Delaware is known for being a business-friendly state. Its low taxes and minimum filing requirements make it a popular location for companies to operate. In fact, the non-profit Tax Foundation ranks Delaware as the 16th most business-friendly state in the United States. However, there’s more to running a business than just paying low taxes. In addition to income taxes, the state also imposes gross receipts taxes on businesses that sell goods or services in Delaware. This tax differs from sales taxes because it is levied on the company rather than consumers. Delaware Gross Receipts Taxes are typically calculated on a monthly basis and may be based on specific industries. Rates range from 0.0945% to 0.7468%.
In addition to the gross receipts tax, the state imposes a franchise tax on most corporations that do business in the state. This is a percentage of the company’s total gross receipts. In addition, the state has an unemployment tax and a local income tax that is imposed by city or county. Businesses that are structured as pass-through entities (sole proprietorships, partnerships, and LLCs) must pay taxes through their personal income tax returns.
What is Gross Receipts Tax?
The state of Delaware has several taxes that startups may need to file and pay. These include income tax, gross receipts tax, franchise tax, and payroll tax. Each of these taxes is unique and has its own filing requirements and deadlines. Failure to file and pay these taxes can result in severe penalties for the business owner.
Gross receipts tax is a state sales tax levied on the seller of goods and services. Unlike sales taxes, gross receipts taxes are not passed on to consumers. The rate varies by industry and is determined by the State Division of Revenue. The State also requires businesses to collect and remit lodging taxes levied on hotels, motels, and tourist homes.
To learn more about these state taxes, visit the State Division of Revenue website. The site also provides a number of helpful resources and tools to help businesses calculate their tax liability. Before using the Portal, please review the Terms of Use (TOU) and DOR Data Policy. The TOU establishes a binding agreement between User and DOR that governs your use of this service.
Delaware Gross Receipts Tax Eligibility
One important factor is whether your business will be liable for gross receipts taxes. This tax on total sales cannot be reduced by operating expenses or inventory. It is typically due monthly or quarterly and must be paid even if no sales were made in that period.
If you are unsure about how this tax applies to your company, please contact the Division of Revenue or your tax advisor for assistance. You can also find additional information on the Division of Revenue website. When filling out your delaware gross receipts tax form lq2 9501, consider using a tax software to verify your signature.