Rhode Island Code of Regulations
Title 280 - Department of Revenue
Chapter 20 - Division of Taxation
Subchapter 70 - Sales and Use Tax
Part 35 - Cellular Telephone - Sold in Bundled Transactions - Promotional Use by Carriers (280-RICR-20-70-35)
Section 280-RICR-20-70-35.6 - Promotional Use by Carriers

A. Cellular telephone carriers ("carriers") frequently use cellular telephones as promotional items in their efforts to solicit new subscribers. In a typical transaction, a carrier will offer to provide a cellular telephone to a customer at no additional charge or for a nominal consideration, if the customer agrees to become and remain a subscriber for a set minimum period, usually one or two years.

B. For example, under a promotional program a carrier may offer to sell a new cellular telephone for $19.95 to any customer who agrees to become a new subscriber for a period of one year. A customer who accepts this promotion pays the same price for cellular service as customers who do not. The telephone itself has a wholesale cost of $200.00. In the example above the carrier would be liable for the tax based upon its cost of the items. In the event the carrier collected a tax from its customer based upon the amount of nominal consideration charged from the telephones it may claim an offsetting credit for that amount.