2013 -- S 0194

=======

LC00608

=======

STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

____________

A N A C T

RELATING TO TAXATION - STATE TAX OFFICIALS

     Introduced By: Senator Frank Lombardo

     Date Introduced: February 06, 2013

     Referred To: Senate Finance

It is enacted by the General Assembly as follows:

1-1

     SECTION 1. Section 44-1-6 of the General Laws in Chapter 44-1 entitled "State Tax

1-2

Officials" is hereby amended to read as follows:

1-3

      44-1-6. Additional collection powers -- Nonresident contractors. -- (a) Any person

1-4

doing business with a nonresident contractor shall withhold payment of an amount of three

1-5

percent (3%) of the contract price until thirty (30) days after the contractor has completed the

1-6

contract and has requested the tax administrator, in writing, to audit the records for the particular

1-7

project, a receipted copy of the request to be furnished to the person holding the funds. The tax

1-8

administrator shall, within thirty (30) days after receipt of the request, furnish to the nonresident

1-9

contractor and to the person holding the funds either a certificate of no tax due or a certificate of

1-10

sales and use tax or income tax withheld, or both, due from the nonresident contractor. Any

1-11

     person doing business with a nonresident contractor and making payments of the contract price to

1-12

such nonresident contractor shall deduct and withhold from such payments an amount of five

1-13

percent (5%) of such payments, unless such nonresident contractor has furnished a certificate of

1-14

compliance as described in subparagraph (b) of this section. The amounts so required to be

1-15

deducted and withheld shall be paid over to the tax administrator by the last day of the month

1-16

following the calendar quarter in which the first payment to the nonresident contractor is made,

1-17

and every calendar quarter thereafter. Each such payment to the tax administrator shall be

1-18

accompanied by a form prescribed by the tax administrator. The amount required to be deducted

1-19

and withheld from the nonresident contractor, when so deducted and withheld, shall be held to be

1-20

a special fund in trust for the state. No nonresident contractor shall have any right of action

2-1

against a person deducting and withholding under this subdivision with respect to any moneys

2-2

deducted and withheld and paid over to the tax administrator in compliance with or intended

2-3

compliance with this subdivision.

2-4

      (b) Upon receipt of a certificate of no tax due, the person holding the payment may pay

2-5

the nonresident contractor. Upon receipt of a certificate of taxes due, the person may pay to the

2-6

contractor out of the amount withheld the excess over the amount of taxes stated in the certificate

2-7

together with the interest and penalties assessed. If the tax administrator furnishes neither

2-8

certificate to both parties within thirty (30) days after receipt of a written request for the making

2-9

of the audit, the person holding the payment may immediately pay the payment withheld to the

2-10

nonresident contractor under the terms of the contract free from any claims of the tax

2-11

administrator against either the person holding the payment or the nonresident contractor for

2-12

payment of sales or use taxes or income taxes withheld, or both.

2-13

     A nonresident contractor shall request in writing, that the tax administrator audit the

2-14

records of such contractor for a project for which amounts were deducted and withheld from such

2-15

contractor under subparagraph (a) of this section. If such request is not made within three (3)

2-16

years after the date the final payment of such amounts was made to the tax administrator, such

2-17

contractor waives the right to request such audit and claim a refund of such amounts. The tax

2-18

administrator shall, after receipt of such request, conduct an audit and issue to the nonresident

2-19

contractor a certificate of no tax due or a certificate of tax due from the nonresident contractor.

2-20

Not later than ninety (90) days after the issuance of a certificate of no tax due, the tax

2-21

administrator shall return to the nonresident contractor the amounts deducted and withheld from

2-22

such contractor and paid over to the tax administrator. Upon issuance of a certificate of taxes due,

2-23

the tax administrator may return to the nonresident contractor the amount by which the amounts

2-24

deducted and withheld and paid over to the tax administrator under subparagraph (a) of this

2-25

section exceed the amount of taxes set forth in the certificate, together with the interest and

2-26

penalties then assessed.

2-27

      (c) In the event the tax administrator serves upon the contractor and the person holding

2-28

the payment a certificate showing the taxes due within a thirty (30) day period, the person holding

2-29

the payment shall deposit with the tax administrator the amount stated in the certificate which is

2-30

not in excess of three percent (3%) of the contract price, taking a receipt for the amount, and is

2-31

free from any claim of the nonresident contractor for that amount or of the tax administrator for

2-32

sales and use taxes or income taxes withheld, or both, arising out of the materials, equipment, and

2-33

services used in performance of the contract of the nonresident contractor on that project.

3-34

     When a person doing business with the nonresident contractor pays over to the tax

3-35

administrator amounts deducted and withheld pursuant to subparagraph (a) of this section, such

3-36

person shall not be liable for any claim of the nonresident contractor for such amounts or for any

3-37

claim of the tax administrator for any taxes of the nonresident contractor arising from the

3-38

activities of the nonresident contractor on the project for which the amounts were paid over. Such

3-39

payment shall not relieve the person doing business with the nonresident contractor of such

3-40

person’s liability for use taxes due on purchases of services from such nonresident contractor.

3-41

     (d) When a nonresident contractor enters into a contract with the state, said contractor

3-42

shall provide the department of labor with evidence demonstrating compliance with the

3-43

provisions of chapter 37-13 regarding prevailing wages and any other provisions of the general

3-44

laws related to conditions of employment.

3-45

     (e) Not later than one hundred twenty (120) days after the commencement of the contract,

3-46

or thirty (30) days after the completion of the contract, whichever is earlier, a nonresident

3-47

contractor may: (i) Furnish a guarantee bond in a sum equivalent to five percent (5%) of the

3-48

contract price; or (ii) Deposit with the tax administrator a cash bond in a sum equal to five percent

3-49

(5%) of the contract price, in lieu of the requirements contained in subparagraph (a) of this

3-50

subdivision. The tax administrator may accept such bond on such terms and conditions as the tax

3-51

administrator may require, and upon acceptance of such bond, shall issue a certificate of

3-52

compliance to the contractor. The provisions of subparagraph (b) of this subdivision shall apply

3-53

to such bond, upon completion of the contract, in the same manner as such provisions apply to

3-54

amounts paid over under subparagraph (a) of this section.

3-55

     (f) Upon the furnishing of a certificate of compliance by the nonresident contractor to the

3-56

person doing business with a nonresident contractor, such person shall not be liable for any claim

3-57

of the tax administrator for any taxes of the nonresident contractor arising from the activities of

3-58

such contractor on the project for which the bond was provided. Such certificate of compliance

3-59

shall not relieve the person doing business with the nonresident contractor of such person’s

3-60

liability for use taxes due on purchases of services from such nonresident contractor.

3-61

     (g) If any person doing business with a nonresident contractor fails to deduct and

3-62

withhold and pay over to the tax administrator amounts under subparagraph (a) of this section or

3-63

fails to obtain a certificate of compliance from the nonresident contractor pursuant to

3-64

subparagraph (f) of this section, such person shall be personally liable for payment of any taxes of

3-65

the nonresident contractor arising from the activities of such contractor on the project for which

3-66

such amounts or certificate were required.

3-67

      (d)(h) As used in this section, "a nonresident contractor" is one who does not maintain a

3-68

regular place of business in this state. "A regular place of business" means and includes any bona

4-1

fide office (other than a statutory office), factory, warehouse, or other space in this state at which

4-2

the taxpayer is doing business in its own name in a regular and systematic manner, and which is

4-3

continuously maintained, occupied, and used by the taxpayer in carrying on its business through

4-4

its regular employees regularly in attendance. A temporary office at the site of construction shall

4-5

not constitute a regular place of business. to carry on the contractor’s business in the contractor’s

4-6

own name, except that “regular place of business” does not include a place of business for a

4-7

statutory agent for service of process, or a temporary office or location used by the contractor

4-8

only for the duration of the contract, whether or not at the site of construction, or an office

4-9

maintained, occupied and used by a person affiliated with the contractor; “contract price” means

4-10

the total contract price, including deposits, amounts held as retainage, costs for any change

4-11

orders, or charges for add-ons; and “person doing business with a nonresident contractor” does

4-12

not include an owner or tenant of real property used exclusively for residential purposes and

4-13

consisting of three (3) or fewer dwelling units, in one of which the owner or tenant resides,

4-14

provided each nonresident contractor doing business with such owner or tenant shall be required

4-15

to comply with the bond requirements under subparagraph (e).

4-16

     SECTION 2. This act shall take effect upon passage.

=======

LC00608

========

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO TAXATION - STATE TAX OFFICIALS

***

5-1

     This act would amend the law regarding nonresident contractors to provide, among other

5-2

things, that the nonresident contractor comply with the prevailing wage laws, withhold five

5-3

percent (5%) of the contract payment unless a certificate of tax compliance has been issued and

5-4

bonding requirements.

5-5

     This act would take effect upon passage.

=======

LC00608

=======