Gross receipts tax, not sales tax, in Delaware

Delaware has no state or local sales tax, so your invoice has no sales tax line. Instead, your business holds an annual Delaware business license and pays Delaware’s gross receipts tax, which falls on the seller, not the customer.

Business license and gross receipts tax: your business owes them

Anyone conducting a trade or business in Delaware, corporations included, must get a State of Delaware Business License from the Division of Revenue. The annual fee is generally $75 for a first location, and each separate business activity needs its own license. Some Delaware counties and towns may also require a business license, so check with your local and county offices.

The gross receipts tax is imposed on the seller of goods or provider of services and paid to the Division of Revenue monthly or quarterly. The Division decides which from your total gross receipts in a look-back period, and every new business starts as a quarterly filer. The rate depends on the activity too, from 0.0945% to 1.9914%, with a separate variable rate for petroleum products.

Contractors: 0.6472% after a $100,000 monthly or $300,000 quarterly deduction

Title 30 of the Delaware Code makes you a contractor if you furnish labor, or labor and materials, to build, alter, repair, dismantle or demolish buildings or other structures as an improvement of real property. That holds whether you’re a general contractor or a subcontractor, a resident or a nonresident. The Division’s tax tips for contractors name electricians, plumbers, painters and carpet layers among them.

• License: your contractor’s license from the Division of Revenue costs $75, and you must have it before, or when, you sign a contract. On a competitively bid Delaware contract over $50,000, start the license application before or with your bid; as a subcontractor, start it before the general contractor bids.
• Tax: you pay 0.6472% of your aggregate gross receipts, after a deduction of $100,000 for each month. A monthly filer pays by the 20th for the month before; a quarterly filer pays by the last day of the month after the quarter, with a $300,000 deduction for the quarter. On $150,000 of receipts in a month (an illustrative figure), a monthly filer owes 0.6472% of $50,000, or $323.60.
• Subcontractors: what you pay a subcontractor stays out of your gross receipts if the subcontractor is licensed and subject to Delaware’s contractor tax on those sums, and a written agreement between you states the exact sums payable to it.
• Nonresident contractors: before starting construction in Delaware, file a surety bond of 6% of the contract price on any contract of $20,000 or more (on a cost-plus contract, 6% of your estimated cost and profit). When two or more contracts in one calendar year add up to $20,000 or more, the bond is 6% of their total. The Division of Revenue may provide for cash bonds instead.

Services, cleaning and lawn care: 0.3983%

A Delaware service business that 30 Del. C. §2301 doesn’t specifically license and tax under another heading pays the $75 general service license fee plus 0.3983% of its aggregate gross receipts, after the same deduction of $100,000 a month, or $300,000 a quarter for a quarterly filer. The Division’s Tax Tips for Occupations / General Service list janitorial, housekeeping, cleaners, carpet and rug cleaners, lawn care, landscaping and tree services among the service businesses that need a license and pay that rate.

Ask the Division of Revenue whether a Delaware landscaping job counts as contracting.

Your invoice: nothing to add for tax

There’s no Delaware sales tax to charge your customer or show on your invoice. The gross receipts tax is your own tax, levied on you as the seller rather than on the consumer, and it’s charged on gross revenue: Delaware allows no deduction for the cost of goods sold, materials, labor, delivery or other expenses. For a contractor, payments to licensed subcontractors, as above, aren’t part of gross receipts in the first place.