2012-05-31 / News

State Senate says ‘no’ to taxing tourism industry

The Rhode Island Senate recently passed legislation to restore the sales-tax exemption on scenic tour and transportation services. The bipartisan legislation is sponsored by Newport County’s delegation to the Senate, which includes Sens. M. Teresa Paiva Weed, Louis P. DiPalma, Christopher Scott Ottiano, David E. Bates and Walter S. Felag Jr.

The legislation was promised by the Newport delegation in August following meetings during which members of the tourism industry expressed their concerns that the new tax placed them at a competitive disadvantage.

The senators noted that the provision impacts one of the state’s most important industries: travel and tourism. The 2011 budget extended the state’s 7 percent sales tax to package tours and sightseeing transportation services.

“This revenue helped to close the budget gap and was one of many very difficult decisions,” said Paiva Weed. “But in the months since its enactment we have heard from many in the tourism industry about the unintended consequences of this provision. This legislation removes a potential impediment to our vital tourism industry.”

She said that travel and tourism represent 5 percent of Rhode Island’s gross domestic product and 9.2 percent of total employment. Paiva Weed added that more than 42,000 jobs were created directly and indirectly by travel and tourism.

“We should be doing everything we can to support this vital industry,” she said. “Instituting a tax detrimental to tourism makes no sense.”

If tourism didn’t exist in Rhode Island, each household would pay $1,349 more in taxes to maintain the current level of state and local tax receipts, according to a Global Insight study. Each visitor creates about $134 in tax receipts, $78 of which goes to state and local authorities. It takes only 185 visitors to pay for one Rhode Island public school student for a year.

“This tax puts Rhode Island at a marketing disadvantage in the highly competitive travel industry,” said Evan Smith, president of Discover Newport. “Our elected officials have a challenging job. I appreciate the responsiveness of Sen. President Paiva Weed and Sen. DiPalma, and look forward to working together with them in a team effort to address our concerns.”

Massachusetts levies a similar tax, applicable to packaged tours in Boston, at a rate of 5 percent. Vermont also levies a similar tax, at a rate of 6 percent. Connecticut, Maine and New Hampshire do not levy a sales tax on packaged tours.

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