Royalty Withholding

A remitter is a person or an entity who either produces oil or gas or the person/entity that distributes a royalty payment to a royalty owner.
Every remitter must register with the Office of State Tax Commissioner by completing and filing an Application to Register for Royalty Withholding. A remitter must register even if any of the exceptions to the withholding requirement apply or the remitter does not withhold any tax for any reporting period.
 

The withholding amount is determined by multiplying the gross amount of the North Dakota oil or gas royalty by the highest marginal individual income tax rate reduced by 0.75%. The highest individual income tax rate is 2.50%, resulting in a withholding tax rate of 1.75% (2.50% - 0.75%).
This withholding tax rate applies to all types of royalty owners; there are exceptions as shown in the Filing Exceptions drop-down below. 

Remitters are required to electronically file all information returns with North Dakota. The Form 1099 and 1042-S forms must be submitted electronically through ND TAP or accounting software.

• The amount that is subject to North Dakota income tax withholding is the gross amount of the North Dakota oil or gas royalty payment. 
• This amount should be the amount reported in Box 2 of the federal or state-only Form 1099-MISC or Form 1042-S. 
   

Form RWT-941 – Royalty Withholding return

Electronically filing returns can be completed in one of the following ways: 

• ND TAP
• ACH Credit - for more information, see the "Payment Options" dropdown below.

If you are not required to file electronically, complete Form RWT-941 – Royalty withholding return. 
 

Form RWT-1096 / Form 1099 or 1042-S – Annual Reconciliation 
 

Electronic filing your information return (Form 1099 or 1042-S) can be completed through ND TAP.
 

How to Amend/Correct Form RWT-941

Correcting electronically filed returns can be completed through ND TAP.  If you are not required to file electronically, complete Form RWT-941 – Royalty withholding return and fill in the “amended” circle.

How to Amend/Correct 1099s

If a corrected Form 1099-MISC or 1042-S reporting North Dakota oil or gas royalty payments is filed with the Internal Revenue Service, a copy of the corrected form must be filed with North Dakota. This includes any correction, including a change to the name or federal identification number of the employee or payee. 

If a correction needs to be made only to the state information on the form, and a corrected form is not going to be filed for federal purposes, report the correction to North Dakota using a Form 1099-MISC or 1042-S (with the “CORRECTED” box checked). For state-only corrections, the forms can be marked “For State Purposes Only.” 

For North Dakota purposes, corrected forms cannot be electronically filed but must be filed on paper. 

There are 3 exceptions to the withholding requirement:

• Remitter is an oil or gas producer whose production in North Dakota in the prior year was less than 350,000 barrels of oil or 500 million cubic feet of gas.
  • To continue to be exempt, the remitter must file the Form RWT-1096 annually to report they met this threshold and include all Form 1099-MISC or Form 1042S issued. 
• Oil and gas royalty payments made to any of the following entities:
  • The United States or any of its agencies, or any state and its political subdivisions.
  • A federally recognized Indian tribe with respect to on-reservation oil and gas production pursuant to a lease entered under the Mineral Leasing Act of 1938 [25 U.S.C. 396a – 396g].
  • The United States as trustee for individual Indians.
  • A publicly traded partnership, as defined in Internal Revenue Code § 7704, that is not treated as a corporation.
  • An organization that is exempt from North Dakota income tax under N.D.C.C. § 57-38-09.
  • The same person or entity as the remitter.
    • A publicly traded partnership or an organization exempt from North Dakota income tax must provide Form RWT-EXM – Exemption Status for Royalty Withholding for Publicly Traded Partnership and Tax-Exempt Organization to each remitter and the Office of State Tax Commissioner.
• Upon written request to the Office of State Tax Commissioner, a remitter may be allowed to not withhold North Dakota income tax from an oil or gas royalty payment that is less than a statutory threshold:
  • Quarterly Payments – payment less than $600
  • Other than Quarterly Payments – when annualized payment is less than $1,000.

Pay Online - Fast and Convenient!
Make a royalty withholding payment electronically to the Office of State Tax Commissioner by using ND TAP.
 

There are two different ways taxpayers can pay for the returns they file.

1. ACH Debit (Free Electronic Payment): The remitter files the royalty withholding return by using ND TAP. Then, the remitter authorizes the State of North Dakota to electronically transfer the payment from the remitter’s bank account to the State’s bank account. With this method, the Office of State Tax commissioner pays all associated bank fees.
2. ACH Credit: The remitter instructs its bank to make an ACH Credit payment to the Office of State Tax Commissioner with information to identify the payment as a royalty withholding return. The ACH Credit acts as the return (nothing else needs to be filed or sent to our office). Information for initiating an ACH Credit Payment is available on page 15 of the ACH Credit PDF.

Please note: Making a non-logged payment in ND TAP does not file your Form RWT-941 – Royalty Withholding Return.
 

Mail- Check or Money Order

If you are unable to pay using ND TAP, you may pay by check or money order, made payable to North Dakota Office of State Tax Commissioner. Complete and print the payment voucher on ND TAP and mail both to the Office of State Tax Commissioner at 600 E. Boulevard Ave. Dept. 127, Bismarck, ND 58505-0599. 
 

Need Help with Filing? 

• Instructions to Sign-Up for ND TAP
• Instructions to E-File 1099s
   

For more information see the Guideline - Income Tax Withholding & Information Returns.
Century Code Reference: N.D.C.C § 57-38-59.4 
 

If you have questions, please contact us:

• Email: taxregcompliance@nd.gov
• Phone: 701-328-1235