Delaware: Basic Business Taxes 2011
Delaware's economic development, finance, and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include license and use taxes, property taxes, and corporate income tax.
Area Development Research Desk (March 2011)
Corporate income tax:
An 8.7 percent direct tax is imposed on net income derived from business activities and property located in the state.
License and Use Taxes:
The state imposes no sales tax. Instead, a business license tax and a use tax on personal property leases are levied.
Cost to the business is a $75 license fee and a tax of 0.144 percent on the gross receipts for all goods manufactured in Delaware. In computing monthly receipts, the first $1 million is not subject to tax.
A wholesaler's license fee is $75 per year, plus a tax of 0.307 percent on the gross receipts of all goods sold within Delaware. In computing the monthly receipts, the first $50,000 is not subject to taxation.
Retailers must pay a $75 annual fee, plus an additional 0.576 percent tax on the gross receipts in excess of $80,000 per month.
Other license taxes specifically apply to restaurants and food processors.
A lease/use tax is 1.536 percent annually on equipment rentals, including automobiles (lessee rate remains at 1.92 percent), payable by the lessee. Property rental tax of 0.384 percent on gross rentals of commercial rental property must be paid by the lesser in addition to the $75 annual fee.
Real estate is subject to county property taxes, school district property taxes, and, if located in an incorporated area, municipal property taxes. The state does not levy a tax on real property. Effective property tax rates per $100 market value range from $0.7799 to $1.6034 for New Castle County; $0.8133 to $1.4293 for Kent County; and $0.3827 to $0.9934 for Sussex County.
New Economy Jobs Program:
Effective July 1, 2007, any employer who adds at least 50 new jobs to the State of Delaware, each of which must have annual wages or salaries of at least $100,000 excluding benefits will qualify for a 25-40 percent of the withholding paid on behalf of qualified employees during the taxable year will be rebated. To ensure that the jobs are, in fact, "new" to Delaware, 90 percent of the eligible employees must not have been required to file a Delaware personal income tax return in the prior year. The minimum salary requirement is indexed for inflation.
In general, 25-40 percent of the withholding paid on behalf of qualified employees during the taxable year will be rebated. Higher refund amounts will be granted for qualifying employees with jobs within targeted growth zones, incorporated municipalities and/or former Brownfields. Qualifying firms would be eligible for credits over a 10-year period. Each year, however, will require a separate application and would be evaluated independently. The withholding rebate will take the form of a refundable credit against the employer's taxes and the company would be eligible to receive the credits for ten years.
Targeted Industry Tax Incentives:
Special tax incentives are available for targeted industries to locate or expand their existing operations within the state. These industries include manufacturers, wholesalers, computer processors, engineering firms, consumer credit reporting services, laboratories, computer software wholesalers, telecommunications services, aviation, and support facilities.
Corporate income tax credits are $400 ($650 in a targeted area engaged in a qualified activity) for each $100,000 investment and $400 ($650 in a targeted area engaged in a qualified activity) for each new qualified employee for whom at least $40,000 in new investment has been made. In any single year, corporate income tax credits cannot exceed 50 percent of a firm's pre-credit tax liability. Unused credits can be carried forward throughout the 10-year life of the credits. There is a 15-year life within a targeted area for gross receipts tax reductions.
Firms that meet the employment and investment thresholds are also eligible for reductions in their gross receipts tax liability. Gross receipts taxes are reduced on a declining scale over a 10-year period, ranging from a 90 percent reduction in the first year to a 5 percent reduction in the tenth and final year.