In ADV 2020-24, the Rhode Island Department of Revenue, Division of Taxation (the Department) provides guidance concerning the assertion of nexus and apportionment for employees temporarily working from their homes within the state due to the COVID-19 emergency. (For information on guidance the Department issued regarding income tax withholding for employees working within and outside of the state due to COVID-19, see EY Tax Alert 2020-1391.)

Sales and use tax nexus

During Rhode Island's COVID-19 state of emergency, the presence of employees who previously worked in another state but, solely due to the state of emergency, are working remotely from Rhode Island, will not in and of itself trigger nexus for Rhode Island sales and use tax purposes. Property that is temporarily located in Rhode Island during the state of emergency solely to allow one or more employees to work from home temporarily in Rhode Island (e.g., computers, computer equipment or similar property) during the state of emergency will also not, in and of itself, trigger nexus for Rhode Island sales and use tax purposes.

This policy is contingent on the fact that there are no other personnel, or any properties or activities, of a remote retailer within Rhode Island that would constitute sufficient physical presence, either before or during the state of emergency, to establish nexus for Rhode Island sales and use tax purposes. This policy is further contingent on the fact that an out-of-state retailer does not have sufficient sales into Rhode Island, either in the number of transactions or in the amount of gross receipts, during the calendar year to warrant a finding of nexus for Rhode Island sales and use tax purposes.

Corporate income tax

For the duration of Rhode Island's COVID-19 state of emergency, the Department will not seek to establish nexus for Rhode Island corporate income tax purposes solely because an employee is temporarily working from home during the state of emergency, or because an employee is temporarily working from home during the state of emergency and is using property to allow the employee to work from home (e.g., computers, computer equipment, or similar property) temporarily during the state of emergency.

In addition, the performance of any services by such employees within Rhode Island will not, in and of itself, cause their employers to lose the protection of Public Law 86-272 provided that there are no other activities being conducted within Rhode Island on behalf such out-of-state corporate employers, either before or during Rhode Island's coronavirus state of emergency, that would establish nexus with Rhode Island for corporate income tax purposes.

Apportionment

For the duration of Rhode Island's COVID-19 state of emergency, services performed by one or more employees, who previously worked in another state but, solely due to COVID-19, are now working remotely from Rhode Island, will not be considered by the Department to increase the numerator of their employer's payroll factor for purposes of apportioning income.

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