If you're used to states like Texas, the home of the Texas franchise tax, or Delaware, you might expect an annual franchise tax bill. This is a fee for the privilege of doing business there. However, North Dakota breaks that pattern completely. The state does not impose a standalone franchise tax; its primary business levy is the corporate income tax.
A traditional franchise tax is calculated on a company's net worth or capital, not on profit. Even unprofitable businesses owe franchise tax simply because they exist and have assets. That model is common elsewhere, but you won't find it in North Dakota. References to franchise tax here are typically shorthand for corporate income tax.
North Dakota's corporate income tax serves as the economic equivalent of a franchise tax because it's the main price of admission for corporations in the state. The difference? Your bill is tied to income instead of capital. Every corporation doing business in or receiving income from North Dakota files Form 40 and pays tax on its North Dakota-taxable income at progressive rates:
Since North Dakota uses corporate income tax instead of traditional franchise tax, you'll owe the state a return if you're organized as a C corporation and either do business in the state or earn income here. This applies whether you formed your company in North Dakota or you're a foreign corporation just selling into the state. What matters is nexus, not where your articles of incorporation were filed.
You also need to file if your corporation has federal tax-exempt status but generates unrelated business taxable income (UBTI). In that case, you'll attach federal Form 990-T to your Form 40 and calculate tax only on the UBTI portion.
Your North Dakota corporate income tax return is just the beginning. Depending on how you operate and where your revenue comes from, you'll likely juggle several other state-level taxes, each with its own forms, due dates, and enforcement rules.
This includes:
North Dakota's corporate income tax calculations require professional expertise, especially when managing three-factor apportionment formulas and coordinating multiple state deadlines for Form 40 filings and quarterly estimates.
While Discern can't help you with these complex tax filings, we can track your North Dakota annual report deadlines alongside your entire multi-state portfolio, ensuring you maintain good standing. Our platform manages registered agent services in all 51 jurisdictions and automates routine state filings, preventing late filing penalties and interest charges that come from missed deadlines. Try Discern today.
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