If you run a business in Delaware, you operate in one of the few states that do not impose a general sales and use tax. This distinction simplifies many transactions but also introduces confusion, especially when vendors outside the state request resale certificates.
Delaware does not have a general resale certificate because it does not have a sales tax. Instead, certain businesses are required to pay a Gross Receipts Tax (GRT).
Understanding how Delaware handles exemptions, what to do when a supplier asks for a resale certificate, and how the Gross Receipts Tax (GRT) works is key to staying compliant and avoiding unnecessary friction with suppliers.
Understanding Resale Certificates in Delaware
What Does a Resale Certificate Mean for Delaware Businesses?
For businesses based in Delaware, the term “resale certificate” only becomes relevant when making purchases from out-of-state vendors that operate in states with a sales tax. These vendors may request documentation to avoid collecting their own state’s sales tax on goods being resold.
In such cases, a Delaware business can provide its state registration documents and Federal Employer Identification Number (FEIN) to prove it is a valid business.
Some vendors may also accept a completed multi-state exemption form, such as the Uniform Sales & Use Tax Certificate – Multijurisdiction, where the Delaware business can indicate that their state does not have a sales tax.
This helps the vendor justify not charging sales tax at the point of sale.
However, this has nothing to do with Delaware’s tax system. Delaware’s Gross Receipts Tax is not a sales tax. It applies to the seller’s total business income, regardless of whether a sale is wholesale or retail. Importantly, sales for resale are not automatically exempt from GRT.
The
Delaware Wholesale Exemption Certificate (Form 373) does allow Delaware sellers to document certain wholesale sales to out-of-state purchasers who pick up goods in Delaware and transport them for resale elsewhere. This form does not function as a resale certificate for buyers. It simply supports the Delaware seller’s claim for a GRT exemption in very specific scenarios.
Why Delaware Businesses Still Need to Understand Resale Exemptions?
- Avoiding Sales Tax on Out-of-State Purchases: Delaware businesses can often avoid paying unnecessary sales tax when buying inventory from vendors in states that impose one. Proper documentation helps secure these exemptions.
- Maintaining Smooth Vendor Relationships: Out-of-state vendors may be unfamiliar with Delaware’s no-sales-tax policy. Clear communication and documentation ensure that you avoid shipping delays or incorrect invoicing.
- Legal Compliance (Interstate & Delaware GRT): You must still navigate use tax liabilities in other states and comply with Delaware’s GRT. For Delaware businesses that sell to out-of-state businesses, understanding tools like Form 373 helps you manage exemptions for specific wholesale sales.
- Streamlining Operations: When your team understands what documents to provide and when, it minimizes back-and-forth with suppliers and reduces administrative overhead.
Resale Certificate vs. Business Registration: The Key Distinction
Because Delaware does not collect sales tax, it does not issue a sales tax permit or resale certificate. That means Delaware businesses do not need a permit for state resale exemption purposes.
Instead, your Delaware business license or other state registration document serves as proof of your business’s legitimacy. You can share this registration with out-of-state vendors to explain why you are not registered for sales tax in Delaware.
Again, this differs from the
Delaware Wholesale Exemption Certificate (Form 373), which applies only to Delaware sellers seeking relief from the Gross Receipts Tax on certain wholesale transactions. It is not used by buyers to claim an exemption on purchases.
How to Handle Resale Exemptions as a Delaware Business
Delaware businesses may not need resale certificates for in-state transactions, but handling purchases across state lines or managing Gross Receipts Tax requires proper documentation and clarity.
For out-of-state purchases, you will use your Delaware business registration or a multi-state exemption form. For specific wholesale transactions to out-of-state buyers, you will use the Delaware Wholesale Exemption Certificate (Form 373) to manage your GRT.
For Purchases from Out-of-State Vendors
Many Delaware businesses buy inventory or materials from suppliers based in states that collect sales tax. In these cases, it’s important to be prepared with the right documents and context.
What Documentation to Provide
To support a tax-exempt purchase from an out-of-state vendor, you should provide the following:
- Delaware Business License: This is the document issued by the Delaware Division of Revenue that proves your business is registered to operate in the state and is in compliance with the state’s tax requirements. This is often more effective than providing documents like your Articles of Incorporation.
- Federal Employer Identification Number (FEIN): Vendors often request this as a way to verify your business’s legitimacy.
- Explanation of Delaware’s tax structure: Clearly state that Delaware does not impose a state or local sales tax, so your business does not have a resale certificate or sales tax permit.
- Vendor-specific documentation: Ask the vendor what they require to waive their own state’s sales tax. Some may accept the Multistate Tax Commission’s Uniform Sales & Use Tax Certificate with a note explaining your Delaware status.
What to Do if an Out-of-State Vendor Insists on a Sales Tax Permit
If the vendor insists on receiving a resale certificate or sales tax permit, you can’t provide:
- Clarify your tax status: Reiterate that Delaware has no sales tax and that your business has no legal obligation to collect it.
- Offer alternatives: Provide your Delaware business license and FEIN. Explain that these documents serve as proof of your business’s legal standing in a state that does not have a general sales tax, which is why you do not possess a sales tax permit. In many cases, this satisfies the vendor’s need for tax documentation.
- Voluntary registration (in rare cases): If you make frequent or high-volume purchases from a particular state, you may choose to register for a sales tax permit in that state. However, be aware that this creates a legal obligation to collect and remit sales tax, file returns, and comply with that state’s tax laws, which can be a significant administrative burden.
- Pay and request a refund: If a purchase is taxed despite your exemption claim, you can often pay the sales tax and apply for a refund from the vendor or directly from the taxing state. However, policies vary by jurisdiction.
For Purchases Within Delaware (Understanding Gross Receipts Tax Exemption)
Delaware does not issue or require a general resale certificate for purchases made within the state. Instead, the focus is on how sellers handle Gross Receipts Tax.
If you are a Delaware seller making a wholesale sale to an out-of-state buyer who picks up the goods in Delaware for resale elsewhere, you may qualify for a GRT exemption, but only if you document it properly.
- Use Form 373 – Delaware Wholesale Exemption Certificate: This form helps you, the seller, verify that goods are being picked up in-state by an out-of-state purchaser and will be transported for resale.
- How it works: Both buyer and seller fill out the form. It includes names, addresses, a description of the goods sold, and a signed statement from the buyer confirming that the purchase is for resale outside of Delaware.
- Retention requirement: You must keep this completed form on file for at least three years in case of a GRT audit or review.
Multi-Jurisdictional Resale Certificates: Tools for Out-of-State Purchases
Even though Delaware does not impose a statewide sales tax, Delaware-based businesses often make purchases from vendors located in states that do.
In these cases, you will use your Delaware business license and an explanation of your state’s tax laws to avoid paying another state’s sales tax unnecessarily.
The Uniform Sales & Use Tax Certificate – Multijurisdiction Form
The
Uniform Sales & Use Tax Certificate – Multijurisdiction Form, issued by the
Multistate Tax Commission (MTC), is one of the most widely accepted resale certificates for interstate commerce.
Delaware businesses can use this form when buying inventory or materials from vendors located in MTC-participating states. Here’s how to properly complete it:
- Business identification: Enter your Federal Employer Identification Number (FEIN) and your Delaware business name and address.
- Reason for exemption: Clearly explain that Delaware does not impose a statewide sales tax, and your business, therefore, does not have a state-issued sales tax permit. You may write something like: “Delaware does not impose a state sales tax. Business is not required to hold a state resale certificate.”
- Signature and title: Make sure to sign and date the form as required to validate your exemption claim.
Important: Not every state accepts this form, and some that do accept it impose limitations or require supplemental documentation. Before using it, always consult the MTC’s list of participating states and footnotes to confirm acceptance.
Streamlined Sales Tax (SST) Certificate of Exemption (Less Applicable to Delaware)
The Streamlined Sales Tax Certificate of Exemption is another standardized resale form, created by the
Streamlined Sales Tax Governing Board (SSTGB). It allows buyers to claim an exemption from sales tax when purchasing from sellers in SST member states.
However, Delaware is not a member of the Streamlined Sales and Use Tax Agreement. This means:
- Delaware businesses are not required to use the SST Certificate, nor do they benefit from SST’s registration or simplification services.
- Some vendors in SST states may still accept the SST Certificate from a Delaware business, especially if Delaware’s no-sales-tax status is clearly explained in the “reason for exemption” section.
- Despite this possibility, most Delaware businesses will find the MTC Uniform Form more suitable for interstate resale transactions.
Responsibilities When Claiming Resale Exemptions
Even though Delaware does not impose a statewide sales tax, Delaware businesses must still take resale-related documentation seriously, especially when dealing with out-of-state vendors or managing obligations under Delaware’s Gross Receipts Tax.
Buyer Responsibilities for Delaware Businesses
Delaware businesses claiming resale exemptions in other states must ensure they comply with each state’s rules. The following responsibilities help avoid misuse or tax penalties:
- Use documentation only for genuine resale purchases: Delaware buyers must use resale certificates or exemption forms when buying goods they intend to resell in the regular course of business. Using exemption documents for personal or non-resale purchases can lead to tax assessments and penalties.
- Provide complete and truthful information: When filling out forms like the MTC Uniform Certificate, Delaware businesses must clearly state that the state does not have a sales tax. They must also include accurate business names, EINs, and contact information to help vendors validate their legitimacy.
- Know other states’ use tax laws: If a Delaware business claims exemption on a purchase and later uses the item instead of reselling it, they may owe use tax in the vendor’s state or their own. Businesses should track how they use items bought tax-free to remain compliant.
Seller Responsibilities for Delaware Businesses (Regarding GRT & Out-of-State Buyers)
Delaware sellers don’t collect sales tax, but they still have important obligations under state law:
- Do not collect sales tax from any buyer: Since Delaware doesn’t impose a sales tax, sellers should not add one to invoices or charge it as a line item. Doing so could mislead buyers or create compliance issues.
- Provide Delaware registration if requested: If an out-of-state buyer asks for a resale certificate, the Delaware seller can explain that the state does not issue resale certificates. Supplying the Delaware business registration typically satisfies the vendor’s need for verification.
- Understand and manage Gross Receipts Tax (GRT): Delaware sellers must pay GRT on gross revenues from sales of goods and services. However, when a wholesale sale is made to an out-of-state buyer who picks up the goods in Delaware and intends to resell them outside the state, the seller may qualify for a GRT exemption. To claim this exemption, the seller must properly complete and retain the Delaware Wholesale Exemption Certificate (Form 373) for the transaction.
To claim this exemption:
- The seller must use Form 373 – Delaware Wholesale Exemption Certificate.
- This form must be filled out with both seller and buyer information, and include certification that the goods will be transported out of state for resale.
- The seller must retain the completed form for at least three years to remain audit-compliant.
Frequently Asked Questions About Delaware Resale Exemptions
Are There Penalties for Misusing Exemption Documentation?
Yes. If a Delaware business misrepresents its intent when providing exemption documentation to an out-of-state vendor, it may face tax liability in that vendor’s state, including back taxes, interest, and penalties.
For Delaware sellers, misuse of the Delaware Wholesale Exemption Certificate (Form 373) can also lead to problems. If a seller fails to retain the form, misuses it for ineligible transactions, or underreports gross receipts, the Delaware Division of Revenue may assess penalties for non-compliance with Gross Receipts Tax (GRT) requirements.
Does Delaware Exemption Documentation Expire?
Delaware business registration must be renewed according to the Secretary of State’s schedule, typically annually. Businesses must maintain an active status to remain in good standing.
As for Form 373, the Delaware Wholesale Exemption Certificate may be issued as either a single-use or blanket certificate, depending on the transaction. Its continued validity depends on the accuracy of the original certification and the seller’s obligation to keep the form on file for at least three years for audit purposes.
How Do I Verify a Delaware Business’s Exemption Claim (As an Out-of-State Seller)?
Out-of-state vendors can verify a Delaware business’s registration by using the Delaware Secretary of State’s online business search tool.
If the Delaware seller provides Form 373 to support a GRT exemption, the buyer should confirm that:
- The business is registered and active in Delaware.
- The certificate is filled out correctly and includes buyer and seller details.
- The goods are being picked up in Delaware and transported out of state for resale.
How TaxHero Can Help Your Delaware Business
Managing sales tax compliance and resale certificates in Delaware doesn’t have to be complicated. TaxHero simplifies the process by keeping you well-informed and ensuring you use resale certificates correctly outside of Delaware.
Save time. Avoid penalties. Stay compliant.
Schedule a Demo to see how TaxHero can streamline your Delaware resale certificate process today!
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