How to File LLC Taxes in North Dakota? (Simple Guide)
As a North Dakota LLC owner, you are liable for keeping up with various tax responsibilities and tax requirements to maintain compliance with state, local, and federal governments.
To help you understand the numerous taxes you are liable to, we have assembled a team of LLC wizards with more than two decades of joint expertise in the LLC business sector. We also did two weeks of research on the North Dakota state website.
This article summarizes all North Dakota LLC taxes you need to be aware of.
- LLCs in North Dakota are taxed based on the number of members and the corporation filing status.
- All S-corp LLCs are subject to a North Dakota corporate tax.
- Local North Dakota counties may charge sales, use, and property taxes.
How Are LLCs Taxed in North Dakota?
LLCs in North Dakota are taxed as pass-through entities by default at the state and federal levels.
Because of this status, the IRS does not expect LLCs to file taxes themselves. Instead, the tax filing responsibility is passed down from the LLC to individual members.
LLCs are responsible for filing specific federal, state, and local government taxes. Let's look at them below.
State Taxes for North Dakota LLCs
The Internal Revenue Service must approve the status for a North Dakota LLC to be taxed by the North Dakota state tax commissioner.
The IRS categorizes LLCs based on number of members and corporation status for tax purposes. Here's how.
1. Single-Member LLCs
According to the IRS, single-member LLCs are disregarded entities. In this regard, LLCs are taxed like proprietorships, with the individual owner completing a tax return Form 1040.
2. Multi-Member LLCs
Through the K-1 Form, members report their distributive share of profits. This way, members pay income tax on their personal tax return (Form 1040).
3. LLCs taxed as S-corp
A North Dakota LLC may also be taxed as an S-corp by filing Form 2553 with the IRS. Once approved, the S-corp will not be subject to any federal taxes. Instead, it will only pay individual state income tax.
LLCs with S-corp status use Form 1120-S to report income.
4. LLCs taxed as C-corp
A North Dakota LLC can also get taxed as a C-corp. Unlike an S-corp, a C-corp undergoes double taxation, with taxes levied at the federal and the individual income level. C-corp LLCs file federal taxes using Form 1120, US Corporation Income Tax Return.
If your LLC meets C-corp status filing requirements, you can submit Form 8832 with the IRS.
Federal Taxes for North Dakota LLCs
Here's how North Dakota LLCs pay federal taxes:
1. Federal Self-Employment Tax
LLCs in North Dakota are subject to a 15.3% federal self-employment tax administered by the Federal Insurance Contributions Act (FICA).
The federal self-employment tax covers Medicare, Social Security, and other benefits.
As an S-corp, you won't be liable to pay the 15.3% self-employment tax on your income or withdrawals; instead, you'll pay on your individual salary.
Read our article and learn how to reduce & avoid self-employment tax.
2. Federal Income Tax
Your LLC is also liable for filing the federal income tax. Federal Income tax is only levied on profits withdrawn from the business minus allowances and specific deductions like expenses, healthcare, and retirement plans.
The amount of federal income taxes you pay varies with your earnings, current income tax bracket, deductions, and filing status.
Here are the other taxes a North Dakota LLC pays:
1. Business Tax
Since North Dakota LLCs don't pay and file LLC business taxes directly, the entity's profits/loss is passed through to business owners who file individual tax returns.
All LLCs with a corporation filing status are subject to the North Dakota corporate tax.
The North Dakota corporate tax is filed with Form 40 with rates below:
- $0-$25,000 charged 1.41% of North Dakota taxable income.
- Over $25,000- $50,000 charged $352.50 plus 3.55% of the amount over $25,000.
- Over $50,000 charged $1,240 plus 4.31% of the amount over $50,000 .
2. Sales and Use Tax
North Dakota LLCs with retail sales must collect sales tax from their customers. In North Dakota, physical goods, hotel rentals, and entry fees to recreational activities are all taxable sales.
Any seller in North Dakota who anticipates making these transactions must apply for a North Dakota Sales and Use Permit via the North Dakota Taxpayer Access Point (ND TAP) at least 30 days before making any sales.
Your application will define your sales tax pay period, whether monthly, quarterly, or yearly. From there, the North Dakota LLC will use ND TAP to file and pay its sales and use tax to the state tax commissioner.
The state and local or county sales taxes are always included in North Dakota's sales tax. The base North Dakota sales tax rate is 5% for most transactions. However, it is 7% for alcohol, 3% for newly purchased farm equipment solely used for agricultural production, and 3% for newly purchased mobile homes .
Besides the North Dakota sales tax, North Dakota counties and cities may collect additional local sales and use taxes, including specific levies for lodging, dining, and car rentals.
North Dakota uses tax functions similar to sales tax. Any purchaser of taxable goods transported into North Dakota or sent there who did not pay sales tax must also pay use tax.
The use tax is determined based on the purchase price in the same manner as the applicable sales tax.
- How to Open an LLC in North Dakota
- Top LLC Formation Services in North Dakota
- Professional Registered Agent Services in North Dakota
3. Local North Dakota Taxes
In addition to the local sales and use tax discussed above, North Dakota LLCs may need to pay property taxes. In North Dakota, all real estate is subject to property taxes unless it is very specifically exempt.
"Property taxes are set and levied by the counties, who then give the funds to the relevant taxing districts such as the city, township, school, or others as necessary."
- North Dakota Association of Counties
North Dakota requires payment of all property taxes by January 1. However, late payments are not subject to penalties.
Property taxes go directly to each county, and you must direct any specific inquiries to your county's Tax Director or Auditor.
4. Taxes in Lieu of Property Tax
Some industries in North Dakota don't pay property taxes; they pay industry-specific levies .
These sectors and assets may include:
- Rural electric cooperatives
- Tourism or concession license
- Telecommunications companies
- Land owned by the Board of University and School Lands
- Farm or ranch land owned by nonprofits for conservation
5. Employee & Employer Taxes
North Dakota employers and employees are subject to various taxes, including:
- North Dakota Income Tax Withholding: North Dakota LLCs must submit income tax withholding if they're paying wages to an employee in the state. However, wages paid by a farmer or rancher or wages exempt from federal tax withholding are not subject to income tax withholding in North Dakota.
- Unemployment Insurance Tax: Employers must pay UI tax if they have a quarterly payroll of $1500 or at least one employee for 20 weeks out of the year .
- Workers’ Compensation: In North Dakota, most employers must carry worker's compensation insurance. The North Dakota Workforce Safety & Insurance is the only provider and administrator for North Dakota's workers' compensation system.
Does North Dakota Have a Sales Tax?
Yes, North Dakota has a sales tax levied at 5% for most of the sales, 7% for alcohol, 3% for new farm equipment, and 3% for new mobile homes.
Do Foreign LLCs in North Dakota Need to Pay North Dakota Taxes?
Yes, foreign LLCs in North Dakota need to pay North Dakota taxes, including state and local taxes.
Do You Need Help Filing Your North Dakota LLC Taxes?
All LLCs in North Dakota must file their taxes timely and accurately. To help you navigate this process, we recommend using QuickBooks, an accounting software that supports automated tax reporting and filing.
QuickBooks provides thorough tax management solutions that simplify difficult filing processes, ensuring you file your federal, local, and state taxes without issues.
Their services also offer choices with professional advice whereby you can speak with CPA tax experts who provide customized advice and collaborate to maximize your tax benefits.