North Dakota Pass-Through Entity Tax
LLCs in North Dakota typically do not pay direct state taxes. Instead, their profits pass through to the members/owners who file individual income taxes.
North Dakota is one of the few states that does not have a pass-through entity (PTE) tax. Here’s a breakdown of the situation:
- Pass-through entities (PTEs): These are business structures like partnerships, S corporations, and limited liability companies (LLCs) where the business’s income “passes through” to the individual owners on their personal tax returns.
- PTE tax: This is a tax imposed by some states directly on the income of pass-through entities, separate from the income tax paid by the owners.
The state of North Dakota has a two-step sales tax filing process, which includes submitting the required data and remitting collected tax dollars. The state’s filing system forces business owners to detail their total taxable sales in the state and the location of each sale. Failure to file returns and remit collected tax can result in penalties and interest charges.
Passthrough entities must also pay regular federal income tax based on earnings, current tax bracket, deductions, and filing status. Some LLCs benefit from filing as an S-corp for federal tax purposes, but this requires additional and more complicated filings. A CPA can help a business owner determine if S-corp status will benefit them.
North Dakota Business Tax Exemption
If you’re a North Dakota small business owner, there are several state tax incentives to consider. For example, the state’s low individual income taxes, local sales and property tax rates, and no franchise tax offer significant advantages to small businesses. Additionally, the state offers a wide variety of investment and financial institution tax exemptions and credits.
North Dakota State Taxes Due Dates
A PTE tax due date is the last day of the entity’s taxable year. A PTE must pay its tax by the end of its taxable year or face late payment fees.
North Dakota Office of State Tax Commissioner – Form PWE: This form is related to withholding requirements for nonresident members of pass-through entities, but it doesn’t indicate the existence of a PTE tax itself: https://www.tax.nd.gov/individual
I you’re operating a pass-through entity in North Dakota, you’ll focus on filing individual income tax returns for the owners, following the federal tax guidelines for your specific PTE structure. No separate PTE tax is imposed at the entity level in North Dakota.
