2014 -- S 2556

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LC004305

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2014

____________

A N   A C T

RELATING TO TAXATION - SALES AND USE TAXES - LIABILITY AND

COMPUTATION

     Introduced By: Senator Maryellen Goodwin

     Date Introduced: February 27, 2014

     Referred To: Senate Finance

     It is enacted by the General Assembly as follows:

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

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

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

the taxes imposed by this chapter the following gross receipts:

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

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

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

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

      (2) Newspapers.

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

newspaper.

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

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

interest.

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

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

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

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

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

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

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

      (4) Containers.

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

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

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

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

the contents with the container.

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

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

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

the contents or when resold for refilling.

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

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

returnable containers."

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

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

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

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

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

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

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

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

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

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

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

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

women, and parent teacher associations.

     (A) Hospitals operated for a profit providing community benefit. – The assembly finds

that the sales and tangible tax exemption granted pursuant to subdivision (5)(i), above, to

hospitals not operated for a profit is in recognition of the community benefit derived from such

acute-care community hospitals. The community benefit includes the provision of high quality

healthcare to individuals who could not otherwise afford such care, as well as providing quality,

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well-paying jobs to the community. It is further found that due to the changing economic

conditions in the healthcare industry, it is becoming increasingly difficult for stand alone, not-for-

profit, acute-care community hospitals to operate successfully within the state of Rhode Island.

Absent capital partners, such acute-care community hospitals have been forced to seek the

perspective of state receivership proceedings. The assembly further finds it important to the

community to encourage the on-going success of acute-care, community hospitals from both a

healthcare and an economic perspective. Accordingly, the sales and tangible tax exemption

provided in § 46(5)(i), above, to hospitals not operated for a profit is hereby extended to hospitals

operated for a profit for a phased, twelve (12) year period so long as such acute-care community

hospitals continue to operate in accord with the licensure granted pursuant to chapters 17 and

17.14 of title 23.

     On or before October 15, of each year, the qualifying hospital operated for a profit shall

submit an annual report (“Annual Tangible/Sales Tax Exemption Compliance Report”) to the

division of taxation, as well as to the tax assessor for its host community, reporting its operations

as an acute-care community hospital in the fiscal year preceding the date of the annual tangible

sales tax exemption compliance report. Upon review, the division of taxation shall issue

certificates entitling the qualifying hospital operated for a profit to such exemptions in the

calendar year following said report. The term “qualifying hospital” shall include any affiliated

entities identified by the qualifying hospital in an application for conversion filed pursuant to

chapter 17.14 of title 23, on or after January 1, 2013. Any dispute related to the division of

taxation’s annual determination shall proceed in accord with chapter 35 of title 42.

     The exemption shall be a twelve (12) year exemption and phased as follows:

     …………….Year 1 100% of the sales otherwise subject to tax shall be exempt.

     .……………Year 2 100% of the sales otherwise subject to tax shall be exempt.

     …………….Year 3 100% of the sales otherwise subject to tax shall be exempt.

     ……………..Year 4 67% of the sales otherwise subject to tax shall be exempt.

     ……………..Year 5 67% of the sales otherwise subject to tax shall be exempt.

     ……………..Year 6 67% of the sales otherwise subject to tax shall be exempt.

     ……………..Year 7 33% of the sales otherwise subject to tax shall be exempt.

     ……………..Year 8 33% of the sales otherwise subject to tax shall be exempt.

......………..Year 9 33% of the sales otherwise subject to tax shall be exempt.

     …………….Year 10 15% of the sales otherwise subject to tax shall be exempt.

     …………….Year 11 15% of the sales otherwise subject to tax shall be exempt.

     …………….Year 12 15% of the sales otherwise subject to tax shall be exempt.

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The sales tax paid by the qualifying hospital during the twelve (12) year phased

exemption shall be designated for distribution to the host community for the qualifying hospital.

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

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

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

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

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

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

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

under the contracts without payment of the tax.

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

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

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

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

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

pay the tax on the property used.

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

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

propulsion of airplanes.

      (7) Purchase for manufacturing purposes.

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

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

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

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

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

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

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

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

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

      (iii) "Consumed" includes mere obsolescence.

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

assembling, preparing, or producing.

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

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

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

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

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

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

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

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

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

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

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

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

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

subdivision of the municipality where it is located.

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

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

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

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

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

food is:

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

except sub-sector 3118 (bakeries);

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

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

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

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

glasses, cups, napkins, or straws.

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

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

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

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

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

7.1(h)(iii).

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

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

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

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

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

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

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

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

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

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

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

wheelchairs, crutches and canes.

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

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

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

      (13) Motor vehicles sold to nonresidents.

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

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

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

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

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

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

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

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

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

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

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

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

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

motor vehicles.

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

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

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

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

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

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

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

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

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

under the provisions of section 44-18-20.

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

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

licensed under section 40-9-11.1.

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

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

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

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

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

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

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

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

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

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

device, building, machinery, or equipment.

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

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

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

operated summer camps for children.

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

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

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

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

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

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

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

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

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

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

inures to the benefit of any individual.

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

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

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

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

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

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

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

use.

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

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

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

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

devices to auditory signals.

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

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

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

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

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

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

special adaptations, including installation.

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

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

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

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

      (22) Manufacturing machinery and equipment.

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

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

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

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

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

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

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

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

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

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

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

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be sold in the regular course of business;

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

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

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

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

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

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

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

operations;

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

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

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

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

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

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

production flow or manufacturing process;

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

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

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

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

otherwise identifiable as to use.

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

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

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

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

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

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

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

does not refer to any other type of motor vehicle.

      (24) Precious metal bullion.

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

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

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

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

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

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

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

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

uses.

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

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

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

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

of the vessels.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

thereto.

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

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

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

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

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

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

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

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

Board, upon passage of any federal law which authorizes states to require remote sellers to collect

and remit sales and use taxes, this unlimited exemption will apply as it did prior to October 1,

2012. The unlimited exemption on sales of clothing and footwear shall take effect on the date that

the state requires remote sellers to collect and remit sales and use taxes.

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

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

premises.

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

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

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

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

      (30) Boats.

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

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

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

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

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

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

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

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

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

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

nonresident of this state.

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

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

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

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

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the schools or of organized activities of the enrolled students.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

the state of compressed air.

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

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

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

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

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

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

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

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

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

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

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

by any purveyor.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(iii) are mailed to customers at no charge.

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

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

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

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

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

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

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

the number of hours spent on the job.

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

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

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

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

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

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

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

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

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

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

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

numismatic or investment value.

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

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

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

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

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

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

farming.

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

telecommunications service when purchased by a telecommunications company from another

telecommunications company to facilitate the provision of telecommunications service.

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

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

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

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

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

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

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

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

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vessel.

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

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

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

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

and is not returned to the jewelry manufacturer or seller.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

a state chartered bank.

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

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

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

      (51) Manufacturing business reconstruction materials.

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

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

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

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

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

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

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

the production and administrative facilities.

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

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

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

insurance, this exemption does not apply.

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

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

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

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

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

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

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

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

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

food, insecticide and fertilizers.

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

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

the boarding of horses.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

of motor vehicles.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

of title 31.

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

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

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

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

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

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

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

on December 31, 2008.

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

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

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

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

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

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

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

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

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

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

LC004305 - Page 17 of 18

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

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

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

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

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

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

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

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

not exempt from state sales tax.

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

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

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

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

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

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

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

blood.

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

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

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

ordinarily constitute fibers for human use.

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

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

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

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

      (64) Alcoholic beverages. - From the sale and storage, use, or other consumption in this

state by a Class A licensee of alcoholic beverages, as defined in section 44-18-7.1, excluding beer

and malt beverages from December 1, 2013 through March 31, 2015; provided, further,

notwithstanding section 6-13-1 or any other general or public law to the contrary, alcoholic

beverages, as defined in section 44-18-7.1, shall not be subject to minimum markup from

December 1, 2013 through March 31, 2015.

     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TAXATION - SALES AND USE TAXES - LIABILITY AND

COMPUTATION

***

     This act would exempt hospitals operating for profit from sales and use taxes.

     This act would take effect upon passage.

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