This is the thirty-fourth FAQ of this series on taxes for Canadian businesses in the USA.
What state taxes does a Canadian business pay in Delaware?
The Delaware state sales tax rate is currently 0%.
The Delaware state use tax rate is currently 0%.
Unemployment Insurance (Payroll Tax)
If you have employees working in Delaware, you must pay unemployment taxes on their gross wages up to the taxable wage base ($16,500 as of 2021). The tax rate varies from 0.3%-8.2%. Delaware’s new employer’s rate is 2.3% in 2021.
Withholding (Payroll Tax)
If you have an employee earning income while in Delaware, you must withhold a certain percentage of their income from each payroll. The amount of tax you withhold from an employee depends on the length of your pay period, the employee’s gross pay and the number of withholding allowances/exemptions claimed on their W-4.
Gross Receipts Tax
Delaware imposes a gross receipts tax on the total receipts of a business received from goods sold and services rendered in the State. Tax rates range from 0.0945% to 1.9914%, depending on the business activity.
Corporate Income Tax
Delaware has a flat corporate income tax rate of 8.7% of taxable income.
The state of Delaware calculates franchise tax based on the authorized shares of the corporation. The minimum annual franchise tax is $175 and the maximum annual franchise tax is $200,000.
Availability of Treaty Benefits:
Income taxes in the USA are almost always treated as income taxes by the Canadian government. Thus, in the majority of cases, if you pay corporate income taxes in the state, you don’t pay tax again in Canada unless the Canadian rate is higher.
If you are a Canadian company considering doing business in Delaware, including sales to residents and businesses in Delaware, please contact a member of the EPR tax team by completing the contact form below. Our tax experts can advise on the best structure to reduce or minimize the impact of the taxes.
Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. EPR Maple Ridge Langley, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.