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S 2815Administration & Compliance

Taxation - State Tax Officials

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

Signed into law72 Yea1 Nay2 Not voting
Population
Affected
15
Email Legislator
Introduced Mar 4, 2026Committee Senate Finance

Plain-English Summary

This legislation amends the state tax laws regarding 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 to audit records and ensure taxes are paid. This bill extends that holding period and the time allowed for the audit from 30 days to 60 days. This gives the state more time to determine if the contractor owes any sales, use, or income taxes before the final payment is released.

For younger readers

When people build things in Rhode Island using builders from other states, the law says they have to wait a little while before paying the builder the full amount of money. This waiting time lets the state government check to make sure the builder pays their taxes. Right now, the government has 30 days to do this check. This new rule changes that time to 60 days. This means the government gets more time to do its work, but the builder has to wait longer to get their final paycheck.

Who & Where It Applies

Impacted groups
Nonresident ContractorsProperty Owners hiring contractorsGeneral ContractorsRI Division of TaxationCommercial Developers
Impacted communities
All

Constitutional & Fiscal Check

None Likely

Estimated cost
None
Estimated revenue
Amount unknown

Bill Analysis

Both viewpoints
For Progressives
  • Strengthens the state's ability to collect tax revenue from out-of-state entities, ensuring adequate funding for public services and social programs.
  • Promotes economic fairness by ensuring nonresident contractors cannot evade taxes, leveling the playing field for local workers and businesses who contribute to the community.
  • Enhances the oversight capacity of the tax administrator, ensuring that regulations are enforced thoroughly rather than rushed.
  • Delays payment to workers and small contracting businesses, potentially causing cash flow issues for smaller operations that rely on timely compensation.
  • Could discourage out-of-state contractors from bidding on projects in Rhode Island, potentially reducing competition and options for consumers.
  • Increases bureaucratic delays in the construction process, which could slow down housing or infrastructure projects that benefit the community.
For Conservatives
  • Ensures the rule of law is upheld by verifying that out-of-state entities meet their legal tax obligations comparable to resident businesses.
  • Protects local businesses from unfair competition by ensuring nonresident competitors cannot undercut prices by evading state taxes.
  • Improves the accuracy of tax collection without creating new taxes or raising existing tax rates on Rhode Island citizens.
  • Expands government inefficiency by admitting the state bureaucracy needs double the time to perform a standard audit task.
  • Interferes with the free market and private contracts by forcing businesses to hold private funds for two months due to government slowness.
  • Increases the regulatory burden on commerce, potentially stifling economic activity and discouraging business investment 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.