Two very costly ones. First, forgetting 30 Del. C. § 1158: a Delaware S corp with ANY nonresident shareholder must prepay 6.60% Delaware personal income tax on that shareholder's apportioned share, in four installments starting with a 50% payment on the 15th day of the 4th month of the tax year — and the declaration is due even when the estimate is zero. Missing it triggers a 1.5%-per-month penalty, and any overpayment can never be refunded to the corporation. Second, the Authorized Shares Method franchise tax shock: owners who incorporate in Delaware with 10,000,000 authorized shares receive a March 1 franchise tax bill in the tens of thousands of dollars unless they recompute under the Assumed Par Value Capital Method (which for a small company usually lands at the $400 minimum). Delaware bills the higher of the default calculation, not the lower — you must run the alternative method yourself.
S-corp election in Delaware
In short
No corporate income tax on the S corp itself, but Delaware franchise tax + annual report to the Division of Corporations (min $175 or $400, plus $50 report fee, due March 1), a Delaware business license and gross receipts tax if it actually operates in-state, and mandatory 6.60% prepayments of personal income tax for nonresident shareholders.
Does Delaware recognize the federal S election?
Delaware automatically honors the federal S election — there is no separate Delaware S-corporation election form. 30 Del. C. § 1902(b)(9) exempts from the Delaware corporation income tax "qualified small business corporations having a valid election under Subchapter S of the Federal Internal Revenue Code," and the Division of Revenue instructions state that a valid federal QSub election "shall be valid for Delaware purposes upon making the federal election." The S corp does not pay Delaware's 8.7% corporate income tax; instead it files an information/reconciliation return and prepays personal income tax for nonresident shareholders. Note that Delaware renamed its business tax forms in 2025: the old Form 1100-S is now Form SCT-RTN, and Form 1100-P is now Form SCT-TAX.
Tax the entity still owes
(1) FRANCHISE TAX / ANNUAL REPORT (Division of Corporations, corp.delaware.gov): due on or before March 1 each year for the prior year. Annual report fee $50 for non-exempt domestic corporations. Franchise tax minimum $175 under the Authorized Shares Method, $400 under the Assumed Par Value Capital Method; maximum $200,000 under either method; $250,000 for Large Corporate Filers. Late penalty $200 plus 1.5% interest per month on tax and penalty. Corporations owing $5,000+ must pay quarterly estimates. (2) CORPORATE INCOME TAX: 8.7% of federal taxable income apportioned to Delaware — does NOT apply to a valid federal S corp (30 Del. C. § 1902(b)(9)). (3) MANDATORY NONRESIDENT SHAREHOLDER PREPAYMENT (30 Del. C. § 1158): every S corp deriving Delaware income must pay, on behalf of each nonresident shareholder, tax at the highest Delaware personal rate — 6.60% — on the nonresident's share of distributive income apportioned to Delaware. Declaration on Form SCT-TAX (formerly 1100-P) due by the 15th day of the 4th month of the taxable year with 50% of the estimate, then 20% on the 15th day of the 6th month, 20% on the 15th day of the 9th month, and 10% on the 15th day of the 12th month. "Small corporations" (gross receipts not exceeding $26,071,000 in any 2 of the 3 preceding years) instead pay 25%/25%/25%/25%. Declaration is due even if the estimate is zero. Penalty 1.5% per month on underpayments; safe harbor is 80% of current-year or 100% of prior-year liability. Overpayments are never refunded to the S corp — they pass proportionally to the shareholders. (4) BUSINESS LICENSE + GROSS RECEIPTS TAX (Division of Revenue): any entity conducting a trade or business in Delaware must obtain a Delaware business license when business commences; most licenses expire December 31 annually. Gross receipts tax rates run from.0945% to 1.9914% depending on activity (petroleum products variable, up to 2.4218%), remitted monthly or quarterly, with NO deduction for cost of goods sold, labor, interest, delivery, or taxes. Online filing of gross receipts tax has been mandatory since January 1, 2021.
Registering for payroll
Two separate registrations. (1) WITHHOLDING: register with the Delaware Division of Revenue (Delaware One Stop / revenue portal) for a withholding account; Delaware employers must "deduct and withhold an amount substantially equivalent to the tax estimated to be due from the employee" under Chapter 11, Title 30, Delaware Code, and remit on an eighth-monthly, monthly, or quarterly schedule assigned by the Division. (2) UNEMPLOYMENT INSURANCE: register with the Delaware Department of Labor, Division of Unemployment Insurance for the UI tax account. (3) BUSINESS LICENSE: an operating Delaware business must also hold a current Delaware business license from the Division of Revenue. Note: a Delaware-incorporated company with no Delaware operations and no Delaware employees generally has no withholding, UI, license, or gross receipts obligation — only the March 1 franchise tax/annual report.
Annual filings
Form SCT-RTN (S Corporation Reconciliation and Shareholders Information Return; formerly Form 1100-S) — due on or before the 15th day of the 3rd month following the close of the taxable year (March 15 for calendar-year filers). A federal automatic 6-month extension automatically extends the Delaware filing date; attach a copy. Form SCT-EXT to extend with payment. Form SCT-SSR must be filed for EACH resident and nonresident shareholder — a federal Schedule K-1 cannot be substituted. Form SCT-TAX declaration and quarterly estimated payment vouchers (15th day of the 4th, 6th, 9th and 12th months). Form CMP-TAX composite personal income tax return optionally available for qualifying nonresident shareholders. Delaware Annual Report + franchise tax — March 1. Business license renewal — annual, expires December 31. Gross receipts tax returns — monthly or quarterly. Employer withholding returns and W-2/1099 reporting; 1099-MISC/1099-R/1099-NEC electronic reporting rules apply. Late-filing penalty on SCT-RTN: 5% per month up to 50%, plus 0.5%/month interest, plus a 1% per month (max 25%) failure-to-pay penalty.
Pass-through entity tax
Delaware has NOT enacted a pass-through entity tax. No PTET form appears on the Division of Revenue's 2025-2026 business tax forms page (the only corporate/S forms are CIT-TAX, CIT-DCP, CIT-EST, CIT-EXT, SCT-TAX, SCT-RTN, SCT-EXT), and the Division's Tax Season Updates page announces no PTET for 2025 or 2026. Delaware is one of the small group of income-tax states (with Pennsylvania and North Dakota) that never adopted a SALT-cap workaround. Delaware DOES conform to the federal $40,000 SALT deduction cap for TY2025 under OBBBA, and decoupled from certain OBBBA provisions under HB 255 (retroactive R&D expensing for 2022-2024, 100% bonus depreciation, 100% special depreciation for Qualified Production Property).
The mistake owners make most often in Delaware
Filing your federal Form 2553
Businesses operating in Delaware send Form 2553 to the IRS Kansas City service center — fax 855-887-7734. Full address and filing checklist for Delaware.
Frequently asked questions
Does Delaware require a separate S-corporation election?
No. Delaware does not require a separate state election. Delaware automatically honors the federal S election — there is no separate Delaware S-corporation election form. 30 Del. C. § 1902(b)(9) exempts from the Delaware corporation income tax "qualified small business corporations having a valid election under Subchapter S of the…
What tax does an S corporation pay in Delaware?
No corporate income tax on the S corp itself, but Delaware franchise tax + annual report to the Division of Corporations (min $175 or $400, plus $50 report fee, due March 1), a Delaware business license and gross receipts tax if it actually operates in-state, and mandatory 6.60% prepayments of personal income tax for nonresident shareholders.
Where do I file Form 2553 from Delaware?
With the IRS Kansas City service center. Fax 855-887-7734, or mail to Department of the Treasury, Internal Revenue Service, Kansas City, MO 64999.
What is the most common S-corp mistake in Delaware?
Two very costly ones. First, forgetting 30 Del. C. § 1158: a Delaware S corp with ANY nonresident shareholder must prepay 6.60% Delaware personal income tax on that shareholder's apportioned share, in four installments starting with a 50% payment on the 15th day of the 4th month of the tax year — and the declaration is due even when the estimate is zero. Missing it triggers a 1.5%-per-month penalty, and any overpayment can never be refunded to the corporation. Second, the Authorized Shares Method franchise tax shock: owners who incorporate in Delaware with 10,000,000 authorized shares receive a March 1 franchise tax bill in the tens of thousands of dollars unless they recompute under the Assumed Par Value Capital Method (which for a small company usually lands at the $400 minimum). Delaware bills the higher of the default calculation, not the lower — you must run the alternative method yourself.
Compare with other states: District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois.
Sources
- https://revenuefiles.delaware.gov/2025/BusinessTaxForms_Instructions/SCT-RTN_2025-01_Instructions.pdf
- https://revenue.delaware.gov/business-tax-forms/
- https://revenue.delaware.gov/business-tax-forms/filing-corporate-income-tax/
- https://corp.delaware.gov/paytaxes/
- https://revenue.delaware.gov/business-tax-forms/doing-business-in-delaware/
- https://revenue.delaware.gov/business-tax-forms/doing-business-in-delaware/step-4-gross-receipts-taxes/
File your Form 2553 correctly
Scorply completes your federal election and includes a Delaware guide in your packet, so you know exactly what else you owe here.
Start my Form 2553Researched from official Delaware sources and verified July 30, 2026. State tax rules change. This is general information, not tax advice — confirm with the state or a CPA before you rely on it.