North Dakota LLC Taxes
When establishing a North Dakota limited liability company (LLC), you’ll need to follow certain tax requirements based on your LLC's chosen tax status, business activities, and where your operations are based.
This guide to North Dakota LLC Taxes looks at key taxes your LLC might be subject to at the local, state, and federal levels, how to file them, and what other compliance filings are required.
Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes.
How Is an LLC Taxed in North Dakota?
Taxation in North Dakota isn’t applied in the same way to all LLCs – instead, it varies depending on a number of factors, such as an LLC’s nature, locality, and tax election.
While LLCs typically benefit from pass-through taxation by default, they can elect to be taxed as one of the following:
- C Corporations: The LLC is treated as a separate entity to its owners, paying corporate income tax rates on its total profit while the owners also pay personal income taxes on any distributions they take.
- S Corporations: In return for paying owners a “reasonable salary,” the LLC’s remaining profits are distributed among members without a need to pay self-employment tax or FICA tax on them.
The following sections go into the various tax responsibilities of your LLC at local, state, and federal levels in North Dakota to help you ensure your LLC navigates them effectively.
North Dakota Local Taxes
Each municipality in North Dakota has its own different local tax rules and regulations. Read on below to learn more about the local taxes that your LLC may have to pay.
Local Sales and Use Taxes
All North Dakota LLCs selling tangible goods and certain services will be required to collect sales tax and remit it to the North Dakota Office of State Tax Commissioner. At a local level, sales tax rates can range between 0.00% and 4.20% depending on the city or county in which your LLC is based.
Alongside sales tax, there's also the use tax, which is paid at the same rate by individuals or businesses who buy or receive tangible personal property from another state or country but do not pay sales tax on it.
Depending on the activities your business engages in, it may also be required to pay certain special sales taxes, which are imposed in some cities and counties. Some examples of these include lodging taxes, restaurant taxes, and motor vehicle rental taxes.
Note: You can use the North Dakota Office of State Tax Commissioner’s Local Taxes by Location publication to find the specific sales and use tax rates in effect in your city and county.
If your LLC owns property in North Dakota, you’ll be required to pay tax on it at a rate that varies based on your county. These taxes are set and collected by each county on an annual basis by January 1, though you’ll be able to pay them without penalty until March 1.
Since property taxes are managed at a local level, you’ll need to get in contact with your county’s Tax Director or Auditor for more specific information on how this tax will apply to your LLC.
Note: You can get in contact with the relevant authorities in your local area using the North Dakota Association of Counties website.
Recommended Service: Schedule a free consultation with 1-800Accountant to ensure your business remains legally compliant.
North Dakota State Taxes
Every state has its own regulations and rules that dictate how it taxes individuals and businesses. Below is a list of the most relevant state-level taxes for LLCs in North Dakota.
On top of any federal income tax responsibilities, LLCs based in North Dakota are required to pay certain state-level income taxes on their earnings, including:
- Individual Income Tax: This is set at a rate that varies between 1.10% and 2.90% on the salaries each member receives from your LLC’s gross earnings. An individual tax return needs to be filed by April 15, which can be done either online or by mail using Form ND-1.
- Corporate Income Tax: North Dakota LLCs that have elected to be taxed as C Corps are subject to a variable rate corporate income tax ranging between 1.41% to 4.31%. This is imposed on the business’s total taxable income and must be filed by April 15 using Form 40.
It’s worth noting that, while LLCs organized as S Corps and partnerships benefit from passthrough taxation, they will still need to file a state income tax return at an entity level. S Corps will do so using Form 60, while partnerships will need to use Form 58.
While your LLC can pay its North Dakota state income tax bill using a check or money order made payable to the ND State Tax Commissioner, it’s far easier and quicker to do this online using the ND Taxpayer Access Point (TAP).
If your North Dakota LLC pays wages to employees who either reside or provide services within the state, you may have to submit a North Dakota income tax withholding return.
To calculate the amount you need to withhold, you can use the federal Employee's Withholding Allowance Certificate (Form W-4). It's essential to note that North Dakota employers are also responsible for paying income tax withholding for resident employees who work in another state, unless the employer is already required to withhold the other state's income tax from the wages earned in that state.
However, there are certain wages that are exempt from North Dakota income tax withholding, such as wages paid by a farmer or rancher and those that are otherwise exempt from federal income tax withholding.
Note: For more information on income tax withholding, see the Income Tax Withholding & Information Returns Guideline.
Sales and Use Taxes
If your LLC engages in retail sales and tangible personal property brought or shipped into the state, you’ll be subject to North Dakota sales tax. This is set at a general rate of 5.00% for most retail sales, though this can increase up to as much as 8.00% when local sales and use taxes are considered.
In addition to this, items such as alcohol, farm machinery, and new mobile homes are subject to additional sales tax rates. Local and state sales taxes are paid online together through the ND TAP at a filing frequency assigned to you by the North Dakota Office of the State Tax Commissioner.
Note: To be able to operate legally within the state, your LLC must secure a sales tax permit from NDTap 30 days before it makes its first sale.
In addition to the standard taxes we’ve outlined above, North Dakota charges a variety of special taxes on the sale of certain types of goods and services. We’ve outlined some of the most common ones encountered by our readers below:
- Alcohol Tax: This is imposed at a rate of 7.00% on the sale of alcoholic beverages and applies to both on-sale and off-sale transactions, such as bars, restaurants, grocery stores, and liquor stores.
- Cigarette and Tobacco Products Tax: This tax is set at a rate of 28% on the wholesale purchase price of cigarettes and tobacco products, such as pipe tobacco, cigars, snuff, chewing tobacco, and kreteks.
- Motor Fuel Tax: This is imposed at a rate that varies depending on the type of fuel being sold. For example, it’s levied at a rate of $0.23 per gallon on gasoline and gasohol, but $0.08 per gallon of aviation fuel. Special fuels such as diesel, kerosene and liquefied petroleum gas are also all taxed at different rates.
Note: For a full list of the different statewide business taxes your LLC may be required to pay in North Dakota, be sure to refer to the Office of the State Tax Commissioner’s website.
Regardless of where your business is located, if you run an LLC in the US, there are a number of federal taxes you’ll need to pay. Below are some of the main types your LLC may be required to pay for federal tax purposes:
By default, the Internal Revenue Service (IRS) will not treat single and multi-member LLCs as separate entities from you for tax purposes. What this means is that you’ll need to report your share of your LLC’s profits on your individual tax returns and pay federal income tax on them at the personal rate of your tax bracket.
Having said that, keep in mind that LLCs can also elect to be taxed as C corps or S corps, which changes how these taxes are levied in different ways.
In addition to income tax, members of single- and multi-member LLCs will need to pay federal self-employment taxes on the share of the business’s profits that they report on their personal tax return at the end of the year.
This tax is levied at a flat rate of 15.3% against businesses with net earnings that exceed $400, though it is applied slightly differently to LLCs that have elected to be taxed as S corps or C corps.
If your LLC hires any employees, it will need to withhold a portion of their salaries to cover various types of taxes on your employees’ behalf – including Social Security, Medicare (FICA), and payroll taxes.
Furthermore, the members of any LLCs that have elected to be taxed as an S corp will be required to pay employment taxes on their salaries. However, in return for this, the remainder of the business’s profit after these salaries have been distributed will be safe from both self-employment and FICA taxes.
If your LLC engages in certain types of business (such as the sale of alcohol and tobacco or operating a heavy highway vehicle, among others), it may need to pay federal excise taxes in order to do so legally. Each excise tax comes with its own set of rules, rates, and filing obligations you’ll need to be aware of.
Understanding and fulfilling these federal tax obligations is crucial for keeping your LLC compliant and avoiding unnecessary financial penalties and/or fines.
How to File LLC Taxes in North Dakota
Below, we’ve outlined the general process an LLC in North Dakota will need to follow in order to file their tax return correctly. Note that the specificities of each step will vary slightly depending on how your LLC is organized and the specific locality it’s based in.
Step 1: Gather Your Documentation
To ensure accurate tax filing, thorough record-keeping is essential. Begin by collecting your personal information, including:
- You and your partner’s Social Security number, date of birth, and residential address
- The previous year’s tax returns
- Your LLC’s Federal Tax Identification Number or Employer Identification Number (EIN)
Then, you’ll need to gather all documentation related to your business’s income, such as:
- Invoices you’ve issued
- Sales transaction logs
- Electronic payment reports from services like PayPal or Stripe
Lastly, assemble all records pertaining to your business expenses, which should cover:
- Lease receipts for your business premises
- Bills for utilities
- Records of office supplies purchases
- Documentation of business-related travel
- Payroll records for employees
Note: Depending on how your LLC is organized and its tax election, you may need different information for your tax return.
Step 2: Find The Right Tax Forms
Once you've gathered all necessary documents, the next step is to select the correct tax forms for your LLC based on its organization:
- Single-Member LLCs: The business’s total income and expenses are reported on a Schedule C form, which is attached to the owner’s personal tax return and due by April 15 or the following business day if it lands on a weekend or holiday.
- Multi-Member LLCs: File an information return using Form 1065. Members must fill out a Schedule K-1 showing their individual earnings or losses by March 15 or the next business day.
- C Corporations: File a corporate tax return using Form 1120 by the April 15 deadline or on the next business day if it's a weekend or holiday.
- S Corporations: Use Form 1120-S for the corporate tax return and distribute Schedule K-1 forms to shareholders for reporting their shares of profits or losses. The deadline for filing taxes using 1120-S is March 15 or the following business day.
Since state and local taxes will have their own individual forms and requirements, we recommend contacting your municipality or hiring an accountant for guidance.
With the appropriate documentation gathered and the correct tax forms for your business entity on hand, you’ll be ready to fill them out and submit them.
Step 3: File Your Taxes
The majority of businesses choose electronic filing for its speed, enhanced security, and reliability compared to paper filing, which can be slower and more prone to errors. Here’s how it works:
- Federal Tax Returns: The IRS provides two electronic services for tax submission: Free File for businesses with an AGI below $72,000 and Free Fillable Forms for those above the threshold.
- State and Local Tax Returns: Exact filing requirements can vary depending upon the tax, though the vast majority of state and local taxes can be filed online using the ND TAP platform.
Note: These electronic filing tools are best suited for those who are already confident in handling their LLC taxes as if filling out a paper form.
For new business owners, we recommend opting for the expertise of a tax professional in order to ensure both accuracy and compliance in your tax filings.
Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes.
Keep Your North Dakota LLC Compliant
While LLCs are generally easier to maintain than corporations, there are certain state and local formalities your LLC must satisfy in order to remain compliant.
North Dakota LLC Annual Report
North Dakota LLCs must file an annual report with the Secretary of State, in which every LLC must file an annual report on or before November 15 of each year. The first annual report is due following the year the LLC became effective in the state and must be completed on the North Dakota Secretary of State’s FirstStop online portal.
You must submit the annual report on or before November 15 to pay a fee of $50. If you submit the annual report after November 15, you will be charged a fee of $100. You may file online with a credit card payment or print the form found on FirstStop and mail it with a check, cashier’s check, or money order payable to “Secretary of State.”
If an LLC fails to file an annual report by the due date, it will be placed in “Not Good Standing” with the state. This has serious consequences for the LLC, as six months after the report is due, the LLC will be involuntarily terminated or, in the case of a foreign company, the company’s authority will be revoked.
Licensure and Tax Requirements
In North Dakota, almost all businesses are required to obtain various licenses and permits at the local, state, and federal levels. Below, we’ve broken down three of the most common types your LLC may need:
- Sales Tax Permit: If your LLC sells taxable tangible personal property, admissions to recreational activities, and lodging rentals, you’ll need to obtain a sales tax permit from the North Dakota Department of Revenue.
- Professional Licenses: LLCs offering professional services will likely need a specific license. For example, if you plan to work in real estate or health care, your LLC will need to obtain the relevant license from the applicable licensing board. See the North Dakota Boards and Commissions for more information.
- Environmental Permits: If your LLC discharges pollutants into the air, water, or soil, you need to obtain an environmental permit from the North Dakota Department of Environmental Quality (ND DEQ).
North Dakota LLC Taxes FAQs
There are several states with no income taxes, including Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming. Though it levies a state income tax, North Dakota has some of the lowest rates in the state.
To learn more about the different ways LLCs are taxed, see our guide.
North Dakota business income tax is a tax levied on corporations that do business or have income sources in North Dakota. The tax rates vary depending on the amount of taxable income, ranging from 1.41% to 4.31%.
To know more about how to pay taxes in the state, check out the section on North Dakota state taxes above.
To start an LLC in North Dakota, you need to choose a unique business name, appoint a registered agent, file Articles of Organization with the Secretary of State, create an Operating Agreement, and pay the filing fee. Additionally, it's advisable to file the necessary taxes and obtain necessary licenses and permits.
See the steps on how to start an LLC in North Dakota.
The individual income tax rates in North Dakota range from 1.1% to 2.9%, which apply to federal taxable income, while the corporate tax ranges from 1.41% to 4.31% of North Dakota taxable income. Besides the state and federal income taxes that you need to file, it’s worth mentioning North Dakota doesn’t levy any local income taxes.