Use tax is a tax imposed by state taxing authorities on the purchase of goods outside the taxpayer’s state of residence when sales tax is not collected on the transaction. Use taxes are generally designed to discourage the purchase of goods that are not subject to sales tax.
In Rhode Island, use tax complements the state sales tax and is designed to ensure that Rhode Island residents pay tax on goods purchased out of state or online where sales tax is not collected. The use tax rate in Rhode Island is the same as the state sales tax rate, which is currently 7%. This means that if a Rhode Island resident buys goods out of state or from an online retailer that does not charge Rhode Island sales tax, the resident is responsible for paying the 7% use tax directly to the Rhode Island Division of Taxation. The use tax applies to individual consumers as well as businesses and is intended to level the playing field between in-state and out-of-state sellers, preventing a tax incentive for consumers to shop out of state or from untaxed online retailers.