Uniquely Positioned

BY TYLER MICIK

DELAWARE IS UNIQUE in many ways but one important factor that separates Delaware from its neighbors Pennsylvania, New Jersey, and Maryland is that it has no sales tax. In fact, Delaware is one of only five states in the country without a sales tax. The others are Alaska, Montana, New Hampshire, and Oregon. So, why is this important? It makes Delaware an attractive place to buy goods, and individuals travel from surrounding states to shop here because their money goes further.

But Delaware’s absence of a sales tax is not the only thing that makes it attractive. Its geographic location and access to the I-95 Corridor offers residents from Washington D.C., Philadelphia, New York, New Jersey, and Baltimore easy access to retailers here in a short drive.

Furthermore, Delaware is internationally recognized as an incorporation destination because of its business-friendly tax laws and Court of Chancery. Unlike most states, corporations registered in Delaware do not pay corporate income tax. Also, corporate lawsuits are settled by the Court of Chancery—a non-jury trial court with a long history dating back to 1792, comprised of judges specializing in corporate law. The Delaware Division of Corporations states that 66.8 percent of all Fortune 500 companies are incorporated in Delaware and 93 percent of U.S. based initial public offerings selected Delaware as their corporate home in 2021. According to Delaware Economic and Financial Advisory Council (DEFAC) in each of the last two fiscal years, incorporation and unclaimed property revenues totaled 38.6 percent of the State’s net general fund revenues. Unclaimed property refers to financial assets that have been abandoned or unclaimed by an owner. For example, if someone purchases a gift card for twenty dollars, spends nineteen dollars and fifty cents, then throws the card away, the remaining fifty cents eventually goes back to the state of incorporation, which in many cases is Delaware.

Protecting these laws is important for all Delawareans because it’s a few of the main reasons why Delaware has no sales tax. This benefits Delawareans and Delaware retailers and makes the First State a unique and attractive place to shop and conduct business.

The Delaware Retail Council (DRC), an affiliate of the State Chamber of Commerce and National Retail Federation (NRF), serves as retailers’ advocate. The group meets regularly to discuss issues retailers are experiencing and help solve challenges facing the industry. According to the NRF, retailers account for 26 percent of Delaware’s workforce, or approximately 102,410 workers, and have a $4.1 billion direct impact on Delaware’s GDP.

Nationally, the NRF forecasted retail sales growth would increase between six and eight percent to more than $4.86 trillion in 2022. At the time of writing this article, according to a survey conducted by the NRF, 46 percent of holiday shoppers said they plan to browse or buy before November and spend about $832.84 on average on gifts and food over the holiday season, which is in line with the NRF’s full year forecast. But, like many other industries, retailers face numerous challenges such as inflation, availability of products, organized retail crime, and a workforce shortage—despite needing between 450,000 and 600,000 workers over the holiday season. However, the NRF found that even with these challenges, consumer spending remains steady and while e-commerce sales saw significant growth throughout the pandemic, shoppers have shifted back to in-store shopping.

As we begin 2023, the retail industry in Delaware is strong and growing. Although challenges lie ahead, the Delaware Retail Council stands ready to support retailers, their employees, and ensure Delaware remains an attractive place for all shoppers near and far! If you are a retailer and interested in joining the DRC, please contact me at tmicik@dscc.com.