The ultimate guide to Delaware sales tax

2024 overview of sales tax in Delaware

Welcome to Kintsugi's rundown on tax rates in the state of Delaware. Delaware's sales tax rates can vary depending on state, county/city, and local tax rates.

If you're wondering 'does Delaware have sales tax?', the answer is no, as Delaware boasts a 0% statewide sales tax, attracting many shoppers and businesses. New Castle County, Sussex County, and Kent County maintain this 0% rate, ensuring uniformity across the board.

Additionally, the lowest and highest district rates align uniformly with the state rate, as Delaware does not impose additional county-specific sales taxes.

Sales tax range in Delaware

In Delaware, the state has maintained its long-standing policy of not imposing a sales tax on residents and businesses, including no sales tax in Delaware on cars. As of 2024, Delaware continues this trend, providing tax relief that distinguishes it from many other states:

2024: No sales tax implemented across the state.

2023: No sales tax was in place during this period as well.

For comparison, the situation was consistent in 2023, where Delaware also did not levy any sales tax on goods and services, adhering to the sales tax Delaware policies. The state government has prioritized this approach to encourage business investment and consumer spending, ensuring that Delaware remains an attractive location for both shoppers and businesses.

While Delaware does charge certain other types of taxes, such as a gross receipts tax on businesses, its policy to not impose sales tax directly on consumer purchases has remained unchanged from 2023 to 2024. This stable tax environment has been a consistent element of Delaware's economic strategy.

Calculating Delaware sales tax

Understand Delaware's Tax Policy

Delaware has no state sales tax. No additional local sales taxes are levied.

Identify Applicable Taxes

• E-commerce: No state sales tax on online sales.
• SaaS (Software as a Service): Generally no state sales tax.
• Services: Typically exempt from state sales tax.

Special Considerations

• Out-of-State Purchases: No use tax for Delaware residents.
• Businesses with Nexus in Other States: Must comply with tax laws in the state where the business operates.
• Digital Goods and Services: No state sales tax on digital products.

Calculate Cost Without Sales Tax

Add up the total cost of goods or services as listed. Include any shipping or handling fees.

Review Invoices and Receipts

Ensure that no sales tax is added by mistake. Verify compliance with Delaware’s tax-exempt status.

Consult with a Tax Professional

For complex transactions or multi-state operations, seek expert advice.

Maintain Records

Keep documentation of sales and purchases for auditing purposes.

Understanding use tax in Delaware

Use tax in Delaware pertains to the tax liability on goods and services purchased outside the state but used, stored, or consumed within Delaware. Although Delaware is one of the few states without a state-level sales tax, it actively enforces the use tax to ensure tax equity among all purchases made by its residents.

When Delaware residents buy taxable goods or services from out-of-state sellers that do not collect Delaware state taxes, they are required to pay use tax directly to the state. This commonly applies to online purchases, mail-order goods, and items bought from out-of-state vendors. The use tax rate in Delaware aligns with the general principles of fairness, ensuring that local businesses aren’t disadvantaged compared to out-of-state sellers who might not collect sales tax.

The responsibility to report and pay use tax falls on the consumer. Delaware residents can file use tax through Form UC-1, available on the Delaware Division of Revenue website, and payment is generally due by January 31st of the year following the taxable purchase. It’s critical to maintain detailed records of all out-of-state purchases to ensure compliance and accuracy when filing.

One primary advantage for Delaware is economic neutrality; use tax helps to level the playing field between in-state and out-of-state sellers, discouraging residents from circumventing state tax by buying online or across state lines. Additionally, it contributes to state revenue without burdening local businesses.

Recent changes to Delaware sales tax

In 2024, Delaware maintained its unique position among U.S. states by continuing to enforce no statewide sales tax, similar to 2023. Delaware historically generates its revenue through other means, such as corporate taxes, personal income taxes, and gross receipts tax.

Excise and discretionary taxes and other sales tax considerations in Delaware

Excise Taxes

Even though Delaware doesn’t have a general sales tax, it does levy specific excise taxes on certain goods and services:

Alcohol: There are excise taxes on alcoholic beverages. For example, as of the last update, the tax rates include $0.97 per gallon of beer, $5.46 per gallon of wine, and $8.15 per gallon of spirits.

Tobacco: Delaware imposes excise taxes on tobacco products. The tax on cigarettes is $2.10 per pack of 20 cigarettes. Other tobacco products, including cigars and smokeless tobacco, are also taxed at various rates.

Motor Fuel: There are excise taxes on gasoline and diesel fuel. As of recent data, gasoline is taxed at $0.23 per gallon and diesel at $0.22 per gallon.

Utility Services: This includes a 4.25% public utility tax on the cost of electricity and natural gas services provided to consumers.

Discretionary Taxes

Specific local jurisdictions in Delaware may have discretionary taxes or fees:

Real Estate Transfer Tax: Delaware charges a transfer tax on the sale of real estate, typically shared between the buyer and the seller or as negotiated. The state rate is 2.5%, with an additional potential local option tax that can increase the total rate to as much as 4%.

Accommodations Tax: There is a transient occupancy tax on hotel stays. For example, the City of Wilmington and some other municipalities impose their own specific accommodations tax on lodging services.

Other Considerations

Without a sales tax, Delaware places greater reliance on other forms of revenue:

Personal and Corporate Income Taxes: Delaware has progressive personal income tax rates ranging from 0% to 6.6%. For 2024, corporate income tax is generally imposed at a rate of 8.7%.

Business Incorporation Fees: Delaware is known for its business-friendly incorporation laws. As a result, it is home to many corporations. The state collects significant revenue from various franchise taxes and incorporation fees.

Gross Receipts Tax: Instead of a sales tax, Delaware imposes a gross receipts tax on the seller of goods (not the consumer). The rates vary by business activity, and some industries might experience different rates.

Understanding nexus in Delaware for local and out-of-state sellers

Physical nexus

For the state of Delaware in 2024, the concept of physical nexus for sales tax remains widely unchanged from previous years.

2024

• No physical presence requirement for sales tax exists.
• Businesses do not need to collect or remit sales tax, irrespective of physical storefronts or warehouses in the state.
• Out-of-state retailers remain exempt from Delaware sales tax obligations despite possessing inventory or offices.

Comparison to 2023

• Delaware maintained its no sales tax policy.
• Physical nexus requirements for sales tax remained non-existent.
• Businesses, both in-state and out-of-state, had no sales tax collection or remittance duties.
• There were no changes or introductions of sales tax legislation impacting physical presence.

Economic nexus

In 2024, Delaware maintains its unique stance of having no statewide sales tax, which remains unchanged from 2023. Businesses operating in Delaware do not need to concern themselves with economic nexus for sales tax, as the state has consistently opted not to impose this tax, deferring to other revenue mechanisms:

• Delaware continues its policy of no statewide sales tax in 2024, identical to 2023.
• No changes in economic nexus requirements exist since Delaware does not participate in these for sales tax purposes, remaining the same from 2023 to 2024.
• Businesses benefit from the absence of sales tax, reducing administrative burdens related to tax compliance, consistently as in 2023.

Affiliate nexus

There are no significant changes regarding affiliate nexus for sales tax in Delaware from 2023 to 2024.

The state remains consistent in its approach to not imposing sales tax, and thus no new affiliate nexus rules or requirements have been introduced or modified during this period.

2023

• Delaware does not impose a retail sales tax.
• No affiliate nexus rules apply due to the absence of sales tax.
• Businesses are not required to collect or remit sales tax on sales made to Delaware customers.

2024

• Delaware maintains its policy of not imposing a general retail sales tax.
• No changes or introductions of affiliate nexus rules for sales tax.
• Businesses continue to have no obligation to collect or remit sales tax on sales within the state.

Click-through nexus

In 2024, Delaware remains one of the five states that does not impose a state sales tax, thus maintaining its appeal as a tax-free destination for shoppers and businesses.

As of 2023 and continuing into 2024, Delaware does not have a click-through nexus for sales tax due to its lack of a sales tax framework:

• In 2023, Delaware did not implement a sales tax, including click-through nexus provisions, because the state relies on other forms of revenue, such as corporate taxes and franchise taxes. This policy is consistent in 2024.
• Delaware’s primary method for generating state revenue in 2023 involved imposing corporate income taxes and franchise taxes, rather than sales tax. This revenue approach remains stable in 2024.
• Due to the absence of a sales tax in 2023, businesses operating through affiliate or referral programs involving Delaware residents were not subject to click-through nexus regulations. This non-taxable stance remains unchanged in 2024.
• In 2023, Delaware’s tax infrastructure favored businesses and e-commerce by avoiding the complexities associated with sales tax collection and remittance, including any click-through nexus obligations—a status that continues through 2024.

Marketplace nexus

Overall, Delaware's 2024 marketplace nexus rules reflect a progressive tightening and refinement over the 2023 framework, with enhanced clarity, increased thresholds, and stricter compliance enforcement mechanisms:

Threshold Adjustments

2024: Businesses with gross sales or 200 or more separate transactions in Delaware exceed $100,000 must register, collect, and remit sales tax.

2023: Comparatively, in 2023, the threshold was set slightly lower at $75,000 or 200 transactions.

Determining Nexus

2024: Economic nexus standards in 2024 include both direct sales by sellers and sales by third-party marketplace facilitators.

2023: In 2023, similar criteria were applied, though enforcement and compliance checks were less stringent.

Marketplace Facilitators' Responsibility

2024: Marketplace facilitators in 2024 are wholly responsible for collecting and remitting sales tax on behalf of third-party sellers, simplifying vendor obligations.

2023: In 2023, facilitators held the same responsibilities; however, new compliance systems improve enforcement in 2024.

Interstate Commerce Impact

2024: Delaware in 2024 ensures sellers from other states meet the nexus standards for cross-border commerce to foster equity among in-state and remote sellers.

2023: The 2023 mandates upheld similar requirements but faced criticism about clarity and application consistency.

Penalties and Compliance

2024: Non-compliance penalties in 2024 include more robust measures, with elevated fines for repeated infractions.

2023: In 2023, penalties existed but were generally milder and limited in scope.

Trade shows

In Delaware, participating in trade shows in 2024 involves specific sales tax obligations that businesses must adhere to:

No State Sales Tax: Delaware does not impose a state sales tax, offering a favorable environment for trade show participants.

Business License: Vendors must obtain a Delaware business license from the Division of Revenue, regardless of whether they are Delaware residents.

Gross Receipts Tax: Although there is no sales tax, vendors are subject to a gross receipts tax, which varies by business activity and ranges from 0.0945% to 2.0114%.

Permits and Regulations: Businesses must comply with local permits and regulations specific to trade show venues or municipalities.

Record Keeping: Maintaining detailed records of all sales transactions during the trade show is essential for tax compliance and reporting.

Filing Requirements: Vendors must file gross receipts tax returns either monthly or quarterly, depending on their business classification and gross income levels.

Non-Compliance Penalties: Failure to comply with licensing, tax filing, or payment requirements can result in fines, penalties, and interest charges.

Consultation: Engage with a tax professional or the Delaware Division of Revenue for specific guidance to ensure full compliance with state tax obligations during trade show participation.

Fulfillment by Amazon and nexus

Fulfillment by Amazon (FBA) is a service provided by Amazon where sellers can store their products in Amazon's fulfillment centers.

Amazon takes care of storage, packaging, and shipping, along with customer service and returns. This allows sellers to take advantage of Amazon's robust logistics network and focus more on their business growth.

Sales Tax Obligations in Delaware for 2024:

• Delaware does not impose a state sales tax on retail sales, including FBA transactions.
• Sellers using FBA services are not required to collect sales tax from customers in Delaware.
• Despite the absence of sales tax, businesses should still be aware of potential obligations regarding other types of taxes, such as franchise taxes.
• Sellers must ensure they comply with administrative requirements for business operations in the state, including potential licensing and reporting needs.

Permits, certificates and sales tax registration in Delaware

To register for sales tax in Delaware in 2024, businesses must obtain a Delaware business license from the Delaware Division of Revenue.

Although Delaware does not impose a state sales tax, businesses are required to register to comply with any applicable gross receipts tax and other state regulations.

Registering for sales tax collection in Delaware

In Delaware, there is no state sales tax.

Delaware is one of the few states in the United States that does not impose a state sales tax on the sale of goods and services. Therefore, you do not need to register for sales tax collection in Delaware for the year 2024.

Businesses in Delaware may still need to comply with other state and local tax regulations, such as gross receipts tax, business licenses, or other specific requirements, but sales tax collection is not one of them.

Cost of registering for sales tax in Delaware in 2024

As of 2024, Delaware does not impose a state sales tax.

Therefore, there is no cost associated with registering for sales tax in Delaware, as businesses are not required to register for sales tax collection.

Delaware relies on other forms of taxation and revenue generation, such as corporate income taxes and gross receipts taxes, rather than a state sales tax.

Federal tax ID requirements for registering

In Delaware, if you are registering for sales tax, you typically need to obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). An EIN is necessary for identifying your business entity for tax purposes.

To apply for an EIN, you can visit the IRS website and apply online. Here is the link to apply for an EIN: Apply for an EIN online with the IRS

Once you have your EIN, you can proceed to register for a Delaware Sales Tax Permit, which in Delaware is known as a "business license". The Delaware Division of Revenue handles this, and you can register online via their One Stop business registration and licensing system.

Here is the link to the Delaware One Stop portal for business registration and licensing: Delaware One Stop - Business Registration

Make sure to have your EIN ready when you start the registration process.

Streamlined sales tax program and Delaware

As of October 2023, Delaware is not part of the Streamlined Sales Tax (SST) Agreement.

Delaware does not have a state sales tax, which is a key reason why it is not part of the SST program. The SST program is designed to simplify and modernize sales and use tax collection and administration, but since Delaware does not impose a sales tax, participation in the program is not necessary.

Acquiring a business and registering for sales tax in Delaware

Delaware is one of the few states in the United States that does not impose a state sales tax. Therefore, if you are acquiring a business in Delaware, you won't need to register for sales tax because there is no sales tax to collect or remit to the state.

However, if the business conducts activities that require other types of state permits, registrations, or licenses, you may need to take care of those. For example, you might need to register for a business license, and depending on the nature of the business, obtain other applicable state or local licenses. It's also important to ensure compliance with any federal tax obligations.

If you're transferring ownership of a business, make sure to update any existing business licenses and notify any relevant local and state authorities of the change in ownership. Always consider consulting with a local attorney or accountant to ensure compliance with all applicable regulations and to address any specific circumstances related to your acquisition.

Other Delaware registrations to consider

In Delaware, you don't need to worry about state sales tax because Delaware does not impose a state sales tax. However, there are other registrations that you should consider depending on the nature of your business:

Business License: All businesses operating in Delaware are required to obtain a Delaware business license from the Division of Revenue. This applies regardless of the type of business structure you choose.

Unemployment Insurance: If you have employees, you will need to register with the Delaware Department of Labor for unemployment insurance.

Worker’s Compensation Insurance: For businesses with employees, Delaware law requires you to have worker’s compensation insurance.

Gross Receipts Tax: While Delaware does not have a sales tax, it does impose a gross receipts tax on the total receipts of goods sold and services rendered within the state. Businesses need to register and file for this tax with the Division of Revenue.

Federal Employer Identification Number (EIN): If you have employees, operate as a corporation or partnership, or meet certain other conditions, you will need an EIN from the IRS.

Industry-Specific Licenses: Depending on your business type, you may need additional licenses or permits. For example, businesses in the food, alcohol, or professional service sectors often require specific state or local licenses.

Local Permits and Zoning Clearances: Check with the local city or county where your business will operate to ensure compliance with local regulations, permits, and zoning laws.

Requirements for online sellers in Delaware

In Delaware, there is no state sales tax; therefore, online sellers are not required to collect sales tax on sales made to customers in the state. Delaware is one of the few states in the U.S. that does not impose a state sales tax on businesses or consumers.

Consequently, online sellers do not need to worry about special sales tax collection requirements for the state of Delaware in 2024.

Collecting sales tax in Delaware

In 2024, Delaware continues its unique stance by not imposing a state sales tax.

Retailers and consumers benefit from this tax-free shopping environment, fostering a business-friendly climate. However, certain businesses must fulfill alternative tax obligations, ensuring state revenue through different channels.

Understanding origin vs. destination sales tax collection

Delaware does not levy a state sales tax. Therefore, it is not classified as an origin-based, destination-based, modified origin, or modified destination sales tax collection jurisdiction. The state instead primarily relies on other forms of revenue such as corporate taxes and business licensing fees.

For further information, you can visit the official website of the Delaware Division of Revenue.

Taxable products in Delaware

Delaware is unique among U.S. states because it does not impose a state sales tax on the sale of goods or services. This means that there are no product genres or categories that incur sales tax within the state.

However, businesses in Delaware are subject to a gross receipts tax, which is a tax on the total gross revenues of a business, regardless of its source.

Here is a brief overview of how Delaware handles taxation in this context:

No Sales Tax: There are no traditional sales taxes applied to consumer purchases, meaning everything from electronics to groceries is exempt from such taxation.

Gross Receipts Tax: Delaware businesses must pay a tax on the total gross revenues they generate. Different types of businesses may have different rates for this tax. This is not a direct tax on consumers, but it can affect the overall cost structure for businesses.

Licensing and Other Fees: While Delaware doesn't have a sales tax, there may be other fees, such as business license fees, that are required for operation within the state.

Non-taxable products in Delaware

In the state of Delaware, sales tax is generally not imposed on goods and services.

This makes Delaware one of the few states in the U.S. without a statewide sales tax. Consequently, product genres such as groceries, clothing, electronics, and automotive supplies, among others, are exempt from sales tax. This extends to both in-store and online purchases within the state.

However, while the state doesn't charge a sales tax, businesses may still be subject to gross receipts taxes, and specific rules might apply to certain transactions or services.

Is SaaS taxable in Delaware?

In Delaware, Software as a Service (SaaS) is currently not subject to sales tax. The state does not impose a general sales tax, so SaaS and other services typically avoided such taxes.

Are digital products taxable in Delaware?

In 2024, digital products remain non-taxable in Delaware.

Unlike many other states, Delaware does not impose a sales tax on digital goods, including software downloads, e-books, music, and streaming services. This aligns with the state's overall policy of not having a sales tax on goods and services.

Are services taxable in Delaware?

In Delaware, services are generally not subject to sales tax.

The state is known for its business-friendly environment and does not impose a sales tax on most goods and services. This tax structure attracts companies and consumers looking to minimize their tax burden.

Sales tax exemption certificates

In 2024, Delaware maintains its status as one of the five U.S. states without a state sales tax, making sales tax exemption certificates unnecessary for most transactions.

Businesses and consumers benefit from buying goods and services without added tax costs. However, businesses may need to be aware of other regulatory filings and documentation to verify their tax-exempt status for other purposes, such as federal taxes or out-of-state sales.

State tax holidays in Delaware for 2024

Sales tax holidays are designated periods when specific items can be purchased without paying sales tax. Delaware does not have any sales tax holidays for 2024, as the state does not impose a sales tax.

Filing sales tax returns in Delaware

Sales Tax Overview: Delaware does not have a state sales tax on goods and services.

Gross Receipts Tax: Instead of sales tax, businesses in Delaware pay a Gross Receipts Tax (GRT) on the total receipts from sales of goods and services.

Registration: Register your business with Delaware Division of Revenue to get a business license and establish a gross receipts tax account. Visit the website of the Delaware Division of Revenue and complete the online application.

Tax Rates: Determine the applicable tax rate for your category; rates vary by industry and range from 0.096% to 0.7468%.

Filing Frequency: Frequencies vary; some businesses file monthly, while others file quarterly or annually, based on the business type and revenue level. Delaware’s Division of Revenue provides specific guidelines.

Filing Process: Log in to the Delaware Tax Portal to file your GRT return. Enter the total gross receipts for the period and calculate the tax due using the appropriate rate.

Payment: Payments can be made online via Electronic Funds Transfer (EFT) or by mail with a check or money order.

Deadlines: Compliance is crucial; ensure you file and pay by the assigned due date to avoid penalties and interest.

Record Keeping: Maintain detailed records of all sales and gross receipts to support the amounts reported on your tax returns.

Additional Information: For more detailed information and to access forms and guides, please visit the Delaware Division of Revenue: Delaware Division of Revenue.

Sales tax filing frequency

Delaware is unique among U.S. states for its lack of a state sales tax.

As of 2024, Delaware does not impose a sales tax on the sale of goods or services, which means that businesses operating within the state are not required to collect or remit sales tax to the state government.

Consequently, there is no need for businesses to file sales tax returns on a monthly, quarterly, or annual basis as they might in states with a sales tax.

Instead, Delaware relies on other forms of taxation, such as gross receipts tax, to generate revenue. The gross receipts tax is a tax on the total gross revenues of a business, regardless of their source, and businesses must file and remit this tax based on their revenue levels.

The filing frequency for the gross receipts tax can vary, but it typically requires periodic filings throughout the year, such as monthly or quarterly, depending on the business's revenue.

Filing when no sales tax has been collected

In Delaware, there is no state sales tax. Businesses do not collect sales tax from customers.

However, businesses with a presence in other states might need to collect sales tax for those states. If a Delaware-registered business fails to collect required sales tax in other states, it can face penalties, fines, and interest charges, depending on the laws of those states.

This can also potentially lead to audits and legal complications. Ensuring compliance with multi-state sales tax obligations is crucial for Delaware businesses operating interstate.

Penalties for late filing and non-payment of sales taxes

In the state of Delaware, timely sales tax filing and payment are critical for businesses.

For 2024, any delays in filing sales tax returns can result in significant penalties and interest charges. If a business fails to file its sales tax return on time, it may be subject to a penalty calculated based on a percentage of the tax due.

Additionally, interest accrues on the unpaid tax from the original due date until the date of the actual payment. Prompt filing helps avoid these extra costs and potential legal complications.

Non-payment of sales taxes is a serious issue in Delaware. Businesses that do not pay the required sales taxes face severe penalties, including hefty fines, interest on the outstanding amount, and potential legal action. Persistent non-payment can lead to the state's Department of Revenue taking stringent measures, such as revoking the business's sales tax permit, seizing assets, or even initiating criminal proceedings against the responsible parties.

Sales tax discounts and incentives

As of 2024, Delaware maintains its reputation as a business-friendly state due to its absence of a state-level sales tax.

This lack of sales tax serves as a significant incentive for businesses operating within Delaware. The absence of this tax can result in considerable savings, encouraging both small and large businesses to establish and conduct their operations in the state.

Additionally, Delaware is known for its favorable business laws and tax structure, making it an attractive location for incorporation.

Aside from the absence of a state sales tax, Delaware may offer various other incentives to businesses, such as tax credits and grants, but these would generally be related to specific activities like job creation or investments in certain areas rather than direct sales tax discounts.

2024 sales tax filing due dates for Delaware

Coming soon.

Shipping and sales tax in Delaware

When to pay tax on shipping in Delaware

In Delaware, businesses do not pay sales tax on shipping or any other transactions because Delaware does not impose a state sales tax.

Delaware is one of the few states in the United States that does not have a state sales tax. Therefore, in 2024, businesses in Delaware would not need to concern themselves with sales tax on shipping charges.