Delaware does not have a statewide sales tax
Delaware is one of five U.S. states with no sales tax at the point of purchase. When you buy something in a Delaware store, you do not pay sales tax on that transaction. This applies to most goods and services, including clothing, groceries, electronics, and prepared food.
However, the absence of sales tax does not mean Delaware has no consumption taxes. The state uses other revenue sources, including corporate income tax, personal income tax, and business-specific fees. Some municipalities also charge local taxes on specific services or activities.
If you live in Delaware or are planning to shop there, understanding what is and is not taxed will help you budget accurately and avoid confusion at checkout.
Key Takeaways
- Delaware has no statewide sales tax on retail purchases, making it one of five states without one.
- Groceries, clothing, and most goods are not subject to sales tax when bought in Delaware.
- Some services and specific items—like hotel stays and car rentals—may be subject to state or local taxes.
- Online purchases shipped to Delaware are generally not subject to Delaware sales tax, though federal rules on remote sales continue to change.
What is taxed in Delaware
While retail purchases are not taxed, Delaware does tax certain services and transactions. Hotel rooms and short-term lodging are subject to a 8% tax in most counties, though rates vary by location. Car rentals are taxed at 8% statewide. Restaurant meals and prepared food are not subject to sales tax, but some municipalities charge a meals tax on food served in restaurants.
Gasoline is not subject to sales tax, but Delaware charges a fuel tax per gallon that is built into the pump price. Alcohol purchases are subject to excise taxes, which vary by type of beverage and are collected at the wholesale or retail level depending on the product.
Services like haircuts, dry cleaning, and repairs are generally not taxed. However, if a service involves a tangible product—such as parts used in a repair—that product component may be subject to tax in some cases.
How Delaware's tax system works instead
Delaware funds state services through income taxes rather than sales taxes. Residents pay personal income tax on wages and investment income, with rates ranging from 2.2% to 5.75% depending on income level. Businesses pay corporate income tax on profits. These taxes generate the revenue that other states collect through sales tax.
This structure means Delaware residents pay taxes on earnings rather than spending. For people who earn income in Delaware but live in another state, this can create a tax advantage when shopping in Delaware, since they avoid sales tax but may still owe income tax in their home state.
Online and remote purchases shipped to Delaware
When you order something online and have it shipped to a Delaware address, you typically do not pay Delaware sales tax. This is because Delaware has no sales tax to collect. However, you may owe sales tax in the state where the seller is located or where the seller has a physical presence, depending on that state's laws.
If you order from a retailer based outside Delaware, that retailer's home state may require them to collect tax on the sale. The tax you pay depends on the seller's location and their tax obligations, not on Delaware's rules. Always check the tax line on your receipt or order confirmation to see what was charged.
Local taxes and fees in Delaware cities
Although Delaware has no statewide sales tax, some cities and counties impose local taxes on specific services or activities. Wilmington and other municipalities may charge local taxes on hotel stays, meals, or entertainment. These local taxes are separate from any state tax and vary by location.
Before traveling to a Delaware city or making a large purchase, check with the specific city or county to learn whether local taxes apply. The Delaware Division of Revenue can direct you to local tax information, or you can contact the city or county government directly.
Why Delaware has no sales tax
Delaware's lack of sales tax is a historical choice that has shaped the state's economy and tax structure for decades. The state relies on corporate income tax and personal income tax instead, which has made Delaware attractive to businesses and residents seeking to avoid sales tax on purchases.
This tax structure also reflects Delaware's economy, which includes significant financial services and corporate registration revenue. Many companies incorporate in Delaware for legal and tax reasons, and the state's corporate tax revenue helps offset the lack of sales tax revenue.
Frequently Asked Questions
Do I pay sales tax on groceries in Delaware?
No. Groceries and unprepared food are not subject to sales tax in Delaware. This includes items like produce, meat, dairy, and packaged foods you buy at a grocery store. Prepared foods and restaurant meals are also not taxed, though some municipalities may charge a local meals tax on restaurant dining.
Is clothing taxed in Delaware?
No. Clothing and shoes are not subject to sales tax in Delaware. This applies to all types of apparel, from everyday wear to formal clothing. Many people from neighboring states shop in Delaware specifically to avoid sales tax on clothing purchases.
What about hotel stays and car rentals?
Hotel rooms and short-term lodging are taxed at 8% in most Delaware counties, though rates may vary. Car rentals are also taxed at 8% statewide. These taxes are charged at checkout and are separate from the room or rental rate quoted to you.
If I buy something online from a Delaware company, do I pay sales tax?
No Delaware sales tax is charged because Delaware has no sales tax. However, the seller's home state or the state where they have a physical location may require them to collect tax on the sale. The tax you pay depends on the seller's location and obligations, not on Delaware's rules.
Do I have to pay Delaware income tax if I shop there but live elsewhere?
No. Delaware income tax applies to residents and people who earn income in Delaware. If you live in another state and simply shop in Delaware, you do not owe Delaware income tax. However, you may owe sales tax or income tax in your home state depending on your state's rules.