Delaware, along with Alaska, New Hampshire, Montana, and Oregon, is one of five states with no state sales tax. Therefore, if you are selling goods or products over the Internet to customers located in Delaware, sales tax for your Delaware customers should be a non-issue.
However, the federal government is now considering legislation that would affect large Internet retailers and how online sales taxes are collected in all states. The proposed federal law (called the Marketplace Fairness Act of 2013) would allow states to require sellers not physically located in their state to collect taxes on online and catalog sales made to people in their state. Sellers that make $1 million or less in annual sales and have no physical presence in the state would be exempt from this requirement. States would have to meet certain criteria to simplify their sales tax laws and make sales tax collection easier before they could require sellers to collect the tax. Internet sellers in Delaware with sales of over $1 million would have to start collecting sales tax on sales made to customers in other states under the new law.
Below is an article on the current rules on Internet sales tax in Delaware. A new federal law would affect all state Internet sales tax laws so be sure to check for updates in this area.
Delaware’s Gross Receipts Tax
Do keep in mind that although there is no sales tax in Delaware, the state does have a gross receipts tax, which is briefly discussed on a Delaware Division of Revenue FAQ page; the tax is also codified in Chapter 29 of Title 30 of the Delaware Code. Note, however, that it appears this tax applies only to retailers and other businesses located in, and therefore required to be registered in, Delaware. Moreover, a retailer can deduct the first $100,000 in aggregate gross receipts each month prior to having to pay the tax. In short, if you are an out-of-state Internet seller, you are not likely to need to concern yourself with Delaware’s gross receipts tax.
For States That Do Have Sales Tax
The current default rule throughout the United States is that you must collect sales tax on Internet sales to customers in those states where your business has a “physical presence”—assuming, of course, that the state involved has a sales tax. The physical-presence rule is based on a 1992 United States Supreme Court decision, Quill Corp. v. North Dakota, that addressed the obligations of mail-order businesses to collect sales tax on out-of-state sales; the decision has been extended to include online retailers. Generally speaking, a physical presence means such things as:
- having a warehouse in the state
- having a store in the state
- having an office in the state, or
- having a sales representative in the state.
As you might expect, the corollary to the physical-presence rule is that, if you do not have a physical presence in the state, you generally are not required to collect sales tax for an Internet-based sale to someone in that state.
However, because Delaware has no state sales tax, these rules are not relevant to sales you make to Delaware customers.
If you find yourself wondering if anything has changed regarding Delaware sales tax, you can always check the Delaware Division of Revenue’s website. For more general information on taxes on Internet sales, see Nolo's article Sales Tax on the Internet. And, for information on the rules about collecting sales tax for Internet sales in any other state, see Nolo’s article, 50-State Guide to Internet Sales Tax Laws.