The way this shoud be reported on the federal return is using schedule C.
For the state taxes, you will have to file a information return reporting any business losses. The income derived to the pennsulvani business has to be reported in PA.
Becasue you are delaware residents, delaware requires reporting of world wide income, so it is also reported to delaware; however, delaware will give credit for any taxes paid to pennsylvania.
thanks for the feed back quesiton. It brings out another issue.
You mentioned business taxes. so let me inform you:
1. since you are not residents of PA, you will file a personal nonresident return. Using the regular form, based on your federal return. Remember, your federal return should be inlcuidng a schedule C. YOu use information off your federal return to complete the PA return.
2. Business taxes. Your business activities in PA may genereate public trust tax requiremens related to being an employer and conducting your business. such taxes inlcude
In that case then you would file the reguarl non-resident income tax teturn for Pennsylvania. Personal income tax.
How are you fixed for the business taxes, do you know what to do with that?
did you have employees?
did your employees have tip income?