Filippi Says Current Tax is Hurting Rhode Island Businesses

STATE HOUSE  —  On Tuesday, May 3, 2016 Representative Blake Filippi (I-District 36 Charlestown, South Kingstown, Westerly, New Shoreham) will present a bill (H-7230) to the House Finance Committee to abolish a little known tax rule that is hurting business opportunities in Rhode Island.

The rule, dubbed the Amazon Tax, was established in 2009 with the intent to generate more state revenue and to effectively tax large online retailers.  The tax worked by redefining the presence of a retailer.  According to the rule, any company with a local “click through” affiliate marketer would be required to collect and remit sales tax for all goods sent into the state, even if the purchase was unrelated to the local affiliate marketer. Local affiliates include individuals that drive web traffic to large online retailers as well as those that use and online retailer as a platform to sell their goods. In anticipation of legal challenges and additional costs, large retailers such as an severed all ties with all Rhode Island affiliates.

“In efforts to get more revenue, Rhode Island effectively cut off every business in the state from selling-through or working-with the largest online retailers in the nation,” remarked Filippi.  “Plainly, this policy is bad for Rhode Island businesses that want to establish an online retail presence.”
In an interview with GoLocalProv, Larry Girouard from the advocacy group, RI Taxpayer said, “If these Amazon Tax costs are levied on them during their normal course of business, it is probably minor as a % of their costs.  That said, the Rhode Island business community is being nickeled and dimed to death which has garnered our state the reputation of being one of the highest taxed in the US.  These taxes and fees only add to Rhode Island’s “well earned” brand as being the most hostile in the continental United States.  Only Hawaii is a worse brand.”
“It is always a penny here (the gas tax increase), a nickel there, etc. that continues with the tax creep.  The corporate tax reduction last year was significant, but in the face of budgets that are never driven down, the income stream must be made up somehow,” continued Girouard. “The fiscal solution for Rhode Island is not about squeezing more monies from the taxpayers (individual taxpayers and businesses), but is all about delivering a higher quality product with the money they already have.”
Recently, Rep. Filippi was contacted by Cayla Mackey, a young entrepreneur who was investigating establishing a high growth start-up in Rhode Island. Mackey was adamant that the Amazon Tax made it impossible for her to base her high growth tech company in Rhode Island: ““I am an experienced and successful serial entrepreneur.  I have started two successful ventures and am working on my third. I have been on the cover of the Nashville Business Journal twice, and am the youngest named member of Nashville’s ‘30 Under 30’.”

“I recently relocated to Rhode Island because my business partner is attending graduate school at the Rhode Island School of Design. I took my current business venture, Unicorn Goods, with me. The website is Unicorn Goods is the Internet’s largest online catalog of vegan products. We list 1000+ items from 200+ retailers. A visitor to our site finds an item they like, clicks “available here” and is directed to a website where they can purchase the product. We collect a percentage of these referred sales as an affiliate marketer. Effective affiliate relationships with retailers is the backbone of our business model, and the primary way we make money. We are a high growth tech company serving a rapidly growing market. There is no other company doing what we do the way we do it and we are expecting to define a market for ourselves and redefine an industry.”

She added, “I am a member of Social Enterprise Greenhouse and have a growing team. I was planning to formally incorporate in Rhode Island using the L3C filing (also called the “Social Enterprise LLC”). Rhode Island is only one of 11 states in the US to offer the L3C filing, and I was excited to take advantage of this to grow my social business in Rhode Island.  I was alerted this morning to legislation that makes it impossible for me to incorporate in Rhode Island. As an affiliate marketing company based in Rhode Island, we would not be able to establish functional affiliate relationships with retailers because of something passed in 2009 called ‘the Amazon tax.’”

“To say that this new is disappointing would be an understatement. We are now looking at incorporating in Delaware. I had really hoped to incorporate in Rhode Island. Were this law not in effect, we would have incorporated in Rhode Island, based our business in Rhode Island, and grown our high growth tech company in Rhode Island.”

“This is just one of many stories of our state losing revenue due to this tax,” calculated Filippi. “All businesses that had relationships with Amazon lost that relationship and the income that went with it.”

“I am happy to introduce this legislation to abolish an ineffective tax, which raises no revenue and merely places our businesses at a distinct disadvantage.  I would encourage support from all of my fellow legislators on H-7230.”
For more information, contact:
Raina C. Smith, House Minority Office
State House Room 106
Providence, RI 02903
(401) 222-2259