Rhode Island Contractor Taxes and Licensing: A Guide for Trades

Almost every Rhode Island contractor and subcontractor must register with the Contractors' Registration and Licensing Board, and a new state license for homebuilders and structural remodelers takes effect January 1, 2028. On construction contracts you pay the 7% sales tax on materials as the consumer and don't charge tax on labor.

Why is Rhode Island strict about contractor registration?

Rhode Island casts a wide net. The Contractors' Registration and Licensing Board (CRLB) says anyone doing residential or commercial construction work, from building to remodeling to handyman repairs, must register. That includes all subcontractors. The board's FAQ says that if a 1099 is filed for you, you count as a subcontractor and must be registered. Painters, power washers, fence installers and sealcoaters are all on its list.

A bigger change is coming. Under R.I. Gen. Laws Chapter 5-65.4, enacted July 2, 2025, the CRLB says a license will be required as of January 1, 2028 to build new homes or do structural remodeling on existing homes. Nonstructural home improvements and commercial work aren't covered by the new license. The board has proposed rules (440-RICR-10-00-7) and was taking written comments through November 1, 2026. If you frame additions or move bearing walls, watch this closely.

Do Rhode Island contractors charge sales tax on labor?

Not on a typical construction contract. Regulation 280-RICR-20-70-54 says a contractor "shall pay the tax as a consumer" on all materials, supplies, tools and equipment, rentals included, used on a lump-sum, cost-plus, capped time-and-materials or other construction contract. The regulation defines a construction contract as one for the repair, alteration, improvement, remodeling or construction of real property, so repairs follow the same rule. The customer isn't billed sales tax.

The Division of Taxation's sales tax page sets the sales and use tax rate at 7%. You flip to retailer status in two cases the regulation spells out:

1. You contract to sell materials at an agreed price and render service for an additional price or by time spent.
2. You're in the business of selling those materials at retail.

Then you need a retail permit, buy with a resale certificate, and collect tax from the customer. The regulation also says that selling and installing a complete unit of standard equipment, like an awning or electrical fixtures, makes you a retailer: tax applies to the retail price of the item, not the separate installation charge. A sheet metal shop that fabricates its own ductwork for a job is still the consumer of the metal. The labor and materials picture across states is in sales tax on labor vs. materials.

How do materials, exemptions and use tax work in Rhode Island?

Since you're the consumer, a resale certificate is off limits for ordinary job materials. The regulation warns that a contractor misusing one is held "strictly and solely accountable" for the tax, and owes use tax on any out-of-state purchases. Rhode Island's use tax is also 7%, so materials bought tax-free across the line in Massachusetts or Connecticut for a Rhode Island job can still owe tax here. See use tax for contractors.

Exempt projects are the exception. Contractors working for federal, state or local government, nonprofit hospitals and schools, churches and charities may buy essential project materials tax-free by giving suppliers a Contractor's Exemption Certificate. The exemption covers only materials built into that project. Tools, equipment, temporary signs and barricades stay taxable, and anything not earmarked for the exempt job is taxed.

Out-of-state firms should plan for a holdback. The regulation requires anyone awarding a construction contract to a nonresident contractor to withhold 3% of the contract price. The Division's 2026 legislative summary says a new law (H 7809/S 2815, effective June 19, 2026) extends the holding period to 60 days after completion and gives the Division 60 days to audit.

Which Rhode Island trades need a state license?

Registration and licensing are different things in Rhode Island. CRLB registration is the base requirement for contractors. Separate licenses cover specific trades, issued either by the CRLB or by the Department of Labor and Training (DLT).

A few CRLB details matter for small shops. Jobs where labor, materials and everything else total less than $500 under one contract don't require registration, but anyone advertising as a contractor must register. Applicants submit a $500,000 certificate of liability insurance naming the CRLB, plus a workers' comp certificate if they have employees. There's no reciprocity with other states. Licensed plumbers and electricians don't need CRLB registration unless they contract work outside their license. Your city or town still issues building permits, so check with the local building official. More: contractor license basics.

What income taxes does a Rhode Island contracting business pay?

Rhode Island's personal income tax has three brackets. The Division's advisory ADV 2025-22 sets the tax year 2026 schedule at 3.75% on taxable income up to $82,050, 4.75% from $82,050 to $186,450, and 5.99% above that. Sole proprietors pay on their business profit through the personal return.

• Minimum tax and annual charge: corporations and S corporations pay 7% of Rhode Island net income or a $400 minimum, whichever is greater. LLCs not taxed as corporations, LPs, LLPs and single-member LLCs pay an annual charge equal to that minimum. General partnerships are exempt from the charge.
• Pass-through entity election: since tax year 2019, a pass-through entity may elect to pay tax at the entity level at 5.99%.
• New surtax: the 2026 legislative summary says the fiscal 2027 budget adds a 1% surtax on personal income over $1 million starting in tax year 2027, rising to 2% in 2028 and 3% in 2029. Electing pass-through entities can pay it at the entity level too.
• Estimated payments: required when your estimated tax is expected to be $250 or more beyond your credits.

Build both state and federal estimates into your cash plan. See quarterly estimated taxes for contractors and try the quarterly estimated tax calculator.

When does a Rhode Island contractor need workers' comp?

As soon as you have one employee. DLT says employers "with one or more employees" must carry workers' comp, with limited exceptions. Individual owners and partners are exempt. Most corporate officers are covered unless they file a waiver, Form DWC-11, with DLT. Independent contractors must file a DWC 11-IC form for each business that hires them, and since January 1, 2024 that registration is annual.

The penalties are steep: DLT can fine an uninsured employer $1,000 for each day without coverage, bring a felony charge and close the business. The CRLB also wants proof of coverage at registration if you have employees. Background: workers' compensation for contractors.