Delaware does not have a sales tax, but it does imposes a gross receipts tax on businesses that sell tangible personal property or services. Rates vary based on the business activity, with filings due either monthly or quarterly.
The Division of Revenue strongly suggests and sometimes requires online filings. If you need help understanding how to do this, reach out to a tax attorney for guidance.
Online filing
Many states use gross receipts tax to boost state tax revenues. These taxes operate similarly to sales taxes, but apply solely to business sales rather than retail purchases.
These states include Delaware, Nevada, Ohio, Oregon, Tennessee and Texas. Businesses in these jurisdictions must file gross receipts taxes regularly which could lead to mounting liabilities over time.
Thankfully, you can file your Delaware gross receipts tax online through e-filing – also known as electronic filing.
Postal paperwork can be a hassle, with its associated costs and long lines at the post office. With this process, you can forgo all those hassles and receive email confirmation of delivery of your documents.
In addition to sales tax, Delaware also levies a gross receipts tax on limited liability companies as an effort to raise additional revenue for the state since these firms are pass-through entities. This tax represents Delaware’s fifth largest source of revenue.
Paper filing
If your Delaware business generates gross receipts tax, filing may be mandatory. Many types of businesses, such as retail and wholesale operations, are subject to this taxation.
Businesses with multiple types of activities must pay different rates. This tax can be complex to comprehend and may result in a potential liability for them.
It’s wise to invest in software that manages this type of tax for you. Doing so can help prevent liabilities from piling up over time.
Based on your total gross receipts, you may be required to file monthly or quarterly. The Division of Revenue uses a lookback period to determine which filing and payment frequency works best for your company.
Franchise tax can be a substantial burden for young, unprofitable startups in Delaware. There are two methods used by the state of Delaware for calculating this tax: authorized share count method and assumed par value method.
Lookback period
Businesses selling goods or services in Delaware must pay a Gross Receipts Tax (GRT). This tax is applied to your total gross revenues as an entity.
GRT rates range from.0945% to.7468%, depending on the type of business activity you conduct. To find out which rate applies to your particular venture, visit the Division of Revenue’s Business Tax Tips page for more information.
No matter the rate, you must file and pay the GST on either a monthly or quarterly basis. You can do this online, or print off and send it directly to the Division of Revenue via paper form.
When calculating how often to withhold and remit tax, the Division of Revenue takes into account your “lookback period,” which is the twelve month period between July 1 and June 30 immediately preceding the calendar year for which you are being determined. Withholding agents who have no prior record of withholding must file on a monthly basis until their next “lookback period.” For further details about your filing frequency in Delaware, consult our Withholding Tables.
Rates
Delaware Gross Receipts Tax (GRT) is a state tax on the amount of revenue your business receives. The rate can vary based on your activity, though typically at lower rates than sales or use taxes.
Taxation can be complex, with different rates applied to various businesses. Fortunately, the Delaware Division of Revenue provides information for each type of business and its associated tax.
Many small businesses can avoid paying taxes by applying for an exemption that varies based on your business activities. Furthermore, small businesses may qualify for a tax credit.
In addition to the GRT, Delaware also collects a franchise tax from businesses operating within its borders. While this tax may be burdensome for some firms, it helps boost revenue for the state by encouraging corporations to locate there.
