Starting a New Business

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When you’re starting a new business, it can be overwhelming to know where to begin. We’re here to help you understand your tax responsibilities.

There are a few things to consider from a tax perspective when establishing your business. They are as follows:

 

  1. Determine your operational business structure. Choices may include a sole proprietorship, LLC, partnership, corporation, or S corporation. Once you determine how you will operate, you must register with the North Dakota Secretary of State. If you are a Sole Proprietor, you will need to register the trade name or “doing business as” name.
Business Structure
Taxation Structure
Sole ProprietorshipIndividual income tax
PartnershipPass-through taxation for each partner
S-CorporationPass-through taxation for each shareholder
C-CorporationTaxed at a corporate level, but shareholders also pay taxes on Dividends
LLC

Based on their number of members:

  • Single member- disregarded as an entity
  • Multi-member- Pass-through taxation for each partner

Can elect to be taxed as a C-Corporation

 

  1. Determine what products or services you will be selling and if they are subject to sales tax. If they are, you need to apply for a North Dakota Sales Tax Permit. Additional guidance and information can be found within the Sales Tax Guidelines.
    1. Local lodging and restaurant tax is collected on short-term lodging rentals for a city or county. An additional tax may be imposed on the rental of lodging and sales of prepared food and beverages. The governing body of any city or county may, by ordinance, impose a city or county tax.
    2. There may be additional registrations or applications required depending on the products and services you sell.
Tax/Business Type
Application Required
Who is required to apply?
Alcohol TaxYes- ND TapA business privilege tax is imposed on alcohol and beer at the wholesale level. A privilege tax is a tax that is paid for a license or opportunity to provide a service. Alcoholic beverage wholesalers, domestic wineries and distilleries, microbrew pubs, brewer taprooms, and out-of-state direct shippers pay alcohol tax.
Cigarette and Tobacco Products TaxYes- North Dakota Attorney General's Office Licensing DivisionWholesales who purchase, sell, or bring cigarettes or tobacco products into the state for resale; retailers who sell untaxed cigarettes or tobacco products to consumers; and individuals who purchase untaxed cigarettes or tobacco products for personal consumption online or from sources outside of North Dakota pay cigarette and tobacco products tax.
ContractorsYes- Application to Obtain Contractor’s Request for ClearanceContractors need to complete several forms and applications to become a licensed contractor in North Dakota. More information about how to become a licensed contractor is available on the North Dakota Secretary of State’s website.
Motor Fuel TaxYes- ND TapNorth Dakota imposes a fuel tax on motor vehicle fuel (gas, gasoline), special fuel (diesel, dyed diesel, natural gas, CNG, LNG), and aviation fuel (jet fuel). All refiners, terminal operators, suppliers, distributors, importers, exporters, or retail fuel locations on a Native American Reservation in North Dakota require a license before operating.
Oil and Gas TaxYes- Application to Register for Oil & Gas TaxesOil and gas production tax is imposed in lieu of property taxes on oil and gas producing properties in North Dakota.
Prepaid Wireless 911 FeeYes- Application InstructionsPrepaid wireless 911 fees must be collected by a seller at the time of sale from the purchaser of the prepaid wireless service. A prepaid wireless service is a mobile wireless telecommunication service, which includes downloading digital products and content. Businesses who sell prepaid wireless services need a sales tax account and an account to report the prepaid wireless 911 fee with the Office of State Tax Commissioner.
Royalty Withholding TaxYes- Application to Register for Royalty WithholdingA business is required to withhold royalty withholding from royalties paid to owners of oil or gas produced in North Dakota.
Telecommunications TaxYes- Application for Telecommunications Carriers TaxationNorth Dakota imposes a gross receipts tax on all telecommunication companies. Gross receipts means the total amount a seller receives from selling a good or service without subtracting any costs or expenses.

 

  1. Determine if you will have employees. If so, you must apply for the following:

    1. Apply with the IRS for a Federal Employer Identification Number, if you do not already have one to be able to issue W2’s and 1099’s to your employees.
    2. Apply for a North Dakota Withholding Account. An employer is required to withhold North Dakota income tax from wages paid to an employee, if the employee performs services in North Dakota or if the business is based in North Dakota. If you plan to have employees in your business, you need to apply for an income tax withholding account.
    3. As a North Dakota business with employees, you may also need to contact:
      1. Job Service North Dakota – Unemployment
      2. Workforce Safety and Insurance – Workers’ Compensation

     

  2. Explore your Tax Exemptions and Incentives. The 2025 Business Tax Incentives includes information about tax exemptions and credits. Whether you're just starting out or already an established business, there are various property tax incentives that could benefit you and your business. 

The Secretary of State’s Business Services website shares information about building your business, registering your business, licensing information, sales tax requirements, and more.

If you have tax questions as you're starting your business, please feel free to contact us.