Senator proposes sales tax on luxury clothing items

Sen. Daniel J. Issa (D-Dist. 16, Central Falls, Pawtucket, Cumberland) said he has always been pleased to live in a state that exempts clothing from sales tax “because most of our citizens consider clothes a basic, human necessity, like food, and not taxing such necessities is one way government can help citizens who are already taxed pretty heavily.”

At some point, though, he said, “expensive clothing goes beyond being about filling a basic human need and becomes a luxury and I believe that luxury items, including luxury clothing items, should not be exempt from our state sales tax.”

Senator Issa would define a luxury clothing item as a single item costing over $500. Under legislation that he plans to introduce again in the 2006 legislative year, clothing with a price tag of $500 or more would be subject to the state sales tax for the amount over $500.

“It’s still a better deal than you would get in Massachusetts, where sales tax kicks in on the amount of an item over $175, or in Connecticut, where sales tax is applied to the amount of any item over $50,” said Senator Issa.

If approved and enacted into law, Senator Issa’s legislation would require that any taxes generated by the law be applied directly to existing programs that help the state’s low-income and elderly residents, such as heating assistance programs.

Senator Issa said he believes enactment of his bill could generate as much as $1 million annually in sales tax revenue for the state, “and that is a figure that would have a significant impact on helping those in our state most in need.”

One important aspect of the legislation, said Senator Issa, is that it would apply the $500 limit to a single purchased item. “In other words, a family out shopping for back-to-school clothing for the children may spend more than $500 total, but there would be no tax since none of the individual items cost more than $500.”

In addition to establishing a luxury tax as a funding stream to help the state’s needy, Senator Issa said he has long been concerned that the existing Rhode Island sales tax exemption on clothing may be attracting out-of-state shoppers to come to Rhode Island to make their purchases to avoid paying tax in their own state. “That may be good for certain merchants in Rhode Island that deal in high end apparel, but the state derives no direct benefit. It’s just not fair, or good business, for Rhode Island.”