Did a Rhode Island door company owe use tax on stock doors stored in Warwick, and were specialty doors for known out-of-state jobs exempt during temporary Rhode Island storage?

Plain-English summary

The Company correctly paid Rhode Island use tax on stock doors placed into Warwick inventory, but specialty doors ordered for known out-of-state customers were exempt while stored temporarily before continuing to use solely outside Rhode Island. The final destination and purpose of storage controlled.

The Company operated a construction business in Massachusetts and Rhode Island from a Warwick office and warehouse. It bought stock doors from Pennsylvania, shipped FOB Warwick, without knowing where they would ultimately be used. It also bought specialty doors built for identified jobs and paid use tax in the state where those doors were used.

R.I. Gen. Laws § 44-18-11 excluded from “storage” and “use” property brought into Rhode Island for later transport and use solely outside the state. The Division explained that the exemption required temporary storage as part of a continuing interstate journey.

The stock doors did not qualify because they entered general inventory for Company's convenience, could be used in Rhode Island, and had no known out-of-state destination. Their interstate journey ended when they were placed into inventory.

The specialty doors qualified because they were designed for specific customers, had known out-of-state destinations, and entered Rhode Island only temporarily before resuming interstate movement for exclusive use elsewhere.

What this means for you

Contractors and material suppliers

General inventory is different from goods committed to a specific out-of-state job. Unknown destination and owner convenience supported Rhode Island use tax.

Warehousing and logistics teams

Document customer, job location, intended final use, and the temporary nature of Rhode Island storage before claiming the export-storage exemption.

Accountants and tax professionals

The interstate journey must remain intact. A business-purpose interruption for ordinary inventory can end the journey and permit Rhode Island taxation.

Common questions

Why were stock doors taxable? Their final destination was unknown, they might never leave Rhode Island, and inventory storage served Company's business convenience.

Why were specialty doors exempt? They were made for specific out-of-state customers and temporarily stored before continuing to use solely outside Rhode Island.

Did shipment from Pennsylvania by itself create the exemption? No. The property also needed a known out-of-state destination and only temporary Rhode Island storage.

What if an interstate shipment is interrupted for business convenience? The order says the interstate character may end and state taxation becomes possible.

Who could rely on the ruling? The Company, subject to statutory and factual changes.

Citations and references

• R.I. Gen. Laws § 44-18-11 — storage or use for export.
• Paul Arpin Van Lines Co. v. Norberg, 346 A.2d 655 (1975) — temporary Rhode Island storage before sole out-of-state use.
• Safeway Systems, Inc. v. Norberg, 341 A.2d 47 (1975) — business-convenience interruption can end an interstate journey.

Source

• Landing page: Rhode Island Declaratory Rulings
• Declaratory order: Declaratory Order 1992-01

Original ruling text

Ruling Request No. 92-01

Ruling Request No. 92-01

Re: Request for Declaratory Ruling on Taxability of Certain Purchases from Out-of-State Vendors

Facts

A certain door company ("the company") engages in construction business in Massachusetts and Rhode Island and its office and warehouse is located in Warwick, Rhode Island. The company purchases stock doors for inventory without knowledge of the doors final distribution. The doors are shipped from Pennsylvania FOB Warwick, Rhode Island. The company has been reporting and paying Rhode Island use tax on these purchases.

In addition to stock doors, the company purchases specialty doors ordered for jobs. The company pays use tax to the state where the doors are used.

Ruling Requested

The company requests confirmation that it properly pays the use tax to Rhode Island on the doors purchased for inventory and stored in Rhode Island and that the specialty doors purchased for specific jobs outside the state are exempt from tax in Rhode Island.

Discussion

R.I.G.L. 44-18-11 reads as follows:

44-18-11. Storage or use for export. -- "Storage" and "use" do not include the keeping, retaining, or exercising of any right or power over tangible personal property shipped or brought into this state for the purpose of subsequently transporting the property outside the state for use thereafter solely outside the state, or for the purpose of being processed, fabricated, or manufactured into, attached to, or incorporated into, other tangible personal property to be transported outside the state and thereafter used solely outside the state.

The exemption granted by section 44-18-11 only applies to tangible personal property which is shipped or brought into Rhode Island, stored here temporarily and then withdrawn from storage to be used solely outside this state. Paul Arpin Van Lines Co. v. Norberg , 346 A. 2d 655 (1975). If, however, the interstate journey is interrupted for reasons of convenience or business needs of the owner, the interstate character of the journey ceases and taxation by a state is possible. Safeway Systems, Inc. v. Norberg , 341 A.2d 47 (1975).

The "stock" doors purchased by the company are not brought into this state for the purpose of being stored here temporarily to be withdrawn from storage to be used solely outside the state. The company purchases the stock doors for inventory without any knowledge of the doors final destination. The doors may never leave the state. They are strictly inventory items to be used at the convenience of the company. Their interstate journey is therefore at an end when placed in inventory at the company's convenience.

The "specialty" doors are designed and built to a customer's specifications and destined for use in the state where the customer is located. They are purchased with full knowledge of the final destination of the door. The shipment of the specialty doors into this state is therefore a part of their interstate journey for use solely outside the state.

Ruling

The company is properly paying a use tax on stock doors shipped into this state and placed into the taxpayer's inventory.

Specialty doors purchased for specific customers located outside the state are exempt from tax under R.I.G.L. 44-18-11 when shipped from outside the state, and stored here temporarily before resuming their interstate journey for use solely outside the state.

This ruling may be relied upon by the company and shall be valid until the applicable statutory provisions are amended in a manner requiring a different result or until the underlying factual presentation changes.

**R. Gary Clark

Tax Administrator

January 28, 1992**