Frequently asked questions

Any person or entity conducting a trade or business in the State of Delaware is required to obtain a Delaware business license from the Delaware Division of Revenue. This includes entities located in Delaware who conduct their business outside the state. A business license must be obtained at the time business commences in Delaware. If you are unsure of whether or not you have substantial presence in Delaware to be subject to licensing and taxation, complete and submit our Nexus Questionnaire and the Delaware Division of Revenue will provide guidance: Nexus Questionnaire

No, depending on your business and where you live you may also be required to register with other local, state and federal entities.

In addition to registering with the Delaware Division of Revenue and obtaining a Delaware business license:

• All businesses (except sole proprietors with no employees) must additionally register with the federal government and obtain an Employee Identification Number (EIN). Businesses can comply with federal requirements by contacting the Employer ID Numbers section of the IRS website.
• Depending on where you are located in Delaware, your city and/or county may also require a city and/or county business license, in addition to a State of Delaware business license. Please contact your local government offices for more information about local requirements.
• Businesses with employees must additionally register with the Delaware Division of Unemployment Insurance and the Delaware Office of Workers Compensation
• Corporations, Partnerships, Limited Liability Companies, etc who conduct business in Delaware must additionally register with the Delaware Division of Corporations.
• Certain professions must additionally register and obtain a license with the Delaware Division of Professional Regulations. Please visit the Division of Professional Regulations for a list of applicable professions.

Complete your registration right here on the Delaware One Stop using the One Stop Business Licensing and Registration Service. This service will allow you to register simultaneously with other state and federal entities.

Most businesses receive their Delaware business license within a month of registering with the Delaware Division of Revenue.

Licenses obtained using the One Stop Business Licensing and Registration Service and/or Revenue's Online Renewal may print a temporary license at the end of the registration or renewal process and are valid for up to 60 days. Permanent licenses are generally sent within 10 working days.

There are two ways to renew a Delaware Business License:

• RECOMMENDED: Renew you business license right here on this site using Delaware One Stop.
• Complete and mail a business license renewal with the appropriate license fee before business operations begin. If you do not receive your business license renewal in the mail, you can obtain one by contacting the Delaware Division of Revenue's Public Service Office at (302) 577-8200.

The license fees for the particular type of business activity can be found by calling one of our Public Service Offices at (302) 577-8200 or by completing a license application on One Stop.

Most licenses are proratable for the first year of activity. You may contact one of the Delaware Division of Revenue's Public Service Offices for your specific license fee amount due.

Generally, most Delaware business licenses are good for one year and expire each December 31st. Three-year business licenses expire on December 31st of the third year.

After the first year of being licensed in Delaware, a business may opt, but is not required, to obtain a three-year Delaware business license, decreasing paperwork and mitigating the opportunity for license-renewal oversight.

The cost of a three-year Delaware license is not discounted; businesses will pay three times their regular yearly license fee for a three-year license.

Businesses will receive one license document for all three years.

You can also renew your Delaware business license online using our Online Renewal.

One of the benefits of online business registration and renewal is that Temporary Delaware Business Licenses can be obtained and printed right from your desktop computer.

If you are obtaining a Delaware business license for the first time, please access Delaware's One Stop Business Licensing and Registration Service. This service will allow you to register and print a temporary license.

If you already have a Delaware business license and need to renew, you may complete an Online Renewal right here on the Delaware One Stop. The Department of Revenue's online renewal will allow you to print a temporary license.

You may also obtain a temporary license in person at one of our Public Service Offices.

Permanent licenses will be subsequently mailed.

There are no temporary licenses available for those who mail their business license registration or renewal.

Yes, a State of Delaware business license is needed in addition to any professional licenses. Please visit the Division of Professional Regulations to see which professions require additional licensure.

All Delaware business licenses expire on December 31st of each year or December 31st of the third year for 3-year licenses. Business Licenses for the forthcoming year are required to be renewed no later than December 31st of the proceeding year.

There are two ways to renew a Delaware Business License:

• Renew your license online using Revenue's Online Renewal.
• Complete and mail a business license renewal with the appropriate license fee before business operations begin. If you do not receive your business license renewal in the mail, you can obtain one by contacting the Delaware Division of Revenue Public Service Office.

The Division of Revenue will send renewal coupons each year for one year licenses and every three years for those licensees who have opted to renew for three years. However, if you fail to receive a renewal coupon by December 1st, please contact one of our Public Service Offices for assistance in renewing your license prior to the December 31st expiration.

You may also renew online using our Online License Renewal.

You will want to consider what type of entity your business will be. For example, will you register your business as a sole proprietorship, a partnership, a corporation or a Limited Liability Company?

Please note that the Division of Revenue cannot assist you with this choice. If you are unsure how you should register, you may need to contact an accountant, a lawyer or Delaware's Small Business Administration for assistance. Also, please visit Step 1: Determine Your Business Type on the Delaware Division of Revenue website.

A business license may not be transferred from one owner to another. New owners of a business must apply for their own business license by completing a new license application right here on One Stop. It is the responsibility of the owner(s) to advise the Business License Department of ownership changes or legal entity changes.

Any change of legal entity (i.e., sole proprietorship to corporation, etc.) requires a new business license. It is the responsibility of the business owner to advise the Business License Department that the former legal entity is "Out of Business".

Delaware does not impose a state sales tax; however, Delaware does impose a tax on the gross receipts of most businesses. Gross receipts are the total amount received from the sale of goods or services sold by the business.

Gross receipts tax rates range from 0.1037% to 2.0736%, depending on your business activity. To determine the gross receipts tax rate for a specific business activity in the State of Delaware, please visit Tax Tips for each business category.

If you have employees you are required to withhold State of Delaware "withholding tax" for each employee and submit this to the Delaware Division of Revenue. You can register as a withholding agent right here on One Stop.

Please access our Withholding Guide for more information.

Depending on your entity type, you may have an income tax return obligation as well. Sole Proprietors report business income on their individual tax returns. Partnerships report income on a partnership return. Corporations report income on a corporation return.

For more information on business licenses, please contact the Delaware Division of Revenue's Business Master File at (302) 577-8778. Our customer service representatives will provide you with detailed information and answers to your specific tax questions.

To open a withholding account you can:

1. Register online using the One Stop Business Licensing and Registration system

If you would like to close your withholding tax account, you must first file a final year-end Withholding Tax Reconciliation form, and then complete the process by filing a Request for Change form indicating your account as closed. If you should have any further questions, please contact our withholding tax unit at (302) 577-8779.

There is no cost to open a State of Delaware withholding account.

After a withholding application is filed with the Division of Revenue (using One Stop, you should receive your personalized withholding tax forms within a few weeks.

NOTE: In order to reduce printing and mailing costs, the Delaware Division of Revenue will no longer mail paper booklets to Withholding taxpayers who file their Delaware State Withholding tax electronically. File or pay Withholding Tax online using ACH Debit or Electronic Funds Transfer.

No. Each entity liable for paying State of Delaware withholding tax is required to file its own individual withholding tax return, and must file using its own Federal Employer Identification Number. Please do not make payments under one identification number and then issue Forms W-2/1099 or file Form W-3 for multiple identification numbers.

Please visit Delaware's Employer's Guide for withholding regulations and Employer's duties.

The annual form, accompanied by copies of Forms W-2, is due on or before the last day of January of the following year or on or before the 30th day from the date on which the last payment of wages was made.

Please check the Withholding Due Dates calendar.

Section 1151 of Title 30 of the Delaware Code Annotated requires State withholding if the wages or other remuneration is subject to Federal withholding. The easy rule is "If you withhold Federal tax, then you must withhold State tax."

The recommended withholding for payments of deferred compensation is 5%. If your company makes deferred compensation payments to Delaware residents, you should be registered as a withholding agent. A Combined Registration Application must be completed and mailed to the Division of Revenue, and appropriate withholding coupons will be mailed to you.

Delaware accepts Federal Form W-4 for an employee to claim personal exemptions.

Delaware does not have reciprocity with any state. Withholding is only required in the "duty assigned state", e.g. your state. Delaware provides a credit against the state liability for taxes paid by its residents to other states. If your state has a lower marginal tax rate than Delaware, your employee(s) may need to have additional tax withheld to meet his/her Delaware liability.

All withholding agents having no prior record of withholding will file on a monthly basis until the next "lookback period".

Withholding tax returns filed late are subject to a penalty of 5% per month, plus interest of 0.5% per month from the original due date until paid. In addition to the above penalties and interest, an additional penalty of 1% per month (not to exceed 25%) is imposed for failure to pay (in whole or in part) the tax liability shown to be due on a timely filed return. (30 Del.C., Sec. 533 & 534)

An 'employer' is an individual or employing unit, which employs one or more individuals for some portion of the day. Besides the multitude of regular employers, such as manufacturers, retailers, etc., it also includes special types of employment that are sometimes overlooked by employers. These types and liability requirements are:

• Agricultural Employer - If during any calendar quarter of the current or preceding year paid cash remuneration of $20,000 or more to individuals performing agricultural labor; or employed at any time 10 or more individuals for a portion of a day in any 20 weeks in the current or preceding calendar year.
• Domestic employer - If during any calendar quarter of the current or preceding calendar year there is a total payroll of $1,000 or more to an individual(s) performing domestic service.
• Farm Crew Leader - If crew leader holds a valid certificate of registration under the Farm Labor Contractor Registration Act of 1963; or the crew leader provides mechanized equipment which substantially all the individuals operate or maintain, provided the individuals are not employees of another employer.
• Employment is defined as any service performed for remuneration (payment) whether full-time or part-time. This also includes salaries paid to corporate officers who are employees of the corporation (including close and subchapter S corporations).

One of the most common employment exclusions is an "independent contractor." The criteria for independent contractor status are:

• The individual who performs the work is free from control and direction over its performance both in fact and under the contract;
• The individual customarily is engaged in an independent business or occupation of the same nature as that involved in the work; and ,
• The work is: (a) outside the usual course of business of the person for whom the work is performed, or (b) performed outside any place of business of the person for whom the work is performed.

All three of the above must be met to qualify as an independent contractor.

When independent contractor status is in question, employers should determine if the person has a Federal Identification Number. Independent contractors are required to file business tax returns and have a Federal Identification Number.

The following categories are specific exemptions from covered employment under the Delaware Unemployment Insurance Law provided certain criteria are met:

• Barbers and Beauticians
• Taxicab Drivers
• Some Maritime Employment
• Church Employees
• Clergy
• Certain Governmental Employees
• Railroad Employment
• Insurance Sales for commission only
• Real Estate Sales for commission only
• Direct Sellers
• Foreign Employment
• Other Unemployment Insurance Programs
• Work-Relief and Work-Training
• Family Members in proprietorships
• Hospital Patients
• Students Nurse and Interns

When an individual files a claim for benefits, two determinations are made. The first is a monetary determination of the amount of benefits the claimant may receive based on his/her wages paid in a specified time period (base period). The second is a nonmonetary determination that considers the claimant's eligibility for benefits and reason for separation from employment. Both determinations affect the charging of benefits against an employer's account.

The gross wages paid to a claimant by all employers in the base period are used in determining a UI claimant's weekly benefit amount (WBA). An employer's percentage of charging for UI benefits is based on the following elements:

1. Base Period Gross Wages Paid by the Employer - The base period is defined in Delaware's Unemployment Insurance Law as the first four of the last five completed calendar quarters prior to the filing of the claim, and is used to establish eligibility for benefits.
2. Percent of Liability - If a claimant has only one employer in the base period, that employer's account would be charged for 100% of any benefits paid and chargeable. If the claimant had two or more employers during the base period, each employer's liability would be determined by the total gross wages paid by all base period employers.

The percentage, times the total amount of wages ultimately received by the claimant while employed, equals your benefit charges. You are notified of the exact amount of charges at the end of each calendar quarter.

Part-time/full-time employment - If a claimant loses his/her full-time job, but continues to work his/her part-time job, partial benefits received by the claimant will not be charged to the part-time employer's account as long as the claimant remains actively employed. Employers receiving a "Request for Separation Information" Form UC-119 for claimants actively employed on a part-time basis should clearly indicate the claimant's continued part-time status.

Delaware employers are required to report the amount of total 'gross wages' paid each quarter on the 'Forms UC-8 and Form UC-8A' Gross wages include all remuneration for personal services, including commissions and bonuses and the cash value of all compensation in any medium other than cash. Employers must also calculate and report the amount of total 'taxable wages'. For Delaware unemployment insurance purposes, 'taxable wages' are defined as the first $16,500 earned by each employee in a calendar year.

You are required to report your payroll and pay unemployment insurance taxes four times a year. Forms UC-8 and UC-8A will be sent to you at the end of each quarter. If you do not receive a blank form, call (302)761-8484. You have one month following each quarter to file reports and pay the tax. You must file on time in order to:

• Receive maximum credit for your state payments against Federal Unemployment Tax (FUTA) payments;
• Receive credit for your payroll in 'experience rating'; and,
• Avoid interest charges at a rate of 1.5% per month for late payments and a penalty assessment of $17.25 for each late report.

Accuracy when reporting the taxable wages is extremely important. It affects the amount of taxes owed and your tax rate. In Delaware, an employer's 'benefit ratio' is determined by dividing the amount of benefits charged against the employer's account by the amount of taxable wages.

Delaware employers are required to file wages and tax returns each quarter. Each return covers the activity during the calendar quarter. The return is due by the end of the month following the end of the quarter. Payment is due with the return.

Delaware employers are assigned one of four different types of tax rates: the new employer rate, the delinquent rate, the earned rate and the transfer of experience rate.

New Employer Rate

'New Employer' means an employing unit that does not qualify for an earned rate. The tax rate for a new employer will be the average of the rates for all employers in the State during the last 12 months. Construction companies will be assigned a tax rate that is the average of the rates for all construction employers in Delaware during the year for which the rate is assigned.

Delinquent Rate

• If any liable employer fails to file its quarterly tax and wage reports due, the employer is assigned the Penalty rate if the delinquency is from the second quarter of the previous year and prior.
• Please note- A delinquent rate reduction can only be made effective in the year and quarter the delinquency is resolved in.

Earned Rate

The earned rate is calculated by using the three most recent experience years; the experience year starts from July 1 to June 30. The basic rate is determined by finding the ratio between the benefits charged to your account and the taxable wages that you reported in three experienced years prior to the computation date ( benefits charged/taxable wages = benefit ratio). The ratio is then used in conjunction with the State Experience Factor Tables in Title 19 § 3350 (5) to determine the basic tax assessment rate for the current calendar year.

In addition, the supplemental assessment rate of .02% which is based on the balance in the UI Trust Fund, will be added to determine the final tax assessment rate for the current calendar year.

Transfer of Experience Rate

Frequently, an employer will acquire a business from a previous owner or the employer will reorganize a business. All Employer 'Merit Rate Notices' are issued in January for tax year January 1 through December 31. The effect of various transactions on the employer's contribution rate are summarized below:

• Reorganizations - This is when a new employing unit is formed. The assets, employees, and business or trade are the same under the new organization as they were under the old. The new organization retains the contribution rate and has the same liabilities as before the changeover.
• Successorship - If an existing employing unit acquires the assets, business, organization, or trade of another employing unit, the acquiring employing unit is known as a successor employer.
• An employing unit transferring by sale or otherwise, all or part of the organization, trade, business, or assets to another employing unit or employing units is known as a predecessor employer.
• Commencing January 1 after the transfer, the successor's rate of contributions for each calendar year is based on its experience with payrolls and benefit charges combined with the experience with payrolls and benefit charges of the predecessor. The successor is liable for all contributions, interest and penalties owed by the predecessor employer at the time of the transfer.
• A person who is not an employing unit at the time of acquisition of a business, trade, or organization whether in full or in part will be assigned a new account rate.
• A person who is not an employing unit at the time of transfer of a business, trade, or organization and is substantially the same ownership, will be given the experience rate of the previous business, trade, or organization. For example, in a partnership when one partner buys out another partner and the remaining partner retains the majority interest in the previous business.

Note: Pursuant to legislative change regarding the transfer of experience rate, the following will be effective January 1, 2006:

• If an employer transfers its trade or business, or a portion thereof, to another employer and, at the time of the transfer, there is any common ownership, management or control of the two employers, then the unemployment experience attributable to the transferred trade or business shall be transferred to the employer to whom such business is so transferred. The rates of both employers shall be recalculated and made effective immediately upon the date of the transfer of trade or business.
• Whenever a person who is not an employer under Delaware's Unemployment Insurance Law at the time the trade or business of an employer is acquired, the unemployment experience of the acquired business shall not be transferred to such person if the division finds that such person acquired the business solely or primarily for the purpose of obtaining a lower rate of contributions. Instead, such person shall be assigned the applicable new employer rate under §3348 of Delaware's Unemployment Insurance Law. In determining whether the business was acquired solely or primarily for the purpose of obtaining a lower rate of contributions, the division shall use objective factors which may include the cost of acquiring the business, whether the person continued the business enterprise of the acquired business, how long such business enterprise was continued, or whether new employees were hired for performance of duties unrelated to the business activity conducted prior to acquisition.

For additional information regarding employer tax rates, call the Unemployment Insurance Employer Contributions Unit at (302) 761-8484.

Services performed within this state, or both within and without this state are to be reported to Delaware if:

• The service is localized in Delaware; or,
• When there is employment in more than one state and some service is performed in the state where the base of operations is located, then the earnings are to be reported to that state where the individual's base of operations is located. If no services are performed in the state with the base of operations and some services are performed in the state where direction or control is received, then the earnings are to be reported to the state where the individual's direction or control is received. If there are no services performed in the state where the base of operations is located or where direction or control is received, then the individual's state of residence is to be used.

The objective is for all services performed by an individual for a single employer to be covered under one state law, wherever the services are performed. Employers may elect to cover an employee through a Reciprocal Coverage Agreement between states. For additional information, contact the Unemployment Insurance Employer Contributions Unit (302) 761-8484.

Nonprofit organizations operated exclusively for religious, charitable, scientific, literary or educational purposes (those exempt under Section 501(c)(3) of the Internal Revenue Code) and governmental entities may elect to reimburse the Division for benefits paid to their former employees on a dollar for dollar basis in lieu of tax assessments. The State of Delaware is itself a reimbursable employer for its merit system employees.

Questions concerning not-for-profit status and/or requirements may be directed to the Unemployment Insurance Employer Contributions Unit at (302) 761-8484.

Taxable wages include total remuneration paid up to the taxable wage base limit of $16,500 before any deductions are made.

The following wages are taxable:

1. Meal and lodging provided by an employer to an employee, unless the meals and lodging are provided on the employer's premises for the employer's convenience.
2. Tips which are reported pursuant to Section 6053 of the Internal Revenue Code.
3. Payments to workers for: (a) dismissal; (b) vacations; (c) sick leave; and (d) Bonuses

The following payments are not to be reported:

1. Employer payments, without deduction from the employee's wages, for Retirement, Sickness or Accident disability insurance or medical insurance.
2. Payment by the employer, without deduction, of the employee's Social Security Taxes
3. Vacation pay paid incident to or during a period of unemployment
4. Attendance bonus paid during or incident to any period of unemployment.
5. Wages of a sole proprietor, his/her spouse and children of the sole proprietor under 18 years old, and owner's parents.
6. Wages of partners.
7. Wages earned by an individual who is enrolled in a full-time educational program that combines academic instruction with work experience, which is an integral part of the educational program.

If you have questions concerning the inclusions and exclusions listed, please call the Unemployment Insurance Employer Contributions unit at (302) 761-8484.

We only require 1099 information for contractors working in Delaware.

Yes, a physical address is required.

The address of the business location in Delaware where the work will be performed.

1. If you are a single entity, an organizational chart of the single entity is required.
2. If you are owned by another entity, an organizational chart of the parent company is required.

No, the full social security number is required.

1. For identification purposes.
2. To determine if an employer qualifies for the combining of accounts or transfer of experience.

If you choose as a way to reduce the overall cost of your policy with your insurer you can exclude up to a maximum number of individuals from the business's workers compensation coverage. For an LLC entity type maximum 4 exclusions and a corporation maximum 8 exclusions are allowed.

For legal entities (corporations, LLCs, LPs, etc.), check name availability online through the Division of Corporations name reservation service. The name you choose must be unique from corporations or other entities reserved or registered under the laws of Delaware.

Please note, business names for sole proprietors are different than ones for legal entities. Sole proprietors must use their personal name or register a trade name (also called a Doing Business As Name).

Sole proprietors, register your business name with the Prothonotary's Office for each county in which you plan to transact business.

Please visit the Division of Corporations' website for further information.