Chapter 006

2007 -- H 5143 SUBSTITUTE A

Enacted 03/14/07

 

A N A C T

RELATING TO TAXATION

     

     

     Introduced By: Representatives Costantino and Crowley

     Date Introduced: January 23, 2007

     

It is enacted by the General Assembly as follows:

 

     SECTION 1. Section 39-1-27.7 of the General Laws in Chapter 39-1 entitled "Public

Utilities Commission" is hereby amended to read as follows:

 

     39-1-27.7. System reliability and least-cost procurement. -- Least-cost procurement

shall comprise system reliability and energy efficiency and conservation procurement as provided

for in this section and supply procurement as provided for in section 39-1-27.8, as complementary

but distinct activities that have as common purpose meeting electrical energy needs in Rhode

Island, in a manner that is optimally cost-effective, reliable, prudent and environmentally

responsible.

      (a) The commission shall establish not later than June 1, 2008, standards for system

reliability and energy efficiency and conservation procurement, which shall include standards and

guidelines for:

      (1) System reliability procurement, including but not limited to:

      (i) Procurement of energy supply from diverse sources, including, but not limited to,

renewable energy resources as defined in chapter 26 of this title;

      (ii) Distributed generation, including, but not limited to, renewable energy resources and

thermally leading combined heat and power systems, which is reliable and is cost-effective, with

measurable, net system benefits;

      (iii) Demand response, including, but not limited to, distributed generation, back-up

generation and on-demand usage reduction, which shall be designed to facilitate electric customer

participation in regional demand response programs, including those administered by the

independent service operator of New England ("ISO-NE") and/or are designed to provide local

system reliability benefits through load control or using on-site generating capability;

      (iv) To effectuate the purposes of this division, the commission may establish standards

and/or rates (A) for qualifying distributed generation, demand response, and renewable energy

resources, (B) for net-metering, (C) for back-up power and/or standby rates that reasonably

facilitate the development of distributed generation, and (D) for such other matters as the

commission may find necessary or appropriate.

      (2) Least-cost procurement, which shall include procurement of energy efficiency and

energy conservation measures that are prudent and reliable and when such measures are lower

cost than acquisition of additional supply, including supply for periods of high demand.

      (b) The standards and guidelines provided for by subsection (a) shall be subject to

periodic review and as appropriate amendment by the commission, which review will be

conducted not less frequently than every three (3) years after the adoption of the standards and

guidelines.

      (c) To implement the provisions of this section:

      (1) The commissioner of the office of energy resources and the energy efficiency and

resources management council, either or jointly or separately, shall provide the commission

findings and recommendations with regard to system reliability and energy efficiency and

conservation procurement on or before March 1, 2008, and triennially on or before March 1,

thereafter through March 1, 2017.

      (2) The commission shall issue standards not later than June 1, 2008, with regard to

plans for system reliability and energy efficiency and conservation procurement, which standards

may be amended or revised by the commission as necessary and/or appropriate.

      (3) The energy efficiency and resources management council shall prepare by July 15,

2009 2008, a reliability and efficiency procurement opportunity report which shall identify

opportunities to procure efficiency, distributed generation, demand response and renewables,

which report shall be submitted to the electrical distribution company, the commission, the office

of energy resources and the joint committee on energy.

      (4) Each electrical distribution company shall submit to the commission on or before

September 1, 2008, and triennially on or before September 1, thereafter through September 1,

2017, a plan for system reliability and energy efficiency and conservation procurement. In

developing the plan, the distribution company may seek the advice of the commissioner and the

council. The plan shall include measurable goals and target percentages for each energy resource,

pursuant to standards established by the commission, including efficiency, distributed generation,

demand response, combined heat and power, and renewables.

      (5) The commission shall issue an order with regard to the plan from the electrical

distribution company not greater than sixty (60) days after it is filed with the commission.

      (6) Each electrical distribution company shall provide a status report, which shall be

public, on the implementation of least cost procurement on or before December 15, 2008, and on

or before February 1, 2009, to the commission, the division, the commissioner of the office of

energy resources and the energy efficiency and resources management council which may

provide the distribution company recommendations with regard to effective implementation of

least cost procurement. The report shall include the targets for each energy resource included in

the order approving the plan and the achieved percentage for energy resource, including the

achieved percentages for efficiency, distributed generation, demand response, combined heat and

power, and renewables.

      (d) If the commission shall determine that the implementation of system reliability and

energy efficiency and conservation procurement has caused or is likely to cause under or over-

recovery of overhead and fixed costs of the company implementing said procurement, the

commission may establish a mandatory rate adjustment clause for the company so affected in

order to provide for full recovery of reasonable and prudent overhead and fixed costs.

      (e) The commission shall conduct a contested case proceeding to establish a performance

based incentive plan which allows for additional compensation for each electric distribution

company and each company providing gas to end-users and/or retail customers based on the level

of its success in mitigating the cost and variability of electric and gas services through

procurement portfolios.

 

     SECTION 2. Section 42-61.2-7 of the General Laws in Chapter 42-61.2 entitled "Video

Lottery Terminal" is hereby amended to read as follows:

 

     42-61.2-7. Division of revenue. -- (a) Notwithstanding the provisions of section 42-61-

15, the allocation of net terminal income derived from video lottery games is as follows:

      (1) For deposit in the general fund and to the state lottery division fund for

administrative purposes: Net terminal income not otherwise disbursed in accordance with

subdivisions (a)(1)(2) -- (a)(6) herein;

      (i) Nineteen one hundredths of one percent (0.19%) up to a maximum of twenty million

dollars ($20,000,000) shall be equally allocated to the distressed communities as defined in

section 45-13-12 provided that no eligible community shall receive more than twenty-five percent

(25%) of that community's currently enacted municipal budget as its share under this specific

subsection. Distributions made under this specific subsection are supplemental to all other

distributions made under any portion of general laws section 45-13-12.

      (ii) Five one hundredths of one percent (0.05%) up to a maximum of five million dollars

($5,000,000) shall be appropriated to property tax relief to fully fund the provisions of section 44-

33-2.1. The maximum credit defined in subdivision 44-33-9(2) shall increase to the maximum

amount to the nearest five dollar ($5.00) increment within the allocation until a maximum credit

of five hundred dollars ($500) is obtained. In no event shall the exemption in any fiscal year be

less than the prior fiscal year.

      (iii) One and twenty-two one hundredths of one percent (1.22%) to fund section 44-34.1-

1, entitled "Motor Vehicle and Trailer Excise Tax Elimination Act of 1998", to the maximum

amount to the nearest two hundred fifty dollar ($250) increment within the allocation. In no event

shall the exemption in any fiscal year be less than the prior fiscal year.

      (iv) Ten one hundredths of one percent (0.10%) to a maximum of ten million dollars

($10,000,000) for supplemental distribution to communities not included in paragraph (a)(1)(i)

above distributed proportionately on the basis of general revenue sharing distributed for that

fiscal year.

      (2) To the licensed video lottery retailer:

      (a) (i) Prior to the effective date of the NGJA Master Contract, Newport Jai Ali twenty-

six percent (26%) minus three hundred eighty four thousand nine hundred ninety-six dollars

($384,996);

      (ii) On and after the effective date of the NGJA Master Contract, to the licensed video

lottery retailer who is a party to the NGJA Master Contract, all sums due and payable under said

Master Contract minus three hundred eighty four thousand nine hundred ninety-six dollars

($384,996).

      (b) (i) Prior to the effective date of the UTGR Master Contract, to the present licensed

video lottery retailer at Lincoln Park which is not a party to the UTGR Master Contract, twenty-

eight and eighty-five one hundredths percent (28.85%) minus seven hundred sixty-seven

thousand six hundred eighty-seven dollars ($767,687);

      (ii) On and after the effective date of the UTGR Master Contract, to the licensed video

lottery retailer who is a party to the UTGR Master Contract, all sums due and payable under said

Master Contract minus seven hundred sixty-seven thousand six hundred eighty-seven dollars

($767,687).

      (3) (i) To the technology providers who are not a party to the GTECH Master Contract

as set forth and referenced in Public Law 2003, Chapter 32, seven percent (7%) of the net

terminal income of the provider's terminals;

      (ii) To contractors who are a party to the Master Contract as set forth and referenced in

Public Law 2003, Chapter 32, all sums due and payable under said Master Contract;

      (iii) Notwithstanding paragraphs (i) and (ii) above, there shall be subtracted

proportionately from the payments to technology providers the sum of six hundred twenty-eight

thousand seven hundred thirty-seven dollars ($628,737);

      (4) To the city of Newport one and one hundreth percent (1.01%) of net terminal income

of authorized machines at Newport Grand and to the town of Lincoln one and twenty-six

hundreths (1.26%) of net terminal income of authorized machines at Lincoln Park; and

      (5) To the Narragansett Indian Tribe, seventeen hundredths of one percent (0.17%) of net

terminal income of authorized machines at Lincoln Park up to a maximum of ten million dollars

($10,000,000) per year, which shall be paid to the Narragansett Indian Tribe for the account of a

Tribal Development Fund to be used for the purpose of encouraging and promoting: home

ownership and improvement, elderly housing, adult vocational training; health and social

services; childcare; natural resource protection; and economic development consistent with state

law. Provided, however, such distribution shall terminate upon the opening of any gaming facility

in which the Narragansett Indians are entitled to any payments or other incentives; and provided

further, any monies distributed hereunder shall not be used for, or spent on previously contracted

debts.

      (6) Unclaimed prizes and credits shall remit to the general fund of the state;

      (7) Payments into the state's general fund specified in subdivisions (a)(1) and (a)(6) shall

be made on an estimated monthly basis. Payment shall be made on the tenth day following the

close of the month except for the last month when payment shall be on the last business day.

 

     SECTION 3. Section 42-141-5 of the General Laws in Chapter 42-141 entitled

"Affordable Energy" is hereby amended to read as follows:

 

     42-141-5. Affordable energy fund. -- (a) Fund established.

      (1) A special account is hereby established in the state treasury to be called the

"affordable energy fund."

      (2) Money remaining in the fund at the end of a fiscal year shall remain available for

expenditure in successive fiscal years.

      (3) The fund shall be used for only those purposes enumerated in subsection (d).

      (b) Financing of the fund. - The fund shall consist of the following sources:

      (1) Sums the legislature may appropriate;

      (2) Moneys received from federal, state, private donor or other sources for the purpose of

energy affordability by low income households;

      (3) Fees required pursuant to subsection (c); and

      (4) Any interest earned on the moneys in the fund.

      (c) Affordable energy fees.

      (1) [Effective July 1, 2007]. An affordable energy fee in an amount set forth in this

subsection shall be imposed on gross receipts of electricity and gas companies and gross receipts

on the sale of heating fuels not used for residential heating. The fee shall be remitted to the

division of taxation according to the applicable schedule for the remission of the gross receipts

tax as provided for in chapter 44-13 or the sales and use as provided for in chapter 44-18. The

fees shall be as follows:

      (i) Gas. - One percent (1%) of the gross receipts of gas companies subject to the

provisions of chapter 44-13, "Public Service Corporation Tax".

      (ii) Electricity. - One percent (1%) of the gross receipts of electric companies subject to

the provisions of chapter 44-13. "Public Service Corporation Tax".

      (iii) Heating fuel other than natural gas and electricity. - Two percent (2%) of gross

receipts from the sales and use of heating fuel subject to the provisions of chapter 44-18. "Sales

and Use Taxes -- Liability and Computation".

      (2) Every person from whom an affordable energy fee is due shall be liable for the fee

until it has been paid to the state.

      (d) Purposes of the fund.

      (1) The commissioner may use money from the fund to:

      (i) Support weatherization and energy conservation educational programs and

weatherization and energy conservation services for low-income and very low income

households;

      (ii) Compensate electric and gas distribution companies for revenues lost due to the

reductions in distribution and customer charges, in accordance with a plan approved by the

commission, to very low income households, and if feasible to low income households, which

shall, as a first priority, be used to provide up to a fifty percent (50%) reduction in the distribution

and customer charges for a reasonable and prudent use by very low-income households of gas

and electricity that does not exceed average use for comparable dwelling units.

      (iii) Defray the cost of heating fuel delivered to very low income households by an

amount not to exceed twenty-five percent (25%) of the allowable cost of heating fuel and a total

usage by the household, supported assistance from all sources overseen by the commissioner, that

is reasonable and prudent and does not exceed average use for comparable dwelling units.

      (iv) It is not the purpose of the fund to reduce the amount of assistance a household

would otherwise receive from LIHEAP and other sources in the absence of the fund or to

subsidize utility rates in effect as of July 1, 2006, and provided for by law.

      (2) If the commissioner determines it is in the public interest to allocate funds for the

purposes set forth in subparagraph (1)(ii) above, the commissioner shall notify the commission of

the amount of funds to be allocated for a specified period. The commission shall then direct the

electric and/or gas distribution companies to file amendments to the appropriate tariffs to

implement rate reductions designed to provide the rate reduction consistent with the amount

allocated for the period designated, which amendments are subject to the review and approval of

the commission. Once approval is given, the allocated funds shall be transferred to the gas and/or

electric distribution company. Any funds held after transfer shall accumulate interest at the

customer deposit rate ("interest"). If, at the end of the rate reduction period, there are any unused

dollars from the fund, such dollars shall be returned to the affordable energy fund with interest.

Likewise, if at the end of the rate reduction period, there were not enough funds allocated to

cover the rate reduction as designed, the shortfall will be reimbursed from the affordable energy

fund with interest; provided, however, if there are no additional funds available from the fund,

such shortfall or uncovered balance of such shortfall will be recovered with interest from all

customers in a manner and over the period approved by the commission.

      (e) Administration and records of the fund.

      (1) The commissioner shall administer the fund in accordance with this chapter.

      (2) The commissioner in consultation with the department shall adopt procedures

governing the expenditure of, and accounting for, money expended from the fund.

      (3) The commissioner is responsible for insuring that there are adequate moneys

available in the fund to carry out the purposes of this section.

      (4) The commissioner shall maintain accounting records showing the income and

expenses of the fund.

      (f) Expenditure of fund money. - Disbursements may be made from the fund for the

following purposes:

      (1) Necessary administrative expenses, personnel expenses and equipment costs of the

office related to this section which shall not exceed ten percent (10%) of the revenue of the fund;

      (2) All costs to effectuate the purposes of the fund as set forth in subsection (d).

      (g) Report to the legislature. - The commissioner shall submit a report to the legislature

not later than the tenth (10th) day following the convening of each regular session of the

legislature. The report may include information considered significant by the commissioner but

must include:

      (1) The amount of money expended under section 42-141-5 during the preceding fiscal

year;

      (2) The amount and source of money received during the preceding fiscal year;

      (3) A detailed summary of activities funded by the fund during the preceding fiscal year;

      (4) The projected cost to the fund for affordable energy programs in the next fiscal year.

 

     SECTION 4. Sections 44-18-7, 44-18-7.1, 44-18-8 and 44-18-30 of the General Laws in

Chapter 44-18 entitled "Sales and Use Taxes - Liability and Computation" are hereby amended to

read as follows:

 

     44-18-7. Sales defined. [Effective January 1, 2007.] -- "Sales" means and includes:

      (1) Any transfer of title or possession, exchange, barter, lease, or rental, conditional or

otherwise, in any manner or by any means of tangible personal property for a consideration.

"Transfer of possession", "lease", or "rental" includes transactions found by the tax administrator

to be in lieu of a transfer of title, exchange, or barter.

      (2) The producing, fabricating, processing, printing, or imprinting of tangible personal

property for a consideration for consumers who furnish either directly or indirectly the materials

used in the producing, fabricating, processing, printing, or imprinting.

      (3) The furnishing and distributing of tangible personal property for a consideration by

social, athletic, and similar clubs and fraternal organizations to their members or others.

      (4) The furnishing, preparing, or serving for consideration of food, meals, or drinks,

including any cover, minimum, entertainment, or other charge in connection therewith.

      (5) A transaction whereby the possession of tangible personal property is transferred, but

the seller retains the title as security for the payment of the price.

      (6) Any withdrawal, except a withdrawal pursuant to a transaction in foreign or interstate

commerce, of tangible personal property from the place where it is located for delivery to a point

in this state for the purpose of the transfer of title or possession, exchange, barter, lease, or rental,

conditional or otherwise, in any manner or by any means whatsoever, of the property for a

consideration.

      (7) A transfer for a consideration of the title or possession of tangible personal property,

which has been produced, fabricated, or printed to the special order of the customer, or any

publication.

      (8) The furnishing and distributing of electricity, natural gas, artificial gas, steam,

refrigeration, and water.

      (9) (i) The furnishing for consideration of intrastate, interstate and international

telecommunications service sourced in this state in accordance with subsections 44-18.1(15) and

(16) which includes local exchange service, intrastate toll service, interstate and international toll

service including cellular mobile telephone or telecommunications service, specialized mobile

radio and pagers and paging service including any form of mobile two-way communication, and

all ancillary services, any maintenance services of telecommunication equipment other than as

provided for in section subdivision 44-18-12(b)(ii)(B) and including the furnishing, rental, or

leasing of all equipment pertaining or incidental thereto; provided, that the service is: rendered in

its entirety within this state, originated in this state and terminated in another state or a foreign

country and with respect to which the service is charged to a telephone number, customer, or

account located in this state or to the account of any transmission instrument in this state,

originated in another state or a foreign country and terminated in this state and is charged to a

telephone number, customer, or account located in this state at which the service is terminated, or

to the account of any transmission instrument in this state at which the service is terminated;

provided, that the service does not include receipts except as otherwise provided in sections 44-

18-8 and 44-18-12. For the purposes of chapters 18 and 19 of this title only, telecommunication

service does not include service rendered using a prepaid telephone calling arrangement.

      (ii) Notwithstanding the provisions of paragraph (i) of this subdivision, in accordance

with the Mobile Telecommunications Sourcing Act (4 U.S.C. sections 116 -- 126), subject to the

specific exemptions described in 4 U.S.C. section 116(c), and the exemptions provided in

sections 44-18-8 and 44-18-12, mobile telecommunications services that are deemed to be

provided by the customer's home service provider are subject to tax under this chapter if the

customer's place of primary use is in this state regardless of where the mobile

telecommunications services originate, terminate or pass through. Mobile telecommunications

services provided to a customer, the charges for which are billed by or for the customer's home

service provider, shall be deemed to be provided by the customer's home service provider.

      (10) The furnishing of service for transmission of messages by telegraph, cable, or radio

and the furnishing of community antenna television, subscription television, and cable television

services.

      (11) The rental of living quarters in any hotel, rooming house, or tourist camp.

      (12) The transfer for consideration of prepaid telephone calling arrangements and the

recharge of prepaid telephone calling arrangements sourced to this state in accordance with

sections 44-18.1-11 and 44-18.1-15. If the transfer or recharge of a prepaid telephone calling

arrangement does not take place at a vendor's place of business, the transfer or recharge is

conclusively determined to take place at the customer's shipping address, or if there is no item

shipped, at the customer's billing address or the location associated with the customer's mobile

telephone number. "Prepaid telephone calling arrangement" means and includes a prepaid

telephone calling card and/or the right to exclusively purchase telecommunications services, that

must be paid for in advance, that enables the origination of calls using an access number and/or

authorization code, whether manually or electronically dialed prepaid calling service and prepaid

wireless calling service.

 

     44-18-7.1. Additional definitions. [Effective January 1, 2007.] -- (a) "Agreement"

means the Streamlined Sales and Use Tax Agreement.

      (b) "Alcoholic Beverages" means beverages that are suitable for human consumption and

contain one-half of one percent (.5%) or more of alcohol by volume.

      (c) "Bundled Transaction" is the retail sale of two or more products, except real property

and services to real property, where (1) the products are otherwise distinct and identifiable, and

(2) the products are sold for one non-itemized price. A "bundled transaction" does not include the

sale of any products in which the "sales price" varies, or is negotiable, based on the selection by

the purchaser of the products included in the transaction.

      (i) "Distinct and identifiable products" does not include:

      (A) Packaging -- such as containers, boxes, sacks, bags, and bottles -- or other materials -

- such as wrapping, labels, tags, and instruction guides -- that accompany the "retail sale" of the

products and are incidental or immaterial to the "retail sale" thereof. Examples of packaging that

are incidental or immaterial include grocery sacks, shoeboxes, dry cleaning garment bags and

express delivery envelopes and boxes.

      (B) A product provided free of charge with the required purchase of another product. A

product is "provided free of charge" if the "sales price" of the product purchased does not vary

depending on the inclusion of the products "provided free of charge."

      (C) Items included in the member state's definition of "sales price," pursuant to

Appendix C of the Agreement.

      (ii) The term "one non-itemized price" does not include a price that is separately

identified by product on binding sales or other supporting sales-related documentation made

available to the customer in paper or electronic form including, but not limited to, an invoice, bill

of sale, receipt, contract, service agreement, lease agreement, periodic notice of rates and

services, rate card, or price list.

      (iii) A transaction that otherwise meets the definition of a "bundled transaction" as

defined above, is not a "bundled transaction" if it is:

      (A) The "retail sale" of tangible personal property and a service where the tangible

personal property is essential to the use of the service, and is provided exclusively in connection

with the service, and the true object of the transaction is the service; or

      (B) The "retail sale" of services where one service is provided that is essential to the use

or receipt of a second service and the first service is provided exclusively in connection with the

second service and the true object of the transaction is the second service; or

      (C) A transaction that includes taxable products and nontaxable products and the

"purchase price" or "sales price" of the taxable products is de minimis.

      1. De minimis means the seller's "purchase price" or "sales price" of the taxable products

is ten percent (10%) or less of the total "purchase price" or "sales price" of the bundled products.

      2. Sellers shall use either the "purchase price" or the "sales price" of the products to

determine if the taxable products are de minimis. Sellers may not use a combination of the

"purchase price" and "sales price" of the products to determine if the taxable products are de

minimis.

      3. Sellers shall use the full term of a service contract to determine if the taxable products

are de minimis; or

      (D) The "retail sale" of exempt tangible personal property and taxable tangible personal

property where:

      1. the transaction includes "food and food ingredients", "drugs", "durable medical

equipment", "mobility enhancing equipment", "over-the-counter drugs", "prosthetic devices" (all

as defined in section 44-18-7.1) or medical supplies; and

      2. where the seller's "purchase price" or "sales price" of the taxable tangible personal

property is fifty percent (50%) or less of the total "purchase price" or "sales price" of the bundled

tangible personal property. Sellers may not use a combination of the "purchase price" and "sales

price" of the tangible personal property when making the fifty percent (50%) determination for a

transaction.

      (d) "Certified Automated System (CAS)" means software certified under the Agreement

to calculate the tax imposed by each jurisdiction on a transaction, determine the amount of tax to

remit to the appropriate state, and maintain a record of the transaction.

      (e) "Certified Service Provider (CSP)" means an agent certified under the Agreement to

perform all the seller's sales and use tax functions, other than the seller's obligation to remit tax on

its own purchases.

      (f) Clothing and Related Items

      (i) "Clothing" means all human wearing apparel suitable for general use.

      (ii) "Clothing accessories or equipment" means incidental items worn on the person or in

conjunction with "clothing." "Clothing accessories or equipment" does not include "clothing,"

"sport or recreational equipment," or "protective equipment."

      (iii) "Protective equipment" means items for human wear and designed as protection of

the wearer against injury or disease or as protections against damage or injury of other persons or

property but not suitable for general use. "Protective equipment" does not include "clothing,"

"clothing accessories or equipment," and "sport or recreational equipment."

      (iv) "Sport or recreational equipment" means items designed for human use and worn in

conjunction with an athletic or recreational activity that are not suitable for general use. "Sport or

recreational equipment" does not include "clothing," "clothing accessories or equipment," and

"protective equipment."

      (g) Computer and Related Items

      (i) "Computer" means an electronic device that accepts information in digital or similar

form and manipulates it for a result based on a sequence of instructions.

      (ii) "Computer software" means a set of coded instructions designed to cause a

"computer" or automatic data processing equipment to perform a task.

      (iii) "Delivered electronically" means delivered to the purchaser by means other than

tangible storage media.

      (iv) "Electronic" means relating to technology having electrical, digital, magnetic,

wireless, optical, electromagnetic, or similar capabilities.

      (v) "Load and leave" means delivery to the purchaser by use of a tangible storage media

where the tangible storage media is not physically transferred to the purchaser.

      (vi) "Prewritten computer software" means "computer software," including prewritten

upgrades, which is not designed and developed by the author or other creator to the specifications

of a specific purchaser. The combining of two (2) or more "prewritten computer software"

programs or prewritten portions thereof does not cause the combination to be other than

"prewritten computer software." "Prewritten computer software" includes software designed and

developed by the author or other creator to the specifications of a specific purchaser when it is

sold to a person other than the specific purchaser. Where a person modifies or enhances

"computer software" of which the person is not the author or creator, the person shall be deemed

to be the author or creator only of such person's modifications or enhancements. "Prewritten

computer software" or a prewritten portion thereof that is modified or enhanced to any degree,

where such modification or enhancement is designed and developed to the specifications of a

specific purchaser, remains "prewritten computer software;" provided, however, that where there

is a reasonable, separately stated charge or an invoice or other statement of the price given to the

purchaser for such modification or enhancement, such modification or enhancement shall not

constitute "prewritten computer software."

      (h) Drugs and Related Items

      (i) "Drug" means a compound, substance or preparation, and any component of a

compound, substance or preparation, other than "food and food ingredients," "dietary

supplements" or "alcoholic beverages:"

      (A) Recognized in the official United States Pharmacopoeia, official Homeopathic

Pharmacopoeia of the United States, or official National Formulary, and supplement to any of

them; or

      (B) Intended for use in the diagnosis, cure, mitigation, treatment, or prevention of

disease; or

      (C) Intended to affect the structure of or any function of the body.

      "Drug" shall also include blood, insulin and medical oxygen whether or not sold on

prescription.

      (ii) "Over-the-counter-drug" means a drug that contains a label that identifies the product

as a drug as required by 21 C.F.R. section 201.66. The "over-the-counter-drug" label includes:

      (A) A "Drug Facts" panel; or

      (B) A statement of the "active ingredient(s)" with a list of those ingredients contained in

the compound, substance or preparation.

      "Over-the-counter-drug" shall not include "grooming and hygiene products."

      (iii) "Grooming and hygiene products" are soaps and cleaning solutions, shampoo,

toothpaste, mouthwash, antiperspirants, and suntan lotions and screens, regardless of whether the

items meet the definition of "over-the-counter-drugs."

      (iv) "Prescription" means an order, formula or recipe issued in any form of oral, written,

electronic, or other means of transmission by a duly licensed practitioner authorized by the laws

of the member state.

      (i) "Delivery charges" means charges by the seller of personal property or services for

preparation and delivery to a location designated by the purchaser of personal property or services

including, but not limited to, transportation, shipping, postage, handling, crating, and packing.

      "Delivery charges" shall not include the charges for delivery of "direct mail" if the

charges are separately stated on an invoice or similar billing document given to the purchaser.

      (j) "Direct mail" means printed material delivered or distributed by United States mail or

other delivery service to a mass audience or to addressees on a mailing list provided by the

purchaser or at the direction of the purchaser when the cost of the items are not billed directly to

the recipients. "Direct mail" includes tangible personal property supplied directly or indirectly by

the purchaser to the direct mail seller for inclusion in the package containing the printed material.

"Direct mail" does not include multiple items of printed material delivered to a single address.

      (k) "Durable medical equipment" means equipment including repair and replacement

parts for same which:

      (i) Can withstand repeated use; and

      (ii) Is primarily and customarily used to serve a medical purpose; and

      (iii) Generally is not useful to a person in the absence of illness or injury; and

      (iv) Is not worn in or on the body.

      Durable medical equipment does not include mobility enhancing equipment.

      (l) Food and Related Items

      (i) "Food and food ingredients" means substances, whether in liquid, concentrated, solid,

frozen, dried, or dehydrated form, that are sold for ingestion or chewing by humans and are

consumed for their taste or nutritional value. "Food and food ingredients" does not include

"alcoholic beverages," "tobacco," "candy," "dietary supplements" and "soft drinks."

      (ii) "Prepared food" means:

      (A) Food sold in a heated state or heated by the seller;

      (B) Two (2) or more food ingredients mixed or combined by the seller for sale as a

single item; or

      (C) Food sold with eating utensils provided by the seller, including plates, knives, forks,

spoons, glasses, cups, napkins, or straws. A plate does not include a container or packaging used

to transport the food.

      "Prepared food" in (B) does not include food that is only cut, repackaged, or pasteurized

by the seller, and eggs, fish, meat, poultry, and foods containing these raw animal foods requiring

cooking by the consumer as recommended by the Food and Drug Administration in chapter 3,

part 401.11 of its Food Code so as to prevent food borne illnesses.

      (iii) "Candy" means a preparation of sugar, honey, or other natural or artificial

sweeteners in combination with chocolate, fruits, nuts or other ingredients or flavorings in the

form of bars, drops, or pieces. "Candy" shall not include any preparation containing flour and

shall require no refrigeration.

      (iv) "Soft drinks" means non-alcoholic beverages that contain natural or artificial

sweeteners. "Soft drinks" do not include beverages that contain milk or milk products, soy, rice

or similar milk substitutes, or greater than fifty percent (50%) of vegetable or fruit juice by

volume.

      (v) "Dietary supplement" means any product, other than "tobacco," intended to

supplement the diet that:

      (A) Contains one or more of the following dietary ingredients:

      1. A vitamin;

      2. A mineral;

      3. An herb or other botanical;

      4. An amino acid;

      5. A dietary substance for use by humans to supplement the diet by increasing the total

dietary intake; or

      6. A concentrate, metabolite, constituent, extract, or combination of any ingredient

described in above; and

      (B) Is intended for ingestion in tablet, capsule, powder, softgel, gelcap, or liquid form, or

if not intended for ingestion in such a form, is not represented as conventional food and is not

represented for use as a sole item of a meal or of the diet; and

      (C) Is required to be labeled as a dietary supplement, identifiable by the "Supplemental

Facts" box found on the label and as required pursuant to 21 C.F.R. section 101.36.

      (m) "Food sold through vending machines" means food dispensed from a machine or

other mechanical device that accepts payment.

      (n) "Hotel" means every building or other structure kept, used, maintained, advertised as

or held out to the public to be a place where living quarters are supplied for pay to transient or

permanent guests and tenants and includes a motel.

      (i) "Living quarters" means sleeping rooms, sleeping or housekeeping accommodations,

or any other room or accommodation in any part of the hotel, rooming house or tourist camp

which is available for or rented out for hire in the lodging of guests.

      (ii) "Rooming house" means every house, boat, vehicle, motor court or other structure

kept, used, maintained, advertised or held out to the public to be a place where living quarters are

supplied for pay to transient or permanent guests or tenants, whether in one or adjoining

buildings.

      (iii) "Tourist camp" means a place where tents or tent houses, or camp cottages, or

cabins or other structures are located and offered to the public or any segment thereof for human

habitation.

      (o) "Lease or rental" means any transfer of possession or control of tangible personal

property for a fixed or indeterminate term for consideration. A lease or rental may include future

options to purchase or extend. Lease or rental does not include:

      (i) A transfer of possession or control of property under a security agreement or deferred

payment plan that requires the transfer of title upon completion of the required payments;

      (ii) A transfer or possession or control of property under an agreement that requires the

transfer of title upon completion of required payments and payment of an option price does not

exceed the greater of one hundred dollars ($100) or one percent of the total required payments; or

      (iii) Providing tangible personal property along with an operator for a fixed or

indeterminate period of time. A condition of this exclusion is that the operator is necessary for

the equipment to perform as designed. For the purpose of this subsection, an operator must do

more than maintain, inspect, or set-up the tangible personal property.

      (iv) Lease or rental does include agreements covering motor vehicles and trailers where

the amount of consideration may be increased or decreased by reference to the amount realized

upon sale or disposition of the property as defined in 26 U.S.C. section 7701(h)(1).

      (v) This definition shall be used for sales and use tax purposes regardless if a transaction

is characterized as a lease or rental under generally accepted accounting principles, the Internal

Revenue Code, the Uniform Commercial Code, or other provisions of federal, state or local law.

      (vi) This definition will be applied only prospectively from the date of adoption and will

have no retroactive impact on existing leases or rentals. This definition shall neither impact any

existing sale-leaseback exemption or exclusions that a state may have, nor preclude a state from

adopting a sale-leaseback exemption or exclusion after the effective date of the Agreement.

      (p) "Mobility enhancing equipment" means equipment including repair and replacement

parts to same, which:

      (i) Is primarily and customarily used to provide or increase the ability to move from one

place to another and which is appropriate for use either in a home or a motor vehicle; and

      (ii) Is not generally used by persons with normal mobility; and

      (iii) Does not include any motor vehicle or equipment on a motor vehicle normally

provided by a motor vehicle manufacturer.

      Mobility enhancing equipment does not include durable medical equipment.

      (q) "Model 1 Seller" means a seller that has selected a CSP as its agent to perform all the

seller's sales and use tax functions, other than the seller's obligation to remit tax on its own

purchases.

      (r) "Model 2 Seller" means a seller that has selected a CAS to perform part of its sales

and use tax functions, but retains responsibility for remitting the tax.

      (s) "Model 3 Seller" means a seller that has sales in at least five member states, has total

annual sales revenue of at least five hundred million dollars ($500,000,000), has a proprietary

system that calculates the amount of tax due each jurisdiction, and has entered into a performance

agreement with the member states that establishes a tax performance standard for the seller. As

used in this definition, a seller includes an affiliated group of sellers using the same proprietary

system.

      (t) "Prosthetic device" means a replacement, corrective, or supportive devices including

repair and replacement parts for same worn on or in the body to:

      (i) Artificially replace a missing portion of the body;

      (ii) Prevent or correct physical deformity or malfunction; or

      (iii) Support a weak or deformed portion of the body.

      (u) "Purchaser" means a person to whom a sale of personal property is made or to whom

a service is furnished.

      (v) "Purchase price" applies to the measure subject to use tax and has the same meaning

as sales price.

      (w) "Seller" means a person making sales, leases, or rentals of personal property or

services.

      (x) "State" means any state of the United States and the District of Columbia.

      (y) "Telecommunications" tax base/exemption terms

      (i) Telecommunication terms shall be defined as follows:

      (A) "Ancillary services" means services that are associated with or incidental to the

provision of "telecommunications services", including, but not limited to, "detailed

telecommunications billing", "directory assistance", "vertical service", and "voice mail services".

      (B) "Conference bridging service" means an "ancillary service" that links two (2) or

more participants of an audio or video conference call and may include the provision of a

telephone number. "Conference bridging service" does not include the "telecommunications

services" used to reach the conference bridge.

      (C) "Detailed telecommunications billing service" means an "ancillary service" of

separately stating information pertaining to individual calls on a customer's billing statement.

      (D) "Directory assistance" means an "ancillary service" of providing telephone number

information, and/or address information.

      (E) "Vertical service" means an "ancillary service" that is offered in connection with one

or more "telecommunications services", which offers advanced calling features that allow

customers to identify callers and to manage multiple calls and call connections, including

"conference bridging services".

      (F) "Voice mail service" means an "ancillary service" that enables the customer to store,

send or receive recorded messages. "Voice mail service" does not include any "vertical services"

that the customer may be required to have in order to utilize the "voice mail service".

      (G) "Telecommunications service" means the electronic transmission, conveyance, or

routing of voice, data, audio, video, or any other information or signals to a point, or between or

among points. The term "telecommunications service" includes such transmission, conveyance,

or routing in which computer processing applications are used to act on the form, code or

protocol of the content for purposes of transmission, conveyance or routing without regard to

whether such service is referred to as voice over Internet protocol services or is classified by the

Federal Communications Commission as enhanced or value added. "Telecommunications

service" does not include:

      (1) Data processing and information services that allow data to be generated, acquired,

stored, processed, or retrieved and delivered by an electronic transmission to a purchaser where

such purchaser's primary purpose for the underlying transaction is the processed data or

information;

      (2) Installation or maintenance of wiring or equipment on a customer's premises;

      (3) Tangible personal property;

      (4) Advertising, including, but not limited to, directory advertising.

      (5) Billing and collection services provided to third parties;

      (6) Internet access service;

      (7) Radio and television audio and video programming services, regardless of the

medium, including the furnishing of transmission, conveyance and routing of such services by the

programming service provider. Radio and television audio and video programming services shall

include, but not be limited to, cable service as defined in 47 U.S.C. section 522(6) and audio and

video programming services delivered by commercial mobile radio service providers, as defined

in 47 CFR 20.3;

      (8) "Ancillary services"; or

      (9) Digital products "delivered electronically", including, but not limited to, software,

music, video, reading materials or ring tones.

      (H) "800 service" means a "telecommunications service" that allows a caller to dial a

toll-free number without incurring a charge for the call. The service is typically marketed under

the name "800", "855", "866", "877", and "888" toll-free calling, and any subsequent numbers

designated by the Federal Communications Commission.

      (I) "900 service" means an inbound toll "telecommunications service" purchased by a

subscriber that allows the subscriber's customers to call in to the subscriber's prerecorded

announcement or live service. "900 service" does not include the charge for: collection services

provided by the seller of the "telecommunications services" to the subscriber, or service or

product sold by the subscriber to the subscriber's customer. The service is typically marketed

under the name "900 service," and any subsequent numbers designated by the Federal

Communications Commission.

      (J) "Fixed wireless service" means a "telecommunications service" that provides radio

communication between fixed points.

      (K) "Mobile wireless service" means a "telecommunications service" that is transmitted,

conveyed or routed regardless of the technology used, whereby the origination and/or termination

points of the transmission, conveyance or routing are not fixed, including, by way of example

only, "telecommunications services" that are provided by a commercial mobile radio service

provider.

      (L) "Paging service" means a "telecommunications service" that provides transmission of

coded radio signals for the purpose of activating specific pagers; such transmissions may include

messages and/or sounds.

      (M) "Prepaid calling service" means the right to access exclusively "telecommunications

services", which must be paid for in advance and which enables the origination of calls using an

access number of or authorization code, whether manually or electronically dialed, and that is

sold in predetermined units or dollars of which the number declines with use in a known amount.

      (N) "Prepaid wireless calling service" means a "telecommunications service" that

provides the right to utilize "mobile wireless service" as well as other non-telecommunications

services including the download of digital products "delivered electronically", content and

"ancillary services" which must be paid for in advance that is sold in predetermined units of

dollars of which the number declines with use in a known amount.

      (O) "Private communications service" means a telecommunications service that entitles

the customer to exclusive or priority use of a communications channel or group of channels

between or among termination points, regardless of the manner in which such channel or

channels are connected, and includes switching capacity, extension lines, stations, and any other

associated services that are provided in connection with the use of such channel or channels.

      (P) "Value-added non-voice data service" means a service that otherwise meets the

definition of "telecommunications services" in which computer processing applications are used

to act on the form, content, code, or protocol of the information or data primarily for a purpose

other than transmission, conveyance or routing.

      (ii) "Modifiers of Sales Tax Base/Exemption Terms" -- the following terms can be used

to further delineate the type of "telecommunications service" to be taxed or exempted. The terms

would be used with the broader terms and subcategories delineated above.

      (A) "Coin-operated telephone service" means a "telecommunications service" paid for by

inserting money into a telephone accepting direct deposits of money to operate.

      (B) "International" means a "telecommunications service" that originates or terminates in

the United States and terminates or originates outside the United States, respectively. United

States includes the District of Columbia or a U.S. territory or possession.

      (C) "Interstate" means a "telecommunications service" that originates in one United

States state, or a United States territory or possession, and terminates in a different United States

state or a United States territory or possession.

      (D) "Intrastate" means a "telecommunications service" that originates in one United

States state or a United States territory or possession, and terminates in the same United States

state or a United States territory or possession.

      (E) "Pay telephone service" means a "telecommunications service" provided through any

pay telephone.

      (F) "Residential telecommunications service" means a "telecommunications service" or

"ancillary services" provided to an individual for personal use at a residential address, including

an individual dwelling unit such as an apartment. In the case of institutions where individuals

reside, such as schools or nursing homes, "telecommunications service" is considered residential

if it is provided to and paid for by an individual resident rather than the institution.

      The terms "ancillary services" and "telecommunications service" are defined as a broad

range of services. The terms "ancillary services" and "telecommunications service" are broader

than the sum of the subcategories. Definitions of subcategories of "ancillary services" and

"telecommunications service" can be used by a member state alone or in combination with other

subcategories to define a narrower tax base than the definitions of "ancillary services" and

"telecommunications service" would imply. The subcategories can also be used by a member

state to provide exemptions for certain subcategories of the more broadly defined terms.

      A member state that specifically imposes tax on, or exempts from tax, local telephone or

local telecommunications service may define "local service" in any manner in accordance with

section 44-18.1-28, except as limited by other sections of this Agreement.

      (z) "Tobacco" means cigarettes, cigars, chewing or pipe tobacco, or any other item that

contains tobacco.

 

     44-18-8. Retail sale or sale at retail defined. [Effective January 1, 2007.] -- A

"retail sale" or "sale at retail" means any sale, lease or rentals of tangible personal property, for

any purpose other than resale, sublease or subrent in the regular course of business. The sale of

tangible personal property to be used for purposes of rental in the regular course of business is

considered to be a sale for resale. In regard to telecommunications service as defined in section

44-18-7(9), retail sale does not include the purchase of telecommunications service by a

telecommunications provider from another telecommunication provider for resale to the ultimate

consumer; provided, that the purchaser submits to the seller a certificate attesting to the

applicability of this exclusion, upon receipt of which the seller is relieved of any tax liability for

the sale.

      (b) The delivery in this state of tangible personal property by an owner or former owner

or by a factor, if the delivery is to a consumer pursuant to a retail sale made by a retailer not

engaged in business in this state, is a retail sale in this state by the person making the delivery and

he or she shall include the retail selling price of the property in his or her gross receipts.

 

     44-18-30. Gross receipts exempt from sales and use taxes. [Effective January 1,

2007.] -- There are exempted from the taxes imposed by this chapter the following gross receipts:

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

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

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

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

      (2) Newspapers.

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

newspaper.

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

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

interest.

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

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

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

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

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

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

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

      (4) Containers.

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

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

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

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

the contents with the container.

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

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

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

the contents or when resold for refilling.

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

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

returnable containers."

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

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

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

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

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

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

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

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

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

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

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

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

women, and parent teacher associations.

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

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

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

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

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

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

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

under the contracts without payment of the tax.

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

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

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

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

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

pay the tax on the property used.

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

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

propulsion of airplanes.

      (7) Purchase for manufacturing purposes.

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

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

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

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

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

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

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

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

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

      (iii) "Consumed" includes mere obsolescence.

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

assembling, preparing, or producing.

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

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

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

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

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

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

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

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

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

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

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

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

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

subdivision of the municipality where it is located.

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

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

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

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

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

food is:

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

except sub-sector 3118 (bakeries);

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

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

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

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

glasses, cups, napkins, or straws.

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

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

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

oxygen, and insulin whether or not sold on prescription, and over-the-counter drugs as defined in

section 44-18-7.1(h)(ii). For purposes of this exemption over-the-counter drugs shall not include

grooming and hygiene products as defined in section 44-18-7.1(h)(iii).

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

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

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

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

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

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

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

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

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

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

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

wheelchairs, crutches and canes.

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

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

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

      (13) Motor vehicles sold to nonresidents.

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

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

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

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

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

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

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

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

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

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

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

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

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

motor vehicles.

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

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

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

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

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

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

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

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

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

under the provisions of section 44-18-20.

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

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

licensed under section 40-9-11.1.

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

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

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

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

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

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

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

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

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

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

device, building, machinery, or equipment.

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

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

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

operated summer camps for children.

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

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

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

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

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

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

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

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

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

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

inures to the benefit of any individual.

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

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

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

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

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

special adaptations, including installation.

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

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

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

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

      (22) Manufacturing machinery and equipment.

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

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

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

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

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

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

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

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

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

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

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

be sold in the regular course of business;

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

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

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

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

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

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

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

operations;

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

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

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

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

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

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

production flow or manufacturing process;

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

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

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

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

otherwise identifiable as to use.

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

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

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

the proceeds applicable only to the motor vehicle as are received from an insurance claim as a

result of a stolen or damaged motor vehicle, 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; provided, that the proceeds from an insurance claim or repurchase is in lieu of the

benefit prescribed in section 44-18-21 for the total loss or destruction of the automobile; and

provided, further, that the tax has not been reimbursed as part of the insurance claim or

repurchase. For the purpose of this subdivision, the word "automobile" means a private passenger

automobile not used for hire and does not refer to any other type of motor vehicle.

      (24) Precious metal bullion.

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

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

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

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

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

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

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

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

uses.

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

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

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

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

of the vessels.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

thereto.

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

intended to be worn or carried on or about the human body. 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).

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

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

premises.

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

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

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

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

      (30) Boats.

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

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

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

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

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

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

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

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

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

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

nonresident of this state.

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

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

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

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

the schools or of organized activities of the enrolled students.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

the state of compressed air.

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

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

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

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

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

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

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

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

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

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

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

by any purveyor.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(iii) are mailed to customers at no charge.

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

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

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

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

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

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

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

the number of hours spent on the job.

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

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

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

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

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

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

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

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

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

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

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

numismatic or investment value.

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

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

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

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

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

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

farming.

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

telecommunications service when purchased by a telecommunications company from another

telecommunications company to facilitate the provision of telecommunications service.

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

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

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

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

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

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

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

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

vessel.

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

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

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

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

and is not returned to the jewelry manufacturer or seller.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

a state chartered bank.

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

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

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

      (51) Manufacturing business reconstruction materials.

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

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

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

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

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

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

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

the production and administrative facilities.

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

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

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

insurance, this exemption does not apply.

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

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

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

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

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

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

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

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

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

food, insecticide and fertilizers.

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

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

the boarding of horses.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

of motor vehicles.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

of title 31.

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

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

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

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

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

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

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

on December 31, 2008.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

not exempt from state sales tax.

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

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

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

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

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

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

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

blood.

     (61) Prewritten computer software delivered electronically. - From the sale and from the

storage, use or other consumption of prewritten computer software delivered electronically or by

load and leave.

 

     SECTION 5. Section 44-18.1-13 of the General Laws in Chapter 44-18.1 entitled

"Adoption of the Streamlined Sales and Use Tax Agreement" is hereby repealed.

 

     44-18.1-13. Multiple points of use. [Effective January 1, 2007.] -- (A) Notwithstanding

the provisions of section 44-18.1-11, a business purchaser that is not a holder of a direct pay

permit that knows at the time of its purchase of a digital good, computer software, or a service

that the digital good, computer software, or service will be concurrently available for use in more

than one jurisdiction shall deliver to the seller in conjunction with its purchase an exemption

certificate claiming multiple points of use or meet the requirements of section 44-18.1-13,

subsections (B) or (C). Computer software, for purposes of this section includes, but is not limited

to computer software delivered electronically, by load and leave, or in tangible form. Computer

software received in-person by a business purchaser at a business location of the seller is not

included.

      Upon receipt of an exemption certificate claiming multiple points of use, the seller is

relieved of all obligation to collect, pay, or remit the applicable tax and the purchaser shall be

obligated to collect, pay, or remit the applicable tax on a direct pay basis.

      (2) A purchaser delivering an exemption certificate claiming multiple points of use may

use any reasonable, but consistent and uniform, method of apportionment that is supported by the

purchaser's books and records as they exist at the time the transaction is reported for sales or use

tax purposes.

      (3) A purchaser delivering an exemption certificate claiming multiple points of use shall

report and pay the appropriate tax to each jurisdiction where concurrent use occurs. The tax due

will be calculated as if the apportioned amount of the digital good, computer software or service

had been delivered to each jurisdiction to which the sale is apportioned pursuant to section 44-

18.1-13, subdivision (A)(2).

      (4) The exemption certificate claiming multiple points of use will remain in effect for all

future sales by the seller to the purchaser (except as to the subsequent sale's specific

apportionment that is governed by the principles of section 44-18.1-13, subdivisions (A)(2) and

(A)(3)) until it is revoked in writing.

      (B) Notwithstanding section 44-18.1-13, subsection (A), when the seller knows that the

product will be concurrently available for use in more than one jurisdiction, but the purchaser

does not provide an exemption certificate claiming multiple points of use as required in

subsection (A), the seller may work with the purchaser to produce the correct apportionment. The

purchaser and seller may use any reasonable, but consistent and uniform, method of

apportionment that is supported by the seller's and purchaser's business records as they exist at the

time the transaction is reported for sales or use tax purposes. If the purchaser certifies to the

accuracy of the apportionment and the seller accepts the certification, the seller shall collect and

remit the tax pursuant to section 44-18.1-13, subdivision (A)(3). In the absence of bad faith, the

seller is relieved of any further obligation to collect tax on any transaction where the seller has

collected tax pursuant to the information certified by the purchaser.

      (C) When the seller knows that the product will be concurrently available for use in more

than one jurisdiction and the purchaser does not have a direct pay permit and does not provide the

seller with an exemption certificate claiming multiple points of use exemption as required in

section 44-18.1-13, subsection (A), or certification pursuant to section 44-18.1-13, subsection

(B), the seller shall collect and remit the tax based on the provisions of section 44-18.1-11.

      (D) A holder of a direct pay permit shall not be required to deliver an exemption

certificate claiming multiple points of use to the seller. A direct pay permit holder shall follow the

provisions of section 44-18.1-13, subdivisions (A)(2) and (A)(3) of this section in apportioning

the tax due on a digital good, computer software, or a service that will be concurrently available

for use in more than one jurisdiction.

      (E) Nothing in this section shall limit a person's obligation for sales or use tax to any

state in which the qualifying purchases are concurrently available for use, nor limit a person's

ability under local, state, federal, or constitutional law, to claim a credit for sales or use taxes

legally due and paid to other jurisdictions.

 

     SECTION 6. Sections 44-18.1-11, 44-18.1-18 and 44-18.1-22 of the General Laws in

Chapter 44-18.1 entitled "Adoption of the Streamlined Sales and Use Tax Agreement" are hereby

amended to read as follows:

 

     44-18.1-11. General sourcing rules. [Effective January 1, 2007.] -- (A) The retail sale,

excluding lease or rental, of a product shall be sourced as follows:

      (1) When the product is received by the purchaser at a business location of the seller, the

sale is sourced to that business location.

      (2) When the product is not received by the purchaser at a business location of the seller,

the sale is sourced to the location where receipt by the purchaser (or the purchaser's donee,

designated as such by the purchaser) occurs, including the location indicated by instructions for

delivery to the purchaser (or donee), known to the seller.

      (3) When subsections (A)(1) and (A)(2) do not apply, the sale is sourced to the location

indicated by an address for the purchaser that is available from the business records of the seller

that are maintained in the ordinary course of the seller's business when use of this address does

not constitute bad faith.

      (4) When subsections (A)(1), (A)(2) and (A)(3) do not apply, the sale is sourced to the

location indicated by an address for the purchaser obtained during the consummation of the sale,

including the address of a purchaser's payment instrument, if no other address is available, when

use of this address does not constitute bad faith.

      (5) When none of the previous rules of subsections (A)(1), (A)(2), (A)(3), or (A)(4)

apply, including the circumstance in which the seller is without sufficient information to apply

the previous rules, then the location will be determined by the address from which tangible

personal property was shipped, from which the digital good or the computer software delivered

electronically was first available for transmission by the seller, or from which the service was

provided (disregarding for these purposes any location that merely provided the digital transfer of

the product sold).

      (B) The lease or rental of tangible personal property, other than property identified in

subsection (C) or subsection (D), shall be sourced as follows:

      (1) For a lease or rental that requires recurring periodic payments, the first periodic

payment is sourced the same as a retail sale in accordance with the provisions of subsection (A).

Periodic payments made subsequent to the first payment are sourced to the primary property

location for each period covered by the payment. The primary property location shall be as

indicated by an address for the property provided by the lessee that is available to the lessor from

its records maintained in the ordinary course of business, when use of this address does not

constitute bad faith. The property location shall not be altered by intermittent use at different

locations, such as use of business property that accompanies employees on business trips and

service calls.

      (2) For a lease or rental that does not require recurring periodic payments, the payment is

sourced the same as a retail sale in accordance with the provisions of subsection (A).

      (3) This subsection does not affect the imposition or computation of sales or use tax on

leases or rentals based on a lump sum or accelerated basis, or on the acquisition of property for

lease.

      (C) The lease or rental of motor vehicles, trailers, semi-trailers, or aircraft that do not

qualify as transportation equipment, as defined in subsection (D), shall be sourced as follows:

      (1) For a lease or rental that requires recurring periodic payments, each periodic payment

is sourced to the primary property location. The property location shall be as indicated by an

address for the property provided by the lessee that is available to the lessor from its records

maintained in the ordinary course of business, when use of this address does not constitute bad

faith. This location shall not be altered by intermittent use at different locations.

      (2) For a lease or rental that does not require recurring periodic payments, the payment is

sourced the same as a retail sale in accordance with the provisions of subsection (A).

      (3) This subsection does not affect the imposition or computation of sales or use tax on

leases or rentals based on a lump sum or accelerated basis, or on the acquisition of property for

lease.

      (D) The retail sale, including lease or rental, of transportation equipment shall be sourced

the same as a retail sale in accordance with the provisions of subsection (A), notwithstanding the

exclusion of lease or rental in subsection (A). "Transportation equipment" means any of the

following:

      (1) Locomotives and railcars that are utilized for the carriage of persons or property in

interstate commerce.

      (2) Trucks and truck-tractors with a Gross Vehicle Weight rating (GVWR) or of 10,001

pounds or greater, trailers, semi-trailers, or passenger buses that are:

      (a) Registered through the International Registration Plan; and

      (b) Operated under authority of a carrier authorized and certificated by the U.S.

Department of Transportation or another federal authority to engage in the carriage of persons or

property in interstate commerce.

      (3) Aircraft that are operated by air carriers authorized and certificated by the U.S.

Department of Transportation or another federal or a foreign authority to engage in the carriage of

persons or property in interstate or foreign commerce.

      (4) Containers designed for use on and component parts attached or secured on the items

set forth in subsection (D)(1) -- (D)(3).

 

     44-18.1-18. Administration of exemptions. [Effective January 1, 2007.] -- (A) Each

member state shall observe the following provisions when a purchaser claims an exemption:

      (1) The seller shall obtain identifying information of the purchaser and the reason for

claiming a tax exemption at the time of the purchase as determined by the governing board.

      (2) A purchaser is not required to provide a signature to claim an exemption from tax

unless a paper exemption certificate is used.

      (3) The seller shall use the standard form for claiming an exemption electronically as

adopted by the governing board.

      (4) The seller shall obtain the same information for proof of a claimed exemption

regardless of the medium in which the transaction occurred.

      (5) A member state may utilize a system wherein the purchaser exempt from the

payment of the tax is issued an identification number that shall be presented to the seller at the

time of the sale.

      (6) The seller shall maintain proper records of exempt transactions and provide them to a

member state when requested.

      (7) A member state shall administer use-based and entity-based exemptions when

practicable through a direct pay permit, an exemption certificate, or other means that does not

burden sellers.

      (8) After December 31, 2007, in the case of drop shipment sales, member states must

allow a third party vendor (e.g., drop shipper) to claim a resale exemption based on an exemption

certificate provided by its customer/re-seller or any other acceptable information available to the

third party vendor evidencing qualification for a resale exemption, regardless of whether the

customer/re-seller is registered to collect and remit sales and use tax in the state where the sale is

sourced.

      (B) Each member state shall relieve sellers that follow the requirements of this section

from the tax otherwise applicable if it is determined that the purchaser improperly claimed an

exemption and to hold the purchaser liable for the nonpayment of tax. This relief from liability

does not apply to a seller who fraudulently fails to collect the tax; to a seller who solicits

purchasers to participate in the unlawful claim of an exemption; to a seller who accepts an

exemption certificate when the purchaser claims an entity-based exemption when (1) the subject

of the transactions sought to be covered by the exemption certificate is actually received by the

purchaser at a location operated by the seller and (2) the state in which that location resides

provides an exemption certificate that clearly and affirmatively indicates (graying out exemption

reason types on the uniform form and posting it on a state's web site is an indicator) that the

claimed exemption is not available in that state; or to a seller who accepts an exemption

certificate claiming multiple points of use for tangible personal property other than computer

software for which an exemption claiming multiple points of use is acceptable under section 44-

18.1-13.

      (C) Each state shall relieve a seller of the tax otherwise applicable if the seller obtains a

fully completed exemption certificate or captures the relevant data elements required under the

Agreement within 90 days subsequent to the date of sale.

      (1) If the seller has not obtained an exemption certificate or all relevant data elements as

provided in section 44-18.1-18, subsection (C) the seller may, within 120 days subsequent to a

request for substantiation by a member state, either prove that the transaction was not subject to

tax by other means or obtain a fully completed exemption certificate from the purchaser, taken in

good faith. For purposes of this section, member states may continue to apply their own standards

of good faith until such time as a uniform standard for good faith is defined in the Agreement.

      (2) Nothing in this section shall affect the ability of member states to require purchasers

to update exemption certificate information or to reapply with the state to claim certain

exemptions.

      (3) Notwithstanding the aforementioned, each member state shall relieve a seller of the

tax otherwise applicable if it obtains a blanket exemption certificate for a purchaser with which

the seller has a recurring business relationship. States may not request from the seller renewal of

blanket certificates or updates of exemption certificate information or data elements when there is

a recurring business relationship between the buyer and seller. For purposes of this section a

recurring business relationship exists when a period of no more than twelve months elapses

between sales transactions.

 

     44-18.1-22. Confidentiality and privacy protections under Model 1. [Effective

January 1, 2007.] -- (A) The purpose of this section is to set forth the member states' policy for

the protection of the confidentiality rights of all participants in the system and of the privacy

interests of consumers who deal with Model 1 sellers.

      (B) As used in this section, the term "confidential taxpayer information" means all

information that is protected under a member state's laws, regulations, and privileges; the term

"personally identifiable information" means information that identifies a person; and the term

"anonymous data" means information that does not identify a person.

      (C) The member states agree that a fundamental precept in Model 1 is to preserve the

privacy of consumers by protecting their anonymity. With very limited exceptions, a CSP shall

perform its tax calculation, remittance, and reporting functions without retaining the personally

identifiable information of consumers.

      (D) The governing board may certify a CSP only if that CSP certifies that:

      (1) Its system has been designed and tested to ensure that the fundamental precept of

anonymity is respected;

      (2) That personally identifiable information is only used and retained to the extent

necessary for the administration of Model 1 with respect to exempt purchasers;

      (3) It provides consumers clear and conspicuous notice of its information practices,

including what information is it collects, how it collects the information, how it uses the

information, how long, if at all, it retains the information and whether it discloses the information

to member states. Such notice shall be satisfied by a written privacy policy statement accessible

by the public on the official web site of the CSP;

      (4) Its collection, use and retention of personally identifiable information will be limited

to that required by the member states to ensure the validity of exemptions from taxation that are

claimed by reason of a consumer's status or the intended use of the goods or services purchased;

and

      (5) It provides adequate technical, physical, and administrative safeguards so as to

protect personally identifiable information from unauthorized access and disclosure.

      (E) Each member state shall provide public notification to consumers, including their

exempt purchasers, of the state's practices relating to the collection, use and retention of

personally identifiable information.

      (F) When any personally identifiable information that has been collected and retained is

no longer required for the purposes set forth in subsection (D)(4), such information shall no

longer be retained by the member states.

      (G) When personally identifiable information regarding an individual is retained by or

on behalf of a member state, such state shall provide reasonable access by such individual to his

or her own information in the state's possession and a right to correct any inaccurately recorded

information.

      (H) If anyone other than a member state, or a person authorized by that state's law or the

Agreement, seeks to discover personally identifiable information, the state from whom the

information is sought should make a reasonable and timely effort to notify the individual of such

request.

      (I) This privacy policy is subject to enforcement by member states' attorneys general or

other appropriate state government authority.

      (J) Each member states' laws and regulations regarding the collection, use, and

maintenance of confidential taxpayer information remain fully applicable and binding. Without

limitation, the Agreement does not enlarge or limit the member states' authority to:

      (1) Conduct audits or other review as provided under the Agreement and state law.

      (2) Provide records pursuant to a member state's Freedom of Information Act, disclosure

laws with governmental agencies, or other regulations.

      (3) Prevent, consistent with state law, disclosures of confidential taxpayer information.

      (4) Prevent, consistent with federal law, disclosures or misuse of federal return

information obtained under a disclosure agreement with the Internal Revenue Service.

      (5) Collect, disclose, disseminate, or otherwise use anonymous data for governmental

purposes.

      (K) This privacy policy does not preclude the governing board from certifying a CSP

whose privacy policy is more protective of confidential taxpayer information or personally

identifiable information than is required by the Agreement.

 

     SECTION 7. Section 44-59-4 of the General Laws in Chapter 44-59 entitled "Uniform

Sales And Use Tax Administration Act" is hereby amended to read as follows:

 

     44-59-4. Authority to enter agreement. -- The tax administrator shall be authorized and

directed to enter into the Streamlined Sales and Use Tax Agreement with one or more states to

simplify and modernize sales and use tax administration in order to substantially reduce the

burden of tax compliance for all sellers and for all types of commerce. In furtherance of the

Agreement, the tax administrator is authorized to act jointly with other states that are members of

the Agreement to establish standards for certification of a certified service provider and certified

automated system and to establish performance standards for multi-state sellers. The tax

administrator is further authorized to take other actions reasonably required to implement the

provisions set forth in this chapter. Other actions authorized by this section include, but are not

limited to, the adoption of rules and regulations and the joint procurement, with other member

states, of goods and services in furtherance of the cooperative agreement. The tax administrator or

the tax administrator's designee is, the chairperson of the house finance committee or the

chairperson's designee(s) and the chairperson of the senate finance committee or the chairperson's

designee(s) are authorized to represent this state before the other states that are signatories to the

Agreement.

 

     SECTION 8. Section 44-59-10 of the General Laws in Chapter 44-59 entitled "Uniform

Sales And Use Tax Administration Act" is hereby repealed.

 

     44-59-10. Sunset provision. -- This chapter shall be repealed on June 30, 2007, without

further action by the general assembly, if the statutory amendments to the sales and use tax law

necessary to bring this state into compliance with the Streamlined Sales and Use Tax Agreement

are not enacted by the general assembly by January 1, 2007.

 

     SECTION 9. Sections 4, 5 and 6 shall take effect on January 1, 2007 and the remainder

of this act shall take effect upon passage.

     

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LC00750/SUB A

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