PROVIDENCE, R.I. (WPRI) — Gov. Gina Raimondo is rejecting pleas from Rhode Island restaurants to waive Friday’s deadline for them to remit sales tax money to the state to help them amid the unprecedented industry shutdown caused by COVID-19.
Restaurants, bars and other establishments collect sales tax when a customer closes out a tab, but the money does not immediately go to the state. Instead, the establishments transfer – or remit – the accumulated sales tax money to the state periodically.
A number of restaurateurs have suggested the governor should allow them to delay the payment for February sales — due Friday — in light of her decision to temporarily ban dine-in service to help stop the spread of the novel coronavirus.
Raimondo has repeatedly ruled that out, however, noting customers’ sales tax payments are the state’s money, not the restaurants’. Her decision appears to be motivated in part by concerns about state government’s own cash flow in light of the sudden economic crisis caused by coronavirus.
“We are not going to change that deadline,” Raimondo said Wednesday. “This is the sales tax that they collect. If you go out to a bar, there’s a sales tax, they collect it — they hold that money in escrow. That’s the state’s money. And so that ought to be remitted on Friday.”
“Having said that,” she added, “the whole world is upside down right now. I have a whole lot of empathy for what restaurant and bar owners are going through. Some of them may not even be able to reach their accountant by Friday. So on a case-by-case basis, call the Department of Revenue and we’ll work it through with you and give you some leniency if we think it’s necessary.”
In a statement to WPRI 12, Department of Revenue spokesperson Paul Grimaldi said the Division of Taxation “understands the difficulty that many businesses, including small businesses and retailers, are facing during this unprecedented crisis.”
Grimaldi noted that the U.S. Small Business Administration has made low-interest federal loans available to Rhode Island companies after granting a disaster declaration over coronavirus, and also noted they have the right to request that penalties for late payments “be abated where there was no negligence or intentional disregard of the law.”
Rhode Island is taking a different approach than Massachusetts, where Gov. Charlie Baker announced Wednesday he would let small businesses wait until June 30 to remit their sales, meals and hotel tax payments for March, April and May.
“I think those of us in the hospitality industry must figure that the governor, who can’t even leave a little tiny tip for this industry to help us stay in business, really does not have her priorities in order,” said Bob Burke, owner of Pot Au Feu.
“It’s tough when you see that a state next door sees this as a very good measure and our governor sees it as something she couldn’t possibly contemplate,” he said.
Derek Wagner, owner of Nick’s on Broadway and its new Westminster Street sister restaurant, said business was already declining.
“For weeks now it’s been impossible,” he said, “even before the quarantines and ‘Don’t leave the house.'”
While Raimondo has repeatedly pointed out the establishments are holding the money “in escrow” for the state, in practice many restaurant owners say they co-mingle the sales tax money and then find the cash for the sales tax remittance when the time comes.
“The first thing that always gets paid is the staff, and then the expenses that you need to operate to keep the doors open, and those get prioritized,” Wagner said.