North Dakota LLC Taxes
North Dakota LLC taxes (by default) generally work the same federally and at the state level. The IRS does not tax LLCs company taxes. Instead, the LLC’s profits pass through to the individual members (LLC owners) who then pay the federal self-employment income tax of 15.3% (12.4% for social security and 4.9% for Medicare). North Dakota follows a similar model and does not require a company tax for LLCs, but the individual members of the LLC must file state income tax.
In this article, we’ll cover:
How North Dakota LLCs are Taxed Federally
By default an LLC with one owner, a single-member LLC, is taxed as a sole proprietorship, and an LLC with more than one owner, a multi-member LLC is taxed as a partnership. Here are the tax forms needed for either type of LLC :
- Single-member LLC—Form 1040 (usually) Schedule C, but some file C-EZ, E, or F
- Multi-member LLC—Form 1065
Outside of the default federal taxation for North Dakota LLCs, some elect to file as an S-corp or C-corp.
North Dakota LLCs taxed as S-Corp
A North Dakota LLC recognized and taxed as an S-corp will not be taxed at the federal level and only pays individual income tax, just like a regular LLC. The difference is that an LLC with S-corp status can make pre-tax member distributions that are not subject to the 15.3% self-employment income tax.
If you think S-corp status might benefit your North Dakota LLC, first review the IRS Requirements for S-Corps and then consider speaking with a CPA. While an S-corp does benefit some North Dakota LLCs, that is not always the case. The additional and more complicated filings for an S-corp are not always worth the effort for some businesses.
To apply for S-Corp Status for your North Dakota LLC, file Form 2553 with the IRS. If your North Dakota LLC is less than 70 days old, you can still hire Northwest to complete your S-Corp application for $100 from within your account or through initial sign up. Once an LLC receives S-corp status, they will use Form 1120-S to report income.
North Dakota LLCs taxed as C-Corp
Although it’s rarely done, it is possible to have a North Dakota LLC taxed the same as a corporation by electing C-corp status. As a C-corp, an LLC will have double taxation with taxes at the federal level and the individual income level, however C-corps are eligible for corporate tax deductions. If you think the C-corp status would be beneficial to your North Dakota LLC, consult with a CPA to break down the numbers.
If you decide to have your LLC taxed as a C-corp, check out our guide to apply for C-Corp status, and then file Form 8832 with the IRS. When it’s time to file your federal taxes each year, you’ll use Form 1120, US Corporation Income Tax Return.
North Dakota LLC Business Tax
North Dakota LLCs (including LLCs with S-Corp status) do not pay direct state taxes. The entity’s profit or loss is passed through to the LLC members/owners who then pay individual income tax.
If your North Dakota LLC is one of the uncommon companies that has elected to be taxed as a corporation, then your LLC is subject to the North Dakota Corporate Tax. The North Dakota corporate tax should be filed with Form 40, and the rates are as follows:
|Taxable Corporate Income Over:||But Not Over:||ND Corporate Tax:|
|$0||$25,000||1.41% of North Dakota Taxable Income|
|$25,000||$50,000||$352.50 Plus 3.55% of Amount Over $25,000|
$1,240 Plus 4.31% of Amount Over $50,000
North Dakota Individual Income Tax
North Dakota enjoys some of the lowest individual income tax rates in the country. And, regardless of where in the state you live or run your business, these rates will remain consistent as no North Dakota city levies local income taxes.
North Dakota’s income tax system is based on five graduated brackets that each vary based on the individual’s filing status of single, married, married filed separately, or head of household. The North Dakota income tax rates range from 1.1% – 2.9%. The basic tax schedule based on single filing status is outlined below, but you can view all four filing status schedules on the ND Estimated Income Tax Form.
ND-1 & ND-EZ Tax Rate Schedule Filing Single:
|ND Taxable Income is Over:||But Not Over:||ND Income Tax:|
|$41,775||$101,050||$459.53 + 2.04% of amount over $41,775|
|$101,050||$210,825||$1,668.74 + 2.27% of amount over $101,050|
|$210,825||$458,350||$4,160.63 + 2.64% of amount over $210,825|
|$458,350||$$$||$10,695.29 + 2.90% of amount over $458,350|
Employer Withholding for North Dakota LLCs
Many North Dakota LLCs must submit state income tax withholding, specifically businesses that are:
- Paying wages to an employee who performs services in North Dakota, and the wages are subject to federal income tax withholding.
- Based in North Dakota and paying wages to a North Dakota resident employee who works in another state. In this situation, the employer will withhold the other state’s income tax on the wages earned in that state.
Wages not subject to income tax withholding in North Dakota could include wages paid by a farmer or rancher, or wages exempt from federal tax withholding.
North Dakota employers subject to income tax withholding must register online for an Income Tax Withholding account with the Office of State Tax Commissioner by using the North Dakota Taxpayer Access Point (ND TAP). For additional guidance on ND TAP, reference Instructions to Sign-Up for ND TAP.
To calculate income tax withholding, North Dakota uses the federal form W-4 and may be calculated using either the Wage Bracket Method (generally recommended for employers with few employees and manual payroll), or the Percentage Method (recommended for most companies). More information on both methods and further details can be found in the North Dakota Income Tax Withholding Rates and Instructions.
North Dakota Sales and Use Taxes
North Dakota LLCs with retail sales should expect to collect sales tax from their customers. Taxable sales in North Dakota include tangible items, the rental of lodging accommodations, and admissions to recreational activities. Any North Dakota seller anticipating these sales must apply for a North Dakota Sales and Use Permit through the North Dakota Taxpayer Access Point (ND TAP), and should submit the application 30 days prior to making sales. Your sales tax pay period will be determined through your application and may be monthly, quarterly or annually. North Dakota LLCs then file and pay their sales and use tax through ND TAP.
Sales tax in North Dakota always includes the state sales tax and may include a city or county sales tax. Most sales made in North Dakota will include a base, state sales tax rate of 5%, but exceptions include alcohol at 7%, new farm machinery exclusively used for agriculture production at 3%, and new mobile homes at 3%.
On top of the base North Dakota state sales tax, North Dakota counties and cities may add local sales and use taxes, including special taxes for lodging, restaurants, and auto rentals. The North Dakota Taxpayer Access Point (TAP) Sales Tax Rate Lookup tool does not include special taxes, but you can search the combined state and city/county sales tax of any area in North Dakota by zip code.
Use tax in North Dakota works similarly to sales tax. Any buyer who purchases taxable items brought or shipped into North Dakota and did not pay sales tax, must pay use tax. The use tax is calculated the same way as the applicable sales tax, and is based on the purchase price.
Local North Dakota Taxes
As covered earlier, there are no income taxes assessed at the city/county level in North Dakota. However, there are some local sales and use taxes. Another local tax you’ll need to consider is property tax. All real property, unless very specifically exempt, is subject to property tax in North Dakota. These property taxes are determined and collected by the counties who then distribute the funds to the city, township, school, or other taxing district as appropriate.
All property taxes in North Dakota are due January 1, but may be paid until March 1 without penalty. Property taxes are paid directly to each county and specific questions about property taxes should be directed to your county Tax Director or Auditor.
Taxes Paid in Lieu of Property Taxes
In North Dakota, some industries pay industry-specific taxes in lieu of property tax. These industries and properties may include:
- Rural Electric Cooperatives
- Telecommunications Companies
- Tourism or Concession License
- Land owned/leased by the ND Game and Fish Department
- Farm or ranch land owned by nonprofits for conservation
- Land owned by the Board of University and School Lands
Other Taxes in North Dakota
North Dakota LLCs in highly regulated industries should expect specific laws around the requirements, licensing, and taxes for their type of business. Generally, the required licensing and taxes can be managed through the North Dakota Taxpayer Access Point (ND TAP). These industry-specific taxes include:
- Alcohol Tax
- Cigarette and Tobacco Products Tax
- Coal Tax
- Motor Fuel Tax
- Oil and Gas Severance Tax
- Telecommunications Tax
North Dakota State Employer Taxes
Most North Dakota LLCs with employees will need to pay for unemployment insurance and workers’ compensation insurance.
Unemployment Insurance (UI) Tax—Employers with a quarterly payroll of $1500 or at least one worker for 20 weeks of the year need to pay UI tax. The tax rate for new (non-construction) employers is 1.13% until a rate can be calculated based on their their record of unemployment insurance taxes paid and benefits charged.
Workers’ Compensation—Most employers in North Dakota are required to have worker’s compensation coverage. North Dakota Workforce Safety & Insurance is the sole provider and administrator of the workers’ compensation system in North Dakota, so there are no privatized options. North Dakota employers can apply using the Workforce & Safety Insurance Application for Coverage.
Do Foreign LLCs in North Dakota Pay Taxes?
Yes. Any LLC formed in another state or jurisdiction doing business as a foreign North Dakota LLC is subject to the same taxes as domestically formed North Dakota LLCs.