Delaware offers a vibrant environment for business with over 93,000 small businesses, employing about 47% of the state’s workforce. Whether you’re an established business owner or planning to start a new venture, understanding the tax landscape in Delaware is crucial. This guide provides an overview of the various taxes small businesses in Delaware must navigate, including tax rates, filing requirements, and deadlines.

Types of Business Taxes in Delaware

Business owners in Delaware may be subject to various taxes depending on their business structure, activities, and revenue. Here’s a breakdown of the main types of taxes:

  1. Corporate Income Tax
    • Applicable Entities: C corporations, LLCs filing as corporations
    • Tax Rate: 8.7%
    • Filing Requirements: File Form CIT-TAX by the 15th day of the fourth month following the close of the tax year.
    • Estimated Payments: Payments are due by the first day of the fourth month of the tax year (50%), the 15th day of the sixth month of the tax year (20%), the 15th day of the ninth month of the tax year (20%), and the 15th day of the 12th month of the tax year (10%).
  2. Gross Receipts Tax
    • Applicable Entities: Businesses that sell goods or provide services
    • Tax Rate: .0945% to .7468%, depending on the type of business
    • Filing Requirements: File online monthly (by the 20th day of the month for the prior month) or quarterly (by the last day of the first month following the close of the quarter) based on total gross receipts.
  3. Withholding Tax
  4. Unemployment Insurance Tax
    • Applicable Entities: Employers with employees
    • Tax Rate: Varies based on business’s experience rating
    • Wage Base: $10,500 per employee per year
    • Filing Requirements: File quarterly reports (Forms UC-8 and UC-8A) by the last day of the month following the quarter.
  5. Nonresident Withholding Tax
    • Applicable Entities: Pass-through entities with nonresident members
    • Tax Rate: 6.6% on distributive share income
    • Filing Requirements: File Form SCT-TAX by the 15th day of the fourth month following the close of the tax year.
  6. Franchise Tax
    • Applicable Entities: C corps, S corps, LLCs, general partnerships, and limited partnerships
    • Tax Rate: Varies for corporations based on authorized shares or assumed par value capital ($175-$200,000); LLCs, general partnerships, and limited partnerships pay a flat fee of $300.
    • Filing Requirements: Corporations must file annual reports and submit payment by March 1. LLCs, general partnerships, and limited partnerships must pay by June 1.
    • Estimated Payments: Required if liability is $5,000 or more. Payments are due quarterly on June 1 (40%), Sept. 1 (20%), Dec. 1 (20%), and March 1 (remainder).

How to File and Pay Delaware Business Taxes

Business taxes in Delaware can be filed and paid through various methods:

  • Online Filing and Payment: Use the Delaware Taxpayer Portal for electronic submissions and payments.
  • Mail: Send forms and payments to the address indicated on the form.

Important Deadlines

Keep track of these key dates to avoid penalties:

  • Corporate Income Tax Returns: Due by the 15th day of the fourth month after the tax year ends
  • Estimated Tax Payments: Due quarterly by the first day of the fourth month of the tax year (50%), the 15th day of the sixth month of the tax year (20%), the 15th day of the ninth month of the tax year (20%), and the 15th day of the 12th month of the tax year (10%)
  • Gross Receipts Tax: Monthly or quarterly based on total gross receipts.
  • Withholding Tax Returns: Due quarterly, monthly, or eighth/monthly based on the amount withheld.
  • Unemployment Insurance Reports: Due quarterly by the last day of the month following the quarter.
  • Franchise Tax Returns: Due by March 1 for corporations and June 1 for LLCs, general partnerships, and limited partnerships.

Tax Credits and Incentives

Delaware offers several tax credits and incentives for small businesses, including:

  • New Business Facility Tax Credit: When you place a qualified facility in service, you receive a corporate income tax credit of $500 per qualified employee hired (with a minimum of five jobs created) and $500 for each $100,000 capital investment on a qualified activity (with a minimum $200,000 investment). 
  • New Economy Jobs Tax Credit: Eligible companies earn withholding tax credits for creating new jobs that pay within a certain range, worth up to 40% of your withholding taxes paid on behalf of your employees. Companies must create at least 50 new jobs in the state and pay the employees a specified amount ($100,000 multiplied by the inflation adjustment factor). 
  • Neighborhood Assistance Tax Credit: Businesses that invest in qualified entities can receive a corporate income tax credit of 50% of their approved investment amount, up to $100,000 per year. 
  • Business Finder’s Fee Tax Credit: The credit rewards Delaware companies for convincing one of their customers, suppliers, or service providers to relocate to the state. Both the sponsoring business and the new business receive a $500 credit for each new employee hired by the relocated business. 
  • Research and Development Tax Credit: The credit amount is 1) 10% of the excess of your total qualified R&D expenditures over a base amount or 2) 50% of Delaware’s apportioned share of your federal R&D tax credits. 

Check out our guide to Delaware’s Tax Credits for more information. 

Delaware’s business tax breakdown by business type

Business taxes can get complicated, so below, we’ve included a chart that breaks down which taxes different business structures usually pay. 

Keep in mind that pass-through entities don’t pay federal income taxes themselves—the obligation is passed on to their business owners or shareholders, who pay them through their personal income tax returns. 

Business typePersonal income taxCorporate income taxFranchise taxGross receipts taxWithholding taxUnemployment taxFederal income taxes
C corporationNo YesYesYes, if applicableYes, if you hire employeesYes, if you hire employeesYes
S corporationYes (pass-through)NoYesYes, if applicableYes, if you hire employeesYes, if you hire employeesYes (pass-through)
LLCYes (pass-through)Depends on how it’s structuredYesYes, if applicableYes, if you hire employeesYes, if you hire employeesYes (pass-through)
Partnership Yes (pass-through)NoYesYes, if applicableYes, if you hire employeesYes, if you hire employeesYes (pass-through)
Sole proprietorshipYes (pass-through)No NoYes, if applicableYes, if you hire employeesYes, if you hire employeesYes, by way of individual income tax

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Delaware Small Business Taxes: The Employer’s Complete 2023 Guide

Business owners in the know call the state of Delaware a tax haven—and for good reason. 

The non-profit Tax Foundation ranks the First State as the 16th most tax-friendly state in the United States, as it forgoes many of the taxes that companies in other states must pay. Combine that with a relatively simple business formation process, and it’s easy to see why the number of businesses in the state outnumber residents almost two to one—and why 68% of Fortune 500 companies call Delaware home. 

But if you want to start your own venture in Delaware, it’s important to understand what you’re getting into. Here’s what you need to know about small business taxes in Delaware: 

What business taxes do you pay in Delaware?

The taxes a state collects from your business are often determined by factors like your chosen business structure, employer status, and annual revenue.

In Delaware, businesses don’t pay property taxes, state sales tax, or local sales tax. So, most companies that operate in the state only pay income tax, franchise tax, gross receipts tax, withholding tax, unemployment tax, and local or industry-related taxes. 

Delaware personal income tax

Pass-through entities like sole proprietorships, partnerships, and limited liability companies (LLCs) require owners or members to pay taxes through their personal tax returns.

Delaware’s individual income tax rates range from 2.2% to 6.6% in 2023, depending on your taxable income. 

How to pay

Delaware personal income tax returns are due by May 1. Taxpayers submit different tax return forms depending on whether they’re a resident or nonresident of the state. 

File your personal tax return and submit tax payments (along with payment voucher PIT-VCH) online through the Delaware Taxpayer Portal. Alternatively, you can file your returns by mail. Instructions for the resident and nonresident tax forms can be found on the Delaware Division of Revenue website. 

In addition to each partner’s personal return, partnerships must file a separate return (Form 300) for their business. These returns are due by the 15th day of the third month following the end of the fiscal year. Send these returns by mail to the following address: 

Delaware Division of Revenue
PO Box 8703
Wilmington, DE 19899-8703

For more information on the Delaware partnership return, refer to the instructions for Form 300. 

Delaware corporate income tax

Most corporations that are formed in Delaware and operate in the state must pay a corporate income tax to the state’s Division of Revenue. A list of tax-exempt corporations can be found in Section 1902(b) of the Delaware Code.

Delaware’s corporate income tax rate for the 2023 tax year is 8.7%. 

How to pay

All corporations that do business in Delaware must file an annual tax return, even if they’re exempt from paying business taxes. C corporations (and LLCs filing as C corps) use Form 1100, while S corporations (and LLCs filing as S corps) use Form 1100S. 

All corporate returns must be submitted by the 15th day of the fourth month after the end of the fiscal year. For businesses that follow the calendar year, this deadline is April 15. 

The Division of Revenue doesn’t provide an online filing option for corporate tax returns—all forms must be mailed to the following address instead: 

Delaware Division of Revenue
PO Box 2044
Wilmington, DE 198899-2044

Delaware Division of Revenue

PO Box 2044

Wilmington, DE 198899-2044

However, corporate income tax payments can be made online here. Corporations must make quarterly estimated tax payments according to the following schedule: 

  • 50% due by the first day of the fourth month of the fiscal year
  • 20% due by the 15th day of the sixth month of the fiscal year
  • 20% due by the 15th day of the ninth month of the fiscal year
  • 10% due by the 15th day of the 12th month of the fiscal year

For answers to frequently asked questions about the Delaware corporate income tax, visit the Division of Revenue website. 

Franchise tax

Delaware imposes an annual franchise tax on most businesses for the privilege of doing business or incorporating in the state. 

For corporations, the state offers two ways to calculate their franchise tax liability: the authorized shares method and the assumed par value capital method.

  • In the first method, corporation franchise taxes are determined by the type of corporation and number of authorized shares issued.
  • The second method calculates tax liability based on a corporation’s total gross assets, number of issued shares, and number of authorized shares.

Minimum tax payments range from $175 to $400, depending on how shares are reported. Non-stock, for-profit corporations pay a franchise tax of $175. Visit the Delaware Division of Corporations website for more information and examples of how to calculate your company’s franchise taxes. 

Delaware LLCs, general partnerships, and limited partnerships are also required to pay a $300 flat fee franchise tax, which is due by June 1. Note that these business entities don’t need to file an annual franchise tax report. 

How to pay

Corporations must file annual reports and submit payment online by March 1. The Division of Revenue charges a $50 fee to file returns. 

Businesses that expect to owe $5,000 or more in franchise taxes must make estimated tax payments following the schedule below: 

  • 40% due June 1
  • 20% due September 1
  • 20% due December 1
  • Remainder due March 1

For more information on Delaware franchise taxes, visit the Division of Revenue website. 

Gross receipts tax

Instead of imposing state or local sales taxes, the state of Delaware levies a gross receipts tax on the total gross revenue of businesses that sell goods or services. Compared to sales taxes, this tax is paid by the business itself rather than its customers. 

Delaware’s gross receipts tax rate ranges from 0.0945% to 0.7468%, depending on the type of business you own. Keep in mind that you can’t deduct business expenses to lower your gross receipts tax liability.

How to pay

Gross receipts tax returns and payments are made through the Delaware Taxpayer Portal. Businesses file tax returns and make payments on a monthly or quarterly basis, depending on their total gross receipts. 

Monthly filers submit tax returns and payments for the month by the 20th day of the following month. The due date for quarterly filers, on the other hand, is the last day of the month after the quarter ends. 

New businesses are placed on a quarterly schedule first. The Division of Revenue decides whether to keep you on this schedule or move you to a monthly payment schedule after reviewing your business activities. 

For more information on the Delaware gross receipts tax, visit the Division of Revenue’s FAQ page. 

Withholding tax

If your Delaware business has employees, you’ll need to pay state withholding taxes on each employee’s wages. Withholding tax rates in the state range from 2.2% to 6.6% in 2023. 

How to pay

To pay withholding taxes, you’ll need to open a withholding account with the state of Delaware. Register your business through the Delaware One Stop online portal. From there, you file and pay withholding taxes through the Delaware Taxpayer Portal. 

Delaware employers follow one of three reporting frequencies: 

  • Monthly: Submit payment for the month by the 15th of the following month.
  • Quarterly: Submit payment by the last day of the month after the end of the quarter.
  • Eighth monthly: Submit payment eight times each month, within three days of the third, seventh, 11th, 15th, 19th, 22nd, 25th, and the last day of the month.

Withholding tax due dates for the 2023 calendar year can also be found here. Your company’s withholding tax payment frequency depends on your withholding tax liability for the lookback period—which, for the 2023 tax year, is July 1, 2021, to June 30, 2022. New employers file on a monthly basis.

All employers must also submit an annual reconciliation report (Form WTH-REC), along with copies of Forms W-2s, by January 31. Reconciliation reports should be mailed to this address: 

Delaware Division of Revenue
PO Box 8750
Wilmington, DE 19899-8750

For more information on Delaware withholding taxes, read the Division of Revenue’s employer withholding guide.

Unemployment tax

Employers must also pay state unemployment insurance taxes. The current unemployment tax rate in Delaware ranges from 0.3% to 8.2% of the first $18,500 of each employee’s wages. The new employer tax rate is 1.2%.

How to pay

New employers must register with the Delaware Department of Labor’s Online Employer Services Portal to file state unemployment taxes. 

After that, employers are expected to file taxes on a quarterly basis, with reports (Form UC-8) and tax payments due at the end of the month after the quarter ends. Return forms are mailed to registered employers at least 30 days before the filing deadline, and they should be submitted to the appropriate address listed on the Online Employer Services Portal website (even if the business didn’t pay any employee wages for the filing period). 

For more information on Delaware unemployment insurance taxes, read this employer handbook. 

The state of Delaware levies taxes on businesses in certain industries, and on products like alcohol, cigarettes, and gas. 

Some municipalities in the state impose additional taxes on businesses in their jurisdictions. For instance, you may need to pay property taxes at the county level if your business owns any real estate. 

Check with your accountant or tax advisor to find out which of these taxes, if any, apply to your business. 

Delaware business tax breakdown by business type

Review the chart below to learn which federal and Delaware state taxes each business entity is responsible for. Keep in mind that pass-through entities pay federal income taxes through their owners’ personal tax returns. 

Business typeState income taxes Franchise taxGross receipts taxWithholding taxUnemployment taxFederal income taxes
C corporationYesYesYes, if applicable Yes, if you hire employeesYes, if you hire employeesYes
S corporationYesYesYes, if applicable Yes, if you hire employeesYes, if you hire employeesYes (pass-through)
LLC with C corp electionYesYesYes, if applicable Yes, if you hire employeesYes, if you hire employeesYes
LLCYesYesYes, if applicable Yes, if you hire employeesYes, if you hire employeesYes (pass-through)
Partnership YesYesYes, if applicable Yes, if you hire employeesYes, if you hire employeesYes (pass-through)
Sole proprietorshipYesNo Yes, if applicable Yes, if you hire employeesYes, if you hire employeesYes, by way of individual income tax

File your Delaware small business taxes with Gusto

As a small business owner, your time is precious. Every minute counts. With Gusto’s HR and payroll software, business owners save an average of five hours every month—time that they can then use to improve their offerings, increase their revenue, and do what they love most. Sign up for an account today. 

Feli Oliveros Feli Oliveros is a freelance finance and business writer with experience covering personal and small business finance. In 2015 she graduated from UCLA, where she earned her bachelor’s degree in English and minored in Anthropology.

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