AN ACT RELATING TO TAXATION -- STATE TAX OFFICIALS .

3% holdback for out-of-state contractors

Businesses that hire a contractor without a regular place of business in Rhode Island must withhold 3% of the contract price. Hold it until the job is finished and the contractor has asked the tax administrator in writing to audit the project, then wait 60 days. The tax administrator has 60 days after getting that request to send a certificate showing no tax due or sales, use, or income taxes due. If no certificate arrives, you may pay the withheld money to the contractor with no state claim. If a taxes-due certificate arrives, you must deposit that amount (up to the 3%) with the Division of Taxation and get a receipt. If you do not follow these rules, you are liable for the amount due and normal tax collection can be used. A temporary site office does not count as a regular place of business.