Last Thursday, Governor Raimondo released her plan for State revenue and spending. The 621 page, $10 billion plan deals with everything from sales tax expansions to bonds to health care. There are 22 separate Articles in the budget. Over the next few weeks, Under the Dome will look at the various articles of the document as well as the potential effects on segments of the business community.
Article 8 – Taxes
Since taxes are on everyone’s mind, we start with Article 8, Relating to Taxes. The Article does the following:
- Lowers the manufacturing tax on “still wines” from $1.40 per gallon to $.60 per gallon
- Lowers the manufacturing tax on spirits (whiskey, rum, gin, etc.) from $5.40 per gallon to $3.75 per gallon
- Creates a new program (a federal payment offset and state payment offset reciprocal program) to assist in the collection of federal and state taxes owed and nontax debts owed. The State could charge the federal government an administrative fee for assisting in the collections of federal debts owed.
- Expands the 7% sales tax to hunting trapping and shooting services, which would include fishing guides, fishing clubs, archery ranges, shooting clubs, etc.
- Expands the sales tax to lobbying services as defined in RIGL 139.1-3(a). As last year, this specific statute refers to all lobbyists – both contract and in-house lobbyists, meaning organizations with employees acting as lobbyists could be required to pay a sales tax on the employee’s wages associated with the act of lobbying.
- Expands the sales tax to computer system design and related services (projects that require writing, modifying, testing, and supporting software to meet the needs of a particular customer; planning and designing computer systems that integrate computer hardware, software, and communication technologies; providing on-site management and operation of clients' computer systems and/or data processing facilities; and other related services such as computer disaster recovery.
- Expands sales tax to interior design services, and courier and messenger services (the Article specifically states that “delivery charges” are different and not subject to sales tax.
- Allows the State to transfer to the general revenue fund 2% of the local meals and beverage tax collected for the municipalities as an administration fee.
- Eliminates the sales tax exemption for alcoholic beverages sold by Class A licensees (liquor stores)
- Increases the hotel tax from 5% to 6% starting July 1, 2020
Article 8 also proposes to change the way in which the hotel tax is distributed starting July 1, 2020. The distribution percentage of the tax collected changes, but keep in mind the Governor increases the tax by 1%. Cities and Towns get 20.8% of the tax collected – down from the current 25%. The Providence Convention and Visitors Bureau percentage lowers differently in different regions. Providence and Warwick Tourism districts see their percentage lower from 30% to 25%. The Aquidneck Island Tourism District percentage lowers from 45% to 37.5%. Regional Tourism Districts such as the Blackstone Valley see a decrease from 45% to 37.5%. The amount of hotel tax going to the Commerce Corporation lowers in all regions about 3% to 3.5%. And, for the first time, 16.7% of the hotel tax generated would go to the General Fund for State use.
Article 6 – Fees
This broad Article addresses many different programs:
- Allows the Department of Health to establish a fee for conducting data analysis that takes more than 15 hours. Requestors of information must be notified of the costs in advance. This does not apply to data subject to the public access records law.
- Increases the civil penalty for the misclassification of employees. In 2012 the business community supported an increase in this penalty to $1500 - $3000 per misclassified employee. The Governor proposes to increase the penalty to $3000 - $4000 per misclassified employee.
- Establishes a penalty for construction companies working on state projects that violate labor payment rules. The penalty would be equal to two to three times the amount agreed due and payable if the company enters into a settlement agreement with the Department of Labor. This Article also changes the hearing date timeframe for DLT from 10 days to 30 days, with a DLT timeframe to enter a decision after the hearing from 10 days to 30 days. This increase in timeframe guarantees that if a violation (innocent or deliberate) occurs, it will cost the company more in penalties as the amount due and payable adds up over the additional time allotted to DLT to respond.
- Increases Fire Marshall fees for building permits. For construction cost buildings of $500 or less, the fee goes from $25 to $35. For construction cost building between $500 and $1000, the fee goes from $35 to $45. Buildings between $1000 and $2000 see a fee increase from $45 to $55. Building cost between $2000 and $500,000 get a fee increase from $45 to $55 plus $7 (instead of $6) per $1000 fraction over $2000. If the building cost is over $500,000 then the fee goes from $3,033 to $3,292 plus $6.75 (instead of $4) per $1000 or fraction over $500,000.
- Increases the Fire Marshall fee for inspections from $100 to $250. However, this new higher fee covers the initial inspection and any subsequent re-inspections.
- Increases permit fees for explosives. Manufacturer’s permit increases from $85 to $100. Dealer’s permit increases from $50 to $100. Possessor’s permit increases from $50 to $100. Under current law, a User’s permit is $50 per $10,000 of product – that fee would become a flat $50 fee.
- Eliminates the $25 fee for a blaster apprentice permit
- Adds a new $15 late fee for the renewal of a driver’s license, chauffeur’s license, CDL license and car registration that has expired
- Provides a second option for obtaining DMV operator records. Under current law, obtaining a certified record is $16. The budget includes an option to obtain the record online for $20
- Institutes a $100 restoration fee for motor vehicle registrations that were revoked due to a failure to repair equipment following the receipt of a citation by the police, or a revocation due to the failure to have the vehicle inspected as required under state law.
- Institutes a new fee of $250 if convicted of driving under the influence of alcohol or drugs. This is in addition to all of the penalties assessed under current law. The money is to be used for substance abuse prevention programs and student drug abuse programs. The budget also includes a new $250 fee for refusing to submit to a chemical test when driving. This new fee is in addition to the $950 fees that exist in current law for refusal to submit to the test.
- Establishes a $50 application fee for the sheriffs’ training academy, although the fee can be waived in hardship cases
- Lastly, Article 6 includes a new chapter dealing with electric and gas distribution companies. The Article requires these companies to establish emergency preparation plans by June 1, 2021. Failure to submit the plan results in a fine of $500 per day. The Public Utilities Commission can also assess a penalty up to $100,000 for each day (up to $7.5 million) if a company fails to comply with its plan during an outage or other event. The monies raised through this penalty would go back to the company’s customers.
Article 7 – Environment
Article 7 addresses most of the fees associated with hunting and fishing in the state. In the interest of space, each fee increase will not be listed, but can be found starting on page 125 of the H.7171 http://webserver.rilin.state.ri.us/BillText20/HouseText20/H7171.pdf . The following license fees increase:
- Freshwater fishing license
- Hunting license
- Combination fishing and hunting license
- Deer permits
- Wild turkey permits
- Fur trapper license
- Waterfowl stamp fee
- Trout conservation stamp fee
Article 7 also establishes new requirements for “landing” marine species. The language states, “All residents and nonresidents…who have charge of a vessel carrying seafood products legally harvested outside Rhode Island water shall obtain a permit to land, sell or offer for sale seafood products in Rhode Island.” The fee for a resident to “land” is $300; $600 for a nonresident. The Article goes on to say “No person, partnership, firm, association, or corporation shall barter or trade in marine species taken by persons licensed …unless a license so to do has been obtained from the director of environmental management.” This language seems to suggest that any individual or company that buys marine species (lobsters, crabs, fish, etc.) from a licensed fisherman/woman must also be licensed to purchase the seafood. The fees range from $300 to $450 depending upon the species to be purchased. While this language may have been designed to affect wholesale or retail dealers of marine species, it could be interpreted to include businesses such as restaurants or, in the most extreme interpretation of the language, to individuals who go to a boat to buy lobsters for dinner.
Lastly, Article 7 increases the Oil Spill Prevention Administration and Response (OSPAR) fee from five cents ($.05) per barrel on petroleum products brought into the state to ten cents ($.10) per barrel. The five cent fee raises about $1.5 million annually. Three cents of the new fee would go to a new climate change fund called the Ocean State Climate Adaptation and Resilience Fund. The other two cents would stay in the OSPAR Fund. Monies in the OPSAR fund have been taken each year for many projects unrelated to the original purpose of the fund. The fund will soon not be able to meet the needs of the original purpose – a preemption fund for marine oil spills.
The following bills were filed last week:
House Bill No. 7107 Knight, Cassar, McEntee, Speakman, Blazejewski, AN ACT RELATING TO PUBLIC PROPERTY AND WORKS -- STATE PURCHASES (Requires the state, including all its agencies and departments, to purchase one hundred percent (100%) of their energy needs from renewable sources by January 1, 2031.)
House Bill No. 7108 Knight, Cassar, McEntee, Speakman, Blazejewski, AN ACT RELATING TO STATE AFFAIRS AND GOVERNMENT -- MOTOR VEHICLES OWNED BY A GOVERNMENTAL BODY (Requires that all vehicles owned and operated by a governmental body be electric powered within ten (10) years, exclusive of trucks and law enforcement vehicles.)
House Bill No. 7120 Bennett, McNamara, Edwards, Cassar, Corvese, AN ACT RELATING TO HEALTH AND SAFETY -- LICENSING OF MASSAGE THERAPISTS (Moves the disciplinary process for massage therapists from the board of physical therapy to the board of massage therapists.)
House Bill No. 7142 Williams, Craven, Blazejewski, Knight, Alzate, AN ACT RELATING TO CRIMINAL PROCEDURE - EXPUNGEMENT OF CRIMINAL RECORDS (Provides those persons who have previously been convicted of marijuana possession, which would now constitute a decriminalized offense, to have their records for those convictions automatically expunged regardless of their criminal history.)
House Bill No. 7153 Corvese, Canario, Vella-Wilkinson, Azzinaro, Ucci, AN ACT RELATING TO COMMERCIAL LAW - UNFAIR SALES PRACTICES - GIFT CERTIFICATES (Requires issuers of gift certificates to deposit and hold funds used to purchase the gift certificate in escrow for three (3) years, or until the gift certificate is redeemed, and would restrict certain redemption terms in the event of bankruptcy.)
House Bill No. 7157 Bennett, Lima, Canario, Jackson, Blazejewski, AN ACT RELATING TO LABOR AND LABOR RELATIONS -- MINIMUM WAGES (Increases the minimum wage starting on July 1, 2020, from the present amount of $10.50 each year until July 1, 2024 where it will reach $15 per hour.)
House Bill No. 7163 Bennett, Canario, Jackson, Vella-Wilkinson, Handy, AN ACT RELATING TO FOOD AND DRUGS -- SINGLE-USE PLASTIC STRAWS (Prohibits food service establishments from providing plastic straws, unless requested by the consumer. Notices and fined issued upon violation.)
House Bill No. 7164 Bennett, Canario, Jackson, Vella-Wilkinson, Handy, AN ACT RELATING TO FOOD AND DRUGS -- DISPOSABLE FOOD SERVICE CONTAINERS (Prohibits a covered establishment from preparing, selling, processing or providing food or beverages in or on a disposable food service container that is composed in whole or in part of polystyrene foam.)