Delaware Sales Tax

In the US, sales tax is a government tax imposed on the sale of goods and services. It is typically calculated as a percentage of customers' total price for products and services.

The state of Delaware has a unique tax environment. It does not impose sales taxes, making it a shopping haven for locals and visitors alike. In addition, the state has a low corporate tax rate and moderate income taxes. This makes the state an attractive location for businesses to incorporate. However, e-commerce sellers should still be aware of the state’s tax regulations. Although Delaware does not have a sales tax, it does have a gross receipts tax. Keeping up with changes in these regulations can be challenging for business owners. Kintsugi’s sales tax experts can help you navigate these changes and ensure compliance with all state laws.

Additionally, Delaware does not require sales tax exemption certificates or resale certificates. However, it is a member of the Streamlined Sales and Use Tax Agreement, which means that buyers can use their Multistate Tax Commission Uniform Sales and Use Tax Certificate when purchasing qualifying sales-tax-exempt items from vendors in Delaware.

Delaware Gross Receipts Tax

Delaware does not have a sales tax but instead earns its revenue through an alternative system called Gross Receipts Tax. This specific tax is based on a business’s cumulative gross receipts from the sale of goods and services in Delaware. It’s different from income taxes, as businesses cannot deduct expenses like cost of goods sold or R&D.

Delaware Gross Receipts Tax rate varies by industry, ranging from 0.0945% to 1.9914%, and there’s no deduction for business expenses. This can be beneficial for consumers who might enjoy lower prices, but for businesses, it adds complexity. They need to identify their specific tax rate, maintain records, and ensure timely filing and payment.

Companies with nexus must file and pay Delaware Gross Receipts Tax monthly or quarterly. Newly established businesses are initially placed on a quarterly schedule, but the Division of Revenue will determine whether to change this to a monthly schedule after reviewing a company’s activities.

If your company has employees, you must also register with Delaware One Stop and pay state withholding taxes on employee wages. This can be done using the online Delaware One Stop portal.

Key Points about Delaware Gross Receipts Tax
Delaware Sales Tax 1

Key Points about Delaware Gross Receipts Tax

  • There are no deductions allowed for common business expenses. This means the tax is applied to the entire revenue stream, including costs like materials, labor, and rent.
  • The filing frequency, whether monthly or quarterly, also depends on the type of business activity.
  • Businesses with a diverse range of operations might need to file separate reports with different tax rates for each category.
  • This tax structure can be advantageous for consumers as they typically don’t pay a sales tax at the point of purchase, potentially leading to lower prices.
  • However, for businesses, it can be more complex to navigate compared to a sales tax. They need to determine the correct tax rate for their industry, maintain accurate records, and ensure timely filing and payment.

 

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