How Rhode Island’s New Property Tax Legislation Eases Burden on Small Businesses
Rhode Island takes a significant step towards supporting small businesses with new legislation exempting the first $50,000 of business property from tangible personal property tax. This move, while reducing state revenue, aims to stimulate local economy and attract entrepreneurs.
In a significant move towards fostering a more small business-friendly environment, Rhode Island has passed legislation that exempts the first $50,000 of business property from tangible personal property tax. This new law, welcomed by small businesses across the state, is set to have a profound impact on the local economy.
To understand the significance of this legislation, it’s important to first understand what tangible personal property tax is. This tax is levied on physical items owned by a business, such as furniture, machinery, tools, and equipment. In essence, it’s a tax on the tools of the trade, the very items that businesses need to operate and generate income.
Before this legislation, businesses in Rhode Island were required to pay taxes on all their tangible personal property, regardless of the total value. This tax could be quite costly (5.3% in Providence and 6.5% in North Providence, for example), especially for small businesses that operate on slim margins. Imagine running a small bakery, for instance. Every oven, mixer, and even the chairs and tables in the dining area would be subject to this tax. In the case of North Providence’s 6.5% rate, it would be akin to paying nearly the sales tax rate on the assets your business owns every year. The costs could quickly add up, eating into the profits and potentially making it harder for the business to grow or even survive.
The new legislation changes this by exempting the first $50,000 worth of property. This means that if a business’s tangible property is valued at $50,000 or less, they won’t have to pay any tangible property tax. If the property’s value exceeds $50,000, the business will only pay tax on the amount that exceeds $50,000. This is a significant relief for small businesses, many of which have tangible property valued at less than $50,000.
While some local business owners often cite tax burdens that others consider reasonable, the tangible property tax has faced wide, nearly universal opposition among the business community, and often hit new business owners with a sticker shock they didn’t see coming. The removal of this tax for up to $50,000 works towards making Rhode Island a more attractive place to start a business, potentially drawing entrepreneurs and innovators to the state.
However, it’s important to note that this tax exemption also means an estimated $25m less revenue for the state, which will reimburse the cities and towns who assess this tax, for the lost revenue.