized recreational vehicle for use, storage, or other consumption in this state, and is subject

16-2

to, and liable for the use tax imposed under the provisions of section 44-18-20.

16-3

      (iv) "Non-motorized recreational vehicle" means any portable dwelling designed and

16-4

constructed to be used as a temporary dwelling for travel, camping, recreational, and vacation use

16-5

which is eligible to be registered for highway use, including, but not limited to, "pick-up coaches"

16-6

or "pick-up campers," "travel trailers," and "tent trailers" as those terms are defined in chapter 1

16-7

of title 31.

16-8

      (55) Sprinkler and fire alarm systems in existing buildings. - From the sale in this state of

16-9

sprinkler and fire alarm systems, emergency lighting and alarm systems, and from the sale of the

16-10

materials necessary and attendant to the installation of those systems, that are required in

16-11

buildings and occupancies existing therein in July 2003, in order to comply with any additional

16-12

requirements for such buildings arising directly from the enactment of the Comprehensive Fire

16-13

Safety Act of 2003, and that are not required by any other provision of law or ordinance or

16-14

regulation adopted pursuant to that Act. The exemption provided in this subdivision shall expire

16-15

on December 31, 2008.

16-16

      (56) Aircraft. - Notwithstanding the provisions of this chapter, the tax imposed by

16-17

sections 44-18-18 and 44-18-20 shall not apply with respect to the sale and to the storage, use, or

16-18

other consumption in this state of any new or used aircraft or aircraft parts.

16-19

      (57) Renewable energy products. - Notwithstanding any other provisions of Rhode

16-20

Island general laws the following products shall also be exempt from sales tax: solar photovoltaic

16-21

modules or panels, or any module or panel that generates electricity from light; solar thermal

16-22

collectors, including, but not limited to, those manufactured with flat glass plates, extruded

16-23

plastic, sheet metal, and/or evacuated tubes; geothermal heat pumps, including both water-to-

16-24

water and water-to-air type pumps; wind turbines; towers used to mount wind turbines if

16-25

specified by or sold by a wind turbine manufacturer; DC to AC inverters that interconnect with

16-26

utility power lines; manufactured mounting racks and ballast pans for solar collector, module or

16-27

panel installation. Not to include materials that could be fabricated into such racks; monitoring

16-28

and control equipment, if specified or supplied by a manufacturer of solar thermal, solar

16-29

photovoltaic, geothermal, or wind energy systems or if required by law or regulation for such

16-30

systems but not to include pumps, fans or plumbing or electrical fixtures unless shipped from the

16-31

manufacturer affixed to, or an integral part of, another item specified on this list; and solar storage

16-32

tanks that are part of a solar domestic hot water system or a solar space heating system. If the tank

16-33

comes with an external heat exchanger it shall also be tax exempt, but a standard hot water tank is

16-34

not exempt from state sales tax.

17-1

      (58) Returned property. - The amount charged for property returned by customers upon

17-2

rescission of the contract of sale when the entire amount exclusive of handling charges paid for

17-3

the property is refunded in either cash or credit, and where the property is returned within one

17-4

hundred twenty (120) days from the date of delivery.

17-5

      (59) Dietary Supplements. - From the sale and from the storage, use or other

17-6

consumption of dietary supplements as defined in section 44-18-7.1(l)(v), sold on prescriptions.

17-7

      (60) Blood. - From the sale and from the storage, use or other consumption of human

17-8

blood.

17-9

      (61) Agricultural products for human consumption. - From the sale and from the storage,

17-10

use or other consumption of livestock and poultry of the kinds of products of which ordinarily

17-11

constitute food for human consumption and of livestock of the kind the products of which

17-12

ordinarily constitute fibers for human use.

17-13

      (62) Diesel emission control technology. - From the sale and use of diesel retrofit

17-14

technology that is required by section 31-47.3-4 of the general laws.

17-15

      (63) Feed for certain animals used in commercial farming. - From the sale of feed for

17-16

animals as described in subsection 44-18-30(61).

17-17

      (64) Trade-in value of motorcycles. From the sale and from the storage, use, or other

17-18

consumption in this state of so much of the purchase price paid for a new or used motorcycle as is

17-19

allocated for a trade-in allowance on the motorcycle of the buyer given in trade to the seller or of

17-20

the proceeds applicable only to the motorcycle as are received from an insurance claim as a result

17-21

of a stolen or damaged motorcycle, or of the proceeds applicable only to the motorcycle as are

17-22

received from the manufacturer of motorcycles for the repurchase of the motorcycle whether the

17-23

repurchase was voluntary or not towards the purchase of a new or used motorcycle by the buyer;

17-24

provided, that the proceeds from an insurance claim or repurchase is in lieu of the benefit

17-25

prescribed in section 44-18-21 for the total loss or destruction of the motorcycle; and provided,

17-26

further, that the tax has not been reimbursed as part of the insurance claim or repurchase.

17-27

     SECTION 2. This act shall take effect upon passage and shall be retroactive to January 1,

17-28

2013.

=======

LC01318

========

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO TAXATION -- SALES AND USE TAXES -- LIABILITY AND

COMPUTATION

***

18-1

     This act would exempt the trade-in values of motorcycles from sales taxes.

18-2

     This act would take effect upon passage and would be retroactive to January 1, 2013.

=======

LC01318

=======