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Instead of a sales tax rate, Delaware imposes a gross receipts tax on the seller of personal tangible property and services. The state does not allow deductions for discounts, cost of goods sold, manufacturing, cost of manufacturing ingredients, state and federal taxes, or other deductions. Gross receipts tax rates range from 0.0945 percent to 1.9914 percent, depending on the business industry. If a business has two types of activity, it needs to report two separate types of gross receipts tax returns.
Types of taxes
While Delaware does not have a sales and use tax on retail sales, it does have several other taxes in addition to its gross receipts tax. Businesses may pass the gross receipts tax and other taxes onto consumers.
Separate jurisdictions do not have local sales taxes they can add to the state sales tax. The whole state pays only the gross receipts tax, less for certain industries as listed.
Transient rental taxes
The lodging tax, or transient rental tax, is 8 percent. Hotels, motels, and tourist homes are subject to the lodging tax. The business must remit lodging taxes on a monthly basis. Nonprofit, charitable, and religious organizations are not exempt from the lodging tax.
Exemptions include room rented to:
- Employees of the U.S. Government, including agencies.
- Members of the Armed Forces.
- Employees of the State of Delaware, including agencies and public schools, if the rooms are rented for government purposes.
- Children’s summer camps.
- Nursing homes.
- Charitable, educational or religious camps.
If a room is rented for five consecutive months, it is no longer a short-term rental and is exempt from paying the lodging tax.
Taxes on lessees
The state levies a tax of 1.9914 percent on the lease of the tangible personal property leased to another person. Exceptions include:
- Household furniture.
- Medical and remedial equipment.
- Hospital equipment.
- Aids and devices leased to the elderly, handicapped, injured or ill people, such as TV sets leased in health care facilities.
Motor vehicles lessees must pay a lease tax of 1.9914 percent of the rent.
Alcoholic beverage tax
Any business that sells alcohol must pay an alcohol beverage excise tax per gallon or barrel. Rates vary per type of alcohol. If a business uses the alcohol for medical, pharmaceutical, veterinary, manufacturing, or scientific use, it is exempt.
Otherwise, the taxes are as follows:
- Beer: $8.15 per barrel.
- Wine: $1.63 per gallon.
- Cider: $0.27 per gallon.
- Distilled spirits with over 25 percent ethyl alcohol by volume: $4.50 per gallon.
- Distilled spirits with less than 25 percent ethyl alcohol by volume: $3.00 per gallon.
- Gallon of ethyl alcohol: $8.15 per gallon.
Cigarette and tobacco taxes
Cigarette wholesalers must purchase tax stamps from the Delaware Division of Revenue. The wholesalers must affix the stamps to each pack of cigarettes. If a pack of cigarettes brought into Delaware does not have the tax stamp, it is contraband.
The tax per pack of cigarettes is 105 mills per cigarette or $2.10 for a pack of 20 cigarettes.
Additional tobacco taxes include:
- $0.05 per fluid milliliter of vapor product, including nicotine liquid solution and other liquids that contain nicotine and are meant to be used with an electronic smoking device.
- 30 percent tax on other tobacco products, including:
- Chewing tobacco.
- $0.92 per ounce for moist snuff.
Exempt sales include those to:
- Veterans’ hospitals are operated by the state or federal governments and are given free of charge to veterans.
- Military exchanges and commissaries.
- Native Americans operate a cigarette business on a Native American reservation, but only if the sales are to members of the reservation.
Since Delaware does not have a sales tax, out-of-state retailers, including marketplace sellers, do not have to collect and pay Delaware taxes for sales of tangible personal property and services. The state does not have any laws that apply to electronic commerce transactions.
Registering for Delaware’s taxes
You can register your business for a gross receipts tax account by using the state’s One Stop website. You can take care of most of your business needs on the site, including registering with:
- The Delaware Department of Revenue.
- The Delaware Office of Workers’ Compensation.
- The Delaware Division of Unemployment Insurance.
You will also find links to the Internal Revenue Service and the Delaware Division of Corporations for easy access to other information you will need to set up a new business.
You can also register for a new account via regular mail by contacting the Delaware Division of Revenue at (302) 577-8778 or visit the Delaware Taxpayer Portal to sign up for an account to pay gross receipts tax.
Delaware tax exemptions
Delaware does not have exemptions for certain products and services since it has only a gross receipts tax instead of a sales tax. It does, however, exempt certain classes of people from paying “retail sales tax,” or gross earnings tax.
Calculating Delaware’s gross receipts tax
To determine how much a business owes for Delaware’s gross receipts tax, locate the business type, then click through to choose the individual business type.
For example, a grocery store would choose “Retail / Wholesale,” the “Grocery Supermarket.” The document tells the business that the tax is .003267. It also tells the business that it has a $100,000 exemption per month.
Thus, to figure gross receipts of $800,000 for January 2022, subtract $100,000 from the business gross receipts of $800,000 for a taxable amount of $700,000.
Multiply the taxable amount by .003267 by the taxable gross receipts of $700,000 for a total tax of $2,286.90. Round the amount to the nearest dollar. In this case, the grocery store’s tax obligation is $2,287.
The document also gives additional information. In the grocery store example, the document shows due dates and other tax information, including:
- New businesses file quarterly for the first year.
- Monthly filers must file before the 20th day of the following month. Thus, the business pays gross receipts taxes for January before February 20.
- Quarterly filers must file before the last day of the month after the quarter. Thus, the business pays gross receipts taxes for January through March before April 30.
- House Bill No. 678 allows an exemption for gross tax receipts for closely held firms. The business must be 80 percent owned by the same five or fewer shareholders or owned 100 percent by the same family.
Filing and paying Delaware’s gross receipts taxes
A business might file by hand if it calls and requests the filing packet. As of this writing, the packet to remit reports and payments by hand is not available online.
It is more convenient to file and pay the tax due online, as noted above.
Physical offices for the Delaware Division of Revenue
The Delaware Division of Revenue has three offices throughout the state. If you need more information on tax laws for a certain industry, you can contact one of these offices nearest your business location:
- Wilmington: Division of Revenue, Carvel State Office Building, 820 North French Street, Wilmington, DE 19801. The phone number is (302) 577-8205.
- Dover: Division of Revenue, Thomas Collins Building, 540 South DuPont Highway, Suite 2, Dover, DE 19901. The phone number is (302) 744-1085.
- Georgetown: Division of Revenue, 20653 Dupont Blvd., Suite 2, Georgetown, DE 19947. The phone number is (302) 856-5358.
You can also email the Delaware Division of Revenue at rev_[email protected] or call the main number at (302) 577-8662.
The percentage varies from business to business. The percentage depends on the type of business you own or manage.
No. If you ship goods directly to your out-of-state customer, you do not need to pay gross receipts sales and service tax. However, you must keep documentation of the interstate shipment.
Yes. The most current cheat sheet lists the rate for several businesses.
Yes. A business can only use one monthly exemption. If the business has two branches generating tax revenue, it still gets one exemption to cover both businesses, even if the books are separate.
Yes. A cigarette retailer must have a license for each location. The license is $15 per location. If the business chooses a three-year renewal, $150 per location. For annual renewal, the fee is $90 per location.
No. Delaware does not charge sales tax; thus, you do not need an exemption certificate.