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 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 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 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

Delaware recognizes federal S corporation status and does not impose an entity-level corporate income tax on S corporations. Instead, S corporations with Delaware-source income must comply with a withholding regime for nonresident individual shareholders as set forth in 30 Del. C. § 1158 and related agency guidance.

Withholding Requirements: If an S corporation has one or more shareholders who are individuals not resident in Delaware, it must withhold and pay, in estimated installments, Delaware personal income tax on those shareholders' pro rata shares of Delaware-source income. The rate used is the highest individual income tax rate specified by 30 Del. C. § 1102(a). The S corporation makes estimated payments according to the schedule in 30 Del. C. § 1905. Penalties and interest are imposed on the S corporation if these payments are not timely, but the individual nonresident shareholders are protected from underpayment penalties so long as the corporation complies (§ 1158(c)).

Filing Process and Forms: Every S corporation with Delaware-source income must file Form SCT-RTN (S Corporation Reconciliation and Shareholders Information Return) with the Delaware Division of Revenue. This filing includes a copy of federal Form 1120S and a Schedule SCT-SSR for each shareholder (resident and nonresident). Estimated withholding is paid either by voucher (Form SCT-VCH) or by electronic remittance through the options detailed in the SCT-RTN instructions. Overpayments on behalf of nonresident shareholders are not refunded to the corporation but may be claimed by the shareholder on their individual Delaware nonresident income tax return.

Composite Return Option: Delaware allows S corporations to file a composite return (Form CMP-TAX) for certain nonresident shareholders, enabling the corporation to pay tax on behalf of those shareholders collectively. Key eligibility criteria include: all participating shareholders must be full-year nonresidents of Delaware, must have the same tax year, and each must have income only from that S corporation in Delaware for the year. This option and its operational requirements are explained in the SCT-RTN instructions. Not all nonresidents are required or eligible to be included; exclude ineligible individuals per the detailed criteria set by the Division of Revenue.

Electronic Filing and Payments: Per the SCT-RTN instructions (current as of Revision 08/21/24), electronic payment of withholding is permitted and described as the Division's preferred method, but paper vouchers are also accepted. As of that date, there is no universal mandate for electronic-only filing or payment.

Authority and Effective Date: This section reflects Delaware law and published guidance as of the SCT-RTN instructions dated August 21, 2024. No scheduled changes are noted in those instructions.

Source: 30 Del. C. § 1158; Delaware Division of Revenue — SCT-RTN Instructions; Delaware Division of Revenue — Business Tax Forms

Not yet human confirmed. Practitioners should review the most current SCT-RTN and CMP-TAX instructions for annual updates and operational details.

Delaware corporations must calculate their annual franchise tax according to statutory formulas, paying the lesser of the amount determined under two methods: the Authorized Shares Method (default) or the Assumed Par Value Capital Method (optional if proper data is submitted with the annual report).

Authorized Shares Method (Default) Under 8 Del. C. § 503(a)(1):

• Corporations with 5,000 authorized shares or fewer: $175 minimum tax.
• Over 5,000 to 10,000 shares: $250.
• Each additional 10,000 shares (or portion thereof): add $85 per increment.
• Minimum tax under this method is $175; maximum is generally $200,000 (except for "Large Corporate Filers" which may pay up to $250,000).

Assumed Par Value Capital Method Permitted under 8 Del. C. § 503(a)(2) if the corporation provides issued share and total asset information:

• Assumed par value capital is calculated based on the number of authorized shares, issued shares, the par value of shares, and the corporation’s total gross assets as reported on the U.S. Form 1120, Schedule L.
• The tax is $400 on assumed par value capital not exceeding $1,000,000, plus $85 for each additional $1,000,000 or fraction thereof, up to a maximum (generally $200,000).
• If assumed par value capital is less than $500,000, tax is $175; between $500,000–$1,000,000, tax is $250; $400 minimum if over $1,000,000.

Defaults, Deadlines, and Proration

• If a corporation fails to report asset/share data, it will be taxed under the higher Authorized Shares Method by default.
• The maximum franchise tax is higher for qualified Large Corporate Filers (as defined in § 503(c)).
• If the authorized share structure changes during the year, franchise tax is prorated for each period per § 503(e).
• For corporations formed or dissolved mid-year, tax is prorated for the portion of the year in existence.

All calculations, minima, maxima, and required data submissions are governed by 8 Del. C. § 503, which should be consulted for precise language and definitions. The Division of Corporations also provides online calculators that apply these rules but are not themselves primary authority.

Source: 8 Del. C. § 503

Delaware imposes statutory penalties and interest for late filing and late payment of both corporate income tax and franchise tax. The mechanics and authority for each tax are as follows:

1. Corporate Income Tax Penalties and Interest

• Late Filing Penalty: If a corporate income tax return is filed after its due date (without an approved extension), Delaware imposes a penalty of 5% of the tax due per month or fraction thereof, up to a maximum of 50%. This is a statutory penalty under 30 Del. C. § 533.
• Late Payment Penalty: If a return is timely filed, but tax due is not paid by the deadline, Delaware imposes an additional penalty of 0.5% per month or part thereof (maximum 25%), applied to the unpaid balance. This penalty is distinct from the late filing penalty (see 30 Del. C. § 534).
• Interest: Interest accrues on any unpaid tax from the original due date at the rate of 1% per month (unless otherwise prescribed) until payment is made. Interest is imposed in addition to both penalties and is set by 30 Del. C. § 534.
• Estimated Tax Underpayment: A penalty of 1.5% per month applies to underpaid estimated tax installments. This penalty is additive, not a substitute for other penalties, and accrues on the underpaid amount.

The late filing penalty (5%) and late payment penalty (0.5%) can apply simultaneously if both return and payment are late, each up to their respective caps. Interest accrues on any unpaid tax, separate from penalties. Statutory authority is clear that these are cumulative.

Source: 30 Del. C. § 533; 30 Del. C. § 534; Delaware Division of Revenue — Filing Corporate Income Tax

2. Franchise Tax Penalties and Interest

• Due Date: The annual franchise tax report and payment are due by March 1 of each year for all Delaware corporations. Corporations owing $5,000 or more must also make required estimated installment payments throughout the year.
• $200 Penalty: If a corporation fails to file the annual report and pay the franchise tax by March 1, a $200 statutory penalty is automatically imposed.
• Interest: Interest accrues on unpaid franchise tax (and the $200 penalty, if unpaid) at a rate of 1.5% per month or fraction thereof, as set in 8 Del. C. § 504.
• Additional Regulatory Penalty (Final Tax): For the final franchise tax due upon dissolution, merger, or withdrawal, a daily late payment penalty applies at 0.05% of the unpaid final tax per day under 5 Del. Admin. Code § 1103-7.0, separate from regular interest and the standard $200 penalty.

These penalties are imposed by operation of statute, not administrative discretion, and are in addition to any other applicable interest or fees.

Source: 8 Del. C. § 501; 8 Del. C. § 504; Delaware Division of Corporations — Franchise Taxes; 5 Del. Admin. Code § 1103-7.0

Effective Dates All penalties and interest apply to filings and payments due as of June 2026. Statutory sections cited are current as of this date.

This section is based on primary statutory and official regulatory authority; no provision of Delaware law or regulation authorizes the Division of Revenue or Secretary of State to waive these penalties except as specifically provided by statute.

Source: 30 Del. C. § 533 Source: 30 Del. C. § 534 Source: 8 Del. C. § 501 Source: 8 Del. C. § 504 Source: Delaware Division of Revenue — Filing Corporate Income Tax Source: Delaware Division of Revenue — Franchise Taxes Source: 5 Del. Admin. Code § 1103-7.0

Not yet human confirmed.

Delaware does not permit combined reporting, unitary filing, or water’s-edge filing for corporate income tax purposes. Each corporation subject to the Delaware corporate income tax is required to file on a separate-entity basis, regardless of whether the group files a consolidated federal return or constitutes a unitary business group under the laws of other states.

Separate Company Filing Requirement: Delaware law requires every corporation (domestic or foreign, unless specifically exempt) to calculate and file its own corporate income tax return as if it were filing a separate federal return. There is no provision in Title 30, Chapter 19 of the Delaware Code, or in implementing regulations or forms, that authorizes or requires combined, consolidated, or unitary group returns for corporate income tax purposes. Federal consolidation is disregarded for Delaware purposes. Affiliates that are included in a federal consolidated return must each file a separate Delaware CIT unless the affiliate itself does not have nexus or is otherwise exempt. Parent-subsidiary and brother-sister groups with activity in Delaware but which operate as a unitary business elsewhere (e.g., CA, NY, IL) are not treated as such in Delaware.

Official Guidance: The Delaware Division of Revenue’s Corporate Income Tax Return Instructions for Tax Year 2024 directly state: “The State of Delaware does not recognize or approve using Combined Reporting, Unitary or Water’s Edge methods of filing a Delaware corporate income tax return.” This is confirmed in the Corporate Income Tax FAQ, which also explains Delaware does not accept combined, consolidated, or water’s-edge returns for corporate income tax purposes.

Implications for Multistate and Multinational Groups: Corporations that must file combined/unitary returns in other states must still file separately in Delaware, even if the group constitutes a unitary business. This means intercompany transactions are generally recognized, and no group-wide apportionment or eliminations are allowed. Delaware’s approach is distinct from states with mandatory combined or unitary group regimes and increases complexity for taxpayers operating in multiple states.

Review Status: Not yet human confirmed — based on Delaware Division of Revenue’s official guidance documents. As of June 2026, no regulation or statutory authority directly authorizes combined or unitary filing for Delaware CIT, and agency publications are consistent on this policy.

Source: Delaware Division of Revenue, 2024 Corporate Income Tax Return Instructions Source: Delaware Division of Revenue, Corporate Income Tax FAQs

Delaware corporate income tax does not include gross receipts from intangibles—such as interest, dividends, royalties, or capital gains—in the sales factor for apportionment purposes. Instead, Delaware expressly provides that income from intangible personal property is allocated to Delaware only to the extent the intangible is "employed by the taxpayer in a business, trade, commerce, profession or vocation carried on in this State."

Primary statutory rule:

• Under 30 Del. C. § 1903(b)(6)(c), income from intangible personal property—including annuities, dividends, interest, and gains from intangible property—is treated as Delaware-source income only if the intangible is actually used in a trade or business in Delaware.
• The statute clarifies that intangible assets held for investment purposes (i.e., assets or property treated as held for investment for federal income tax purposes) are not considered "employed" in a Delaware business and therefore are not sourced to Delaware for income tax purposes—even if physically located or managed from Delaware.
• However, intangible assets whose acquisition, management, and disposition are integral parts of a taxpayer's regular trade or business operations (other than the business of investing itself) may be considered "employed" in such business.
• As a result, only those intangibles so employed have their related income allocated to Delaware. Receipts from intangible assets not "employed" in Delaware business operations are excluded from the apportionment sales factor and are not allocated to Delaware.

No cost-of-performance or market-based sourcing is used for intangible receipts; the rule is one of statutory allocation depending on "employment" in Delaware business activity.

Implications for practitioners: Careful analysis is required to determine whether and to what extent intangible assets are employed in a Delaware business. The default is exclusion from Delaware sourcing unless the statutory test for "employment in business" is met.

Source: 30 Del. C. § 1903(b)(6)(c)

Not yet human confirmed.