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:
For calendar-year corporations, Form 40 is generally due April 15, with extensions available.
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.
Note: Partnerships, S corporations, and most LLCs are not subject to entity-level corporate income tax in North Dakota; their income generally passes through to owners.
You also need to file if your corporation has a 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 requires professional tax expertise, especially when managing apportionment formulas and coordinating Form 40 filings with quarterly estimates.
While Discern does not file North Dakota corporate income taxes, Discern can track your annual report deadlines, provide registered agent services, and automate routine state filings to help you maintain good standing across all your entities.
Book a demo to see how Discern simplifies entity management across all 50 states and DC.
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