Should Rhode Island eliminate its sales tax to keep small businesses competitive? 

At least one lawmaker says the answer to that question is yes. Saying it is “about time we had a dialogue on this,” Rep. Jan P. Malik (D-Dist. 67, Barrington, Warren) has introduced legislation to eliminate the Rhode Island sales tax.

The bill, 2013-H 5365, calls for the end of the sales tax effective Oct. 1 of this year. The bill provides that, as of that date, all regulations relating to the collection of sales tax and enforcement of collections will sunset and, further, that as of October 1, the local meals and beverage tax will also be eliminated.

“Our sales tax is killing small businesses, especially those in border communities,” said Representative Malik, who is a member of the House Committee on Finance to which the legislation has been referred. “I am one of the small business owners getting hammered because, at least in terms of sales tax, I cannot compete with my nearby Massachusetts competitors. I am down 20 percent in business over the past two years, and it doesn’t matter if we have low prices at my liquor store or not. People just don’t way to pay a sales tax when they can drive a few miles to Massachusetts where there is no sales tax on liquor.”

“How can Rhode Island continue to compete at 7 percent? How can Rhode Island restaurants compete at 8 percent? They can’t. We need to find a way to fix this, and a serious discussion of our sales tax is a discussion we need to have, now, before more small stores close their doors,” he said.

Representative Malik acknowledges that elimination of the sales tax will mean a void in revenue coming into the state, but he believes that competitiveness – by way of lower prices due to no sales tax – will spur economic activity, resulting in more businesses opening and hiring. “Any growth in economic activity in this state should be seen as a major plus, because business owners lives in the state and pay income and local taxes, and the people they employ live in the state and pay taxes, and the other companies that support these small businesses will also grow in volume,” he said.

Representative Malik said he is not wedded to a total elimination of the sales tax, but introduced the bill calling for that because “this is just to get the dialogue started. I just want our state to do better and to level the playing field for those businesses out there that are really hurting because other states are stealing away their customers.”

The Malik bill is co-sponsored by House Minority Leader Rep. Brian C. Newberry (R-Dist. 48, North Smithfield, Burrillville), Rep. Joseph M. McNamara (D-Dist. 19, Warwick, Cranston), Rep. Samuel A. Azzinaro (D-Dist. 37, Westerly), Rep. Arthur J. Corvese (D-Dist. 55, North Providence) and 28 other Representatives.