Understanding Delaware Sales and Use Taxes
Understanding and complying with the sales tax requirements in the states in which you do business is absolutely essential. More states are taxing services, as well as retail sales, so no business owner can afford to be in the dark. In addition, you may find that you are liable for use taxes for products purchased out of state. This article answers some of the basic questions regarding sales tax in Delaware.
Delaware has no general sales tax. Instead, the state imposes a tax called a manufacturers' and merchants' license tax. This is similar to a sales tax because it is assessed against gross sales.
However, it applies to only the following types of businesses:
- food processors
- commercial feed dealers
- restaurant retailers
- grocery supermarkets
- farm machinery dealers
If your business falls into one of these categories, then you're going to need to know how to figure out this tax. There is no provision in the law for passing the tax directly on to consumers.
The manufacturers' and merchants' license tax is determined by taking the manufacturers' and merchants' license tax rate and multiplying it by the gross receipts. We recommend that you carefully assess the type of business you do. The rates will vary considerably depending on the industry you're in, so make sure you have the correct rates.
The applicable rates for tax periods beginning after December 31, 2011 and before January 1, 2014 are as follows:
|Tax Type ||Annual Fee ||Tax Rate |
|Contractors ||$75 ||0.6537% |
|Farm Machinery Retailers || $75 for each place of business ||0.1006% |
|Food Processors ||$75 for each place of business ||0.2012% |
|General Services ||$75 + $25 for each additional place of business ||0.4023% |
|Commercial Feed Dealers ||$75 for each place of business ||0.1006% |
|Lessors ||$75 + $25 for each extra establishment ||0.3017% |
|Lessees ||N/A ||2.0114% |
|Manufacturers ||$75 for each place of business ||0.1886% |
|Clean energy technology device manufacturers ||$75 for each place of business ||0.1414% |
|Automobile manufacturers ||$75 for each place of business ||0.1414% |
|Occupational Licensees ||$75 + $25 for each extra establishment ||0.4023% |
|Restaurant Retailers ||$75 + $25 for each extra establishment ||0.6537% |
|Grocery Supermarket Retailers ||$90 + $40 for each extra establishment ||0.33% |
|Retailers ||$90 + $40 for each extra establishment ||0.7543% |
|Retailers (Transient) ||$40 ||0.7543% |
|Wholesaler ||$75 for each place of business ||0.4023% |
|Petroleum Wholesalers ||$75 for each place of business ||1.5537% |
|Petroleum Retailers ||$90 + $40 for each additional place of business ||1.6543% |
Most businesses are entitled to an exclusion, which varies depending on the business activity conducted. These exclusions, provided monthly or quarterly, generally start at $80,000 per month. To determine the exclusion for a specific business activity in the State of Delaware, please visit the Tax Tip for your business type.