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HB 7809

AN ACT RELATING TO TAXATION -- STATE TAX OFFICIALS

2026 Regular Session Introduced by Alex Marszalkowski

Requires 3% withholding on payments to nonresident contractors in RI, with 30 or 60 day audit-based certificates to determine taxes due and where withheld funds are applied or rele

06/19/2026 Signed by Governor
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Bill Summary · HB 7809

Summary of HB 7809 (Rhode Island, 2026)

Purpose and intent

HB 7809, introduced February 12, 2026 by Representative Alex D. Marszalkowski and referred to House Finance, seeks to modify Rhode Island’s state tax administration rules as they relate to nonresident contractors. The bill aims to extend the review timeframe for tax audits of nonresident contractors and add a specific penalty framework for noncompliance with the withholding requirements.

Key provisions

  • Section 44-1-6, as amended by HB 7809, adds an enhanced withholding mechanism for contracts with nonresident contractors:
    • A person paying a nonresident contractor must withhold 3% of the contract price.
    • Withholding is kept for 30 or 60 days after the contractor completes the project and requests a tax audit.
    • The tax administrator must issue, within 30 or 60 days after the request, a certificate either:
    • No tax due, or
    • Taxes due (sales and use tax, income tax, or both), or both, for the nonresident contractor.
  • Procedural options depending on the tax administrator’s action:
    • If a certificate of no tax due is issued, the payment can be released to the contractor.
    • If a certificate shows taxes due, the payer may withhold the excess over the amount due and remit for taxes, plus any interest and penalties.
    • If no certificate is issued within the time frame, the payer may release the withheld funds to the contractor on the terms of the contract, without claims from the tax administrator against either party.
  • In cases where the tax administrator issues a certificate showing taxes due, the payer must deposit with the tax administrator up to 3% of the contract price (not exceeding the withheld amount) and obtain a receipt.
  • Definitions:
    • “Nonresident contractor” means a contractor without a regular place of business in Rhode Island.
    • A “regular place of business” includes a bona fide office, factory, warehouse, or other space in the state where the contractor conducts business in its own name with regular employees. Temporary site offices do not count.
  • Penalties and liability:
    • A person who does business with a nonresident contractor and fails to comply with the withholding provisions is liable for the amount due as determined by the tax administrator and is subject to the same collection activities as a taxpayer under Rhode Island tax law.
  • Section 2 (Effective date):
    • The act takes effect upon passage.

Affected parties

  • Nonresident contractors performing work in Rhode Island (as defined by the statute).
  • Rhode Island project payers (e.g., property owners, developers, general contractors) who contract with nonresident contractors.
  • Rhode Island Department of Revenue (Tax Administrator), which would administer audits, issue certificates, and collect withheld amounts.
  • Potential indirectly affected third parties involved in project financing and payment flows due to withholding and audit procedures.

Procedural and timeline notes

  • Audit timing:
    • The contractor must request an audit in writing, after project completion, to trigger the withholding process.
    • The tax administrator has 30 or 60 days to issue a certificate after receiving the audit request.
  • If no certificate is issued within the 30/60-day window, the payer may release withheld funds under contract terms, without further claims by the tax administrator against either party.
  • If a certificate indicates taxes due, the payer must remit the withholdings up to 3% of the contract price to the tax administrator, with receipt provided, and the funds are then applied to the tax liability (including potential interest and penalties).
  • Withholding percentage: 3% of the contract price.
  • Withholding period before release: 30 or 60 days, depending on the timing structure in the amended statute.

Practical impact

  • The bill strengthens and formalizes the withholding process for projects involving nonresident contractors, potentially improving collection of Rhode Island taxes on work performed by out-of-state entities.
  • It introduces a specific procedural framework and penalties to encourage timely compliance with withholding requirements.
  • For project owners and funds managers, the bill clarifies when funds may be released and how to handle certificates of tax due or no tax due.

Note: The bill is set to take effect upon passage and may be the subject of clarification or amendment during committee consideration.

Compiled from official sources — confirm details with the bill’s official record.

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