TITLE 30

State Taxes

Occupational and Business Licenses and Taxes

CHAPTER 25. CONTRACTORS' LICENSE REQUIREMENTS AND TAXES


For purposes of this chapter the following definitions shall apply:

(1) "Contractor" includes every person engaged in the business of:

a. Furnishing labor or both labor and materials in connection with all or any part of construction, alteration, repairing, dismantling or demolition of buildings, roads, bridges, viaducts, sewers, water and gas mains and every other type of structure as an improvement, alteration or development of real property; a person is a contractor regardless of whether the person is a general contractor or a subcontractor, or whether the person is a resident or a nonresident; in addition "contractor" shall include "construction transportation contractors" which shall include persons engaged in the business of contracting for transporting tangible property of other persons in connection with all or any part of the construction, alteration, repairing, dismantling or demolition of buildings, roads, bridges, viaducts, sewers, water and gas mains and every other type of structure as an improvement, alteration or development of real property but shall not include draypersons as defined in § 2301(a) of this title; or

b. Real estate development.

(2) "Gross receipts" includes:

a. In the case of a contractor other than a real estate developer, all sums received for any work done or materials supplied in connection with any real property located in the State, but does not include sums paid to subcontractors by the contractor; provided, that said subcontractor is licensed and subject to the provisions of this chapter with respect to these sums; and provided, that a written agreement exists between the contractor and subcontractor stating the exact sums payable to said subcontractor; and

b. In the case of a real estate developer, all sums received from the sale of real property with structures (commercial and/or residential) built thereon reduced by:

1. The cost of the land and improvement thereto other than structures. In determining the cost of the land and improvements thereto other than structures, only the following costs may be included and allocated on a per lot basis:

A. Cost of raw land;

B. Site improvement costs, including, but not limited to, site clearing, grading, landscaping, erection/construction of open space/recreational facilities and installation of street, sanitary and storm sewers, water lines, power lines and other utilities;

C. Engineering costs associated with rezoning (if applicable) and subdivision of the site;

D. Legal costs/fees incurred in connection with the rezoning (if applicable) and subdivision of the site;

E. Fees involved in obtaining final site plans and permits; or

F. Interest and other carrying costs associated with the acquisition and development of the site, regardless of whether interest has been expended or capitalized for federal income tax purposes (to be allocated on a per-lot basis);

2. Miscellaneous expenses, so as to equate the gross receipts tax treatment of a real estate developer with that of a non-developer contractor, including:

A. The developer's share of realty transfer taxes;

B. Real estate commissions/fees (maximum of 2 percent of gross proceeds);

C. Sales concessions to buyers (i.e., points, settlement help, etc.);

D. Other costs associated with a specific subdivision (other than general administrative and overhead); and

E. Decorating and space planning costs associated with model homes; and

3. Sums paid to subcontractors, provided said subcontractor is licensed and subject to the provisions of this chapter with respect to these sums; that a written agreement exists between the contractor and subcontractor stating the exact sums payable to said subcontractor; and that the subcontractor payments are not for labor or labor and materials of the type described in paragraph (2)b.1. of this section.

c.1. In lieu of deducting the actual cost of land and improvements (paragraph (2)b.1. of this section) and miscellaneous expenses (paragraph (2)b.2. of this section), the developer may, at its sole option, elect for a particular tax year to reduce sums received from the sale of real property (including the structure built by a real estate developer) by the assumed cost of land improvements to the land, and miscellaneous expenses equal to 30 percent of the gross proceeds from the sale of the property.

2. In the case of a construction transportation contractor, all sums received for transporting tangible property of other persons as set forth in this section but does not include sums paid to draypersons in connection with such contracts, provided said draypersons are subject to Chapter 23 of this title.

d. The election described in paragraph (2)c. of this section shall be made annually for each tax year and for each piece of real property or development in such form as the Director of Revenue shall prescribe. Notwithstanding the annual election, an election that applies to a particular piece of real estate or development shall be irrevocable as to that piece of real estate or development unless the Director, upon request, waives the election. Deductions described in paragraphs (2)b. and c. of this section shall be made at the time of sale of the real estate and not before. Deductions for particular amounts paid may not be taken under more than 1 of paragraph (2)a.1, 2. or 3. of this section.

(3) "Nonresident contractor" or "nonresident subcontractor" is a general contractor, prime contractor, construction manager, subcontractor or other type of construction or construction transportation contractor who is not a resident contractor or resident subcontractor.

(4) "Person" includes an individual, partnership, firm, cooperative, corporation or any association of persons acting individually or as a unit.

(5) "Real estate developer," for purposes of this chapter, means a person in the business of:

a. Acquiring land (raw or improved); and

b. Improving raw land or building structures (residential or commercial) on land so acquired (or both); and

c. Selling land, where applicable with the structure, to customers.

"Real estate development" means the activities of a real estate developer as described in this subsection. A person shall be treated as a real estate developer or as a contractor who is not a real estate developer depending, in each case, upon the business in which the person is engaged with respect to a specific parcel of real estate.

(6) "Regularly maintaining a place of business in this State" shall not be established by maintenance of a site facility, such as a site trailer, or any other facility intended for use during construction under 1 contract or a related set of contracts irrespective of the expected duration of such contract or contracts.

(7) "Resident contractor" or "resident subcontractor" includes any general contractor, prime contractor, construction manager, subcontractor or other type of construction or construction transportation contractor who regularly maintains a place of business in this State. If any such contractor entity is comprised of more than 1 entity in a partnership, joint venture or some other legal relationship establishing such contractor entity, the contractor entity shall itself be treated as a separate entity which must comply with the provisions of § 375 of this title to the extent they are otherwise applicable. If at least 1 of the constituent entities making up the contractor entity regularly maintains a place of business in this State, such contractor entity shall be construed to be a "resident" or "resident person" or "resident contractor" of this State. If none of such constituent entities regularly maintains a place of business in this State, such contractor entity shall be construed to be a "nonresident person desiring to engage in business in this State as a contractor," or a "nonresident and a nonresident person." If any contractor is not comprised of more than 1 constituent entity in a partnership or joint venture or some other legal relationship establishing such contractor, and if such contractor shall regularly maintain a place of business in this State, such contractor shall be construed to be a "resident contractor".

(8) "Subcontractor" means any person, partnership, firm, corporation or other business association or entity which enters into a contract (oral or written) directly with a prime contractor or directly with another subcontractor, to perform labor or to perform labor and provide materials in connection with such labor, on a site of contract construction located in this State.

18 Del. Laws, c. 555, § 2; Code 1915, § 184; 40 Del. Laws, c. 27, § 1; Code 1935, § 196; 41 Del. Laws, c. 14, § 6; 42 Del. Laws, c. 68, § 1; 30 Del. C. 1953, § 2501; 57 Del. Laws, c. 136, § 14; 57 Del. Laws, c. 188, § 14; 65 Del. Laws, c. 476, §§ 6, 7; 67 Del. Laws, c. 40, §§ 11, 12; 70 Del. Laws, c. 186, § 1; 70 Del. Laws, c. 401, §§ 1-3; 72 Del. Laws, c. 166, §§ 1-4.;

(a) Any person desiring to engage in business in this State as a contractor shall obtain a license upon making application to the Division of Revenue and paying a fee of $75. This license must be obtained and proof of license compliance must be made prior to, or in conjunction with, the execution of a contract to such person. In the case of contracts in excess of $50,000 which are competitively bid, such person shall have initiated the license application procedure required by this subsection with the Division of Revenue prior to, or in conjunction with, the submission of a bid on a contract, or, in the case of a subcontractor, prior to the submission of a bid by the general contractor. Such license shall be valid until January 1 at which time it may be renewed for a full year and every year thereafter; provided, that the contractor makes application therefor and payment of $75 plus the license fee required in subsection (c) of this section.

(b) The Division of Revenue shall not issue any license to any person until and unless such person:

(1) Is in compliance with all the provisions of § 375 of this title applicable to such person;

(2) Has filed a certificate of notice issued by the Delaware Department of Labor certifying that such person has notified the Department of Labor that such person has entered into or will be entering into contracts to perform labor on or to perform labor on and furnish material for a construction project located in Delaware; and

(3) Has filed a certificate of insurance showing that such person has insured liability in the amount and manner, and when due, and as required, under the workers' compensation laws of this State, or a certificate on a form prescribed by the Department of Labor of this State that such person has been declared to be a qualified self-insurer by the Department of Labor of this State pursuant to the workers' compensation laws of this State.

(c)(1) In addition to the license fee required by subsection (a) of this section, every contractor shall pay a license fee of 0.6472% of the aggregate gross receipts paid to such contractor which fee shall be payable monthly on or before the twentieth day of each month with respect to the aggregate gross receipts for the immediately preceding month. In computing the fee due on such aggregate gross receipts for each month, there shall be allowed a deduction of $100,000. For purposes of this subsection all branches or entities comprising an enterprise with common ownership or common direction and control shall be allowed only 1 monthly deduction from the aggregate gross receipts of the entire enterprise. The monthly returns shall be accompanied by a certified statement on such forms as the Department of Finance shall require in computing the fee due.

(2) Notwithstanding paragraph (c)(1) of this section, if the taxable gross receipts prescribed therein during the lookback period as defined in § 2122 of this title do not exceed $750,000, the return and payment of the additional license fee imposed for such month shall be due on or before the last day of the first month following the close of the quarter. In the case of such return, in computing the fee due on such aggregate gross receipts for each quarter, there shall be allowed a deduction of $300,000. For purposes of this paragraph, all branches or entities comprising an enterprise with common ownership or common direction and control shall be allowed only 1 quarterly deduction from the aggregate gross receipts of the entire enterprise. The quarterly return shall be accompanied by a certified statement on such forms as the Department of Finance shall require in computing this fee due.

(3) [Repealed.]

18 Del. Laws, c. 555, § 2; Code 1915, § 184; 40 Del. Laws, c. 27, § 1; Code 1935, § 196; 41 Del. Laws, c. 14, § 6; 42 Del. Laws, c. 68, § 1; 30 Del. C. 1953, § 2502; 57 Del. Laws, c. 136, § 14; 57 Del. Laws, c. 188, § 35; 57 Del. Laws, c. 741, §§ 12A, 12B; 60 Del. Laws, c. 21, §§ 1-3; 60 Del. Laws, c. 24, §§ 5, 6; 61 Del. Laws, c. 117, § 2; 63 Del. Laws, c. 314, § 2; 65 Del. Laws, c. 392, § 3; 65 Del. Laws, c. 402, § 4; 65 Del. Laws, c. 476, §§ 8-10; 66 Del. Laws, c. 381, § 1; 67 Del. Laws, c. 261, § 9; 68 Del. Laws, c. 80, §§ 4, 14; 68 Del. Laws, c. 151, § 1; 69 Del. Laws, c. 289, §§ 1, 4; 70 Del. Laws, c. 186, § 1; 70 Del. Laws, c. 484, § 1; 70 Del. Laws, c. 489, §§ 5, 6; 71 Del. Laws, c. 84, § 30; 71 Del. Laws, c. 351, §§ 2, 19; 75 Del. Laws, c. 199, §§ 1, 15, 24; 76 Del. Laws, c. 282, §§ 2, 16; 77 Del. Laws, c. 83, §§ 5, 25; 78 Del. Laws, c. 73, §§ 10, 11, 32; 79 Del. Laws, c. 13, § 2.;

(a) Every architect or professional engineer or contractor or construction manager engaging in the practice of such profession shall furnish the Department of Finance within 10 days after entering into any contract with a contractor or subcontractor not a resident of this State, a statement of the total value of such contract or contracts together with the names and addresses of the contracting parties.

(b) In the case of any person or firm failing or refusing to comply with this section, there shall be assessed by the Secretary of Finance a civil penalty of not more than $10,000 for each occurrence.

(c) Any person or firm who wilfully or knowingly fails or refuses to comply with this section shall be guilty of a misdemeanor and upon conviction shall be fined not more than $3,000, or imprisoned not more than 6 months, or both.

18 Del. Laws, c. 555, § 2; Code 1915, § 184; 40 Del. Laws, c. 27, § 1; Code 1935, § 196; 42 Del. Laws, c. 68, § 1; 43 Del. Laws, c. 9; 30 Del. C. 1953, § 2503; 57 Del. Laws, c. 136, § 14; 57 Del. Laws, c. 741, § 12A; 65 Del. Laws, c. 476, § 11.;