Delaware — Corporate Income / Franchise Tax

Delaware imposes two distinct taxes on corporations: a franchise tax and a corporate income tax. The two are administered by different state agencies, have different filing deadlines, and apply to different taxpayer populations.

## Franchise Tax

The franchise tax is administered by the Delaware Secretary of State, Division of Corporations. Every corporation incorporated in Delaware must pay an annual franchise tax, regardless of whether it conducts business in the state.

Source: 30 Del. C. § 1902(b)(6); Delaware Division of Revenue, Franchise Taxes

The franchise tax is governed by 8 Del. C. §§ 501–503. A corporation incorporated in Delaware but not conducting business in Delaware is not subject to corporate income tax but must pay the franchise tax.

Source: 8 Del. C. § 501

Domestic (Delaware-incorporated) corporations must file an annual franchise tax report and pay franchise tax on or before March 1 each year. The minimum franchise tax is $175 using the Authorized Shares Method or $400 using the Assumed Par Value Capital Method; the maximum is $200,000 (or $250,000 for certain large corporate filers).

Source: Delaware Division of Corporations, How to Calculate Franchise Taxes

Limited liability companies, limited partnerships, and general partnerships formed in Delaware do not file an annual franchise tax report but must pay an annual tax of $300 by June 1.

Source: Delaware Division of Corporations, LLC/LP/GP Franchise Tax Instructions

## Corporate Income Tax

The corporate income tax is administered by the Delaware Division of Revenue. Every domestic or foreign corporation doing business in Delaware, not specifically exempt under 30 Del. C. § 1902(b), must file a corporate income tax return (Form CIT-TAX) and pay a tax of 8.7% on its federal taxable income allocated and apportioned to Delaware.

Source: 30 Del. C. § 1902(a); Delaware Division of Revenue, Corporate Income Tax FAQs

A corporation incorporated in Delaware but not conducting business in Delaware is not subject to corporate income tax.

Source: 30 Del. C. § 1902(b)(6)

Corporate income tax returns are due on or before April 15 for calendar-year taxpayers or the fifteenth day of the fourth month following the close of the fiscal year for fiscal-year taxpayers. A federal extension automatically extends the Delaware due date.

Source: Delaware Division of Revenue, Corporate Income Tax FAQs

Delaware does not impose a minimum corporate income tax. Delaware recognizes the federal S corporation election and does not impose corporate income tax on S corporation pass-through income, although S corporations must file Form SCT-RTN and make estimated personal income tax payments on behalf of non-resident shareholders.

Source: Delaware Division of Revenue, Corporate Income Tax FAQs

## Key Distinction

The franchise tax is a fee for the privilege of incorporating in Delaware; it is not based on income and is owed even if the corporation earns no income or does no business anywhere. The corporate income tax is an income-based tax imposed only on corporations doing business in Delaware, measured by federal taxable income apportioned to the state.

Delaware imposes a flat corporate income tax rate of 8.7% on taxable income apportioned and allocated to Delaware. The tax applies to every domestic or foreign corporation doing business in Delaware that is not specifically exempt under 30 Del. C. § 1902(b). Delaware does not impose a minimum corporate income tax.

Source: 30 Del. C. § 1902(a)

For tax years beginning on or after January 1, 2020, Delaware apportions corporate income using a single-sales-factor formula based solely on the ratio of Delaware gross receipts to total United States gross receipts. The formula applies to a corporation's entire taxable income after subtracting allocated and exempt income. Prior to 2020, Delaware used transitional weighted formulas that progressively increased the weight of the sales factor.

Source: 30 Del. C. § 1903(b)(6); Delaware Division of Revenue, Corporate Income Tax FAQs

Delaware imposes corporate income tax on every domestic or foreign corporation "doing business" in the state, measured by the corporation's "net income derived from business activities carried on and property located within the State." The statute does not define "doing business." A corporation incorporated in Delaware that maintains only a statutory corporate office in the state but does not do business within Delaware is exempt from corporate income tax under § 1902(b)(6).

Source: 30 Del. C. § 1902

Delaware's single-sales-factor apportionment formula sources receipts as follows. Sales of tangible personal property are sourced to Delaware if the property is physically delivered within the state to the purchaser or the purchaser's agent, excluding delivery to the U.S. mail or to a common or contract carrier for shipment to a destination outside Delaware. Gross income from other sources is included in the Delaware sales factor if it is "from other sources within this State." The statute does not further define sourcing methodology for receipts other than sales of tangible personal property.

Source: 30 Del. C. § 1903(b)(6)b.3

Delaware requires corporations to make quarterly estimated tax payments during the taxable year under a front-loaded payment schedule codified at 30 Del. C. § 1905. The statute does not impose a minimum tax liability threshold; every corporation subject to Delaware corporate income tax that expects to owe tax for the current year must make estimated payments.

## Standard Payment Schedule (Large Corporations)

For corporations that do not meet the small-corporation definition below, the statute mandates payment in four unequal installments:

• 50% of the estimated tax liability on or before the fifteenth day of the fourth month of the taxable year (April 15 for calendar-year filers),
• 20% on or before the fifteenth day of the sixth month (June 15),
• 20% on or before the fifteenth day of the ninth month (September 15), and
• 10% on or before the fifteenth day of the twelfth month (December 15).

The first installment is due with the tentative return filed on the fifteenth day of the fourth month.

## Small-Corporation Exception

"Small corporations" pay estimated tax in four equal 25% installments on the same due dates. A corporation qualifies as a "small corporation" if its gross receipts (within the meaning of 30 Del. C. § 1903) do not exceed $20,000,000 for any two of the three taxable years immediately preceding the taxable year for which estimated tax is being computed. This threshold is subject to annual adjustment as set forth in 30 Del. C. § 515.

## Penalties for Underpayment

The Division of Revenue imposes a penalty of 1½% per month on the failure to pay, timely pay, or underpay any estimated tax installment. This penalty applies to each installment and runs separately on the underpayment amount for each due date.

## Tentative Return and Final Reconciliation

Corporations file a tentative return with the first installment. Any additional tax due as computed in the final return required under 30 Del. C. § 1904 must be paid with that final return. Tentative tax declarations and payments are not required for taxable periods of less than 92 calendar days.

Source: 30 Del. C. § 1905; Delaware Division of Revenue, Filing Corporate Income Tax

Delaware sources service receipts and other non-tangible-property income using a cost-of-performance standard, not market-based or destination sourcing. This is a critical distinction for multistate service providers apportioning income under Delaware's single-sales-factor formula.

## Statutory Framework

The statute governing the sales factor, 30 Del. C. § 1903(b)(6)b.3, provides specific sourcing rules for sales of tangible personal property (destination-based) but states only that "gross income from other sources" is included in the Delaware sales factor if it is "from other sources within this State." The statute does not further define how to determine whether service income or other intangible receipts are "from" sources within Delaware.

## Division of Revenue Guidance: Cost-of-Performance Standard

The Delaware Division of Revenue addresses this gap in its official Corporate Income Tax Instructions. The 2015 instructions, in the Schedule 2 guidance for sourcing gross income from sources within Delaware, state:

> "Other income is considered gross income from a Delaware source when the activity that gives rise to the income is performed within the State of Delaware."

This is the classic cost-of-performance sourcing method. Under this rule, service receipts are assigned to Delaware if the income-producing activity—such as consulting services, software development, legal services, or other professional services—is physically performed in Delaware, regardless of where the customer is located or where the benefit of the service is received.

This contrasts sharply with the market-based sourcing (also called destination sourcing) approach adopted by many other states, which assigns receipts to the state where the customer receives the benefit or where the market for the service is located. Delaware has not adopted the Multistate Tax Commission's market-based sourcing model.

## Practitioner Implications

For service businesses with operations in Delaware but customers nationwide, cost-of-performance sourcing means Delaware receipts will be based on the location of the company's Delaware employees and facilities, not on where customers are located. Conversely, an out-of-state service provider with customers in Delaware but no Delaware-based performance activity will not source those receipts to Delaware under the sales factor.

The cost-of-performance rule applies to service income in the context of Delaware's single-sales-factor apportionment formula, which has been in effect for tax years beginning on or after January 1, 2020.

## Limited Statutory Exception: Asset Management Corporations

The statute provides a specific market-based sourcing framework for a narrow class of taxpayers: asset management corporations under 30 Del. C. § 1903(b)(7). For these entities, gross receipts from asset management services are sourced based on the domicile of the client. Specifically, the statute provides that "the source of gross receipts from asset management services shall be determined as follows" and then lists detailed sourcing rules keyed to the domicile of individuals, investment company shareholders, and institutional investor beneficiaries—not the location where the asset management services are performed. This exception does not apply to service businesses generally.

## Confirmation Status

The cost-of-performance rule stated in the 2015 instructions is the most recent Delaware Division of Revenue guidance located on this topic as of June 1, 2026. Delaware's corporate income tax statute, 30 Del. C. § 1903, does not include detailed regulatory sourcing rules for service receipts beyond the general statutory language and the asset management corporation exception. Practitioners sourcing service receipts for tax years 2020 forward (under the single-sales-factor regime) should apply the cost-of-performance standard unless and until Delaware publishes updated guidance or adopts market-based sourcing by statute or regulation.

Source: 30 Del. C. § 1903(b)(6)b.3; 30 Del. C. § 1903(b)(7); Delaware Division of Revenue, Corporate Income Tax Instructions (2015), Schedule 2

Delaware has not adopted a bright-line economic nexus threshold—such as a specific dollar amount of sales or number of transactions—that automatically triggers corporate income tax filing obligations for out-of-state corporations. Unlike the approach many states took following the U.S. Supreme Court's 2018 decision in South Dakota v. Wayfair, which upheld economic nexus standards for sales tax, Delaware continues to rely on the undefined "doing business" standard codified in its corporate income tax statute, supplemented by a case-by-case nexus questionnaire process administered by the Division of Revenue.

## Statutory Standard: "Doing Business" Remains Undefined

Delaware imposes corporate income tax on "every domestic or foreign corporation" that is not exempt and taxes the corporation on "its net income derived from business activities carried on and property located within the State." The statute does not define "doing business" or establish any quantitative threshold—such as minimum revenue, transaction count, or property value—that would create nexus. This stands in contrast to the economic nexus regimes adopted by most states post-Wayfair, which typically establish nexus when a remote seller exceeds $100,000 in gross receipts or 200 transactions in the state.

A corporation incorporated in Delaware that maintains only a statutory registered office in the state but does not conduct business activities within Delaware is expressly exempt from corporate income tax under 30 Del. C. § 1902(b)(6). The Division of Revenue FAQ confirms that "every domestic or foreign corporation doing business in Delaware, not specifically exempt under Section 1902(b), Title 30, Delaware Code, is required to file a corporate income tax return (Form CIT-TAX)." The FAQ does not define "doing business" or reference any economic nexus threshold.

## Division of Revenue Nexus Questionnaire: Case-by-Case Determination

Rather than applying a bright-line threshold, the Delaware Division of Revenue determines nexus for corporate income tax purposes on a case-by-case basis using a Nexus Questionnaire. The Division's website explains that the questionnaire "is designed to elicit from business taxpayers specific information for use in determining the existence or non-existence of nexus" and that "[r]esponses to these questions will be used to determine the requirement to comply with the provisions of Title 30, of the Delaware Code." The questionnaire addresses physical presence factors (offices, employees, property, services performed in Delaware) as well as income-sourcing questions, but it does not reference any dollar or transaction threshold that would automatically establish or negate nexus.

## No Post-Wayfair Economic Nexus Guidance for Corporate Income Tax

As of June 1, 2026, Delaware has not issued statutory amendments, regulations, or published guidance establishing economic nexus thresholds for corporate income tax following the Wayfair decision. Title 30, Chapter 19 of the Delaware Code (Corporation Income Tax) has not been amended to add factor-presence nexus, sales-threshold nexus, or any other bright-line economic nexus standard comparable to those adopted by other states for corporate income or franchise tax purposes.

Delaware's lack of bright-line economic nexus for corporate income tax stands in contrast to Delaware's gross receipts tax, which does have an economic nexus threshold. The gross receipts tax applies when a business earns over $80,000 annually (or $6,667 per month) from Delaware-sourced activities. That threshold is specific to the gross receipts tax; it does not apply to corporate income tax nexus determinations. Practitioners should not conflate the two taxes—they are administered separately, have different nexus standards, and different filing obligations.

## Practical Implication

An out-of-state corporation with no physical presence in Delaware but with sales delivered into Delaware or customers located in Delaware will not automatically have Delaware corporate income tax nexus solely by exceeding a sales or transaction threshold. Nexus instead depends on whether the corporation is "doing business" in Delaware under the facts-and-circumstances analysis applied by the Division of Revenue through the Nexus Questionnaire. Corporations uncertain about their nexus status may submit the questionnaire to the Division for a determination or may seek a private ruling.

The absence of a bright-line threshold creates uncertainty for multistate corporations compared to states with clear dollar or transaction safe harbors. Delaware has not announced any plan to adopt economic nexus thresholds for corporate income tax as of the date of this section.

Source: 30 Del. C. § 1902; Delaware Division of Revenue, Corporate Income Tax FAQs; Delaware Division of Revenue, Nexus Questionnaire