What taxes apply to a new small business?

Taxes for New Small Businesses in Delaware

When starting a small business in Delaware, understanding the tax obligations is crucial for smooth operations and compliance. Below is an overview of the primary taxes that typically apply to new small businesses in the state.

State-Level Taxes

• Corporate Income Tax: Delaware imposes a corporate income tax on C corporations at a flat rate of 8.7% on net income. This tax applies if your business is incorporated and operates as a C corporation.
• Gross Receipts Tax: Instead of a sales tax, Delaware levies a gross receipts tax on the total receipts of most businesses. Rates vary by business type and are paid monthly or quarterly. This tax applies to many business activities including retail, services, and manufacturing.
• Personal Income Tax: If your business is a pass-through entity such as an LLC, S corporation, or sole proprietorship, business income passes to your personal income tax return. Delaware’s personal income tax rates are progressive, ranging from 2.2% to 6.6% as of 2026.
• Employer Withholding Tax: If you hire employees, you must withhold Delaware state income tax from their wages and remit it regularly to the Delaware Division of Revenue.
• Unemployment Insurance Tax: Employers in Delaware are required to pay unemployment insurance taxes, which fund state unemployment benefits. Registration with the Delaware Department of Labor is necessary before hiring.

Local Taxes

Delaware does not impose local sales or income taxes, which simplifies tax compliance at the municipal level. However, businesses should verify if any local business licenses or fees apply depending on their city or county.

Operational Considerations

• Business Registration: Register your business with the Delaware Division of Corporations and obtain a Delaware business license from the Division of Revenue.
• Recordkeeping: Maintain accurate financial records to track gross receipts, payroll, and tax payments. This supports timely filing and audit preparedness.
• Payroll Setup: Implement payroll systems that handle employee withholding and unemployment tax reporting.
• Tax Filing: Establish a calendar for filing corporate income tax, gross receipts tax, and payroll tax returns to avoid penalties.
• Automation: Consider using accounting and tax software to automate tax calculations and filings, reducing errors and administrative workload.

As of 2026, staying current with Delaware tax rates and filing requirements is essential for new small businesses to maintain compliance and optimize financial management.