AN ACT RELATING TO TAXATION -- STATE TAX OFFICIALS .

Hold 3% on nonresident contractor payments

If you pay a contractor who has no regular business location in Rhode Island, you must withhold 3% of the contract price. A job-site or other temporary office does not count as a regular business location. Keep the money until 60 days after the job is done and the contractor asks the tax administrator in writing for an audit. The tax administrator then has 60 days to send a certificate showing no tax due or taxes due. If no certificate arrives in 60 days, you may release the held money. If a certificate shows tax due, you must deposit up to 3% of the contract price with the tax administrator and take a receipt; that deposit is not subject to later claims by the contractor or the tax agency for that project. If you do not follow these rules, you are liable for the amount the tax administrator sets and face normal tax collection actions.