How to Start a Pawn Shop, Secondhand or Scrap Metal Business in Delaware: $50 State Police License and a Reporting System Subscription up to $300

Delaware's pawnbroking and secondhand dealer laws are among the nation's most straightforward. If you are considering opening a pawn shop, secondhand goods store, or scrap metal processing operation in Delaware, you need a $50 state license from the Division of State Police, a Division of Revenue business license, and a reporting-system subscription running up to $300 per year. The eligibility requirements are strict. This guide walks you through each step.

Prerequisites: Who Can Own a Pawn, Secondhand, or Scrap Metal Business in Delaware

Before you spend money on licenses, confirm you meet the legal eligibility requirements. Under Delaware Code Title 24, Chapter 23, you must:

• Be at least 18 years old.
• Hold a valid Division of Revenue business license (issued through Delaware One Stop).
• Have no pending criminal charges.
• Have no felony conviction within the past 5 years.
• Have no theft-related or moral-turpitude misdemeanor within the past 3 years.

If any of these conditions apply to you, you will not qualify for a State Police license. Delaware law allows the State Police to suspend or revoke a license for violations of the chapter, including submitting false information on an application or no longer meeting the qualifications, and anyone licensed must tell the State Police within 5 days of being arrested for any misdemeanor or felony.

What Business Categories Require Licensing

Delaware law requires separate licenses for three categories of business. You may operate more than one category under the same storefront, but you must pay the $50 license fee for each category and register each one separately.

Pawnbroker

A pawnbroker makes loans to customers in exchange for personal property as collateral. If the borrower does not repay the loan plus interest by the due date, the pawnbroker may sell the pledged item. Pawnbrokers in Delaware face strict rules: they must carry a $50,000 fire insurance policy on all pledged goods and cannot charge more than 30 percent per month in interest on loans. This caps the annual rate at 360 percent, though many states impose lower maximums.

Secondhand Dealer

A secondhand dealer is any business whose storefront includes the sale or receipt of previously owned, used, rented, or leased tangible personal property (excluding motor vehicles). This covers used goods such as electronics, tools, and appliances. However, certain businesses and sales are explicitly excluded from this definition and do not need a license:

• Auction houses.
• Flea markets.
• Antique dealers selling only items 50 or more years old.
• Motor vehicle dealers.
• Garage, yard, and estate sales.
• Stores selling only secondhand furniture, clothing, shoes, books, magazines, postcards, or stamps.
• Nonprofit organizations selling donated goods.
• Businesses conducting exclusive internet sales.
• Federal firearms licensees (FFLs).

A key distinction: a thrift store selling only secondhand clothing, shoes, or furniture does not need this license. A store that buys and sells used electronics, tools, or appliances does.

Scrap Metal Processor

A scrap metal processor collects, sorts, and sells scrap metal and salvage materials. Delaware law imposes special rules for catalytic converters. A catalytic converter may not be purchased with cash; payment must be made by check payable to the licensed seller, and the buyer must withhold payment for 48 hours (not counting holidays or weekends) while keeping the converter intact and tagged. These rules aim to reduce theft.

Numbered Steps to Licensing Your Business

Step 1: Confirm Your Business Category and Determine Your Location

Identify which of the three categories (pawnbroker, secondhand dealer, scrap metal processor) best describes your business. If you plan to operate more than one category, note that you will need a separate license and pay a $50 fee for each. Delaware law allows only one address per license, so if you operate multiple storefronts, you must obtain a separate license for each location. This is a crucial constraint if you plan to expand to a second location later; you cannot license a single business entity for multiple addresses under one license number.

Step 2: Obtain a Division of Revenue Business License

Before applying to the State Police, you must have an active Division of Revenue business license. This is Delaware's general business operating license, required for all businesses conducting a trade in the state. Apply through Delaware One Stop at https://onestop.delaware.gov.

The business license costs $75 per year for most business categories (including general services, professional and occupational activities, and contractors); the fee is $90 per year for general retailers, which includes a $15 retail crime prevention fee. Which category applies depends on what you do. A shop that sells goods to customers is a retailer, so expect $90 for one location, while a business that only provides services may fall under the $75 general service license. Confirm your category with the Division of Revenue.

Along with the business license, you are required to register for Delaware's gross receipts tax (not to be confused with sales tax; Delaware has no sales tax). Retailers owe gross receipts tax at 0.7468 percent of gross sales, and general service businesses owe 0.3983 percent, filed monthly or quarterly (new businesses file quarterly). Ask the Division of Revenue which rate applies to your mix of lending and sales. Keep detailed records of all sales and payments for your tax returns.

Your business license expires on December 31 each year and must be renewed annually by that date.

Step 3: Consider Business Entity Formation (Optional)

You can operate your pawn or secondhand business as a sole proprietorship without forming a separate legal entity. However, many owners form an LLC or corporation for liability protection and tax efficiency. This is optional, not required for the State Police license.

If you choose to form an LLC, file a Certificate of Formation with the Delaware Division of Corporations. The filing fee is $110. An LLC owes a flat annual tax of $400 (due June 1 each year, starting in 2027 for formations in 2026). Verify the current amount and due date at https://corp.delaware.gov/. A corporation costs $109 to form and must file an annual report ($50) and pay franchise tax (minimum $175 under the authorized shares method) by March 1 each year.

Entity formation is a separate process from licensing and does not affect your State Police license eligibility, but it does simplify tax accounting and personal liability.

Step 4: Apply to the Delaware Division of State Police Professional Licensing Section

Once you have your Division of Revenue business license, apply to the State Police Professional Licensing Section for your pawnbroker, secondhand dealer, or scrap metal processor license. Contact the Delaware Division of State Police, Professional Licensing Section, to request the application form and confirm the current address and submission method.

Prepare the following documents:

• Completed State Police application form (request from the Professional Licensing Section).
• Proof of your active Division of Revenue business license.
• Any identification or background documents the Professional Licensing Section requires to confirm you meet the qualifications (age 18 or older, no pending charges, no felony within 5 years, no theft or moral-turpitude misdemeanor within 3 years). Ask for its current checklist.
• For pawnbrokers: proof of a $50,000 fire insurance policy on pledged goods. Contact an insurance broker in Delaware and provide a copy of the policy or a certificate of insurance.

The State Police will conduct a background check. The State Police does not publish a standard processing time that we could verify, so ask the Professional Licensing Section how long a decision currently takes.

Step 5: Pay the License Fee and Reporting-System Subscription

Upon approval, you pay $50 for the license itself (per category, if you are licensing more than one). This covers the license through December 31 of that year. Your license expires annually on December 31 and must be renewed.

You are also required to subscribe to Delaware's reporting system for secondhand goods, pawned items, and scrap metal transactions. This system allows law enforcement to flag stolen property and tracks transaction history. By statute you pay a reasonable annual subscription fee, not to exceed $300, to the electronic reporting system designated by the Secretary of Safety and Homeland Security. Check with the State Police Professional Licensing Section for the designated system and its current fee.

Step 6: Secure Fire Insurance (Pawnbrokers Only)

If you are opening a pawn shop, you must carry a $50,000 fire insurance policy on all pledged goods at all times. This is not negotiable. Contact an insurance broker who works with Delaware pawnbrokers; they can help you select a policy that covers your location and inventory. The statute requires the policy to be in place before you apply for a pawnbroker license. Violating the chapter can result in license suspension or revocation.

Materials and Ongoing Requirements Checklist

Before you open, gather and maintain the following:

• Active Division of Revenue business license (expires December 31).
• State Police pawnbroker, secondhand dealer, or scrap metal processor license (expires December 31).
• Annual reporting-system subscription (pay up to $300 per year).
• For pawnbrokers: current $50,000 fire insurance policy on pledged goods.
• A point-of-sale system or transaction log that records each sale or receipt of goods, the date, the seller's name and ID, and the item description.
• For scrap metal processors: a system to record catalytic converter transactions, pay by check rather than cash, and withhold payment for 48 hours (not counting holidays or weekends).
• Gross receipts tax documentation (file monthly or quarterly, depending on your business size).
• Records of all loan transactions for pawnbrokers, including loan amount, interest rate, and due date.

Tips to Avoid Common Mistakes

Do not assume you qualify. The background check is thorough. If you have a criminal history, contact a Delaware criminal defense attorney before applying.

Do not operate without all licenses. Running a pawn shop without a State Police license is a violation of Delaware Code Title 24, Section 2317. The State Police can issue a cease-and-desist order and seek a Chancery Court injunction to shut you down. A violation of the chapter is also a misdemeanor with a fine of up to $10,000.

Pawnbrokers: do not exceed 30 percent monthly interest. This is a hard cap. Charging more puts you in violation of Title 24, Section 2316, and may result in license suspension or revocation.

Do not skip the Division of Revenue business license. You must meet and maintain the State Police qualifications, which include a current valid Division of Revenue business license, so a lapsed business license puts your State Police license at risk. Renew your business license by December 31 each year.

Secondhand dealers: know what does not require licensing. If you run a thrift store selling only clothing, shoes, furniture, and books, you do not need a secondhand dealer license. If you also buy or sell used electronics, tools, or other general merchandise, you likely do, so confirm with the State Police. Be certain of your classification.

Scrap metal processors: follow the catalytic converter rules. Do not pay cash for catalytic converters, pay by check, and withhold payment for 48 hours (not counting holidays or weekends). The same chapter requires you to record seller identification for transactions. Violations can result in license suspension.

Maintain the reporting-system subscription. The subscription is an annual requirement for every licensee, so pay it on time.

Expected Results and Timeline

If you meet all eligibility requirements and submit a complete application, ask the State Police how long a decision takes, since no standard time is published that we could verify. Combined cost to launch is approximately $125 to $440 in the first year for one category:

• Division of Revenue business license: $75 to $90.
• State Police license: $50 per category.
• Reporting-system subscription: up to $300.

This does not include insurance, location rental, signage, equipment, or inventory. Pawnbrokers must also budget for the required $50,000 fire insurance policy; get a quote from a broker.

When to Consult a Professional

This article is informational and does not constitute legal or tax advice. If you have any of the following circumstances, consult a Delaware business attorney or CPA before applying:

• You have a criminal history and are uncertain whether you meet the background requirements.
• You plan to operate as a corporation or multi-member LLC and need guidance on liability, tax structure, or membership agreements.
• You are opening a second location and need to understand multi-entity licensing.
• You need to comply with local municipal licensing or zoning requirements in your city or county.
• You plan to extend credit or loans and need to understand Delaware interest-rate caps and consumer-protection laws.

Key Resources

• Delaware Division of State Police Professional Licensing Section: Contact for the State Police license application and reporting-system vendor list.
• Delaware One Stop (Division of Revenue Business License): https://onestop.delaware.gov
• Delaware Division of Corporations (Entity Formation): https://corp.delaware.gov/
• Delaware Code Title 24, Chapter 23 (Pawnbrokers, Secondhand Dealers, and Scrap Metal Processors): Official statute covering all licensing requirements, fees, and operating rules.
• Delaware Small Business Development Center: https://delawaresbdc.org/ (free business planning and mentoring)

Disclaimer

This article provides informational content about Delaware's licensing requirements for pawn shops, secondhand dealers, and scrap metal processors. It is not legal advice, tax advice, or a substitute for consultation with a qualified Delaware attorney or certified public accountant. Laws and fees are subject to change. Before filing an application or opening a business, verify all current requirements, fees, and deadlines with the Delaware Division of State Police, the Division of Revenue, and the Delaware Division of Corporations. The author and publisher assume no liability for errors, omissions, or reliance on this content.