Why is Delaware sales tax free ? (real estate, credit card, transfer)

[queenofbavaria]

I always wondered about that. does it have to do with the port of wilmington ?
thanks for any input !

[DC Oldtimer]

I dont know. But I imagine DE makes a lot of money from being the favored state for registering corporations.

[phlydude]

Bingo - corporate and banking taxes cover the cost of the sales tax
plus, our wage taxes help cover the difference as well...it isn't as high as some states but it is higher than PA on the highest tier

[doctorjef]

The title transfer tax on real estate transactions is another money-generator. DE's absence of a sales tax is such a sacred cow that I can't see the General Assembly ever passing one in the next century at least. At the same time, DE is blessed with almost ridiculously low property taxes -- those sadly will be rising, but will be nowhere near the levels seen in the surrounding states.

[phlydude]

Originally Posted by doctorjef

The title transfer tax on real estate transactions is another money-generator. DE's absence of a sales tax is such a sacred cow that I can't see the General Assembly ever passing one in the next century at least. At the same time, DE is blessed with almost ridiculously low property taxes -- those sadly will be rising, but will be nowhere near the levels seen in the surrounding states.

Perhaps it is time to enforce the old rule where they used to make you show a DE state ID before not charging sales tax...

Even if it was 3% for non-essential items, it is still cheaper than the tax in the other states around.

[jdoll]

By choice for starters and it later became a source of pride. The 1st state to levy a sales tax was WV in 1921, by 1940 40 states had a sales tax and today 45 do.

[Aquitaine]

Native Delawarean who has been in NY since '98 (but may be coming back) here--

While it's true that Delaware 'makes up' for its low sales tax with other sources of revenue, DE is still a fairly 'low-tax' state, at least compared to its neighbors. NY has a higher corporate income tax, higher personal income tax, AND one of the highest sales tax rates in the country.

I think 'sacred cow' sums it up, though. Once you pass a 1% sales tax it is easy to raise it to 2 and then 4 and 6 and 10%. DE has kept those doors shut. I don't know that the sales tax thing has anything to do with why business headquarter there; I run a small business and while I'd be glad to relocate it to DE, the corporate and personal income tax rates are not all that great. It's mostly the state itself that is much easier (and cheaper) to deal with than behemoth bureaucracies like NY and CA.

[armx]

Even though marginal income tax rate appears higher .. DE allows all deductions allowed on the federal return thereby reducing the taxable income substantially. That with loooowwww property taxes the total tax load (no sales tax) in almost all cases will be lower in DE than any other state in the Mid-Atlantic states.

Gross receipts tax paid by the businesses - especially, retail stores - is part of the reason why there are so many big shopping centers near the borders with other states - so even though those out of staters don't pay taxes directly they are generating tax without their express knowledge while saving money (sales tax) for themselves - a win-win situation if there was one..

[Delawarean]

Its just our thing I guess. They let you know about it on all the signs. And its only retail sales. You still have to pay a 3.75% tax when register a new or used car in Delaware no matter where or when you bought it or whether you've already paid sales tax to some other state. All in all though, the taxes in Delaware are pretty reasonable. The way I understand it, the reason corporations are set up here has to do with 1. the lack of usury laws (which is good for banks and credit card companies), 2. the fact that we don't tax corporate income earned outside the state, and 3. the court of Chancery (it has lots of experience in corporation on corporation lawsuits so its more predictable than the jackpot justice found elsewhere in the country). Also Aquitaine is probably on to something with corporations wanting to deal with a small state rather than a giant bureaucracy. And a location halfway between New York and Washington is kind of the perfect place to put a corporate tax haven.

[professorsenator]

Don't forget, too, that DE brings in more money (as a percentage of overall revenues) than most states via road & bridge tolls. Delaware was also a fairly early (1974) adopter of a state lottery in order to bring in significant cash.