Introduction
Delaware is one of the few states that does not have a state sales tax, making it attractive for businesses. However, instead of sales tax, Delaware requires businesses to pay a Gross Receipts Tax (GRT).
The Delaware Gross Receipts Tax applies to businesses selling goods and services in the state. It is a tax on total revenue, not just profits, and businesses cannot deduct expenses when calculating their taxable amount.
This guide explains who must pay Delaware Gross Receipts Tax, tax rates, how to file, and how to avoid penalties.
What Is Delaware Gross Receipts Tax?
- A tax on total business revenue (before expenses).
- Applies to most businesses operating in Delaware.
- Rates range from 0.0945% to 0.7468%, depending on the industry.
- Due monthly or quarterly, depending on business revenue.
Who Is Affected?
- Retailers, wholesalers, manufacturers, service providers, and restaurants operating in Delaware.
- LLCs, corporations, sole proprietors, and partnerships.
- Businesses with no physical location in Delaware but selling to Delaware customers may still have filing requirements.
Delaware Gross Receipts Tax Rates
| Business Type | Gross Receipts Tax Rate |
|---|---|
| Retailers | 0.7468% |
| Wholesalers | 0.0945% |
| Manufacturers | 0.126% |
| Service Businesses | 0.307% |
| Food and Restaurants | 0.647% |
| Contractors | 0.647% |
Example Calculation
- A retail business with $500,000 in revenue pays:
$500,000 × 0.7468% = $3,734 in Gross Receipts Tax. - A consulting firm with $200,000 in revenue pays:
$200,000 × 0.307% = $614 in Gross Receipts Tax.
How to Register for Delaware Gross Receipts Tax
Step 1: Visit the Delaware Division of Revenue website.
Step 2: Create an account and register for a Delaware Business License.
Step 3: Select the appropriate business category to determine the correct tax rate.
Step 4: Receive a Gross Receipts Tax account number to file returns.
How to Pay Delaware Gross Receipts Tax
Step 1: Determine Your Filing Frequency
- If your business earns less than $100,000 per month, file quarterly.
- If your business earns $100,000 or more per month, file monthly.
Step 2: Calculate Gross Receipts
- Add up total revenue for the tax period (before expenses).
Step 3: File and Pay Online
- Log into the Delaware Division of Revenue portal.
- Report total revenue and tax due based on the applicable rate.
- Pay using credit card, ACH transfer, or check.
Step 4: Keep Records for Three Years
- Maintain receipts, invoices, and tax filings for audit purposes.
Delaware Gross Receipts Tax Filing Deadlines
| Filing Frequency | Due Date |
|---|---|
| Monthly Filers | 20th of each month |
| Quarterly Filers | 20th of the month after the quarter ends |
Example:
- January–March Quarter → Due April 20.
- April–June Quarter → Due July 20.
What Happens If You Don’t Pay Delaware Gross Receipts Tax?
| Late Payment | Penalty |
|---|---|
| Missed Filing Deadline | $15 minimum penalty |
| Late Tax Payment | Up to 10% of tax due |
| Underpayment of Tax | Interest of 1% per month |
Failure to pay Gross Receipts Tax can lead to business license suspension or legal action by the state.
Can Businesses Reduce Delaware Gross Receipts Tax?
Unlike sales tax, Gross Receipts Tax does not allow deductions for operating expenses, payroll, or cost of goods sold. However, businesses can:
- Track and minimize taxable revenue by structuring contracts strategically.
- Use exemptions if revenue comes from tax-exempt transactions.
- Consult a CPA to identify legal tax-saving strategies.
IRS Compliance & Federal Tax Filing for Delaware Businesses
| Business Type | Federal Tax Form | State Tax Requirement |
|---|---|---|
| LLC (Single-Member) | Schedule C (Form 1040) | Franchise tax + gross receipts tax (if applicable) |
| LLC (Multi-Member) | Form 1065 & K-1s | Franchise tax + gross receipts tax (if applicable) |
| S-Corp | Form 1120S | Franchise tax + gross receipts tax (if applicable) |
| C-Corp | Form 1120 | Franchise tax + gross receipts tax + corporate income tax (if applicable) |
Common Gross Receipts Tax Mistakes to Avoid
- Not Registering for Gross Receipts Tax
- All businesses selling goods or services in Delaware must register.
- Filing Late or Missing Payments
- The state imposes penalties for missed deadlines.
- Underreporting Gross Revenue
- Delaware audits businesses that underreport taxable revenue.
- Assuming It’s the Same as Sales Tax
- Gross Receipts Tax applies to total revenue, not just taxable sales.
How a CPA Can Help with Delaware Gross Receipts Tax
- Ensure accurate tax reporting to avoid penalties.
- File timely and correct returns to maintain compliance.
- Analyze tax-saving strategies within state regulations.
Conclusion
Delaware businesses must pay Gross Receipts Tax based on total revenue, with rates ranging from 0.0945% to 0.7468%. Timely registration, filing, and payment help businesses avoid penalties and legal issues.
For expert tax compliance guidance, schedule a meeting with our CPA Anshul Goyal by clicking at https://calendly.com/anshulcpa/ now.
Frequently Asked Questions (FAQs)
1. Who must pay Delaware Gross Receipts Tax?
Any business selling goods or services in Delaware, including LLCs, corporations, and sole proprietors.
2. How is Delaware Gross Receipts Tax calculated?
It is based on total gross revenue before expenses at rates ranging from 0.0945% to 0.7468%, depending on business type.
3. When is Gross Receipts Tax due in Delaware?
- Monthly filers: 20th of each month.
- Quarterly filers: April 20, July 20, October 20, and January 20.
4. Can Delaware businesses avoid Gross Receipts Tax?
No, but they can structure transactions to minimize taxable revenue and use exemptions when applicable.
5. What happens if I don’t pay my Delaware Gross Receipts Tax?
- $15 penalty + up to 10% of unpaid tax.
- Possible suspension of business license.