Tax Tips for Motor Vehicle Dealers Conducting Business in Delaware

Things You Should Know

Definition 30, Del. C., Ch. 23, 29, 30 and 43

Motor vehicle dealer includes every person in the business of buying, selling or trading new or used motor vehicles, trailers, truck trailers or motorcycles.

Taxable Basis

Every motor vehicle dealer is liable for a motor vehicle handling fee of $2 on the sale of each new or used motor vehicle, trailer, truck or motorcycle sold to the owner thereof. The motor vehicle dealer-handling fee is not imposed on the sale, transfer or registration of motor vehicles, trailers or motorcycles, which are transferred for the purpose of resale. While these sales are exempt from the motor vehicle handling fee, such sales are subject to the wholesaler license fee and gross receipt tax.

Other Gross Receipts

Motor vehicle dealers generally provide other services associated with the sale of an automobile; including servicing, financial arrangements and insurance placement. Except as provided by statute, the receipts attributable to these services are subject to gross receipts taxation. Please refer to the following table on the last page as a guide concerning the appropriate gross receipt liability.

Gross Receipts

Gross receipt includes total consideration received by a motor vehicle dealer for all goods sold or services rendered within the State. Consideration for goods sold or services rendered includes cash, checks, credit cards, gift certificates, travelers checks, money orders, barter, trade-ins, manufacturer's coupons and factory rebates and any other consideration of any kind.

Gross Receipts Do Not Include:

  • Returned merchandise or like kind exchanges
  • Certain sales to the State of Delaware, which are administered by the Department of Administrative Services

Gross Receipts May Not be Reduced By:

  • Cost of property sold
  • Cost of material and/or labor
  • Interest, discount or delivery costs
  • State or Federal taxes

License and Gross Receipts Requirements

A motor vehicle dealer is required to obtain a business license - $100 which must be renewed on or before December 31 of each year. Separate business licenses are required for the activities described on the last page. To register with the Division of Revenue and obtain a business license, please complete a Combined Registration Application, available on the Internet, and mail to the Division of Revenue with the appropriate fee.

Tax Rates, Exclusions and Due Dates

  1998
Monthly
1999
Monthly
  Tax Rate Exclusion Exclusion
Motor Vehicle Dealer/
Retail Sales
.00720 $     35,000 $     50,000
Sample Calculation Total Gross Receipts $     52,000 $     52,000
Less Exclusion        35,000        50,000
Taxable Gross Receipts $     17,000 $       2,000
Tax Rate      x.00720      x.00720
Tax Due $         122 $           14
Motor Vehicle Dealer Vehicles Sold 350  x  $2.00= $         700

(Note: Delaware requires that tax due be rounded-off to the nearest dollar amount.)

Due Dates of Returns

New licensees will file on a quarterly basis through their first calendar year. The Division of Revenue will then perform a "lookback" procedure and determine if the filing frequency should be changed.

Monthly Filers Quarterly Filers
20thday of the following month. Last day of the first month after the end of the calendar quarter

Gross Receipts Return Due Date

If no motor vehicles are sold during any of the calendar quarters of the tax year, the quarterly returns for the entire year are to be filed at the end of the calendar year and received by the Division of Revenue by February 1 of the following year. If cars are sold during any calendar quarter, a return must be filed by the due date printed on the return.

Gross Receipts Tax Exemption

Effective January 1, 1997, House Bill No. 678, exempts from business license gross receipts tax transactions between small, closely held firms. To qualify, the subject firms must be 80% owned by the same five or fewer shareholders, or 100% owned by the same family.

Emergency Planning & Community Right-to-Know Act (EPCRA)

If this business uses, stores or transports chemical substances, you may be covered under Federal and State EPCRA requirements. From motor oils and heating fuels to cleaning solvents and specialty chemicals, many different substances are covered. The requirements range from the submission of annual reports identifying the amounts and locations of these substances at your site(s) to the reporting of releases and spills. The information submitted serves several important purposes. During emergencies, the 911 Fire Dispatch Centers can access and provide the chemical information to local fire fighters and other emergency personnel responding to the site. Local Emergency Planning Committees use the information to develop plans to prepare for and respond to emergencies in their districts. The information is also available to the public to promote community involvement in preparing for emergencies and managing chemical risks.

For additional information and a free business compliance guide, contact the Delaware EPCRA Reporting Program at 302.739.4791.

Regulatory and Local Requirements

The Business License Issued by the Division of Revenue is not a regulatory license and the issuance of such license does not attest to the qualifications of the applicant to perform the activity described on such license. Many local jurisdictions have requirements for a business license and may have restrictions concerning the locations of conducting the referenced business activity. Please check with the local government office in the town, city or county in which you will conduct your business.

The State of Delaware also has a Division of Professional Regulations. Many occupations and some types of equipment have regulatory requirements. Please contact the Division of Professional Regulation for more information.

General

If you have any questions, please contact one of the following offices:

Wilmington Dover Georgetown
Division of Revenue
Carvel State Office Building
820 North French Street
Wilmington DE 19801
302.577.8205
Division of Revenue
Thomas Collins Building
540 South DuPont Highway
Suite 2
Dover DE 19901
302.739.5251
Division of Revenue
Suite 2
422 North DuPont Highway
Georgetown DE 19947
302.856.5358

Requirement for Other Business Licenses

Type of Activity Basic License Fee Additional Fees/Gross Receipt Payment
Sale of motor vehicles, trailers or motorcycles to the owner thereof Motor Vehicle Dealer
$100 Annually
Motor vehicle handling fee; $2 per vehicle. No exclusions. Payments are due quarterly on the first day of the second month following the close of the quarter.
Sale of motor vehicles, trailers, motorcycles and parts physically delivered within Delaware for the purpose of resale. Wholesaler
$75 Annually
Wholesaler gross receipts tax 0.384% (0.00384). $50,000 monthly exclusion. Payment due monthly or quarterly.
Sale of parts to the ultimate consumer. Retailer
$75 Annually
Retailer gross receipts tax 0.72% (0.0072). $50,000 monthly exclusion. Payment due monthly or quarterly.
Repair/Service, Loan Placement and Warranty Income General Service
$75 Annually
General service gross receipts tax, 0.384% (0.00384). $50,000 monthly exclusion. Payment due monthly or quarterly.
Motor Vehicle Leasing Lessor of Tangible Personal Property
$75 Annually
Lessor gross receipts tax, 0.288% (0.00288). $150,000 quarterly exclusion. Plus collection of 1.92% use tax from lessee. Payment due quarterly.
Insurance Placement Fee No Revenue License Required Exempt from General Service requirements provided dealer is licensed as an insurance agent or broker under Title 18 of the Delaware Code; otherwise included with general service gross receipts.
Dealer Financing of Vehicles Finance or Small Loan Agency
$450 Annually
A finance or small loan agency is exempt from paying gross receipts tax on finance charges.

For Delaware Department of Motor Vehicle Dealer Information, Call 302.744.2503