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North Dakota levies a graduated personal income tax and a graduated corporate income tax, but its rates sit among the lowest of any state that taxes income, and recent reforms added a zero-rate bottom bracket that exempts many lower-income filers from individual income tax entirely. The state also imposes a statewide sales and use tax on top of which cities and counties can add local rates, and it does not have a franchise, net-worth, or general gross-receipts tax. Most of these taxes are administered by the North Dakota Office of State Tax Commissioner through its TAP (Taxpayer Access Point) portal.
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North Dakota Business Tax Guide
North Dakota levies a graduated personal income tax and a graduated corporate income tax, but its rates sit among the lowest of any state that taxes income, and recent reforms added a zero-rate bottom bracket that exempts many lower-income filers from individual income tax entirely. The state also imposes a statewide sales and use tax on top of which cities and counties can add local rates, and it does not have a franchise, net-worth, or general gross-receipts tax. Most of these taxes are administered by the North Dakota Office of State Tax Commissioner through its TAP (Taxpayer Access Point) portal.
North Dakota imposes a graduated personal income tax on residents and on nonresidents with North Dakota-source income, but its rate schedule is unusually low, and a recent overhaul created a zero-percent bottom bracket so that filers below a set income level owe no state individual income tax at all. The starting point for the North Dakota return is federal taxable income, which keeps individual filing relatively simple for most owners. Because the vast majority of owner-operated businesses are pass-through entities, profit from sole proprietorships, partnerships, S corporations, and most LLCs flows through to the owners and is taxed on their individual North Dakota returns rather than at the business level, so how an owner draws income still drives the state tax outcome even at these low rates.
C corporations doing business in North Dakota pay the corporate income tax on income apportioned to the state under a three-bracket schedule that, like the personal tax, is among the lowest in the country: 1.41% on the first $25,000 of North Dakota taxable income, $352.50 plus 3.55% on the next $25,000, and $1,240 plus 4.31% above $50,000. The Tax Commissioner notes that those rates have not moved since 2015. Two structural points sit behind them. North Dakota defaults to worldwide unitary combined reporting, which is the reverse of most states, and a corporation that prefers the water's edge method elects it. Making that election carries a price: Form 40 line 17 adds a 3.5% surtax on North Dakota taxable income on top of the bracket tax. North Dakota does not impose a franchise tax, a net-worth or capital-stock tax, or a general gross-receipts tax on operating businesses, so the corporate income tax is the primary entity-level levy for most companies. North Dakota has not enacted a pass-through entity tax election, and remains one of the few income-tax states offering no entity-level workaround to the federal SALT cap. The Tax Commissioner puts it plainly: partnerships, S corporations and LLCs do not pay income tax at the entity level, and the profit or loss passes through to the owners. What North Dakota does provide is narrower and aimed at nonresident owners rather than at the SALT cap. A pass-through entity must withhold North Dakota tax from a nonresident member's distributive share under N.D.C.C. § 57-38-31.1, a nonresident member that is itself a pass-through entity can file Form PWE to opt out of that withholding while remaining liable for the tax, and an eligible entity may instead file a composite return covering nonresident individuals whose only North Dakota income comes from pass-throughs. Composite filing allows no deductions, exclusions or credits, so it buys simplicity at a cost. An owner looking for a SALT-cap workaround will have to find it in the other states the income is sourced to.
North Dakota has a statewide sales and use tax that applies to retail sales of most tangible goods and certain services, and cities and counties can impose their own local sales taxes on top of the state rate, so the combined rate a business charges depends on the exact location of the sale. Remote and online sellers can establish economic nexus once their sales into North Dakota cross the state's threshold, at which point they must register, collect, and remit just as an in-state seller would, and marketplace facilitators are generally required to collect on behalf of their third-party sellers. Many local taxes also carry a maximum-tax or refund cap on large single purchases, a North Dakota wrinkle that matters for businesses making big-ticket sales, so sellers should map collection to each jurisdiction rather than applying one statewide rate.
Short-term lodging in North Dakota is subject to the regular state and local sales tax, and on top of that many cities levy a local lodging tax (and in some cases an additional lodging-and-restaurant tax) that applies to hotels, motels, short-term rentals, campgrounds, RV parks, and similar accommodations for transient guests. These city lodging taxes are stacked on top of state and local sales tax, so the total a guest pays on a room or site varies meaningfully from one North Dakota city to the next, and operators are generally required to register, collect the applicable taxes, and remit them on the assigned schedule. Hosts using online marketplaces should confirm exactly which taxes the platform collects on their behalf, because marketplace collection may cover state sales tax while leaving a city lodging tax to be registered for and remitted directly by the operator.
Most North Dakota tax accounts, including sales and use tax, lodging taxes, income tax withholding, and corporate filings, are set up and managed through the Office of State Tax Commissioner's Taxpayer Access Point (TAP), while entity formation and registration run through the North Dakota Secretary of State. Sales-and-use and lodging returns are typically filed on a recurring cadence the state assigns based on volume, and income and corporate returns follow their own annual cycles with estimated payments for taxpayers above the state's thresholds. Because local sales and lodging taxes are layered on by jurisdiction, the most common compliance pitfall for North Dakota owner-operators is sourcing each sale to the correct city and county, which makes clean, location-tagged records essential if the Tax Commissioner examines the account on audit.
North Dakota's economy and tax base are heavily shaped by oil and gas: the state runs a combined oil extraction tax and gross production tax on petroleum activity in the Bakken and surrounding formations, and that severance revenue is a major reason the state can keep its broad-based income and sales tax rates so low. For most owner-operated and hospitality businesses these production taxes are not directly owed, but they matter indirectly, because boom-and-bust energy cycles drive occupancy, labor costs, and demand for lodging, campgrounds, and RV parks across the western part of the state. Operators in oil-country markets like Williston, Dickinson, and Watford City should expect highly seasonal and cycle-sensitive revenue, and should treat each city's specific lodging-tax rules as its own question rather than assuming a uniform statewide rate.
North Dakota owner-operators work with Parikh Financial because the state's low headline rates hide real complexity in layered local sales taxes, city lodging taxes, pass-through entity elections, and economic nexus for anyone selling across state lines. We handle the bookkeeping, sales-and-lodging-tax registration and remittance for STR, campground, and hospitality clients, and the entity-structure and PTE-election decisions that determine how much North Dakota tax owners actually pay.
Book a CallTax rules and rates change. General information for North Dakota operators, not tax advice — confirm current requirements with the North Dakota Department of Revenue or your Parikh Financial contact.