Pay Your Rhode Island Small Business Taxes

As an entrepreneur, one of the most important things you can do for your business is take the proper steps to keep your Rhode Island business legally compliant with the state. But knowing exactly what taxes you need to pay and when can cause anxiety for even the most experienced small business owners. If filing state taxes has you feeling nervous, we’re here to help. Read on to learn more about the types of taxes you might face as a Rhode Island business owner, how and when to pay them, and which of our products and services can help make the process smoother when tax time comes around.

If you need more complete legal compliance help, check out our Worry-Free Compliance service, which keeps your business documents organized and can help keep you on track with required business filings.

If you’re looking for information about federal taxes, head over to our page on federal taxes for small businesses to learn more.

Step 1: Establish your Rhode Island business’s corporate income tax obligations

The first step to take is to identify and understand your business’s corporate income tax obligations. The amount and rate you must pay depends on your business’s entity structure.

For C corporations, the Rhode Island business tax rate for net income is 7%. State income tax returns for C corporations are due the same time federal income tax returns are due for C corporations. More specifically, the following due dates apply to income tax returns for many C corporations: 

• C corporations with a fiscal tax year ending on June 30 — returns are normally due by the 15th day of the 3rd month after the tax year ends
• C corporations with a short tax year ending at any time in June — returns are normally due by the 15th day of the 3rd month after the tax year ends
• C corporations with a fiscal tax year ending on any other date — returns are normally due by the 15th day of the 4th month after the tax year ends 

As you can see, it’s important to put a lot of thought into the fiscal year you choose for your business in light of the big impact it has on your tax obligations.

The taxation of pass-through businesses sometimes works differently than the taxation of C corporations. Pass-through businesses normally include:

• Partnerships
• S corporations
• Limited liability companies (LLCs)
• Unincorporated sole proprietorships

In many cases, owners of pass-through businesses pay personal income taxes on their share of business income. In Rhode Island, pass-through businesses can choose to pay a 5.99% tax on the business’s income as a whole. State tax returns for S corporations are due the same time as the federal returns, meaning they are due by the 15th day of the 3rd month after the business’s tax year ends.

Step 2: Determine your Rhode Island business’s employment taxes

If your business has one or more employees performing services in Rhode Island, your business probably needs to collect withholding taxes from your employees’ wages. The taxes you collect pay your employees’ income taxes, and the rates range from 3.75% to 5.99%. Often, employers have to pay a wage-dependent flat fee in addition to a percentage of an employee’s wages. 

Depending on how much their employees make and how often they get paid, some businesses need to pay withholding taxes more often than others. The usual deadlines for paying withholding taxes are the following:

• For businesses that withhold $600 or more in wages in a month — withholding payments are due weekly by the next banking day after the end of the week
• For businesses that withhold at least $50 but less than $600 in a month — withholding payments are due monthly by the 20th of the following month if that month doesn’t end a quarter, and by the last day of any month following a month that ends a quarter
• For businesses that withhold less than $50 in a month — withholding payments are due quarterly by the last day of the following month

If your business withholds $200 or more from wages in a month, you have to make your withholding payments electronically.

Step 3: Establish your Rhode Island business’s additional tax obligations

Even at the state level, you can have multiple tax obligations beyond income and withholding taxes. Other common Rhode Island small business taxes include:

• Sales taxes
• Franchise taxes 
• Employer taxes
• Excise taxes

In general, your business’s obligation to pay these state taxes depends on your business’s practices and characteristics. 

Sales Taxes

Many Rhode Island businesses need to collect state sales tax if they sell, lease, or rent out tangible, personal property at retail. Sales tax also applies to providing lodging, telecommunications, and cable television services. The sales tax rate is 7%, and there’s an additional 6% hotel tax for lodging. If your business sells food or beverages, you also need to collect a 1% local tax for those activities. 

Franchise Taxes

Some states charge corporations franchise taxes on the amount of stock the corporations have. Rhode Island no longer charges franchise taxes. 

Employer Taxes

Businesses with employees generally must pay employer taxes to cover a number of benefits for their former or disabled employees. Many businesses have to pay or collect the following taxes:

• Employment Security tax
• Job Development Fund tax 
• Temporary Disability tax

The total rate for these taxes can range from 0.6% to 10% depending on the employer’s characteristics. Affected employers need to make quarterly reports and payments on April 30, July 31, October 31, and January 31. 

Excise Taxes

Many states charge excise taxes for certain business activities related to products such as fuel and tobacco. You can visit the Rhode Island Department of Revenue website to help determine whether these taxes apply to your business activities.

Step 4: Prepare to file and pay your Rhode Island business taxes

Once you’re ready, you’ll likely make most of your state business tax payments to the Department of Revenue. It’s a good idea to use the Department of Revenue’s online Taxpayer Portal to submit your tax returns and payments. But before you hit the “submit” button on your state taxes, you want to make sure they’re correct. A vital part of preparing your taxes correctly is reviewing your important business documents. Business documents you might need to gather to properly prepare your taxes include:

• Payroll documents
• Legal documents 
• Account information
• Invoices 
• Receipts

The kinds of documents you need for business taxes can be unique to the kind of business you run. You’ll probably need to contact a tax professional to make sure you have the appropriate documents to help develop your tax reports. 

Tax seasons can come quickly and often. As tax seasons come, you need to have your important business documents organized and ready for review, which makes tracking your income and expenses extremely important.

Not sure how to stay compliant? Learn more about legal compliance for small business owners.

Do I need an accountant?

You might be self-sufficient as an entrepreneur, but you’ll likely need professional help to correctly file and pay your business taxes. Taxes can get complicated quickly, and most small businesses need professional accounting help to get their taxes right. You don’t want to find out the hard way how many serious consequences you can face from a late or incorrectly filed tax return. It’s best to pay for a professional now rather than pay the price of tax penalties later. When looking for a tax professional, you can use the IRS’s guide to Understanding Tax Return Preparer Credentials and Qualifications. 

How we can help

A large and potentially overwhelming component of preparing your taxes correctly is staying organized. So much paperwork and so many deadlines go into fulfilling tax obligations that it is easy for things to fall through the cracks. But we are here to help with the ZenBusiness Money App. The app allows you to easily send custom invoices, accept credit card and bank transfer payments, and manage your clients from an easy-to-use dashboard.

If your small business is still in the formation stage, our Rhode Island Rhode Island LLC Formation Service or Corporation Formation Service can help you get started.

Even though you are a business owner in the smallest state, we know that your ambitions are big. Let us help you achieve them.