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art.011/7/011/6/011/5/011/4/011/3/011/2/011/1

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     ARTICLE 11 AS AMENDED

RELATING TO REVENUES

     SECTION 1. Sections 42-64.3-3 and 42-64.3-6 of the General Laws in Chapter 42-64.3

entitled "Distressed Areas Economic Revitalization Act" are hereby amended to read as follows:

     42-64.3-3. Definitions. -- As used in this chapter, the following words and terms shall

have the following meanings unless the context shall indicate another or different meaning or

intent:

      (1) "Council" or "enterprise zone council" means the governmental agency created

pursuant to § 42-64.3-3.1.

      (2) "Enterprise zone," "economic revitalization zone," or "zone" means an economically

distressed United States bureau of the census division or delineation in need of expansion of

business and industry, and the creation of jobs, which is designated to be eligible for the benefits

of this chapter.

      (3) "Governing authority" means the governing body of a state, city or town within

which a qualified United States bureau of the census division or delineation lies.

      (4) (i) "Qualified business" or "business facility" means any business corporation, sole

proprietorship, partnership, or limited partnership or limited liability company which:

      (A) After the date of its original application for membership in the enterprise zone

program or the date annual membership is renewed creates and hires a minimum of five percent

(5%) new or additional enterprise jobs or in the case of a company having twenty (20) employees

or less, this requirement shall be that the company create and hire one new or additional

enterprise job, in the respective zone during the same certification year; and

      (B) Whose total Rhode Island wages including those Rhode Island wages for additional

enterprise jobs, exceeds the total Rhode Island wages paid to its employees in the prior calendar

year; and

      (C) Obtains certificates of good standing from the Rhode Island division of taxation, the

corporations division of the Rhode Island secretary of state and the appropriate municipal

authority at the time of certification; and

      (D) Provides the council with an affidavit stating under oath that the entity seeking

certification as a qualified business has not within the preceding twelve (12) months from the date

of application for certification changed its legal status for the purpose of gaining favorable

treatment under the provisions of chapter 64.3 of this title; and

      (E) Meets certain other requirements as set forth by the council; and

      (F) Has received certification from the council pursuant to the rules and regulations

promulgated by the council prior to July 1, 2015.

      (ii) In the event that an applicant for certification meets the criteria of subdivisions

(4)(i)(A) and (4)(i)(C) to (F), but fails to meet the requirements of subdivision (4)(i)(B) solely

because the amount of wages paid to the owner or owners of the business has decreased from the

prior calendar year, the Council may, for good cause shown, certify the applicant as a qualified

business. The applicant shall have the burden to show, notwithstanding its failure to meet the

requirements of subdivision (4)(i)(B) above, that the applicant has met the intent of this chapter.

For the purposes of this provision, owner shall mean a person who has at least twenty percent

(20%) of the indicia of ownership of the applicant.

      (5) "Effective date of certification" means the date upon which the qualified business

meets the tests imposed in subdivisions (4)(i)(A) through (F) above and applies to the calendar

year for which these tests were performed.

      (6) "Enterprise job employees" means those full-time employees whose business activity

originates and terminates from within the enterprise zone business and facility on a daily basis,

and who are domiciled residents of the state (or who, in the case of employees of a high

performance manufacturer as that term is defined in § 44-31-1(b)(3)(i), pay personal income taxes

to the state) and hired (or transferred, in the case of existing out-of-state employees) and

employed by the qualified business in the enterprise zone after the effective date of certification

or annual recertification in excess of those full-time employees employed by the qualified

business in any Rhode Island enterprise zone in the prior calendar year. An employee who is

hired and terminated in the same certification period does not constitute an enterprise job

employee.

      (7) "Wages" means wages, tips and other compensation as defined in the Internal

Revenue Code of 1986, 26 U.S.C. § 1 et seq.

     42-64.3-6. Business tax credits. -- A qualified business in an enterprise zone is allowed a

credit against the tax imposed pursuant to chapters 11, 13 (except the taxation of tangible

personal property under § 44-13-13), 14, 17, and 30 of title 44:

      (1) A credit equal to fifty percent (50%) of the total amount of wages paid to those

enterprise job employees comprising the five percent (5%) new jobs referenced in § 42-64.3-

3(4)(i)(A). The wages subject to the credit shall be reduced by any direct state or federal wage

assistance paid to employers for the employee(s) in the taxable year. The maximum credit

allowed per taxable year under the provisions of this subsection shall be two thousand five

hundred dollars ($2,500), per employee. A taxpayer who takes this business tax credit shall not be

eligible for the resident business owner modification pursuant to § 42-64.3-7.

      (2) A credit equal to seventy five percent (75%) of the total amount of wages paid to

those enterprise job employees who are domiciliaries of an enterprise zone comprising the five

percent (5%) new jobs referenced in § 42-64.3-3(4)(i)(A). The wages subject to the credit shall be

reduced by any direct state or federal wage assistance in the taxable year. The maximum credit

allowed per taxable year under the provisions of this subdivision shall be five thousand dollars

($5,000) per employee. A taxpayer who takes this business tax credit is not eligible for the

resident business owner modification. The council shall promulgate appropriate rules to certify

that the enterprise job employees are domiciliaries of an enterprise zone and shall advise the

qualified business and the tax administrator. A taxpayer taking a credit for employees pursuant to

this subdivision (2) shall not be entitled to a credit pursuant to subdivision (1) of this section for

the employees.

      (3) Any tax credit as provided in subdivision (1) or (2) of this section shall not reduce the

tax below the minimum tax. Fiscal year taxpayers must claim the tax credit in the year into which

the December 31st of the certification year falls. The credit shall be used to offset tax liability

pursuant to the provisions of either chapters 11, 13, 14, 17, or 30 of title 44, but not more than

one chapter.

      (4) In the case of a corporation, the credit allowed under this section is only allowed

against the tax of that corporation included in a consolidated return that qualifies for the credit

and not against the tax of other corporations that may join in the filing of a consolidated tax

return.

      (5) In the case of multiple business owners, the credit provided in subdivision (1) or (2)

of this section is apportioned according to the ownership interests of the qualified business.

      (6) The tax credits established pursuant to this section may be carried forward for a

period of three (3) years if in each of the three (3) calendar years a business which has qualified

for tax credits under this section: (a) does not reduce the number of its employees from the last

Effective Date of Certification; (b) obtains certificates of good standing from the Rhode Island

division of taxation, the corporations division of the Rhode Island secretary of state and the

appropriate municipal tax collector; (c) provides the council an affidavit stating under oath that

this business has not within the preceding twelve (12) months changed its legal status for the

purpose of gaining favorable treatment under the provisions of chapter 64.3 of this title; and (d)

meets any other requirements as may be established by the council in its rules and regulations.

     (7) No new credits shall be issued on or after July 1, 2015 unless the business has

received certification under this chapter prior to July 1, 2015.

     SECTION 2. Sections 42-63.1-2, 42-63.1-3, 42-63.1-5 and 42-63.1-12 of the General

Laws in Chapter 42-63.1 entitled "Tourism and Development" are hereby amended to read as

follows:

     42-63.1-2. Definitions. -- For the purposes of this chapter:

     (1) "Consideration" means the monetary charge for the use of space devoted to transient

lodging accommodations.

     (2) "Corporation" means the Rhode Island economic development corporation.

     (3) "District" means the regional tourism districts set forth in § 42-63.1-5.

     (4) "Hotel" means any facility offering a minimum of three (3) rooms one (1) room for

which the public may, for a consideration, obtain transient lodging accommodations. The term

"hotel" shall include hotels, motels, tourist homes, tourist camps, lodging houses, and inns and

shall exclude schools, hospitals, sanitariums, nursing homes and chronic care centers. The term

"hotel" shall also include houses, condominiums or other residential dwelling units, regardless of

the number of rooms, which are used and/or advertised for rent for occupancy. The term "hotel"

shall not include schools, hospitals, sanitariums, nursing homes, and chronic care centers.

     (5) "Hosting Platform" means any electronic or operating system in which a person or

entity provides a means through which an owner may offer a residential unit for "tourist or

transient" use. This service is usually, though not necessarily, provided through an online or web-

based system which generally allows an owner to advertise the residential unit through a hosted

website and provides a means for a person or entity to arrange tourist or transient use in exchange

for payment, whether the person or entity pays rent directly to the owner or to the hosting

platform. All hosting platforms are required to collect and remit the tax owed under this section.

     (5)(6) "Occupancy" means a person, firm or corporation's use of space ordinarily used for

transient lodging accommodations not to exceed thirty (30) days. Excluded from "occupancy" is

the use of space for which the occupant has a written lease for the space, which lease covers a

rental period of twelve (12) months or more. Furthermore, any house, condominium or other

residential dwelling rented, for which the occupant has a documented arrangement for the space

covering a rental period of more than thirty (30) consecutive days or for one calendar month is

excluded from the definition of occupancy.

     (6)(7) "Tax" means the hotel tax imposed by subsection 44-18-36.1(a).

     (8) "Owner" means any person who owns real property and is the owner of record.

Owner shall also include a lessee where the lessee is offering a residential unit for "tourist or

transient" use.

     (9) "Residential unit" means a room or rooms, including a condominium or a room or a

dwelling unit that forms part of a single, joint or shared tenant arrangement, in any building, or

portion thereof, which is designed, built, rented, leased, let, or hired out to be occupied for non-

commercial use.

     (10) "Tour operator" means a person that derives a majority of his or her or its revenue by

providing tour operator packages.

     (11) "Tour operator packages" means travel packages that include the services of a tour

guide and where the itinerary encompasses five (5) or more consecutive days.

     (12) "Tourist or transient" means any use of a residential unit for occupancy for less than

a thirty (30) consecutive day term of tenancy, or occupancy for less than thirty (30) consecutive

days of a residential unit leased or owned by a business entity, whether on a short-term or long-

terms basis, including any occupancy by employee or guests of a business entity for less than

thirty (30) consecutive days where payment for the residential unit is contracted for or paid by the

business entity.

     42-63.1-3. Distribution of tax. – (a) For returns and tax payments received on or before

December 31, 2015, except Except as provided in § 42-63.1-12, the proceeds of the hotel tax,

excluding such portion of the hotel tax collected from residential units offered for tourist or

transient use through a hosting platform, shall be distributed as follows by the division of taxation

and the city of Newport:

     (1) Forty-seven percent (47%) of the tax generated by the hotels in the district, except as

otherwise provided in this chapter, shall be given to the regional tourism district wherein the hotel

is located; provided, however, that from the tax generated by the hotels in the city of Warwick,

thirty-one percent (31%) of the tax shall be given to the Warwick regional tourism district

established in § 42-63.1-5(a)(5) and sixteen percent (16%) of the tax shall be given to the Greater

Providence-Warwick Convention and Visitors' Bureau established in § 42-63.1-11; and provided

further, that from the tax generated by the hotels in the city of Providence, sixteen percent (16%)

of that tax shall be given to the Greater Providence-Warwick Convention and Visitors' Bureau

established by § 42-63.1-11, and thirty-one percent (31%) of that tax shall be given to the

Convention Authority of the city of Providence established pursuant to the provisions of chapter

84 of the public laws of January, 1980; provided, however, that the receipts attributable to the

district as defined in § 42-63.1-5(a)(7) shall be deposited as general revenues, and that the

receipts attributable to the district as defined in § 42-63.1-5(a)(8) shall be given to the Rhode

Island commerce corporation as established in Rhode Island General Law Chapter 42-64;

     (2) Twenty-five percent (25%) of the hotel tax shall be given to the city or town where

the hotel, which generated the tax, is physically located, to be used for whatever purpose the city

or town decides.

     (3) Twenty-one (21%) of the hotel tax shall be given to the Rhode Island commerce

corporation established in chapter 42-64, deposited as general revenues and seven percent (7%) to

the Greater Providence-Warwick Convention and Visitors' Bureau.

     (b) For returns and tax payments received after December 31, 2015, except as provided in

§ 42-63.1-12, the proceeds of the hotel tax, excluding such portion of the hotel tax collected from

residential units offered for tourist or transient use through a hosting platform, shall be distributed

as follows by the division of taxation and the city of Newport:

     (1) For the tax generated by the hotels in the Aquidneck Island district, as defined in §

42-63.1-5, forty-two percent (42%) of the tax shall be given to the Aquidneck Island district,

twenty-five (25%) of the tax shall be given to the city or town where the hotel, which generated

the tax, is physically located, five percent (5%) of the tax shall be given to the Greater

Providence-Warwick Convention and Visitors Bureau established in § 42-63.1-11, and twenty-

eight percent (28%) of the tax shall be given to the Rhode Island commerce corporation

established in chapter 42-64.

     (2) For the tax generated by the hotels in the Providence district as defined in § 42-63.1-

5, twenty eight percent (28%) of the tax shall be given to the Providence district, twenty-five

percent (25%) of the tax shall be given to the city or town where the hotel, which generated the

tax, is physically located, twenty-three (23%) of the tax shall be given to the Greater Providence-

Warwick Convention and Visitors Bureau established in § 42-63.1-11, and twenty-four (24%) of

the tax shall be given to the Rhode Island commerce corporation established in chapter 42-64.

     (3) For the tax generated by the hotels in the Warwick district as defined in § 42-63.1-5,

twenty-eight percent (28%) of the tax shall be given to the Warwick District, twenty-five percent

(25%) of the tax shall be given to the city or town where the hotel, which generated the tax, is

physically located, twenty-three percent (23%) of the tax shall be given to the Greater

Providence-Warwick Convention and Visitors Bureau established in § 42-63.1-11, and twenty-

four (24%) of the tax shall be given to the Rhode Island commerce corporation established in

chapter 42-64.

     (4) For the tax generated by the hotels in the Statewide district, as defined in § 42-63.1-5,

twenty-five percent (25%) of the tax shall be given to the city or town where the hotel, which

generated the tax, is physically located, five percent (5%) of the tax shall be given to the Greater

Providence-Warwick Convention and Visitors Bureau established in § 42-63.1-11, and seventy

percent (70%) of the tax shall be given to the Rhode Island commerce corporation established in

chapter 42-64.

     (5) With respect to the tax generated by hotels in districts other than those set forth in

sections (1) through (4) above, forty-two percent (42%) of the tax shall be given to the regional

tourism district, as defined in § 42-63.1-5, wherein the hotel is located, twenty-five percent (25%)

of the tax shall be given to the city or town where the hotel, which generated the tax, is physically

located, five percent (5%) of the tax shall be given to the Greater Providence-Warwick

Convention and Visitors Bureau established in § 42-63.1-11, and twenty-eight (28%) of the tax

shall be given to the Rhode Island commerce corporation established in chapter 42-64.

     (c) The proceeds of the hotel tax collected from residential units offered for tourist or

transient use through a hosting platform shall distributed as follows by the division of taxation

and the city of Newport: twenty-five percent (25%) of the tax shall be given to the city or town

where the residential unit, which generated the tax, is physically located, and seventy-five percent

(75%) of the tax shall be given to the Rhode Island commerce corporation established in chapter

64 of title 42.

     (d) The Rhode Island commerce corporation shall be required in each fiscal year to spend

on the promotion and marketing of Rhode Island as a destination for tourists or businesses an

amount of money of no less than the total proceeds of the hotel tax it receives pursuant to this

chapter for such fiscal year.

     42-63.1-5. Regional tourism districts. – (a) The state of Rhode Island is divided into

eight (8) regional tourism districts to be administered by the tourism council, convention and

visitor's bureau or the Rhode Island economic development corporation commerce corporation

established in chapter 42-64 as designated in this section:

     (1) South County district which shall include Westerly, Charlestown, Narragansett, South

Kingstown, North Kingstown, Hopkinton, Exeter, Richmond, West Greenwich, East Greenwich,

and Coventry to be administered by the South County tourism council, inc.;

     (2) Providence district consists of the city of Providence to be administered by the

Convention Authority of the City of Providence.

     (3) Northern Rhode Island district consists of Pawtucket, Woonsocket, Lincoln, Central

Falls, Cumberland, North Smithfield, Smithfield, Glocester and Burrillville to be administered by

the Blackstone Valley tourism council, inc.;

     (4) Aquidneck Island district consists of Barrington, Bristol, Warren, Newport,

Jamestown, Middletown, Portsmouth, Tiverton and Little Compton to be administered by the

Newport and Bristol County convention and visitors bureau;

     (5) Warwick district consists of the city of Warwick to be administered by the city of

Warwick department of economic development;

     (6) Block Island district which shall consist of the town of New Shoreham to be

administered by the New Shoreham tourism council, inc.;

     (7) East Providence to be administered by an entity that shall be acceptable to the

economic development corporation; provided that all funds generated in the city of East

Providence shall be held by the Rhode Island division of taxation until such time as the city of

East Providence elects to become a member of a regional tourism district at which time the

monies held by the Rhode Island division of taxation shall be transferred to the tourism district or

convention visitors' bureau selected by the city of East Providence;

     (8) Statewide district consists of all cities and towns not delineated in subdivisions (1)

through (7) to be administered by the Rhode Island economic development corporation commerce

corporation established in chapter 42-64.

     (b) Before receiving any funds under this chapter, the organizations designated to receive

the funds on behalf of the South County regional tourism district and the Northern Rhode Island

regional tourism district shall be required to apply to and receive approval from the Rhode Island

economic development corporation commerce corporation pursuant to guidelines promulgated by

the Rhode Island economic development corporation commerce corporation. The corporation

shall review the eligibility of the regional tourism district organizations to receive the funds at

least annually.

     (9) On or before January 1, 2016 and every January 1 thereafter, all regional tourism

districts created under these sections shall be required to seek and obtain the approval of the

executive office of commerce regarding the incorporation of common statewide marketing

themes, logos, and slogans, among other features, prior to the release of lodging tax funds to the

districts.

     42-63.1-12. Distribution of tax to Rhode Island Convention Center Authority. – (a)

For returns and tax received on or before December 31, 2015, the The proceeds of the hotel tax

generated by any and all hotels physically connected to the Rhode Island Convention Center shall

be distributed as follows: twenty-seven percent (27%) shall be deposited as general revenues;

thirty-one percent (31%) shall be given to the convention authority of the city of Providence;

twelve percent (12%) shall be given to the greater Providence-Warwick convention and visitor's

bureau; thirty percent (30%) shall be given to the Rhode Island convention center authority to be

used in the furtherance of the purposes set forth in § 42-99-4.

     (b) For returns and tax received after December 31, 2015, the proceeds of the hotel tax

generated by any and all hotels physically connected to the Rhode Island Convention Center shall

be distributed as follows: twenty-eight percent (28%) shall be given to the convention authority of

the city of Providence; twelve percent (12%) shall be given to the greater Providence-Warwick

convention and visitor's bureau; and sixty percent (60%) shall be given to the Rhode Island

Commerce Corporation established in § 42-64..

     (b)(c) The Rhode Island Convention Center Authority is authorized and empowered to

enter into contracts with the Greater Providence-Warwick Convention and Visitors' Bureau in the

furtherance of the purposes set forth in this chapter.

     SECTION 3. Chapter 42-63.1 of the General Laws entitled "Tourism and Development"

is hereby amended to read by adding thereto the following section:

     42-63.1-14. Offering residential units through a hosting platform. – For any

residential unit offered for tourist or transient use on a hosting platform that collects and remits

applicable sales and hotel taxes in compliance with § 44-18-7.3(b)(4)(i), § 44-18-18, and § 44-18-

36.1, cities, towns or municipalities shall not prohibit the owner of such residential unit from

offering the unit for tourist or transient use through such hosting platform, or prohibit such

hosting platform from providing a person or entity the means to rent, pay for or otherwise reserve

a residential unit for tourist or transient use. A hosting platform shall comply with the

requirement imposed upon room resellers in § 44-18-7.3(b)(4)(i) and § 44-18-36.1 in order for the

prohibition of this section to apply. The division of taxation shall at the request of a city, town, or

municipality confirm whether a hosting platform is registered in compliance with § 44-18-

7.3(b)(4)(i).

     SECTION 4. Sections 44-18-7.3 and 44-18-36.1 of the General Laws in Chapter 44-18

entitled "Sales and Use Tax – Liability and Computation" are hereby amended to read as follows:

     44-18-7.3. Services defined. – (a) "Services" means all activities engaged in for other

persons for a fee, retainer, commission, or other monetary charge, which activities involve the

performance of a service in this state as distinguished from selling property.

     (b) The following businesses and services performed in this state, along with the

applicable 2007 North American Industrial Classification System (NAICS) codes, are included in

the definition of services:

     (1) Taxicab and limousine services including but not limited to:

     (i) Taxicab services including taxi dispatchers (485310); and

     (ii) Limousine services (485320).

     (2) Other road transportation service including but not limited to:

     (i) Charter bus service (485510); and

     (ii) All other transit and ground passenger transportation (485999).

     (3) Pet care services (812910) except veterinary and testing laboratories services.

     (4)(i) "Room reseller" or "reseller" means any person, except a tour operator as defined in

§ 42-63.1-2, having any right, permission, license, or other authority from or through a hotel as

defined in § 42-63.1-2, to reserve, or arrange the transfer of occupancy of, accommodations the

reservation or transfer of which is subject to this chapter, such that the occupant pays all or a

portion of the rental and other fees to the room reseller or reseller, room reseller or reseller shall

include, but not be limited to, sellers of travel packages as defined in this section.

Notwithstanding the provisions of any other law, where said reservation or transfer of occupancy

is done using a room reseller or reseller, the application of the sales and use under §§ 44-18-18

and 44-18-20, and the hotel tax under § 44-18- 36.1 shall be as follows: The room reseller or

reseller is required to register with and shall collect and pay to the tax administrator the sales and

use and hotel taxes, with said taxes being calculated upon the amount of rental and other fees paid

by the occupant to the room reseller or reseller, less the amount of any rental and other fees paid

by the room reseller or reseller to the hotel. The hotel shall collect and pay to the tax

administrator said taxes upon the amount of rental and other fees paid to the hotel by the room

reseller or reseller and/or the occupant. No assessment shall be made by the tax administrator

against a hotel because of an incorrect remittance of the taxes under this chapter by a room

reseller or reseller. No assessment shall be made by the tax administrator against a room reseller

or reseller because of an incorrect remittance of the taxes under this chapter by a hotel. If the

hotel has paid the taxes imposed under this chapter, the occupant and/or room reseller or reseller,

as applicable, shall reimburse the hotel for said taxes. If the room reseller or reseller has paid said

taxes, the occupant shall reimburse the room reseller or reseller for said taxes. Each hotel and

room reseller or reseller shall add and collect from the occupant or the room reseller or the

reseller the full amount of the taxes imposed on the rental and other fees. When added to the

rental and other fees, the taxes shall be a debt owed by the occupant to the hotel or room reseller

or reseller, as applicable, and shall be recoverable at law in the same manner as other debts. The

amount of the taxes collected by the hotel and/or room reseller or reseller from the occupant

under this chapter shall be stated and charged separately from the rental and other fees, and shall

be shown separately on all records thereof, whether made at the time the transfer of occupancy

occurs, or on any evidence of the transfer issued or used by the hotel or the room reseller or the

reseller. A room reseller or reseller shall not be required to disclose to the occupant the amount of

tax charged by the hotel; provided, however, the room reseller or reseller shall represent to the

occupant that the separately stated taxes charged by the room reseller or reseller include taxes

charged by the hotel. No person shall operate a hotel in this state, or act as a room reseller or

reseller for any hotel in the state, unless the tax administrator has issued a permit pursuant to §

44-19-1.

     (ii) "Travel package" means a room or rooms bundled with one or more other, separate

components of travel such as air transportation, car rental or similar items, which travel package

is charged to the customer or occupant for a single retail price. When the room occupancy is

bundled for a single consideration, with other property, services, amusement charges, or any other

items, the separate sale of which would not otherwise be subject to tax under this chapter, the

entire single consideration shall be treated as the rental or other fees for room occupancy subject

to tax under this chapter; provided, however, that where the amount of the rental or other fees for

room occupancy is stated separately from the price of such other property, services, amusement

charges, or other items, on any sales slip, invoice, receipt, or other statement given the occupant,

and such rental and other fees are determined by the tax administrator to be reasonable in relation

to the value of such other property, services, amusement charges or other items, only such

separately stated rental and other fees will be subject to tax under this chapter. The value of the

transfer of any room or rooms bundled as part of a travel package may be determined by the tax

administrator from the room reseller's and/or reseller’s and/or hotel’s books and records that are

kept in the regular course of business.

     (c) The tax administrator is authorized to promulgate rules and regulations in accordance

with the provisions of chapter 42-35 to carry out the provisions, policies, and purposes of this

chapter.

     44-18-36.1. Hotel tax. – (a) There is imposed a hotel tax of five percent (5%) upon the

total consideration charged for occupancy of any space furnished by any hotel, travel packages, or

room reseller or reseller as defined in § 44-18-7.3(b) in this state. A house, condominium, or

other resident dwelling shall be exempt from the five percent (5%) hotel tax under this subsection

if the house, condominium, or other resident dwelling is rented in its entirety. The hotel tax is in

addition to any sales tax imposed. This hotel tax is administered and collected by the division of

taxation and unless provided to the contrary in this chapter, all the administration, collection, and

other provisions of chapters 18 and 19 of this title apply. Nothing in this chapter shall be

construed to limit the powers of the convention authority of the city of Providence established

pursuant to the provisions of chapter 84 of the public laws of 1980, except that distribution of

hotel tax receipts shall be made pursuant to chapter 63.1 of title 42 rather than chapter 84 of the

public laws of 1980.

     (b) There is hereby levied and imposed, upon the total consideration charged for

occupancy of any space furnished by any hotel in this state, in addition to all other taxes and fees

now imposed by law, a local hotel tax at a rate of one percent (1%). The local hotel tax shall be

administered and collected in accordance with subsection (a).

     (c) All sums received by the division of taxation from the local hotel tax, penalties or

forfeitures, interest, costs of suit and fines shall be distributed at least quarterly, credited and paid

by the state treasurer to the city or town where the space for occupancy that is furnished by the

hotel is located. Unless provided to the contrary in this chapter, all of the administration,

collection, and other provisions of chapters 18 and 19 of this title shall apply.

     (d) Notwithstanding the provisions of subsection (a) of this section, the city of Newport

shall have the authority to collect from hotels located in the city of Newport the tax imposed by

subsection (a) of this section.

     (1) Within ten (10) days of collection of the tax, the city of Newport shall distribute the

tax as provided in § 42-63.1-3. No later than the first day of March and the first day of September

in each year in which the tax is collected, the city of Newport shall submit to the division of

taxation a report of the tax collected and distributed during the six (6) month period ending thirty

(30) days prior to the reporting date.

     (2) The city of Newport shall have the same authority as the division of taxation to

recover delinquent hotel taxes pursuant to chapter 44-19, and the amount of any hotel tax, penalty

and interest imposed by the city of Newport until collected constitutes a lien on the real property

of the taxpayer.

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

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

effective the first (1st) day of the first (1st) state fiscal quarter following the change, the rate

imposed under § 44-18-36.1(b) shall be one and one-half percent (1.5%).

     SECTION 5. Chapter 44-1 of the General Laws entitled "State Tax Officials" is hereby

amended by adding hereto the following section:

     44-1-36. Contracts. - (a) Except as set forth in section (b) below, the division of taxation

may enter into contracts with persons (defined herein as individuals, firms, fiduciaries,

partnerships, corporations, trusts, or associations, however formed) to be paid on a contingent fee

basis, for services rendered to the division of taxation where the contract is for the collection of

taxes, interest, or penalty or the reduction of refunds claimed. Under such contracts the contingent

fee shall be based on the actual amount of taxes, interest and/or penalties collected and/or the

amount by which the claimed refund is reduced.

     (b) The division of taxation may not enter into a contingent fee contract under which the

person directly conducts a field audit.

     (c) The division of taxation shall publish an annual report setting forth the number of

contracts entered into under paragraph (a), the amount collected and the percentage of the

contingency fee arrangement of each contract.

     SECTION 6. Section 44-25-1 of the General Laws in Chapter 44-25 entitled "Real Estate

Conveyance Tax" is hereby amended to read as follows:

     44-25-1. Tax imposed -- Payment -- Burden. -- (a) There is imposed, on each deed,

instrument, or writing by which any lands, tenements, or other realty sold is granted, assigned,

transferred, or conveyed to, or vested in, the purchaser or purchasers, or any other person or

persons, by his or her or their direction, or on any grant, assignment, transfer, or conveyance or

such vesting, by such persons which has the effect of making any real estate company an acquired

real estate company, when the consideration paid exceeds one hundred dollars ($100), a tax at the

rate of two dollars and thirty cents ($2.30) for each five hundred dollars ($500) or fractional part

of it which is paid for the purchase of the property or the interest in an acquired real estate

company (inclusive of the value of any lien or encumbrance remaining at the time of the sale,

grant, assignment, transfer or conveyance or vesting occurs, or in the case of an interest in an

acquired real estate company, a percentage of the value of such lien or encumbrance equivalent to

the percentage interest in the acquired real estate company being granted, assigned, transferred,

conveyed or vested), which tax is payable at the time of making, the execution, delivery,

acceptance or presenting presentation for recording of the any instrument affecting such transfer

grant, assignment, transfer, conveyance or vesting. In the absence of an agreement to the

contrary, the tax shall be paid by the grantor, assignor, transferor or person making the

conveyance or vesting.

      (b) In the event no consideration is actually paid for the lands, tenements, or realty, the

instrument or interest in an acquired real estate company of conveyance shall contain a statement

to the effect that the consideration is such that no documentary stamps are required.

      (c) The tax administrator shall contribute to the distressed community relief program the

sum of thirty cents ($.30) per two dollars and thirty cents ($2.30) of the face value of the stamps

to be distributed pursuant to § 45-13-12, and to the housing resources commission restricted

receipts account the sum of thirty cents ($.30) per two dollars and thirty cents ($2.30) of the face

value of the stamps. Funds will be administered by the department of administration, office of

housing and community development, through the housing resources commission. The state shall

retain sixty cents ($.60) for state use. The balance of the tax shall be retained by the municipality

collecting the tax. Notwithstanding the above, in the case of the tax on the grant, transfer,

assignment or conveyance or vesting with respect to an acquired real estate company, the tax

shall be collected by the tax administrator and shall be distributed to the municipality where the

real estate owned by the acquired real estate company is located provided, however, in the case

of any such tax collected by the tax administrator, if the acquired real estate company owns

property located in more than one municipality, the proceeds of the tax shall be allocated amongst

said municipalities in the proportion the assessed value of said real estate in each such

municipality bears to the total of the assessed values of all of the real estate owned by the

acquired real estate company in Rhode Island. Provided, however, in fiscal years 2004 and 2005,

from the proceeds of this tax, the tax administrator shall deposit as general revenues the sum of

ninety cents ($.90) per two dollars and thirty cents ($2.30) of the face value of the stamps. The

balance of the tax on the purchase of property shall be retained by the municipality collecting the

tax. The balance of the tax on the transfer with respect to an acquired real estate company, shall

be collected by the tax administrator and shall be distributed to the municipality where the

property for which interest is sold is physically located. Provided, however, that in the case of any

tax collected by the tax administrator with respect to an acquired real estate company where the

acquired real estate company owns property located in more than one municipality, the proceeds

of the tax shall be allocated amongst the municipalities in proportion that the assessed value in

any such municipality bears to the assessed values of all of the real estate owned by the acquired

real estate company in Rhode Island.

     (d) For purposes of this Section, the term “acquired real estate company” means a real

estate company that has undergone a change in ownership interest if (i) such change does not

affect the continuity of the operations of the company; and (ii) the change, whether alone or

together with prior changes has the effect of granting, transferring, assigning or conveying or

vesting, transferring directly or indirectly, 50% or more of the total ownership in the company

within a period of three (3) years. For purposes of the foregoing subsection (ii) hereof, a grant,

transfer, assignment or conveyance or vesting, shall be deemed to have occurred within a period

of three (3) years of another grant(s), transfer(s) , assignment(s) or conveyance(s) or vesting(s) if

during the period the granting, transferring, assigning or conveying or party provides the

receiving party a legally binding document granting, transferring, assigning or conveying or

vesting said realty or a commitment or option enforceable at a future date to execute the grant,

transfer, assignment or conveyance or vesting.

     (e) A real estate company is a corporation, limited liability company, partnership or other

legal entity which meets any of the following:

     (i) Is primarily engaged in the business of holding, selling or leasing real estate, where

90% or more of the ownership of said real estate is held by 35 or fewer persons and which

company either (a) derives 60% or more of its annual gross receipts from the ownership or

disposition of real estate; or (b) owns real estate the value of which comprises 90% or more of the

value of the entity’s entire tangible asset holdings exclusive of tangible assets which are fairly

transferrable and actively traded on an established market; or

     (ii) 90% or more of the ownership interest in such entity is held by 35 or fewer persons

and the entity owns as 90% or more of the fair market value of its assets a direct or indirect

interest in a real estate company. An indirect ownership interest is an interest in an entity 90% or

more of which is held by 35 or fewer persons and the purpose of the entity is the ownership of a

real estate company.

      (f) In the case of a grant, assignment, transfer or conveyance or vesting which results in a

real estate company becoming an acquired real estate company, the grantor, assignor, transferor,

or person making the conveyance or causing the vesting, shall file or cause to be filed with the

division of taxation, at least five (5) days prior to the grant, transfer, assignment or conveyance

or vesting, notification of the proposed grant, transfer, assignment, or conveyance or vesting, the

price, terms and conditions of thereof, and the character and location of all of the real estate assets

held by real estate company and shall remit the tax imposed and owed pursuant to subsection (a)

hereof. Any such grant, transfer, assignment or conveyance or vesting which results in a real

estate company becoming an acquired real estate company shall be fraudulent and void as against

the state unless the entity notifies the tax administrator in writing of the grant, transfer,

assignment or conveyance or vesting as herein required in subsection (f) hereof and has paid the

tax as required in subsection (a) hereof. Upon the payment of the tax by the transferor, the tax

administrator shall issue a certificate of the payment of the tax which certificate shall be

recordable in the land evidence records in each municipality in which such real estate company

owns real estate. Where the real estate company has assets other than interests in real estate

located in Rhode Island, the tax shall be based upon the assessed value of each parcel of property

located in each municipality in the state of Rhode Island.

     SECTION 7. Section 44-18-30 of 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, that 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 that

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); Vocational

Industrial Clubs of America (VICA); organized nonprofit golden age and senior citizens clubs for

men and women; and parent-teacher associations.

     (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 that 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

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 or sales promotion, nor does it mean or

include distribution operations that 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 § 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 § 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 § 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 § 44-18-

7.1(h)(iii).

     (ii) Durable medical equipment as defined in § 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

ambulatory drug delivery pumps that 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 § 44-18-7.1(t),

sold on prescription, including, but not limited to: artificial limbs, dentures, spectacles,

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

prescription; and mobility enhancing equipment as defined in § 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 that 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 § 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 § 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 §§ 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 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 § 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 § 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 that 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 that is

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

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

school year; that keeps and furnishes to students and others records required and accepted for

entrance to schools of secondary, collegiate, or graduate rank; and 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

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 § 39-14-1, and/or a "wheelchair

accessible public motor vehicle" as defined in § 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 heating 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, molds, machinery, 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

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 that is not to be sold and that 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 that has been put through a process of smelting or refining, including, but not

limited to, gold, silver, platinum, rhodium, and chromium, and that 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 that 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 that are in excess of five (5) net tons and

that 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

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

disposing of it 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 § 20-2-27.1 that 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; and (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; and (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,

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 that 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 §§ 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 that the organization is formed to

sponsor and support; and by accredited elementary and secondary schools for the purposes of 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 § 31-1-8 and is eligible for registration displaying

farm plates as provided for in § 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 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 any educational institution within the purview of § 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 § 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 § 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 that either: (i) Accompany the product

that 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. § 2011 et seq.

     (40) Transportation charges. From the sale or hiring of motor carriers as defined in § 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 §§ 44-18-10, 44-18-11 and 44-18-20, the tax

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

any year up 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

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 §§ 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 § 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. § 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 that suffers a disaster, as defined in this subdivision, in this state. "Disaster" means any

occurrence, natural or otherwise, that 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.

     (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 that 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 § 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 § 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.

     (ii) The tax administrator, in addition to the provisions of §§ 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 § 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

that 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 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 §§ 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

utility power lines; and 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 § 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 that ordinarily

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

ordinarily constitutes fibers for human use.

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

technology that is required by § 31-47.3-4.

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

animals as described in § 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 § 44-18-7.1, excluding beer and

malt beverages from December 1, 2013, through June 30, 2015; provided, further,

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

as defined in § 44-18-7.1, shall not be subject to minimum markup from December 1, 2013,

through June 30, 2015.

     SECTION 8. Section 10 of Article 12 of Chapter 145 of the 2014 Public Laws entitled

"AN ACT RELATING TO MAKING APPROPRIATIONS FOR THE SUPPORT OF THE

STATE FOR THE FISCAL YEAR ENDING JUNE 30, 2014" is hereby amended to read as

follows:

     Section 10. Section 3-10-1 of the General Laws in Chapter 3-10 entitled "Taxation of

Beverages" is hereby amended to read as follows:

     3-10-1. Manufacturing tax rates -- Exemption of religious uses. -- (a) There shall be

assessed and levied by the tax administrator on all beverages manufactured, rectified, blended, or

reduced for sale in this state a tax of three dollars ($3.00) three dollars and thirty cents ($3.30) on

every thirty-one (31) gallons, and a tax at a like rate for any other quantity or fractional part. On

any beverage manufactured, rectified, blended, or reduced for sale in this state consisting in

whole or in part of wine, whiskey, rum, gin, brandy spirits, ethyl alcohol, or other strong liquors

(as distinguished from beer or other brewery products), the tax to be assessed and levied is as

follows:

      (1) Still wines (whether fortified or not), sixty cents ($.60) one dollar and forty cents

($1.40) per gallon;

      (2) Still wines (whether fortified or not) made entirely from fruit grown in this state,

thirty cents ($.30) per gallon;

      (3) Sparkling wines (whether fortified or not), seventy five cents ($.75) per gallon;

      (4) Whiskey, rum, gin, brandy spirits, cordials, and other beverages consisting in whole

or in part of alcohol which that is the product of distillation, three dollars and seventy-five cents

($3.75) five dollars and forty cents ($5.40) per gallon, except that whiskey, rum, gin, brandy

spirits, cordials, and other beverages consisting in whole or in part of alcohol which that is the

product of distillation but which that contains alcohol measuring thirty (30) proof or less, one

dollar and ten cents ($1.10) per gallon;

      (5) Ethyl alcohol to be used for beverage purposes, seven dollars and fifty cents ($7.50)

per gallon; and

      (6) Ethyl alcohol to be used for nonbeverage purposes, eight cents ($.08) per gallon.

      (b) Sacramental wines are not subject to any tax if sold directly to a member of the

clergy for use by the purchaser or his or her congregation for sacramental or other religious

purposes.

      (c) A brewer who brews beer in this state which that is actively and directly owned,

managed, and operated by an authorized legal entity which that has owned, managed, and

operated a brewery in this state for at least twelve (12) consecutive months, shall receive a tax

exemption on the first one hundred thousand (100,000) barrels of beer that it produces and

distributes in this state in any calendar year. A barrel of beer is thirty one (31) gallons.

     SECTION 9. Chapter 44-19 of the General Laws entitled "Sales and Use Taxes –

Enforcement and Collection" is hereby amended by adding hereto the following section:

     44-19-43. Managed Audit Program. - (a) The tax administrator may, in a written

agreement with a taxpayer, authorize a taxpayer to conduct a managed audit pursuant to this

section. The agreement shall specify the period to be audited and the procedure to be followed,

and shall be signed by an authorized representative of the tax administrator and the taxpayer.

     (b) For purposes of this section, the term "managed audit" means a review and analysis of

invoices, checks, accounting records, or other documents or information to determine the correct

amount of tax. A managed audit may include, but is not required to include, the following

categories of liability under this Chapter, including tax on:

     (i) Sales of one or more types of taxable items.

     (ii) Purchases of assets.

     (iii) Purchases of expense items.

     (iv) Purchases under a direct payment permit.

     (v) Any other category specified in an agreement authorized by this section. It shall be in

the tax administrator’s sole discretion as to which categories of liability shall be included in any

managed audit.

     (c) The decision to authorize a managed audit rests solely with the tax administrator. In

determining whether to authorize a managed audit, the tax administrator may consider, in

addition to other facts the tax administrator may consider relevant, any of the following:

     (i) The taxpayer's history of tax compliance.

     (ii) The amount of time and resources the taxpayer has available to dedicate to the

managed audit.

     (iii) The extent and availability of the taxpayer's records.

     (iv) The taxpayer's ability to pay any expected liability.

     (d) The tax administrator may examine records and perform reviews that (s)he determines

are necessary before the managed audit is finalized to verify the results of the managed audit.

Unless the managed audit or information reviewed by the tax administrator discloses fraud or

willful evasion of the tax, the tax administrator may not assess a penalty and may waive all or a

part of the interest that would otherwise accrue on any amount identified as due in a managed

audit. This subsection (d) does not apply to any amount collected by the taxpayer that was a tax

or represented to be a tax that was not remitted to the state.

     SECTION 10. Sections 44-20-12 and 44-20-13 of the General Laws in Chapter 44-20

entitled "Cigarette Tax" are hereby amended to read as follows:

     44-20-12. Tax imposed on cigarettes sold. -- A tax is imposed on all cigarettes sold or

held for sale in the state. The payment of the tax to be evidenced by stamps, which may be

affixed only by licensed distributors to the packages containing such cigarettes. Any cigarettes on

which the proper amount of tax provided for in this chapter has been paid, payment being

evidenced by the stamp, is not subject to a further tax under this chapter. The tax is at the rate of

one hundred seventy-five (175) one hundred eighty-seven and one half (187.5) mills for each

cigarette.

     44-20-13. Tax imposed on unstamped cigarettes. - A tax is imposed at the rate of one

hundred seventy-five (175) one hundred eighty-seven and one half (187.5) mills for each cigarette

upon the storage or use within this state of any cigarettes not stamped in accordance with the

provisions of this chapter in the possession of any consumer within this state.

     SECTION 11. Chapter 44-20 of the General Laws entitled "Cigarette Tax" is hereby

amended by adding hereto the following section:

     44-20-12.5. Floor stock tax on cigarettes and stamps. – (a) Whenever used in this

section, unless the context requires otherwise:

     (1) "Cigarette" means any cigarette as defined in § 44-20-1(2);

     (2) "Person" means each individual, firm, fiduciary, partnership, corporation, trust, or

association, however formed.

     (b) Each person engaging in the business of selling cigarettes at retail in this state shall

pay a tax or excise to the state for the privilege of engaging in that business during any part of the

calendar year 2015. In calendar year 2015, the tax shall be measured by the number of cigarettes

held by the person in this state at 12:01 a.m. on August 1, 2015 and is computed at the rate of

twelve and one half (12.5) mills for each cigarette on August 1, 2015.

     (c) Each distributor licensed to do business in this state pursuant to this chapter shall pay

a tax or excise to the state for the privilege of engaging in that business during any part of the

calendar year 2015. The tax is measured by the number of stamps, whether affixed or to be

affixed to packages of cigarettes, as required by § 44-20-28. In calendar year 2015 the tax is

measured by the number of stamps, as defined in § 44-20-1(10), whether affixed or to be affixed,

held by the distributor at 12:01 a.m. on August 1, 2015, and is computed at the rate of twelve and

one half (12.5) mills per cigarette in the package to which the stamps are affixed or to be affixed.

     (d) Each person subject to the payment of the tax imposed by this section shall, on or

before August 15, 2015, file a return, under oath or certified under the penalties of perjury, with

the tax administrator on forms furnished by him or her, showing the amount of cigarettes and

under subsection (b) above the number of stamps under subsection (c) above, in that person's

possession in this state at 12:01 a.m. on August 1, 2015, and the amount of tax due, and shall at

the time of filing the return pay the tax to the tax administrator. Failure to obtain forms shall not

be an excuse for the failure to make a return containing the information required by the tax

administrator.

     (e) The tax administrator may prescribe rules and regulations, not inconsistent with law,

with regard to the assessment and collection of the tax imposed by this section.

     SECTION 12. Section 44-30-2.6 and 44-30-12 of General Laws in Chapter 44-30 entitled

"Personal Income Tax" is hereby amended to read as follows:

     44-30-2.6. Rhode Island taxable income – Rate of tax. – (a) "Rhode Island taxable

income" means federal taxable income as determined under the Internal Revenue Code, 26 U.S.C.

§ 1 et seq., not including the increase in the basic standard deduction amount for married couples

filing joint returns as provided in the Jobs and Growth Tax Relief Reconciliation Act of 2003 and

the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), and as modified by

the modifications in § 44-30-12.

     (b) Notwithstanding the provisions of §§ 44-30-1 and 44-30-2, for tax years beginning on

or after January 1, 2001, a Rhode Island personal income tax is imposed upon the Rhode Island

taxable income of residents and nonresidents, including estates and trusts, at the rate of twenty-

five and one-half percent (25.5%) for tax year 2001, and twenty-five percent (25%) for tax year

2002 and thereafter of the federal income tax rates, including capital gains rates and any other

special rates for other types of income, except as provided in § 44-30-2.7, which were in effect

immediately prior to enactment of the Economic Growth and Tax Relief Reconciliation Act of

2001 (EGTRRA); provided, rate schedules shall be adjusted for inflation by the tax administrator

beginning in taxable year 2002 and thereafter in the manner prescribed for adjustment by the

commissioner of Internal Revenue in 26 U.S.C. § 1(f). However, for tax years beginning on or

after January 1, 2006, a taxpayer may elect to use the alternative flat tax rate provided in § 44-30-

2.10 to calculate his or her personal income tax liability.

     (c) For tax years beginning on or after January 1, 2001, if a taxpayer has an alternative

minimum tax for federal tax purposes, the taxpayer shall determine if he or she has a Rhode

Island alternative minimum tax. The Rhode Island alternative minimum tax shall be computed by

multiplying the federal tentative minimum tax without allowing for the increased exemptions

under the Jobs and Growth Tax Relief Reconciliation Act of 2003 (as redetermined on federal

form 6251 Alternative Minimum Tax-Individuals) by twenty-five and one-half percent (25.5%)

for tax year 2001, and twenty-five percent (25%) for tax year 2002 and thereafter, and comparing

the product to the Rhode Island tax as computed otherwise under this section. The excess shall be

the taxpayer's Rhode Island alternative minimum tax.

     (1) For tax years beginning on or after January 1, 2005 and thereafter the exemption

amount for alternative minimum tax, for Rhode Island purposes, shall be adjusted for inflation by

the tax administrator in the manner prescribed for adjustment by the commissioner of Internal

Revenue in 26 U.S.C. § 1(f).

     (2) For the period January 1, 2007 through December 31, 2007, and thereafter, Rhode

Island taxable income shall be determined by deducting from federal adjusted gross income as

defined in 26 U.S.C. § 62 as modified by the modifications in § 44-30-12 the Rhode Island

itemized deduction amount and the Rhode Island exemption amount as determined in this section.

     (A) Tax imposed.

     (1) There is hereby imposed on the taxable income of married individuals filing joint

returns and surviving spouses a tax determined in accordance with the following table:

If taxable income is: The tax is:

Not over $53,150 3.75% of taxable income

Over $53,150 but not over $128,500 $1,993.13 plus 7.00% of the excess over $53,150

Over $128,500 but not over $195,850 $7,267.63 plus 7.75% of the excess over $128,500

Over $195,850 but not over $349,700 $12,487.25 plus 9.00% of the excess over $195,850

Over $349,700 $26,333.75 plus 9.90% of the excess over $349,700

     (2) There is hereby imposed on the taxable income of every head of household a tax

determined in accordance with the following table:

If taxable income is: The tax is:

Not over $42,650 3.75% of taxable income

Over $42,650 but not over $110,100 $1,599.38 plus 7.00% of the excess over $42,650

Over $110,100 but not over $178,350 $6,320.88 plus 7.75% of the excess over $110,100

Over $178,350 but not over $349,700 $11,610.25 plus 9.00% of the excess over $178,350

Over $349,700 $27,031.75 plus 9.90% of the excess over $349,700

     (3) There is hereby imposed on the taxable income of unmarried individuals (other than

surviving spouses and heads of households) a tax determined in accordance with the following

table:

If taxable income is: The tax is:

Not over $31,850 3.75% of taxable income

Over $31,850 but not over $77,100 $1,194.38 plus 7.00% of the excess over $31,850

Over $77,100 but not over $160,850 $4,361.88 plus 7.75% of the excess over $77,100

Over $160,850 but not over $349,700 $10,852.50 plus 9.00% of the excess over $160,850

Over $349,700 $27,849.00 plus 9.90% of the excess over $349,700

     (4) There is hereby imposed on the taxable income of married individuals filing separate

returns and bankruptcy estates a tax determined in accordance with the following table:

If taxable income is: The tax is:

Not over $26,575 3.75% of taxable income

Over $26,575 but not over $64,250 $996.56 plus 7.00% of the excess over $26,575

Over $64,250 but not over $97,925 $3,633.81 plus 7.75% of the excess over $64,250

Over $97,925 but not over $174,850 $6,243.63 plus 9.00% of the excess over $97,925

Over $174,850 $13,166.88 plus 9.90% of the excess over $174,850

     (5) There is hereby imposed a taxable income of an estate or trust a tax determined in

accordance with the following table:

If taxable income is: The tax is:

Not over $2,150 3.75% of taxable income

Over $2,150 but not over $5,000 $80.63 plus 7.00% of the excess over $2,150

Over $5,000 but not over $7,650 $280.13 plus 7.75% of the excess over $5,000

Over $7,650 but not over $10,450 $485.50 plus 9.00% of the excess over $7,650

Over $10,450 $737.50 plus 9.90% of the excess over $10,450

     (6) Adjustments for inflation. The dollars amount contained in paragraph (A) shall be

increased by an amount equal to:

     (a) Such dollar amount contained in paragraph (A) in the year 1993, multiplied by;

     (b) The cost-of-living adjustment determined under section (J) with a base year of 1993;

     (c) The cost-of-living adjustment referred to in subparagraph (a) and (b) used in making

adjustments to the nine percent (9%) and nine and nine tenths percent (9.9%) dollar amounts shall

be determined under section (J) by substituting "1994" for "1993."

     (B) Maximum capital gains rates

     (1) In general If a taxpayer has a net capital gain for tax years ending prior to January 1,

2010, the tax imposed by this section for such taxable year shall not exceed the sum of:

     (a) 2.5 % of the net capital gain as reported for federal income tax purposes under section

26 U.S.C. 1(h)(1)(a) and 26 U.S.C. 1(h)(1)(b).

     (b) 5% of the net capital gain as reported for federal income tax purposes under 26 U.S.C.

1(h)(1)(c).

     (c) 6.25% of the net capital gain as reported for federal income tax purposes under 26

U.S.C. 1(h)(1)(d).

     (d) 7% of the net capital gain as reported for federal income tax purposes under 26 U.S.C.

1(h)(1)(e).

     (2) For tax years beginning on or after January 1, 2010 the tax imposed on net capital

gain shall be determined under subdivision 44-30-2.6(c)(2)(A).

     (C) Itemized deductions.

     (1) In general

     For the purposes of section (2) "itemized deductions" means the amount of federal

itemized deductions as modified by the modifications in § 44-30-12.

     (2) Individuals who do not itemize their deductions In the case of an individual who does

not elect to itemize his deductions for the taxable year, they may elect to take a standard

deduction.

     (3) Basic standard deduction. The Rhode Island standard deduction shall be allowed in

accordance with the following table:

     Filing status Amount

     Single $5,350

     Married filing jointly or qualifying widow(er) $8,900

     Married filing separately $4,450

     Head of Household $7,850

     (4) Additional standard deduction for the aged and blind. An additional standard

deduction shall be allowed for individuals age sixty-five (65) or older or blind in the amount of

$1,300 for individuals who are not married and $1,050 for individuals who are married.

     (5) Limitation on basic standard deduction in the case of certain dependents. In the case

of an individual to whom a deduction under section (E) is allowable to another taxpayer, the basic

standard deduction applicable to such individual shall not exceed the greater of:

     (a) $850;

     (b) The sum of $300 and such individual's earned income;

     (6) Certain individuals not eligible for standard deduction. In the case of:

     (a) A married individual filing a separate return where either spouse itemizes deductions;

     (b) Nonresident alien individual;

     (c) An estate or trust;

     The standard deduction shall be zero.

     (7) Adjustments for inflation. Each dollars amount contained in paragraphs (3), (4) and

(5) shall be increased by an amount equal to:

     (a) Such dollar amount contained in paragraphs (3), (4) and (5) in the year 1988,

multiplied by

     (b) The cost-of-living adjustment determined under section (J) with a base year of 1988.

     (D) Overall limitation on itemized deductions

     (1) General rule.

     In the case of an individual whose adjusted gross income as modified by § 44-30-12

exceeds the applicable amount, the amount of the itemized deductions otherwise allowable for the

taxable year shall be reduced by the lesser of:

     (a) Three percent (3%) of the excess of adjusted gross income as modified by § 44-30-12

over the applicable amount; or

     (b) Eighty percent (80%) of the amount of the itemized deductions otherwise allowable

for such taxable year.

     (2) Applicable amount.

     (a) In general.

     For purposes of this section, the term "applicable amount" means $156,400 ($78,200 in

the case of a separate return by a married individual)

     (b) Adjustments for inflation. Each dollar amount contained in paragraph (a) shall be

increased by an amount equal to:

     (i) Such dollar amount contained in paragraph (a) in the year 1991, multiplied by

     (ii) The cost-of-living adjustment determined under section (J) with a base year of 1991.

     (3) Phase-out of Limitation.

     (a) In general.

     In the case of taxable year beginning after December 31, 2005, and before January 1,

2010, the reduction under section (1) shall be equal to the applicable fraction of the amount which

would be the amount of such reduction.

     (b) Applicable fraction.

     For purposes of paragraph (a), the applicable fraction shall be determined in accordance

with the following table:

For taxable years beginning in calendar year The applicable fraction is

     2006 and 2007 2/3

     2008 and 2009 1/3

     (E) Exemption amount

     (1) In general.

     Except as otherwise provided in this subsection, the term "exemption amount" mean

$3,400.

     (2) Exemption amount disallowed in case of certain dependents.

     In the case of an individual with respect to whom a deduction under this section is

allowable to another taxpayer for the same taxable year, the exemption amount applicable to such

individual for such individual's taxable year shall be zero.

     (3) Adjustments for inflation.

     The dollar amount contained in paragraph (1) shall be increased by an amount equal to:

     (a) Such dollar amount contained in paragraph (1) in the year 1989, multiplied by

     (b) The cost-of-living adjustment determined under section (J) with a base year of 1989.

     (4) Limitation.

     (a) In general.

     In the case of any taxpayer whose adjusted gross income as modified for the taxable year

exceeds the threshold amount shall be reduced by the applicable percentage.

     (b) Applicable percentage. In the case of any taxpayer whose adjusted gross income for

the taxable year exceeds the threshold amount, the exemption amount shall be reduced by two (2)

percentage points for each $2,500 (or fraction thereof) by which the taxpayer's adjusted gross

income for the taxable year exceeds the threshold amount. In the case of a married individual

filing a separate return, the preceding sentence shall be applied by substituting "$1,250" for

"$2,500." In no event shall the applicable percentage exceed one hundred percent (100%).

     (c) Threshold Amount. For the purposes of this paragraph, the term "threshold amount"

shall be determined with the following table:

     Filing status Amount

     Single $156,400

     Married filing jointly of qualifying widow(er) $234,600

     Married filing separately $117,300

     Head of Household $195,500

     (d) Adjustments for inflation.

     Each dollars amount contain in paragraph (b) shall be increased by an amount equal to:

     (i) Such dollar amount contained in paragraph (b) in the year 1991, multiplied by

     (ii) The cost-of-living adjustment determined under section (J) with a base year of 1991.

     (5) Phase-out of Limitation.

     (a) In general.

     In the case of taxable years beginning after December 31, 2005, and before January 1,

2010, the reduction under section 4 shall be equal to the applicable fraction of the amount which

would be the amount of such reduction.

     (b) Applicable fraction.

     For the purposes of paragraph (a), the applicable fraction shall be determined in

accordance with the following table:

For taxable years beginning in calendar year The applicable fraction is

     2006 and 2007 2/3

     2008 and 2009 1/3

     (F) Alternative minimum tax

     (1) General rule. - There is hereby imposed (in addition to any other tax imposed by this

subtitle) a tax equal to the excess (if any) of:

     (a) The tentative minimum tax for the taxable year, over

     (b) The regular tax for the taxable year.

     (2) The tentative minimum tax for the taxable year is the sum of:

     (a) 6.5 percent of so much of the taxable excess as does not exceed $175,000, plus

     (b) 7.0 percent of so much of the taxable excess above $175,000.

     (3) The amount determined under the preceding sentence shall be reduced by the

alternative minimum tax foreign tax credit for the taxable year.

     (4) Taxable excess. - For the purposes of this subsection the term "taxable excess" means

so much of the federal alternative minimum taxable income as modified by the modifications in §

44-30-12 as exceeds the exemption amount.

     (5) In the case of a married individual filing a separate return, subparagraph (2) shall be

applied by substituting "$87,500" for $175,000 each place it appears.

     (6) Exemption amount. For purposes of this section "exemption amount" means:

     Filing status Amount

     Single $39,150

     Married filing jointly or qualifying widow(er) $53,700

     Married filing separately $26,850

     Head of Household $39,150

     Estate or trust $24,650

     (7) Treatment of unearned income of minor children

     (a) In general.

     In the case of a minor child, the exemption amount for purposes of section (6) shall not

exceed the sum of:

     (i) Such child's earned income, plus

     (ii) $6,000.

     (8) Adjustments for inflation.

     The dollar amount contained in paragraphs (6) and (7) shall be increased by an amount

equal to:

     (a) Such dollar amount contained in paragraphs (6) and (7) in the year 2004, multiplied

by

     (b) The cost-of-living adjustment determined under section (J) with a base year of 2004.

     (9) Phase-out.

     (a) In general.

     The exemption amount of any taxpayer shall be reduced (but not below zero) by an

amount equal to twenty-five percent (25%) of the amount by which alternative minimum taxable

income of the taxpayer exceeds the threshold amount.

     (b) Threshold amount. For purposes of this paragraph, the term "threshold amount" shall

be determined with the following table:

     Filing status Amount

     Single $123,250

     Married filing jointly or qualifying widow(er) $164,350

     Married filing separately $82,175

     Head of Household $123,250

     Estate or Trust $82,150

     (c) Adjustments for inflation

     Each dollar amount contained in paragraph (9) shall be increased by an amount equal to:

     (i) Such dollar amount contained in paragraph (9) in the year 2004, multiplied by

     (ii) The cost-of-living adjustment determined under section (J) with a base year of 2004.

     (G) Other Rhode Island taxes

     (1) General rule. - There is hereby imposed (in addition to any other tax imposed by this

subtitle) a tax equal to twenty-five percent (25%) of:

     (a) The Federal income tax on lump-sum distributions.

     (b) The Federal income tax on parents' election to report child's interest and dividends.

     (c) The recapture of Federal tax credits that were previously claimed on Rhode Island

return.

     (H) Tax for children under 18 with investment income

     (1) General rule. – There is hereby imposed a tax equal to twenty-five percent (25%) of:

(a) The Federal tax for children under the age of 18 with investment income.

     (I) Averaging of farm income

     (1) General rule. - At the election of an individual engaged in a farming business or

fishing business, the tax imposed in section 2 shall be equal to twenty-five percent (25%) of:

     (a) The Federal averaging of farm income as determined in IRC section 1301.

     (J) Cost-of-living adjustment

     (1) In general.

     The cost-of-living adjustment for any calendar year is the percentage (if any) by which: