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H 7809Administration & Compliance

Taxation - State Tax Officials

This bill extends the time the state has to audit out-of-state contractors for unpaid taxes from 30 days to 60 days.

Signed into law68 Yea0 Nay7 Not voting
Population
Affected
15
Email Legislator
Introduced Feb 12, 2026Committee House Finance

Plain-English Summary

This legislation modifies the timeline for tax audits related to nonresident contractors (contractors who do not have a regular place of business in Rhode Island). Currently, anyone hiring a nonresident contractor must withhold 3% of the payment for 30 days to allow the state Tax Administrator time to check for any taxes owed. This bill extends that waiting period from 30 days to 60 days. Consequently, the Tax Administrator also has 60 days, rather than 30, to issue a certificate stating whether taxes are due or if the contractor is clear.

For younger readers

Imagine you hire a builder from another town to fix your clubhouse. There is a rule that says you have to keep a small part of their pay for a month. This is to make sure the builder pays the money they owe to the government first. This new law changes that waiting time from one month to two months. This gives the government workers more time to check their paperwork and make sure the builder paid everything they were supposed to before you give them the rest of their money.

Who & Where It Applies

Impacted groups
Nonresident contractorsGeneral contractorsProperty developersBusiness owners hiring contractorsRhode Island Division of Taxation
Impacted communities
All

Constitutional & Fiscal Check

None Likely

Estimated cost
None
Estimated revenue
Amount unknown

Bill Analysis

Both viewpoints
For Progressives
  • Ensures that out-of-state corporations and contractors pay their fair share of taxes, protecting state revenue streams that fund essential social programs and public services.
  • Levels the playing field for local Rhode Island workers and businesses by preventing nonresident entities from undercutting costs through tax evasion.
  • Provides state employees with a more realistic and manageable timeframe to conduct thorough audits, supporting the integrity and efficacy of the state's administrative systems.
  • Delays payment to workers and smaller contractors for an additional month, potentially causing financial hardship for those who rely on timely cash flow to support their families.
  • Normalizes bureaucratic inefficiency by extending timelines rather than investing in resources to make the government audit process faster and more responsive.
  • Could inadvertently discourage skilled laborers from outside the state from working on Rhode Island projects, potentially hindering housing or infrastructure development needed by the community.
For Conservatives
  • Strengthens the rule of law by ensuring that nonresident entities cannot easily evade state tax obligations, enforcing compliance among those doing business in the state.
  • Protects local Rhode Island businesses from unfair competition by out-of-state actors who might otherwise attempt to bypass tax requirements to lower their bids.
  • Aims to maximize the collection of legitimately owed revenue without raising new taxes on the citizenry, adhering to principles of fiscal responsibility.
  • Expands government inefficiency by allowing bureaucrats double the amount of time to complete a task that should be handled largely by automated systems.
  • Interferes with the free market and private contracts by forcing businesses to withhold payments for a longer duration, slowing down commerce and economic velocity.
  • Increases the regulatory burden on private entities who must manage these withholdings and administrative delays, complicating the ease of doing business in the state.

Votes

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Full Bill Text

Changes to existing Rhode Island law · 9 additions · 7 deletions

It is enacted by the General Assembly as follows:

SECTION 1. Section 44-1-6 of the General Laws in Chapter 44-1 entitled "State Tax Officials" is hereby amended to read as follows: 44-1-6. Additional collection powers — Nonresident contractors.

(a) Any person doing business with a nonresident contractor shall withhold payment of an amount of three percent (3%) of the contract price until thirty (30) sixty (60) days after the contractor has completed the contract and has requested the tax administrator, in writing, to audit the records for the particular project, a receipted copy of the request to be furnished to the person holding the funds. The tax administrator shall, within thirty (30) sixty (60) days after receipt of the request, furnish to the nonresident contractor and to the person holding the funds either a certificate of no tax due or a certificate of sales and use tax or income tax withheld, or both, due from the nonresident contractor.

(b) Upon receipt of a certificate of no tax due, the person holding the payment may pay the nonresident contractor. Upon receipt of a certificate of taxes due, the person may pay to the contractor out of the amount withheld the excess over the amount of taxes stated in the certificate together with the interest and penalties assessed. If the tax administrator furnishes neither certificate to both parties within thirty (30) sixty (60) days after receipt of a written request for the making of the audit, the person holding the payment may immediately pay the payment withheld to the nonresident contractor under the terms of the contract free from any claims of the tax administrator against either the person holding the payment or the nonresident contractor for payment of sales or use taxes or income taxes withheld, or both.

(c) In the event the tax administrator serves upon the contractor and the person holding the payment a certificate showing the taxes due within a thirty (30) sixty (60) day period, the person holding the payment shall deposit with the tax administrator the amount stated in the certificate which is not in excess of three percent (3%) of the contract price, taking a receipt for the amount, and is free from any claim of the nonresident contractor for that amount or of the tax administrator for sales and use taxes or income taxes withheld, or both, arising out of the materials, equipment, and services used in performance of the contract of the nonresident contractor on that project.

(d) As used in this section, “a nonresident contractor” is one who does not maintain a regular place of business in this state. “A regular place of business” means and includes any bona fide office (other than a statutory office), factory, warehouse, or other space in this state at which the taxpayer is doing business in its own name in a regular and systematic manner, and which is continuously maintained, occupied, and used by the taxpayer in carrying on its business through its regular employees regularly in attendance. A temporary office at the site of construction shall not constitute a regular place of business.

(e) Any person doing business with a nonresident contractor who fails to comply with the provisions of this section shall be liable for payment of the amount due as determined by the tax administrator and shall be subject to the same collection activities as a taxpayer pursuant to this title.

SECTION 2. This act shall take effect upon passage.