North Dakota Business Taxes at a Glance
North Dakota's individual income tax is among the lowest of any state that has one, and a 2023 reform added a large zero-rate bracket that removes many residents from the tax entirely. Oil production in western North Dakota drives major state taxes, and the state runs its own workers' compensation system. BOMCAS helps North Dakota individuals and businesses manage these rules and their federal filings.
Individual Income Tax
North Dakota taxes residents on all income and nonresidents on North Dakota-source income. After a 2023 reform, taxable income up to a set amount is taxed at zero, with low rates above that. North Dakota starts from federal taxable income with its own adjustments, and it offers an exclusion for a portion of long-term capital gains and a subtraction for Social Security benefits.
North Dakota has reciprocal agreements with Minnesota and Montana for wages. Residents of those states working in North Dakota, including many in the Fargo–Moorhead and Grand Forks areas, generally pay income tax only to their home state on wages, if they file the exemption form. We prepare North Dakota returns and handle reciprocity and part-year filings.
Oil Extraction and Gross Production Taxes
North Dakota's Bakken oil field generates two main state taxes on oil: a gross production tax and an oil extraction tax, both based on the value of oil produced, with different rates and exemptions. Natural gas pays its own gross production tax. Operators and purchasers report and pay them, and royalty and working interest owners see them on statements.
For small operators, royalty owners, mineral owners, and oilfield service companies, we provide:
- Bookkeeping that tracks production revenue and taxes by well
- Reconciliation of check stubs and statements to deposits
- Depletion and depreciation schedules for federal returns
- Records for nonresident mineral owners, who may need North Dakota returns
Many mineral owners live in other states. Royalty income from North Dakota wells is North Dakota-source income and may require a nonresident return.
Corporate Income Tax and Pass-Throughs
Corporations doing business in North Dakota pay corporate income tax on apportioned income at low rates. Partnerships and S corporations file North Dakota returns and may withhold or file composite returns for nonresident owners, which is common with mineral ownership. An elective entity-level tax is available to North Dakota partnerships and S corporations.
We file the business returns and compare results with and without the election.
No Business Personal Property Tax
North Dakota does not tax business personal property such as equipment, machinery, and inventory. Property tax applies to real property, assessed locally, and agricultural land is valued based on its productivity. We keep fixed asset records for federal depreciation and real property records for local assessment.
Sales and Use Tax
North Dakota's sales tax combines a state rate with local taxes in many cities and counties, and some local taxes have caps on large purchases. Farm machinery and certain agricultural inputs have reduced rates or exemptions. Oilfield equipment and supplies purchased from out-of-state vendors often create use tax.
We register businesses, track local rates and caps, review use tax on purchases, and file returns.
Workers' Compensation Through WSI
North Dakota is one of the few states where workers' compensation coverage comes only from the state. Employers must obtain coverage from Workforce Safety & Insurance (WSI), report payroll, and pay premiums based on job classifications. Private workers' compensation insurance is not available for North Dakota employees. Out-of-state employers with workers in North Dakota also need WSI coverage.
Farm Machinery and Sales Tax
North Dakota exempts qualifying farm machinery and irrigation equipment used for agricultural purposes from sales tax, with documentation from the buyer. Dealers and farmers both need records showing the exemption applies. We help farm clients keep invoices and exemption paperwork with their books.
Payroll Reporting to Three Agencies
North Dakota employers withhold state income tax, report unemployment insurance to Job Service North Dakota, and report payroll to WSI. Employees from Minnesota and Montana may file reciprocity forms. We run payroll, file reports, and reconcile them to the books.
Oil Field, Farm, Energy, and Fargo Services
- Oil and gas: production taxes, joint interest accounting, and mineral owner reporting
- Agriculture: wheat, soybeans, and cattle, with farm reporting and exemptions
- Energy and utilities: coal, wind, and pipelines, with fixed asset records
- Manufacturing and agricultural equipment: inventory and sales tax
- Health care and services in Fargo and Bismarck: payroll and cross-border staff
Temporary Workers in the Oil Patch
Workers who come to western North Dakota for oil field jobs while keeping a home elsewhere usually file North Dakota nonresident returns for wages earned there, unless they live in Minnesota or Montana and reciprocity applies. Those who stay longer, buy a home, or move their family may become North Dakota residents. We help workers understand which state taxes their wages and prepare the returns in each state.
Books by Well, Purchase, and Job Class
North Dakota bookkeeping should track production revenue by well, use tax on equipment, and payroll by job classification for WSI. We build these breakdowns into the chart of accounts and check them at each month-end close.
Contact BOMCAS About North Dakota
Mineral owners receiving Bakken royalties, employers setting up WSI coverage, and farm families can contact BOMCAS for a remote review. Pages for individual North Dakota cities and services will follow under this section. Visit the BOMCAS home page or our United States services. Nothing here is advice for a particular taxpayer, and the details depend on your situation.
Talk to BOMCAS About Your North Dakota Taxes
Have a question about your North Dakota filings, payroll or bookkeeping? Contact BOMCAS or use the contact form below, and we will get back to you as soon as possible. You can also browse all United States services.