Delaware: Basic Business Taxes 2012
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.
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.
Targeted Areas Tax Incentives:
Targeted industries (identified above) investing in targeted areas for economic development receive additional corporate income tax credits and gross receipts reductions. Commercial firms investing in targeted areas receive both corporate income tax credits and gross receipts tax deductions.
Retention and Expansion Tax Credits:
Corporate income tax credits and gross receipts tax reductions are available for those qualifying manufacturers and wholesalers expanding their asset base without expanding their employment. Such companies investing a minimum of $1 million or 15 percent of the unadjusted basis in the facility are eligible to receive 75 percent of blue-collar tax credits. Wages cannot fall below 85 percent of the total wages for the period 12 months prior to the opening of a new facility. The maximum annual credit cannot exceed $500,000. Gross receipts tax reductions are limited to a maximum total credit of $500,000 over the 10-year life.
Green Industries Tax Credits:
Waste reductions - Manufacturers who reduce their chemical waste reported under the Toxics Release Inventory by 20 percent or their other waste by 50 percent are granted a $400 corporate income tax credit for each 10 percent reduction. Credits will be provided over a five-year period.
Eligible firms include: (a) manufacturers whose production inputs are comprised of at least 25 percent recycled materials; (b) firms that engage in the processing of materials removed from Delaware's solid waste stream for resale as input to manufacturers; and (c) firms that collect and distribute recycled materials, and/or materials removed from Delaware's solid waste stream for the purpose of recycling. In addition, eligible firms must meet the investment and employment criteria listed under targeted industry tax incentives.
Qualifying firms receive a $400 corporate income tax credit, in addition to credits offered under the targeted industry tax incentives, per employee and per $100,000 investment. These firms also qualify for the 10-year gross receipts tax reductions.
Investment Tax Incentive:
A deduction from corporate gross income in determining the corporate income tax is available for the amount of investment by a business in an approved neighborhood assistance program. The tax credit is 50 percent of the amount invested by a business firm in a program, and may not exceed $100,000 per business.
There is no property tax on business inventories.
Goods in Transit:
Goods sold out of state by a wholesaler with no Delaware outlet are exempt from the tax on gross receipts.
Industrial Machinery and Equipment:
Industrial machinery and equipment are not taxed.
Research and Development Credit:
Delaware research and development credits provide for up to $5 million in Delaware research and development tax credits to all Delaware taxpayers for qualified research and development expenses in a taxable year. The credit is equal to (a) 10 percent of the excess of the taxpayer's total Delaware qualified research and development over its base amount, or (b) 50 percent of Delaware's apportioned share of the taxpayer's federal research and development tax credits, with modifications. In no year may the Delaware research and development tax credits exceed 50 percent of the taxpayer's qualified tax liability. Unused credits may be carried forward.
Delaware State Contact:
Alan B. Levin
Delaware Economic Development Office
99 Kings Highway
Dover, DE 19901
Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.
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