United States

Delaware: Single-Sales Factor Legislation Pending Signature

Feb 01, 2016
From KPMG TaxWatch

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Recently, the Delaware legislature passed House Bill 235, The Delaware Competes Act of 2016, which is expected to be signed by the Governor shortly. Under current law, multistate taxpayers apportion their income to Delaware using an equally weighted three-factor formula consisting of property, payroll and sales. House Bill 235 gradually phases-in single sales factor apportionment. Specifically, for tax periods beginning after December 31, 2016 and before January 1, 2018, the sales factor would be given double weight. For tax periods beginning after December 31, 2017 and before January 1, 2019, the sales factor would be triple-weighted. For tax periods beginning after December 31, 2018 and before January 1, 2020, the sales factor would be weighted six times. Finally, for tax years beginning after December 31, 2019, single-sales factor apportionment would be fully phased-in. House Bill 235 also revises the state’s apportionment provisions to specify that for non-U.S. Corporations, only property and payroll in the U.S. are included in the denominators of the property and payroll factors. For tax periods beginning after December 31, 2016, certain telecommunications companies and worldwide headquartered corporations (as defined by statute) would be allowed to elect, on an annual basis, to choose between a single-sales factor apportionment formula or an evenly-weighted three factor formula.

House Bill 235 also includes a number of provisions aimed at reducing compliance burdens on smaller businesses. Notably, the bill doubles the thresholds at which certain businesses must make monthly gross receipts tax and withholding filings, enabling more businesses to file quarterly returns instead of monthly returns.  In addition, currently all corporations pay 50 percent of their estimated tax liability in the first quarter of their taxable year.  Beginning in 2017, House Bill 235 allows smaller businesses with receipts of less than $20 million to make use of a simpler schedule whereby 25 percent of estimated tax is remitted each quarter. Please contact Mike Riscili at 703-286-8307 with questions on Delaware House Bill 235.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.