2019 Delaware Code
Title 30 - State Taxes
Chapter 27. Manufacturers’ License Requirements and Taxes
§ 2705 Exemption of gross receipts attributable to intermediate products.
(a) Notwithstanding any other provision of this chapter, for purposes of this chapter “gross receipts” shall not include that portion of the receipts realized by a manufacturer on the sale, transfer or consumption of an ultimate product that is attributable to the manufacturer’s cost of manufacturing an intermediate product in a new or expanded facility. The portion of such receipts attributable to the cost of manufacturing the intermediate product shall be that proportion of such receipts allocated to this State pursuant to § 2701(1) of this title that the manufacturer’s cost of manufacturing the intermediate product in the new or expanded facility bears to the manufacturer’s total cost in Delaware of manufacturing the ultimate product.
(b) As used in this section:
(1) “Existing facility” is any property placed in service by the manufacturer as owner, lessee or sublessee before July 1, 1985.
(2) “Intermediate product” is any product manufactured by the manufacturer and used by the manufacturer in connection with any subsequent manufacturing process or procedure that results in an ultimate product.
(3) “New or expanded facility” is any qualified property within the meaning of § 2010(2) of this title that is located within this State and that:
a. Is placed in service by the manufacturer as owner, lessee or sublessee after June 30, 1985;
b. Is used by the manufacturer in or in connection with a manufacturing process or procedure not engaged in by the manufacturer within this State prior to the date such property was placed in service by the manufacturer; and
c. Is employed by the manufacturer in the manufacture of an intermediate product that, in or in connection with the subsequent manufacture by the manufacturer of an ultimate product in an existing facility, is consumed or becomes an integral part of the ultimate product.
“New or expanded facility” shall not include any existing facility but shall include any improvements or additions to an existing facility other than any improvement or addition resulting from a repair, refurbishing, retooling (such as retooling by an automobile manufacturer), recycling or other similar process or procedure that merely preserves or restores the value of an existing facility.
(4) “Placed in service” shall have the meaning ascribed to such phrase under § 167 of the Internal Revenue Code (26 U.S.C. § 167) and regulations promulgated thereunder.
(5) “Ultimate product” is any product:
a. The manufacture of which involves the consumption of an intermediate product; or
b. That contains an intermediate product as an integral part.
(6) The manufacturer and each related person with respect to the manufacturer within the meaning of § 2010(10) of this title shall be treated as 1 person.
(c) Subsection (a) of this section shall not apply to any gross receipts realized by the manufacturer prior to the date upon which the manufacturer’s aggregate investment in the new or expanded facility first equals or exceeds $200,000. In the case of a facility owned by the manufacturer, investment by the manufacturer shall equal the original cost of such facility to the manufacturer. In the case of a facility leased or subleased by the manufacturer, investment by the manufacturer shall equal 8 times the net annual rent paid by the manufacturer for the use of such facility, less any gross rental income received by the manufacturer from sublessees of any portion of such facility during the period of time to which such net rent paid by the manufacturer relates.
(d) Subsection (a) of this section shall not apply to any gross receipts realized by the manufacturer prior to the date on which the manufacturer first employs in or in connection with the new or expanded facility 5 or more employees on a regular and full-time basis, at least 25 percent of whom are residents of this State on such date.
(e) The Secretary shall prescribe such rules and regulations as the Secretary may deem necessary to carry out the purposes of this section.
65 Del. Laws, c. 169, § 1; 70 Del. Laws, c. 186, § 1; 75 Del. Laws, c. 199, § 36.
