§ 5501 Definitions.
For purposes of this chapter only:
(1) “Direct-to-home satellite services” has the meaning ascribed in the Communications Act of 1934, 47 U.S.C. § 303(v).
(2) “Distribute” includes any and all activity to produce, distribute or supply any commodities and services as defined in this section within this State.
(3) “Distributor” includes any company, corporation, municipality, partnership, firm, association, cooperative or any person or group of persons which supplies any public utility for sale to ultimate consumers or users within this State, whether, in the case of gas or electricity, the gas or electricity is supplied through a distributor’s own or a transmission company’s facilities.
(4) “Gas” for purposes of this chapter means natural gas which is further defined as a naturally occurring gaseous mixture of hydrocarbons and non-hydrocarbons, the principal constituent of the gaseous mixture being methane.
(5) “Gross receipts” includes total consideration received by a distributor for commodities or services sold, distributed, produced or supplied within the State to ultimate consumers or users.
(6) “Internet access” means the provision of a computer and communication service through which a customer using a computer and a modem or other communications device may access content, information, electronic mail or other services offered over the Internet and may also include access to proprietary content, information, and other services as part of a package of services offered to users; the term “Internet access” does not include any services defined in paragraphs (8)a.3. and 4. of this section, except to the extent such services are purchased, used, or sold by a provider of Internet access to provide Internet access.
(7) a. “Intrastate mobile telecommunications services” shall include the following:
1. Mobile telecommunications that originate and terminate in this State or that originate and terminate in the same state and, in either case, that are billed to a customer with a place of primary use in this State, other than charges which are specifically exempt from tax under § 5506 of this title, provided, however, that the taxation of such services shall be subject to the provisions of § 5508 of this title; and
2. All mobile telecommunications services that are sold to a customer whose place of primary use is within this State for a fixed periodic charge, whether or not calls provided within that fixed periodic charge originate or terminate in the same state; provided, however, that the taxation of such services shall be subject to the provisions of § 5508 of this title.
b. “Intrastate mobile telecommunications services” shall not include separately stated electronic paging services, internet access, and interstate wireless data services.
(8) a. “Public utility” includes the following commodities and services:
1. Electricity distributed for any heat, light or power use;
2. Gas (except liquefied gas) piped from a distribution center to the consumer or user for any heat, light or power use;
3. Intrastate telephone services that are not intrastate mobile telecommunications services, intrastate mobile telecommunication services and telegraph communication services;
4. Cable television communication services; and
5. Direct-to-home satellite services.
All such commodities and services are included whether distributed directly by the distributor to the consumer within this State or distributed through an intermediary to the consumer or user within this State.
b. Gas and electricity are public utilities whether distributed to a consumer or user within this State by a distributor, either directly or through an intermediary, or delivered by a transmission company.
(9) “Transmission company” includes any company, corporation, municipality, partnership, firm, association, cooperative or any person or group of persons owning, leasing or controlling property or fixtures to property within this State used for the transmission, transportation or distribution of gas or electricity.
30 Del. C. 1953, § 5501; 58 Del. Laws, c. 301; 60 Del. Laws, c. 152, §§ 1-3; 71 Del. Laws, c. 170, §§ 1-4, 12; 72 Del. Laws, c. 39, §§ 1, 2; 72 Del. Laws, c. 101, §§ 1, 3; 73 Del. Laws, c. 399, §§ 1, 2; 75 Del. Laws, c. 5, §§ 1, 2; 77 Del. Laws, c. 82, §§ 2, 3.;
§ 5502 Imposition of tax; rate; adjustment of tariffs [Subsection (f) waived for fiscal year ending June 30, 2021].
(a) A tax is imposed on intrastate telephone commodities and services distributed within this State and on intrastate mobile telecommunications services at the rate of 5.00% of the charges for such services excluding any charges for Internet access as defined in § 5501(6) of this title.
(b) (1) Except as provided in subsection (a) or paragraph (b)(2), (3) or (4) of this section, a tax is imposed upon any distributor of public utilities, which tax shall be at the rate of 4.25% of the gross receipts or tariff charges received by the distributor for such public utilities. In addition thereto, any municipality with a population greater than 50,000 may impose, by duly enacted ordinance, a local franchise tax of no greater than 2.00% of the gross receipts received by the distributor from the amount of natural gas distributed to residences and businesses located within the boundaries of the municipality. The proceeds of any taxes imposed by such municipality pursuant to its authority set forth in this subsection shall be remitted to that municipality.
(2) A tax is imposed upon any distributor of electricity and gas commodities or services to business locations used primarily for the manufacture (as “manufacturing” is defined in § 2701 of this title and shall not include scientific, agricultural or industrial research, development or testing) of goods within this State; for food processing (as food processing is described in § 2903 of this title), agribusiness processing or the hatching of chickens in conjunction with either food processing or agribusiness processing within this State; which tax shall be at the rate of 2.00% of the gross receipts or tariff charges received by the distributor for said commodities or services distributed within this State. For purposes of this paragraph, in order for a business location to be “used primarily for the manufacture of goods or food and agribusiness processing within this State,” more than 70% of the employees employed at the business location must be employed in such activity exclusively within this State. Employees employed, by way of example and not limitation, in the management or administrative support of facilities, other than or in addition to a Delaware manufacturing or food or agribusiness processing facility, are not employed exclusively in the manufacture of goods or food and agribusiness processing within this State. For purposes of this subsection, the “business location” means all contiguous real property in which the manufacturer or food or agribusiness processor, as the case may be, has an interest, including a possessory interest. For purposes of this section “agribusiness processing” means any processing, working, development, change, conditioning or reconditioning of raw materials or products into products of a different character, or effecting any combination or composition of materials, the inherent nature of which is changed such that the resulting product is food for consumption by livestock or is fertilizer for agricultural use.
(3) Notwithstanding paragraph (b)(1) or (2) of this section, whenever: (i) gas or electricity is delivered within this State by a transmission company from a person who is not a distributor within this State and such person does not report and remit the tax on such gas or electricity; and (ii) a tax would have been imposed under this section had the delivery been made by a distributor, then the tax imposed by this section shall be upon the use of the gas or electricity and shall be paid by the consumer or user and shall be at the same rate applied to the amount paid for the gas or electricity as if the tax had been computed under paragraph (b)(1) or (2) of this section. Transmission companies shall, in a manner to be prescribed by the Director of Revenue, inform persons to whom they deliver gas or electricity of the tax on the use of gas or electricity. The Director of Revenue may require information returns from transmission companies to include, without limitation, identification of the persons to which gas or electricity is delivered and the dates and quantities delivered. The Director of Revenue shall maintain the confidentiality of prices assessed or paid for gas or electricity.
(4) A tax is imposed upon any distributor of direct-to-home satellite commodities and services or cable television communications commodities and services which tax shall be at the rate of 2.125% of the gross receipts or tariff charges received by the distributor for such commodities or services distributed within this State excluding any charges for Internet access as defined in § 5501(6) of this title.
(c) When the tax imposed by subsection (b) of this section applies to a distributor subject to the regulation of the Public Service Commission, the Commission is directed, after consultation with such distributor and without a public hearing, to adjust the tariff of such distributor so that the tax is passed through pro rata to the distributor’s customers and the distributor’s earnings are neither increased nor decreased by such tax. The tariff adjustments filed by such distributor and approved by the Public Service Commission shall not incorporate the tax in the charges for commodities and services, and the tax shall appear on the customer’s bill as a separate item. The Public Service Commission is further directed to allow such adjusted tariffs and the rates therein to become effective immediately upon filing without any requirement of 30 days’ notice and without suspension thereof. The Public Service Commission may enter any orders which shall be necessary to permit the tax to be passed through to such distributor’s customer while revised tariffs and billing procedures are being prepared.
(d) The tax imposed by subsection (a) and paragraph (b)(4) of this section applies to a “bundled transaction” as follows:
(1) The term “bundled transaction” means a transaction consisting of distinct and identifiable commodities or services which are sold for a single nonitemized sales price but which are treated differently for tax purposes.
(2) If the sales price is attributable to commodities or services that are taxable and commodities or services that are nontaxable, the portion of the sales price attributable to the nontaxable commodities or services shall be subject to tax unless the provider reasonably identifies and allocates such portion from its books and records kept in the regular course of business.
(3) If the sales price is attributable to commodities or services that are taxable at different rates, the total sales price shall be treated as attributable to the commodities or services taxable at the highest rate unless the selling provider reasonably identifies and allocates the portion of the sales price attributable to the commodities or services taxable at a lower rate from its books and records kept in the regular course of business.
(e) Nothing herein shall be construed to affect the imposition of tax on a charge for voice or similar service utilizing Internet Protocol or any successor protocol. This section shall not apply to any services that are incidental to Internet access, such as voice-capable e-mail or instant messaging.
(f) [Subsection (f) waived for fiscal year ending June 30, 2021 Subsection (f) waived for fiscal year ending June 30, 2021 ]. The State shall transfer in each fiscal year the first $5,000,000 in tax receipts received under this chapter that would otherwise be deposited to the General Fund to the Energy Efficiency Investment Fund maintained by the Department of Natural Resources and Environmental Control pursuant to Chapter 80 of Title 29.
30 Del. C. 1953, § 5502; 58 Del. Laws, c. 301; 64 Del. Laws, c. 460, § 4; 65 Del. Laws, c. 387, §§ 1, 2; 69 Del. Laws, c. 290, §§ 1, 2; 70 Del. Laws, c. 1, § 1; 70 Del. Laws, c. 485, §§ 1, 2; 71 Del. Laws, c. 170, §§ 5, 6, 11; 72 Del. Laws, c. 39, § 3; 73 Del. Laws, c. 399, § 3; 74 Del. Laws, c. 120, § 1; 75 Del. Laws, c. 5, §§ 3-5; 77 Del. Laws, c. 82, §§ 4, 6; 78 Del. Laws, c. 75, §§ 1, 2, 4; 80 Del. Laws, c. 78, § 18; 80 Del. Laws, c. 299, § 14; 81 Del. Laws, c. 59, § 12; 82 Del. Laws, c. 244, § 23.;
§ 5503 Computation of tax.
(a) The tax imposed by § 5502(a) of this title shall be collected by the distributor from the ultimate consumer as a separate item not included in the sales price or tariff charge. The amount of tax collectible from the ultimate consumer shall in each case be calculated on the basis of a uniform percentage of the sale price or tariff charge payable by the ultimate consumer for the commodity or service which is subject to tax under this section and shall in each case be computed to the nearest highest cent; provided, however, that such tax shall not apply to receipts derived through the use of automatic coin collecting machines or coin boxes. A distributor’s gross receipts shall not be deemed to include any portion of the tax collected from its consumer.
(b) The tax imposed by § 5502(b) of this title shall be paid only once and shall be considered imposed upon, in the case of deliveries of gas or electricity described in § 5502(b)(3) of this title, the ultimate consumer or user for the use of such gas or electricity. In all other cases, the tax shall be imposed on the distributor and is not to be construed as a tax upon the consumer or user.
§ 5504 Payment of tax.
(a) In the case of the distribution of public utilities as described in § 5502(a) and (b)(1), (2) or (4) of this title, the taxes collected under this chapter during any calendar month shall be paid by the distributor to the Department of Finance within 20 days after the end of said calendar month.
(b) A distributor may, with the approval of the Department of Finance, compute its remittances either upon its billings or upon its cash receipts; provided, that if the distributor is permitted to remit on the basis of its billings, the distributor shall be entitled to a credit against subsequent remittances for any taxes billed but not collected. The Secretary of Finance shall prescribe such rules, regulations and forms for the administration of the tax imposed by this chapter as the Secretary deems necessary and as are consistent with the laws of Delaware.
(c) In the case of deliveries of gas or electricity as described in § 5502(b)(3) of this title the taxes due under this chapter shall be paid within 20 days after the end of the calendar month in which the user first receives a statement from the seller of the utility setting forth the amount charged for such gas or electricity.
§ 5505 Failure to file return or pay tax; interest and penalties [Repealed].
Repealed by 68 Del. Laws, c. 187, § 20, effective Jan. 1, 1992.
§ 5506 Exemptions.
(a) No person who is liable for the tax imposed by § 5502(b) of this title shall be required to be licensed as a wholesaler under § 2901(21) of this title.
(b) All intrastate telephone commodities and services shall be subject to the tax imposed by § 5502(a) of this title and the consumer or user thereof shall not be subject to the tax prescribed by Chapter 43 of this title.
(c) Sales of appliances or other equipment or machinery by a distributor shall be exempt from the tax imposed by § 5502(b) of this title; provided, that such sales are subject to and included in the license fees required by Chapter 29 of this title.
(d) The tax imposed by § 5502 of this title shall not apply to commodities and services furnished to:
(1) This State or the United States, or to any of their instrumentalities, agencies (including public school districts, Delaware State University and Delaware Technical and Community College) or political subdivisions;
(2) Delaware Transportation Authority and Delaware Housing Authority;
(3) The University of Delaware; and
(4) Delaware Solid Waste Authority.
(e) Gross receipts or tariff charges received by a distributor of electricity, gas or telegraph commodities and services from residential consumers and residential users and the sale price or tariff charges paid by residential consumers or residential users to distributors of telephone commodities and services shall be exempt from the tax imposed by this chapter. No distributor of electricity, gas or telegraph commodities and services shall pass on any tax imposed by this chapter to any residential consumer or residential user of such commodities and services. There shall be a presumption that all mobile telecommunications services are provided to nonresidential consumers or users unless it can be demonstrated that the services are charged to a place of primary use which is a residence and which has no other telephone service. Such presumption may be rebutted by the consumer a showing to the Division of Revenue that the use of the service took place inside the user’s or consumer’s residence.
(f) The tax imposed by § 5502(b) of this title shall not apply for 36 consecutive months to gas or electricity furnished to a corporation which, at any time after December 31, 1984, was a debtor in possession in a reorganization proceeding under Chapter 11 of the United States Bankruptcy Code and which in good faith files a plan of reorganization with the United States Bankruptcy Court. The 36-month exemption period shall commence on the first day of the calendar month following the filing of the debtor corporation’s plan of reorganization. During the 36-month exemption period no distributor of gas or electricity shall be assessed any tax imposed by this chapter upon the distribution of such gas or electricity to a corporation which qualifies for such exemption under this subsection, nor shall any distributor of gas or electricity pass on any tax imposed by this chapter to any such corporation. The Division of Revenue shall promulgate appropriate rules and regulations to implement this subsection.
(g) The gross receipts or tariff charges of a distributor of electricity and electrical services attributable to sales of electricity or electrical services for use in an electrolytic or electroarcthermal or air separation process shall be exempt from the tax imposed by this chapter.
(h) The gross receipts or tariff charges received by a person who furnishes gas or electricity to another person who purchases said gas or electricity for resale shall be exempt from the tax imposed by this chapter.
(i) The gross receipts or tariff charges received by a person who furnishes gas for use by a distributor in the generation of electricity for distribution and sale and the receipt and consumption of such gas shall be exempt from the tax imposed by this chapter.
(j) The gross receipts or tariff charges of a distributor of electricity, electrical services or gas attributable to sales of electricity, electrical services, gas or gas services for use in an automobile manufacturing process shall be exempt from the tax imposed by this chapter. For purposes of this subsection, the term “automobile manufacturing” shall refer to the manufacturing operations of an automobile assembly plant and shall not refer to either the administrative operations of an automobile assembly plant or to the manufacture of component parts of an automobile outside an automobile assembly plant.
30 Del. C. 1953, § 5506; 58 Del. Laws, c. 301; 59 Del. Laws, c. 169, § 1; 60 Del. Laws, c. 35, § 1; 65 Del. Laws, c. 17, § 2; 66 Del. Laws, c. 412, § 1; 70 Del. Laws, c. 120, §§ 1, 2; 70 Del. Laws, c. 142, § 7; 70 Del. Laws, c. 507, § 1; 71 Del. Laws, c. 170, § 10; 72 Del. Laws, c. 101, § 4; 72 Del. Laws, 1st Sp. Sess., c. 249, §§ 1, 2; 73 Del. Laws, c. 399, § 4; 77 Del. Laws, c. 412, § 2; 78 Del. Laws, c. 1, § 11; 78 Del. Laws, c. 100, § 19.;
§ 5507 Rebate of tax for certain qualified activities.
(a) In the case of the tax imposed by this chapter upon a distributor of gas or electricity commodities and services that is attributable to gross receipts or tariff charges received from a corporation that satisfies the requirements of § 2011(a) of this title for the allowance of a credit against the tax imposed by Chapter 19 of this title (relating to corporation income tax) for the taxable year of such corporation in which a qualified facility (as defined in § 2010(1) of this title) is placed in service by such corporation (within the meaning of § 2010(7) of this title), such corporation shall be allowed a rebate of the tax payable by such distributor for such corporation’s taxable year in which such qualified facility is placed in service and for any of its 4 following taxable years in which such facility is a qualified facility with respect to such corporation on the last business day thereof. The amount of the rebate allowable to such corporation in each such taxable year shall be equal to 50 percent of the amount of the tax imposed by this chapter (computed without regard to this subsection, but computed with regard to subsection (a) of this section, if applicable) upon such distributor that is attributable to that portion of the tariff or other similar charge paid or payable to such distributor by such corporation on account of such taxable year that (1), if such qualified facility is a new facility within the meaning of § 2010(4) of this title, is allocable to the volume of such gas and electricity commodities and services consumed in the operation of such new facility during such taxable year, or (2), if such qualified facility is an expanded facility within the meaning of § 2010(5) of this title, is allocable to the excess, if any, of (i) the volume of such gas and electricity commodities and services consumed during such taxable year in the operation of that facility of which such expanded facility is a part, over (ii) the volume, if any, of such commodities and services consumed by such corporation or a related person (within the meaning of § 2010(10) of this title) in the operation of that same facility during such corporation’s taxable year immediately preceding its taxable year in which such qualified facility is placed in service by such corporation. For purposes of this subsection, the amount of any tariff or other similar charge that shall be deemed allocable to the volume of any specific commodities and services shall be the excess of (1) the total amount of such tariff or charge, over (2) the amount of such tariff or charge computed without including such volume of commodities and services in the base for computing such tariff or charge.
(b) For purposes of this section, the taxable year of any person shall be the year used by such person in computing liability for Delaware income tax.
§ 5508 Sourcing rules for mobile telecommunications services.
(a) Mobile telecommunications services shall be sourced according to the provisions of the federal Mobile Telecommunications Sourcing Act, 4 U.S.C. §§ 116-126. The definitions and provisions of such act are hereby incorporated into this section by reference.
(b) (1) If a customer believes that an amount of tax, or an assignment of place of primary use or taxing jurisdiction included on a billing is erroneous, the customer shall notify the home service provider in writing. The written notification shall include the street address for the customer’s place of primary use, the account name and number for which the customer seeks a correction, a description of the error asserted by the customer, and any other information that the home service provider reasonably requests to process the claim.
(2) a. Within 60 days of receiving a notice under this section, the home service provider shall review its records. If this review shows the amount of tax or assignment of place of primary use or taxing jurisdiction is in error, then the home service provider shall correct the error and, within 90 days, refund or credit the amount of tax erroneously collected from the customer for a period of up to 2 years from the date of the customer’s written notice. If this review shows that the amount of tax or assignment of place of primary use or taxing jurisdiction is correct, then the home service provider shall provide a written explanation to the customer. In either event, the home service provider shall provide notice of any determination under this paragraph to the Director.
b. If the determination is adverse to the customer, the customer may protest such determination to the Director under § 523 of this title as if such determination were a notice of proposed assessment. If the determination is in favor of the taxpayer, the Director may nonetheless direct the home service provider to treat Delaware as the place of primary use and shall give notice to the customer of such determination, from which the customer may protest as if the home service provider had determined adversely to the customer.
(3) The procedures in paragraph (b)(1) and paragraph (b)(2)b. of this section shall be the first course of remedy available to customers seeking correction of assignment of place of primary use or taxing jurisdiction or a refund of or other compensation for taxes erroneously collected by the home service provider, and no cause of action based upon a dispute arising from such taxes shall accrue to the extent otherwise permitted by law until a customer has reasonably exercised the rights and procedures set forth in those subdivisions of this section.
§§ 5509,5510 [Reserved.]