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Department of Finance: Division of Revenue

Retail Tire License and Scrap Tire Fee: FAQS



General Questions Scrap Tire Fee Scrap Tire
Management Fund
Miscellaneous



General Questions:


Q.  How do I obtain a Tire Retail License?

A.  Register online at our One Stop site, download and remit a business license application, or call 577-8778.



Q.  I've registered but need Scrap Tire Fee coupons. How do I obtain the coupons?

A.  Scrap Tire Fee coupons will be mailed to you once you register as a Tire Retailer. You may also download our online Scrap Tire Fee Coupon.



Q.  Can I separately list the 'Scrap Tire Fee' on my customer's invoice?

A.  Yes, 30 Del§ 2910(b) states, "... Each retailer of tires may list, as a separate line item on an invoice, the amount of the fees due under this subsection."



Q.  If we add $2 fee to our gross receipts it makes our income go up even though we do not make the $2 and hence taxes and workers compensation can also increase, this can hurt small businesses. Are there any provisions to not have the fee included in total gross receipts?

A.  No, Title 30, section 2120 states that no deduction shall be made therefrom the calculation of the gross receipts tax and therefore the fee must be included in reportable gross receipts. However, for income tax purposes the collection and payment of the fee net each other. For Gross Receipts tax purposes the first $960,000 of gross receipts are exempted from taxation and therefore small businesses should not be impacted by the total fees they collect and report.



Q.  Who should I contact about receipt and fee collection questions?

A.  The Delaware Division of Revenue at 302-577-8780.



Q.  How will the revenue be tracked as far as what is generated from the fee and where the money is spent? Will it be available to the public?

A.  The Division of Revenue will be able to readily report the revenue collected and DNREC will be responsible for reporting annual expenditures from the Fund.



Q.  If I only sell a few tires a month, what process do I go through to put it in with my gross receipt?

A.  The sales of the tires will be reportable as retail sales and this is no change from the past. In addition, the retailer will have to file the 'Scrap Tire Retail' coupon and pay $2 for each tire sold.



Q.  How will tire sales be tracked? What will happen if I do not collect the fee? Will enforcement action be taken?

A.  Tire Sales will be tracked through periodic audits. If the retailer has not collected the fee the State will assess the business, as an agent of the State, the fee on previous tire sales and the business will be solely responsible for paying the fee.




Scrap Tire Fee Questions:


Q.  Does the $2.00 scrap tire fee apply to the sale of tires to the State of Delaware, the Federal Government and their instrumentalities, and political subdivisions?

A.   A. No, Section 2901(11)(a)(1) of Title 30 of the Delaware Code states " ...sales to the United States or any agency or instrumentality thereof, or sales to this State, or any agency or political subdivision thereof, shall be deemed to be sales at wholesale;" The scrap tire fee does not apply to wholesale transactions.



Q.  What qualifies my business or transaction as a "wholesale" transaction and exempt from collection the $2 fee?

A.  If the transaction is a business buying from another business the business is defined as a wholesaler and the transaction is a wholesale transaction. However, a number of retail businesses transact with other businesses and record the transactions as retail sales. Only those transaction where the business has a wholesale license and properly reports tire sales as wholesale sales to the Delaware Division of Revenue will be exempt from the $2 fee, unless otherwise exempt as described below.



Q.  What tires are included (new, retreads, used, etc.)?

A.  All tires sold at retail in Delaware irrespective of their quality or value.



Q.  If the $2.00 scrap tire fee was paid on the purchase of a tire at retail, should the scrap tire fee be paid a second time when the tire is resold?

A.  The purchase of a tire for resale is considered a wholesale sale, which is not subject to the scrap tire fee. In those situations where a service provider has purchased tires at retail and paid the fee, the scrap tire should not be charged to the consumer of such services.

However if a motor vehicle dealer, motor vehicle serviceperson, auto body repair shop, etc. purchases tires at retail or wholesale and did not pay the scrap tire fee, they must register as a scrap tire retailer. In addition they must pay the $2.00 scrap tire fee on tires that are installed on motor vehicles as part of the sale of the automobile or the service of such automobile. They are permitted to list the scrap tire fee as a separate item on the invoice.



Q.  Is the fee applicable to motorcycle tires?

A.  Yes, as well as Mopeds and/or Scooters licensed for highway use.



Q.  Is the fee applicable to race car and/or airplane tires?

A.  No, the fee is only on tires sold for vehicles tagged for highway use. Airplanes are not tagged and normally race cars are also not tagged to be legally highway driven.



Q.  Are construction vehicles considered "off highway"?

A.  If the equipment is not registered by a State Motor Vehicle Agency for highway use the tires sold for the equipment are not subject to the fee. However, tires sold for trailers that haul the equipment would be subject to the fee, see next the question.



Q.  Are trailer tires included?

A.  Yes, in Title 21, "Vehicle" is defined to mean every device in, upon or by which any person or property is or may be transported or drawn upon a public highway. A trailer transports property and is drawn on a public highway.



Q.  Farm tractors are excluded, is other farm equipment or vehicles?

A.  Only tires sold at retail to vehicles that are tagged by a State Motor Vehicle Agency for highway use are required to pay the fee. Therefore, if the farm equipment is not tagged tires sold for the equipment are exempt.



Q.  Is the fee applicable to a tire replaced via a warranty?

A.  No fee is required on warranty guaranteed replacements, since no retail sale takes place.



Q.  Is the fee applicable to a tire replaced via a warranty, but charged a nominal charge?

A.  That depends on the warranty language and why the nominal charge is being charged. A nominal fee to cover the service cost to remount, discard or storage cost to cover the inventory cost is not subject to the Scrap Tire Fee. However, if the nominal charge covers the wholesalers or retailers cost to purchase a replacement tire then the sale would be subject to the $2 fee.



Q.  Will the $2 fee help me manage my tires?

A.  No, this fee is strictly for cleaning up existing scrap tires piles that meet the definition in 7Del.C§ 6040. You are still responsible for proper management of the scrap tires generated by your business.



Q.  If a company provides a service that replaces new tires of a competitor with their own for no charge, is a fee collected?

A.  No fee is collected if there is a trade, only when a tire is sold at retail. However, if a customer wishes to upgrade their tires instead of doing an equal trade and there is a cost involved the fee must be collected.



Q.  If I already charge a disposal fee for replaced tires why do I need to charge my customer this additional fee?

A.  The disposal fee is a cost to dispose of the tire that is being replaced. The Scrap Tire Fee is a fee to pay for the cleanup of old scrap tire piles that currently exist and require environmental cleanup.



Q.  Are government agencies (federal, state, and local) exempt from the fee?

A.  The scrap tire fee is assessed against the retailer on the sales of retail tires and not the purchaser. However, the retailer may increase the cost of the tire and separately report the scrap tire fee on the retail invoice. In addition, by statute, sales to government agencies and businesses that are required to obtain a Delaware business license are deemed to be wholesale sales and wholesale sales are not subject to the assessment of the scrap tire fee. However, the business is responsible for having the appropriate license and properly reporting the sale as either wholesale or retail. Accordingly, all retail sales of tires are subject to the $2 fee, irrespective of who is the customer.



Q.  Are sales to charitable organizations exempt?

A.  No.



Q.  Are leased tires subject to the fee?

A.  Currently, only tires sold at retail are applicable, although this may change in the future.



Q.  If I buy used tires by the truckload and only actually sell a few tires do I still have to collect the fee?

A.  Yes, but only for the tires that are sold at retail. Any tire that is sold at retail must be charged the fee.




Scrap Tire Management Fund Questions:


Q.  What is the "fund" being used for?

A.  The Scrap Tire Management Fund is a program that was created for environmental clean-up of existing scrap tire piles statewide. The Fund and clean-up program are managed by the Delaware Department of Natural Resources and Environmental Control (DNREC). The $2 'Scrap Tire Fee' that is collected by the State of Delaware goes to this Fund to clean up existing scrap tire piles.



Q.  What is considered a scrap tire pile?

A.  An accumulation of 100 or more scrap tires, whether or not they are lying one upon Another, that have been accumulated or located in the same general vicinity, or accumulated or located on a parcel of real property and is not enclosed by a building. The program will only apply to scrap tire pile in existence in Delaware on June 30, 2006.



Q.  Why are we paying to clean up scrap tire piles of irresponsible property owners?

A.  It is imperative that the scrap tire piles are cleaned up properly. Scrap tire piles are huge fire hazards and are breeding grounds for mosquitoes, which can carry the West Nile Virus and cause other severe human health concerns. Many other states have been successful using a fee to clean up their scrap tire piles.



Q.  Who will clean up the sites, how much will it cost?

A.  DNREC will contract for companies to clean up the scrap tire piles. Based on current inventory the rough estimate is there are two to three million scrap tires in existing scrap tire piles throughout the State and that it will cost approximately $2 per tire to clean up each pile. The fund is expected to generate about $850,000 annually.



Q.  If a business does a good job keeping receipts and collecting fees for the first 2 years, will they be exempt from collecting money in the future if the program continues as an incentive?

A.  No, but on January 1, 2009 the Program's success will be reviewed and possibly modified, extended or terminated.




Miscellaneous Questions:


Q.  Why were businesses not notified earlier about this?

A.  Both DNREC and the Division of Revenue have been working to identify businesses that sell tires at retail and made notification of the licensing and fee collection requirements through the annual business license renewal notice pertaining.



Q.  Who do I contact to voice my opinion about this fee?

A.  You can call the Division of Revenue's Quality Service Line at 302-577-8207 or DNREC's Scrap Tire Fund at (302) 739-9403.



Last Updated: Wednesday, 15-Aug-2007 14:48:20 EDT
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