Updated January 28 at 1:28pm

Report: R.I. sales tax burden 21st highest; YTD collections rise 2%

The R.I. Department of Revenue has collected $2.06 billion in general revenue during the fiscal year through February, including $172 million in last month alone, the agency reported Tuesday. The monthly report was released the same day as a Tax Foundation study ranking U.S. states according to their state and local sales tax rates was released. More

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Report: R.I. sales tax burden 21st highest; YTD collections rise 2%

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PROVIDENCE – The R.I. Department of Revenue has collected $2.06 billion in general revenue during the fiscal year through February, including $172 million in last month alone, the agency reported Tuesday.

The monthly report was released the same day as a Tax Foundation study ranking U.S. states according to their state and local sales tax rates was released.

The year-to-date figure for fiscal year 2014 represents a collections increase of $39.3 million, or 2 percent, over the $2.02 billion collected during the same period in fiscal year 2013. Personal income tax collections registered the largest percentage increase, gaining 4.1 percent for a total of $720 million, while sales and use tax collections rose 3.1 percent to $614 million.

Revenue from lottery transfer payments dropped 1.3 percent to $217 million, and general revenue from all other sources fell 3.4 percent to $239 million, the Department of Revenue reported.

Director of Revenue Rosemary Booth Gallogly noted that while personal income tax collections appear particularly strong this fiscal year, the excess is due mainly to the delayed start of the federal income tax filing season and will likely moderate over the next month.

In February alone, personal income tax collections rose 20.6 percent to $27.5 million, while sales and use tax collections increased 2.5 percent to $64.7 million and lottery transfer collections dropped 2.3 percent to $28.9 million. Revenue from all other sources rose 51.5 percent to $36.3 million.

Overall in February, general revenue totaled $172 million, an increase of 11.1 percent over the $155 million reported for the same month last year.

Released the same day as the Department of Revenue’s cash collections report, a new study by the Tax Foundation found that Rhode Island’s 7 percent sales tax ranks as the second-highest rate in the country.

Indiana, Mississippi, New Jersey and Tennessee joined Rhode Island in second place with 7 percent each. Only California’s sales tax rate, currently 7.5 percent, ranked higher. Across the border in Massachusetts, the sales tax rate of 6.25 percent ranked as the 12th highest in the country, tied with the rates of Illinois and Texas, also 6.25 percent.

Of the 45 U.S. states that collect statewide sales taxes, 38 allow municipal governments to levy local sales taxes as well, the Tax Foundation said. Neither Rhode Island nor Massachusetts levy local sales taxes, meaning their combined sales tax rate is the same as the state-level sales tax rate.

In the ranking of the 50 U.S. states by their combined average state and local sales tax rates, Rhode Island ranked at No. 21 while Massachusetts ranked at No. 33.

“Sales taxes are some of the most easily understood taxes because every time a consumer makes a purchase, they can see the rate on the receipt,” said Scott Drenkard, an economist for the Tax Foundation, an independent tax-policy research organization based in Washington, D.C. “While many factors influence business location and investment decisions, sales taxes are something within policymakers’ control that can have immediate impacts.”

The Tax Foundation study highlighted the role of competition in setting state sales tax rates, noting that consumers can and do leave high-tax areas to make major purchases in lower-tax areas, and that businesses sometimes locate just beyond the borders of high sales tax areas to avoid the levy.

A study produced in December by the Rhode Island Center for Freedom & Prosperity suggested that cutting the Rhode Island sales tax to 3 percent could produce as many as 14,000 new jobs in the state. The study was conducted at the request of the General Assembly commission currently evaluating potential repeal or reduction of the state sales tax.

R.I. Department of Revenue, Rhode Island sales tax, Rhode Island personal income tax, Rosemary Booth Gallogly, Rhode Island cash collections, Rhode Island general revenue, Massachusetts sales tax, Scott Drenkard, sales tax competitiveness, Tax Foundation, Rhode Island Center for Freedom & Prosperity,

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