Delaware Sales Tax Rules

Delaware Sales Tax Rules For Businesses: A Complete Guide

“As per the Delaware Sales Tax Rules, the State Government of Delaware does not levy any sales tax.”

What Does The Delaware Sales Tax Rules Mean For Businesses?

You need not worry about it. 

Delaware is one of the states where businesses do not have to pay any amount of sales tax. 

This is a relief for a business owner. But business owners do not get away fully with their duty of filing taxes. 

According to the Delaware Sales Tax Rules, the State Government of Delaware taxes businesses on their gross receipts. 

It is an alternative to sales tax. 

How Much Is The Sales Tax For Businesses In Delaware?

Cities and local counties are also not allowed to collect sales tax from businesses. 

Businesses are not allowed to pass taxes collected on gross receipts onto consumers.

As per the Delaware Sales Tax Rules, the State Government of Delaware collects two different fees on the following

  • 3.75% “document fee related to the sale of all automobiles. 
  • 1.92% occupational license tax on certain corporate activities. 

The State Government of Delaware has its reasons for not collecting sales tax. For example:

Businesses are already obliged to pay a flat 8.7% corporate income tax. It is the fourth-highest tax rate in the country.  

The combination of personal income tax and corporate income tax helps the state government earn enough money to deal with financial matters. 

This is why the State Government of Delaware does not collect sales tax. 

Corporate Income Tax In Delaware Threshold Limit
8.7% $5000
Personal Income Tax In Delaware Threshold limit 
2.2% < $ 60,000
6.60% > $ 60,000

Read More: Georgia Sales Tax 2022 for Businesses: A Complete Guide

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Do You Have To Collect Sales Tax In Delaware For Your eCommerce Business?

Instead of the sales tax, businesses and business owners pay the following taxes in Delaware:

  • Corporate income tax
  • Personal Income Tax

Every individual running a business in this state of the country is obliged to pay personal income tax. 

All domestic and foreign entities running their businesses in Delaware are also obliged to pay corporate income tax. 

They have to pay 8.7% tax on their federal taxable income. The tax has to be filed regardless of the amount of the following:

  • Gross income
  • Taxable income

Even corporations that do not have their offices in Delaware are obliged to pay corporate and personal income tax. 

What Types Of Goods And Services Are Taxable Under Sales Tax Delaware?

Check the list given below:

  • Personal income
  • Gross receipts
  • Real-estate
  • Capital gains
  • Property
  • Cigarette 
  • Alcohol
  • Gas

Things not taxed in Delaware:

  • Social security.
  • Railroad retirement income.
  • State-level gains from fixed income and equity investments. 
  • Business transactions.
  • Inventory.
  • Anything inherited.
  • No unitary tax.
  • Capital gains.
  • Stock transfers.

The list does not end here only. 

How Often Do You Need To File A Sales Tax Return In Delaware?

A calendar-year taxpayer is obliged to file a Delaware corporate income tax return before April 15th of the next year. 

A fiscal year taxpayer should file tax returns on or before the 15th of the fourth month before the fiscal year concludes. 

Only federal extension reserves all rights related to the extending due date. 

It does not mean that taxpayer gets some extra time to file tax returns. You have to file your tax on time. 

Determining your tax liabilities will add value to your experience related to filing tax returns. 

What Happens If You Do Not File Sales Tax By The Due Date?

Avoid making this mistake as much as possible. You will get penalized in multiple ways for making this mistake.

It could be the most expensive mistake of your life that you may never want to commit. 

You are charged ½% interest for underpayment and late payment per month. You are fined interest from the date prescribed to the date you file your return. 

You can be penalized for filing a late filing balance due return. The penalty could be 5% per month of the balance due. 

You could be penalized severely for the following:

  • Filing false returns
  • For filing fraudulent returns
  • Fake certification 

You could be penalized 1% per month for failure to file or late filing of your net tax liability return. This penalty increases the interest you pay for late payments.

You do not want to be penalized ½% every month for failure to file estimated taxes. It is in addition to the fines listed above. The Division of Revenue, Delaware, reserves can assess these penalties if you do not file the estimated return on time. 

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