Delaware – Tax Safe Harbor for Out-of-State Emergency Service Providers

SALT Report 2778 – The Delaware General Assembly passed a bill that will allow out-of-state businesses to respond to emergencies in Delaware when certain resources and personnel are requested by the State, and a State of emergency has been declared by the Governor or the President.

House Bill 145 creates a tax safe harbor for these companies, their property, and their employees.  As a result, those entering the state during a declared emergency will not create nexus or residency that would otherwise require them to register, file, or remit state or local taxes during the emergency period. This exemption extends to corporate income taxes, personal income taxes, withholding tax, sales and use taxes, and ad valorem taxes on equipment.

However, the exemption does not apply to transaction taxes and fees such as, fuel taxes, sales and use taxes on materials or services, hotel taxes, and car rental taxes or fees, unless these taxes are specifically exempted during a state-declared emergency.

If an out-of-state business or any affiliate enters Delaware during an emergency period they may be asked to provide the Division of Revenue with a written statement that the business is in the state to perform emergency-related work.  The statement should include the name of the business, its home state, its principal business address, federal tax identification number, and the date of entry. The contact information for the out-of-state business or any affiliate and the Delaware business requesting the emergency work must also be included with the statement.

The tax safe harbor period will begin within five days of the announcement of a state-declared emergency and will extend for 60 days after the end of the declared emergency, unless a longer period is authorized.   However, if an out-of-state business or any employee remains in Delaware once the emergency period has ended, it will be subject to the State’s normal standards for establishing nexus, residency, or doing business in the state and will be responsible for all state and local registration, licensing, and tax filing requirements.

These provisions are effective July 16, 2013.

For Further Information

Delaware General Assembly – House Bill 145, Laws 2013