In North Dakota, the apportionment of business income for corporations is governed by specific statutes and administrative rules. For a business operating in multiple states, including North Dakota, determining the portion of its income subject to North Dakota income tax requires applying an apportionment formula. This formula typically considers factors such as sales, property, and payroll within the state relative to the total amounts for those factors everywhere. North Dakota, like many states, utilizes a three-factor apportionment formula, although the weighting and specific definitions of these factors can vary. The relevant statute, North Dakota Century Code (NDCC) Section 57-38-12, outlines the methodology. For a business with activities both within and outside North Dakota, the income subject to tax is calculated by multiplying the total business income by the apportionment percentage. The apportionment percentage is derived from the sum of the property factor, the payroll factor, and the sales factor, divided by three. The property factor is the ratio of the average value of the taxpayer’s real and tangible property in North Dakota to the average value of the taxpayer’s real and tangible property everywhere. The payroll factor is the ratio of the total compensation paid to employees in North Dakota to the total compensation paid to employees everywhere. The sales factor is the ratio of the total sales in North Dakota to the total sales everywhere. For a business with $10,000,000 in total business income, $2,000,000 in property in North Dakota and $10,000,000 everywhere, $1,000,000 in payroll in North Dakota and $5,000,000 everywhere, and $3,000,000 in sales in North Dakota and $15,000,000 everywhere, the calculation proceeds as follows: Property Factor: \(\frac{\$2,000,000}{\$10,000,000} = 0.20\) or 20% Payroll Factor: \(\frac{\$1,000,000}{\$5,000,000} = 0.20\) or 20% Sales Factor: \(\frac{\$3,000,000}{\$15,000,000} = 0.20\) or 20% Apportionment Percentage: \(\frac{0.20 + 0.20 + 0.20}{3} = \frac{0.60}{3} = 0.20\) or 20% North Dakota Taxable Income: \(0.20 \times \$10,000,000 = \$2,000,000\). This calculation demonstrates how North Dakota’s apportionment rules allocate a portion of a multistate business’s income to the state for taxation purposes. The methodology ensures that income is taxed in proportion to the business’s economic presence within North Dakota, as measured by property, payroll, and sales. Understanding the specific definitions and valuation methods for each factor, as outlined in NDCC 57-38-12 and related administrative rules, is crucial for accurate tax compliance. The state’s approach aims to prevent both double taxation and the avoidance of taxation by businesses operating across state lines.

The North Dakota Century Code, specifically Chapter 57-38, governs income taxation. The concept of domicile is crucial in determining residency for tax purposes. Domicile is generally defined as the place where an individual has their permanent home and to which they intend to return whenever absent. This is distinct from mere residence, which can be temporary. North Dakota law considers several factors when establishing domicile, including the location of a person’s principal dwelling, where they register to vote, where they hold a driver’s license, and where their bank accounts and personal property are primarily located. If an individual claims to have established domicile in another state while maintaining significant ties to North Dakota, the tax authorities will scrutinize these connections. The burden of proof often rests on the individual to demonstrate a clear intent to abandon North Dakota as their domicile and establish it elsewhere. For instance, if a taxpayer moves to Montana for employment but retains ownership of their North Dakota home, continues to vote in North Dakota elections, and keeps their primary financial and social ties within the state, they may still be considered a North Dakota domiciliary for tax purposes. This is because the intent to make Montana their permanent home, coupled with the abandonment of North Dakota domicile, must be clearly demonstrable. The state’s tax commission can assess income earned both within and outside North Dakota if an individual is deemed a domiciliary.

North Dakota’s corporate income tax structure, as governed by North Dakota Century Code Chapter 57-38, imposes a tax on the net income of corporations operating within the state. For a business incorporated in North Dakota but conducting significant operations and deriving substantial income from other states, the critical factor in determining the portion of its income subject to North Dakota tax is the apportionment formula. North Dakota, like many states, utilizes a three-factor apportionment formula, which typically includes sales, property, and payroll. The Uniform Division of Income for Tax Purposes Act (UDITPA), as adopted and modified by North Dakota, generally dictates that sales are weighted more heavily in the apportionment calculation. Specifically, for most businesses, the sales factor is given a double weight. The formula is calculated as follows: Apportionment Percentage = \( \frac{(\text{Property in ND} + \text{Payroll in ND} + 2 \times \text{Sales in ND})}{(\text{Total Property} + \text{Total Payroll} + 2 \times \text{Total Sales})} \). This percentage is then applied to the corporation’s total net income to determine the portion taxable by North Dakota. Therefore, understanding the specific definitions of property, payroll, and sales within the state, as well as the weighting of each factor, is crucial for accurate tax liability determination. The concept of “doing business” in North Dakota, which can extend beyond physical presence to include economic nexus, also plays a role in establishing tax jurisdiction.

In North Dakota, the determination of whether a business activity constitutes a taxable sale or a non-taxable service hinges on specific statutory definitions and administrative interpretations. The North Dakota Century Code (NDCC) § 57-39.2-01 defines a “sale” to include the exchange of tangible personal property for consideration. Services, conversely, are generally not subject to sales tax unless specifically enumerated as taxable. The core of this question lies in distinguishing between the transfer of tangible personal property and the provision of an intangible service, even when they are bundled. The scenario describes a company that sells custom-designed software, which is an intangible product. However, the company also provides installation and ongoing maintenance for this software. North Dakota’s sales tax law, particularly as interpreted by the North Dakota Office of State Tax Commissioner, often views the sale of custom software as a non-taxable service, especially when it is tailored to a specific client’s needs and is not a standardized, off-the-shelf product. The installation and maintenance, being integral to the use of the software and not involving the transfer of tangible personal property (beyond the media on which the software might be delivered, which is often considered incidental), are also typically treated as non-taxable services. Therefore, the entire transaction, as described, would not be subject to North Dakota sales tax because the primary component is the development and provision of a custom intangible product and associated services. The crucial distinction is the nature of the product and the services rendered, not the price or the fact that a business is involved.

The North Dakota Century Code, specifically Chapter 57-38, governs income taxation. For a business entity treated as a pass-through entity for federal tax purposes, such as a partnership or an S-corporation, the income is generally taxed at the individual partner or shareholder level. North Dakota law provides a mechanism for such entities to elect to pay income tax at the entity level. This election, if made, effectively shifts the tax liability from the individual owners to the entity itself. When an entity makes this election, it is then responsible for remitting the tax on the income passed through to its owners. The purpose of this provision is often to mitigate the impact of the limitation on the deduction of state and local taxes (SALT) for individuals under federal law. By having the entity pay the tax, the owners can potentially avoid this limitation on their personal returns, as the entity’s payment is not subject to the same federal deduction limitations. Therefore, if a limited liability company (LLC) in North Dakota has elected to be taxed as a partnership for federal purposes and subsequently makes the entity-level tax election under North Dakota law, the LLC itself becomes liable for the income tax on the income attributable to its members. This election is a significant consideration for pass-through entities operating within the state.

In North Dakota, the concept of “nexus” is fundamental to determining whether a business is subject to the state’s tax laws. Nexus refers to the sufficient connection a business has with a state that allows the state to impose its tax jurisdiction. For sales and use tax purposes, North Dakota, like many states, has historically relied on physical presence to establish nexus. However, the landmark South Dakota v. Wayfair, Inc. Supreme Court decision in 2018 significantly altered this landscape by allowing states to require out-of-state sellers to collect and remit sales tax based on economic activity, even without a physical presence. North Dakota responded to the Wayfair decision by enacting legislation that establishes economic nexus. Under North Dakota Century Code (NDCC) Section 57-39.2-01.1, an out-of-state seller is presumed to have nexus with North Dakota and is required to register, collect, and remit North Dakota sales and use tax if, in the preceding or current calendar year, the seller’s gross revenue from sales of tangible personal property or services delivered into North Dakota exceeds \$100,000, or the seller has engaged in 200 or more separate transactions delivering tangible personal property or services into North Dakota. This threshold is designed to capture businesses with a substantial economic presence in the state, even if they lack physical facilities or employees. The purpose of this economic nexus rule is to ensure fair competition between in-state businesses, which are already subject to sales tax collection, and out-of-state businesses that previously could avoid collecting North Dakota sales tax due to a lack of physical presence. The \$100,000 gross revenue threshold or the 200 separate transactions threshold serves as a de minimis safe harbor, preventing the imposition of tax obligations on businesses with minimal economic contact with the state.

North Dakota’s corporate income tax structure, as defined by North Dakota Century Code Chapter 57-38, levies a tax on the net income of corporations operating within the state. The tax is imposed on the entire net income of a corporation derived from business conducted within North Dakota. For corporations operating in multiple states, apportionment of income is necessary to determine the portion subject to North Dakota tax. The standard apportionment formula in North Dakota, similar to many states, utilizes a three-factor formula: property, payroll, and sales. The sales factor is typically weighted more heavily to reflect the economic activity within the state. Specifically, North Dakota generally uses a single-sales factor apportionment method for most businesses, which means that only sales within North Dakota are considered for apportionment. However, there are exceptions and specific rules for certain industries. The tax rate is progressive, meaning higher levels of income are taxed at higher rates. Understanding the intricacies of nexus, apportionment, and the specific tax rates is crucial for accurate tax reporting. For a corporation like “Prairie Holdings Inc.,” which has operations in both North Dakota and Montana, the key is to correctly apportion its total income to North Dakota. If Prairie Holdings Inc. has \( \$1,000,000 \) in total net income, and its sales within North Dakota represent \( 80\% \) of its total sales, its payroll in North Dakota is \( 30\% \) of its total payroll, and its property in North Dakota is \( 20\% \) of its total property, and the state uses a single-sales factor apportionment, then the income apportioned to North Dakota would be \( \$1,000,000 \times 0.80 = \$800,000 \). If the highest tax bracket for corporations in North Dakota is \( 6.5\% \) on income over \( \$50,000 \), the tax liability on the apportioned income would be calculated based on the progressive rate structure. However, the question asks about the tax treatment of income from business conducted within North Dakota, and the primary determinant for apportionment is the nature and location of the business activity. The tax is levied on net income derived from business conducted within the state. Therefore, income generated from sales made to customers located in North Dakota, or services performed within North Dakota, is considered North Dakota-source income. The apportionment formula ensures that only the portion of a multi-state corporation’s income that is reasonably attributable to its activities within North Dakota is subject to the state’s corporate income tax.

North Dakota’s tax laws, particularly concerning property taxation, are governed by statutes that aim for fairness and uniformity. The concept of “true and full value” is central to property assessment, meaning the property is assessed at its market value. However, the actual tax liability is determined by applying a mill levy to the assessed value. A mill is one-tenth of a cent, or \( \$0.001 \). Mill levies are set by various taxing districts, such as school districts, cities, and counties, and can fluctuate based on budgetary needs. Consider a scenario where a parcel of land in North Dakota is assessed at its true and full value of \( \$200,000 \). The combined mill levy for the county, city, and school district applicable to this property is 120 mills. To calculate the property tax, we first convert the mill levy to a decimal by dividing by 1,000: \( 120 \text{ mills} / 1000 = 0.120 \). The property tax is then calculated by multiplying the assessed value by this decimal: \( \$200,000 \times 0.120 = \$24,000 \). This calculation demonstrates the direct relationship between assessed value, mill levy, and the resulting tax obligation under North Dakota law. The principle of uniformity requires that all properties within a taxing district be assessed at the same percentage of their true and full value, and that the mill levies be applied consistently.

North Dakota’s corporate income tax structure, as governed by North Dakota Century Code (NDCC) Chapter 57-38, imposes a tax on the net income of corporations operating within the state. The determination of a corporation’s taxable income in North Dakota involves several adjustments and allocations, particularly for businesses engaged in interstate commerce. A key aspect of this is the apportionment of income, which is the process of dividing a corporation’s total income among the states in which it operates. North Dakota, like many states, utilizes a three-factor apportionment formula for most businesses, although specific industries may have different rules. The three factors are typically property, payroll, and sales. The property factor is calculated by dividing the average value of the taxpayer’s real and tangible property in North Dakota by the average value of all its real and tangible property. The payroll factor is determined by dividing the total compensation paid to employees in North Dakota by the total compensation paid to all employees. The sales factor, which is generally considered the most significant in modern apportionment, is calculated by dividing the gross receipts from sales in North Dakota by the total gross receipts from sales everywhere. For sales other than sales of tangible personal property, the destination of the sale dictates whether it is considered in-state. For sales of tangible personal property, the Uniform Division of Income for Tax Purposes Act (UDITPA) principles, adopted by North Dakota, generally attribute sales to the state where the property is delivered or shipped to the purchaser, or if not shipped, to the state where the property is physically located at the time of receipt by the purchaser. Therefore, if a North Dakota-based software company sells a perpetual software license to a client located in Montana, and the license key is delivered electronically to the client’s server in Montana, that sale is considered a Montana sale for apportionment purposes, not a North Dakota sale.

In North Dakota, the concept of nexus, or the sufficient connection a business has with a state to be subject to its tax laws, is crucial for determining sales and use tax obligations. For remote sellers, understanding when they establish nexus is paramount. North Dakota, like many states, has moved beyond physical presence as the sole determinant of nexus. Economic nexus, established when a business meets certain sales or transaction thresholds within the state, is now a significant factor. For a business to be considered to have established economic nexus in North Dakota, it must exceed either a gross revenue threshold of \$100,000 or 200 separate transactions within the state during the preceding or current calendar year. This threshold is outlined in North Dakota Century Code (NDCC) §57-39.2-02.1. Therefore, if a business, regardless of its physical location, meets or exceeds either of these economic nexus thresholds in North Dakota, it is required to register, collect, and remit North Dakota sales and use tax on its sales into the state. This principle is a direct application of the state’s approach to modernizing its tax collection mechanisms in response to the evolution of e-commerce and interstate commerce. The state’s legislative framework aims to ensure a level playing field for in-state businesses and to capture tax revenue from out-of-state sellers benefiting from the North Dakota market.

The North Dakota Century Code, specifically Chapter 57-38, governs income taxation. For individuals, the state generally follows federal adjusted gross income (AGI) as a starting point, but allows for specific North Dakota modifications. These modifications can include additions or subtractions to federal AGI to account for state-specific economic factors or policy decisions. For instance, North Dakota may allow a subtraction for income that is also taxed by another state or a foreign country, or an addition for certain deductions that are not permitted under state law. The concept of “taxable income” in North Dakota is derived from federal taxable income, with further adjustments as prescribed by state law. The rate structure for individual income tax in North Dakota is progressive, meaning higher income levels are taxed at higher rates. The determination of tax liability involves applying the appropriate tax brackets to the North Dakota taxable income. Understanding these state-specific adjustments and the progressive rate structure is crucial for accurate tax computation.

North Dakota’s tax laws provide specific treatment for certain agricultural property when determining property tax liability. For property tax purposes, agricultural land is generally assessed at its “gross productivity value.” This valuation method considers the land’s inherent capacity to produce agricultural commodities, taking into account factors like soil type, topography, and climate, as reflected in typical agricultural yields and market prices. This contrasts with the assessment of non-agricultural property, which is typically assessed at its true and full value, often interpreted as fair market value. The concept of “gross productivity value” is designed to maintain a tax burden that is commensurate with the land’s agricultural use and economic potential, thereby supporting the agricultural sector. This valuation is distinct from the income approach to property valuation, which might consider actual net income from a specific farming operation. Instead, gross productivity value focuses on the land’s potential rather than the operator’s current profitability or specific operational choices. Understanding this distinction is crucial for property owners and tax administrators in North Dakota.

North Dakota’s corporate income tax structure, as outlined in Chapter 57-38 of the North Dakota Century Code, imposes a tax on the net income of corporations operating within the state. For a corporation to be subject to North Dakota’s corporate income tax, it must establish a sufficient nexus with the state. Nexus, in the context of corporate taxation, refers to the minimum level of connection or link a business must have with a state to be subject to its taxing authority. This connection can be established through various activities, including physical presence, economic activity, or soliciting sales within the state. North Dakota law, consistent with federal interpretations, generally requires a physical presence for nexus to be established, though significant economic activity can also create nexus. The question centers on determining which of the provided activities would establish nexus for a business in North Dakota, thereby subjecting it to the state’s corporate income tax. Owning a warehouse within North Dakota, which is used for storing inventory and facilitating distribution, clearly constitutes a physical presence. This physical presence, regardless of the volume of sales or revenue generated from that location, is a primary indicator of nexus. Other activities, such as occasional trade shows or soliciting sales through independent contractors, might not, on their own, be sufficient to establish nexus, depending on the specific nature and extent of those activities and current state and federal legal interpretations. The presence of a warehouse, however, represents a tangible and ongoing connection to the state’s economic infrastructure.

North Dakota’s corporate income tax structure, as defined by North Dakota Century Code Chapter 57-38, generally follows federal taxable income with modifications. For corporations operating both within and outside North Dakota, the apportionment of income is a critical aspect. North Dakota employs a three-factor apportionment formula, which includes sales, property, and payroll. However, for tax years beginning on or after January 1, 2017, North Dakota transitioned to a single-sales factor apportionment formula for most business activities. This means that only sales within North Dakota are considered when determining the portion of a corporation’s total income subject to North Dakota corporate income tax. Property and payroll factors are no longer included in the apportionment calculation for these businesses. This change was enacted to promote business growth and investment within the state by reducing the tax burden on companies with significant in-state property or payroll but lower in-state sales. The statutory basis for this shift is found within amendments to North Dakota Century Code Section 57-38-01.1, which details the apportionment methods. It is important to note that specific industries or types of income might have different apportionment rules, but the general trend for most business income is towards a single-sales factor.

The scenario describes a business operating in North Dakota that sells tangible personal property to customers in other states. The key issue is determining when this business establishes sufficient nexus with those other states to be required to collect and remit sales and use tax in those jurisdictions. Economic nexus, as established by the South Dakota v. Wayfair, Inc. Supreme Court decision and subsequently adopted by many states, including North Dakota, is the primary consideration. Economic nexus is generally triggered when a business exceeds a certain threshold of sales revenue or transaction volume into a state, regardless of physical presence. North Dakota’s economic nexus threshold is currently set at \$100,000 in gross sales or 200 separate transactions into the state within the current or preceding calendar year. Therefore, if the North Dakota business’s sales into Montana exceed \$100,000 in gross revenue or 200 transactions during the current or previous calendar year, it would likely establish economic nexus in Montana and be obligated to collect and remit Montana sales tax. The question hinges on the interpretation of “sufficient nexus” in the context of interstate commerce and modern sales tax collection obligations. Understanding the specific thresholds and the concept of economic nexus is crucial for businesses engaged in remote sales.

The North Dakota Century Code, specifically Chapter 57-38, governs income taxation. For a business operating in North Dakota, the sourcing of income is crucial for determining tax liability. Business income is generally sourced to North Dakota if it is derived from or connected with a business activity conducted within the state. This includes income from sales of tangible personal property where the shipment originates in North Dakota or the property is delivered to a purchaser in North Dakota. For services, the income is sourced to the state where the services are performed. If a business has both in-state and out-of-state activities, apportionment is necessary. North Dakota uses a three-factor apportionment formula (property, payroll, and sales) to determine the portion of a business’s total income that is taxable in the state. However, when a business’s activities are so intertwined that a single factor or a modified apportionment formula provides a more equitable result, the Tax Commissioner may permit or require an alternative method. This ensures that income is taxed in the state where the economic activity giving rise to that income actually occurs. The key principle is to accurately reflect the business’s presence and economic nexus within North Dakota.

The scenario involves a North Dakota business owner, Ms. Anya Sharma, who operates a sole proprietorship providing specialized consulting services. She has invested in a new office building in Bismarck, North Dakota, which she uses exclusively for her business operations. The question pertains to the deductibility of property taxes paid on this business-owned building. Under North Dakota tax law, specifically as outlined in Chapter 57-01 of the North Dakota Century Code, property taxes paid on real property used for business purposes are generally deductible as ordinary and necessary business expenses. This deduction reduces the business’s taxable income. The key principle is that the property is directly utilized in generating business revenue. Therefore, the property taxes are not considered a personal expense but rather a cost of doing business. This aligns with the general tax principle of allowing deductions for expenses incurred in the production of income. The specific amount of the property tax is not relevant to determining the deductibility itself, only the use of the property. The deduction would be claimed on her business’s income tax return, reducing her net earnings from self-employment.

North Dakota’s approach to the taxation of intangible personal property, such as patents and copyrights, is generally to exempt them from property tax. This is in contrast to tangible personal property, which is subject to taxation. The state’s property tax laws, as codified in North Dakota Century Code Chapter 57-02, focus on the taxation of real property and certain tangible personal property. Intangible assets, by their nature, represent rights rather than physical objects and are typically not included in the property tax base. This exemption is a common feature in many state tax systems, recognizing the difficulty in valuing and administering taxes on such assets. The rationale often centers on the fact that the income generated by these intangibles is already subject to income tax. Therefore, a separate property tax would lead to double taxation. The North Dakota tax code does not enumerate intangible assets as taxable property.

In North Dakota, the concept of nexus, or sufficient connection, is crucial for determining a business’s tax obligations. For sales and use tax purposes, nexus can be established through various means, including physical presence and economic presence. North Dakota law, particularly under Chapter 57-39.2 of the North Dakota Century Code, addresses these principles. A physical presence, such as maintaining an office, warehouse, or employees within the state, generally creates nexus. However, the landmark South Dakota v. Wayfair, Inc. Supreme Court decision significantly altered the landscape by affirming that states can require out-of-state sellers to collect and remit sales tax even without a physical presence, based on economic activity. North Dakota has adopted economic nexus thresholds. For a business that does not have a physical presence in North Dakota, nexus is established if its gross revenue from sales of tangible personal property or services delivered into North Dakota exceeds a specified amount within a calendar year. This threshold is currently set at $100,000 in gross sales or 200 separate transactions, whichever is met first. Therefore, if a remote seller’s sales into North Dakota surpass either the gross revenue or the transaction count threshold during a calendar year, they are required to register, collect, and remit North Dakota sales and use tax on subsequent sales into the state. This is a crucial compliance point for businesses operating in interstate commerce.

The North Dakota Century Code, specifically Chapter 57-38, governs the imposition and administration of the state’s income tax. Section 57-38-01.2 outlines the imposition of a tax on the net income of every resident and non-resident individual, estate, and trust. For the purpose of determining the tax liability, North Dakota generally conforms to the Internal Revenue Code (IRC) as it exists on December 31, 2022, with certain modifications. This conformity means that many deductions and exemptions allowed for federal income tax purposes are also allowed for North Dakota income tax purposes. However, North Dakota has specific provisions that may differ from federal law, such as the treatment of certain agricultural income or specific credits. The concept of “adjusted gross income” (AGI) as defined by the IRC is typically the starting point for calculating North Dakota taxable income, after which state-specific adjustments are made. The state’s tax structure includes progressive tax rates, meaning higher levels of income are taxed at higher percentages. Understanding the interplay between federal conformity and state-specific modifications is crucial for accurate tax preparation in North Dakota. This includes awareness of any North Dakota-specific additions or subtractions to federal AGI, as well as any credits or deductions unique to the state’s tax code, such as those related to property taxes or certain business investments.

North Dakota’s corporate income tax law, specifically Chapter 57-38 of the North Dakota Century Code, outlines the framework for taxing business entities operating within the state. A key aspect of this framework involves the apportionment of income for businesses that operate both inside and outside of North Dakota. The state employs a three-factor apportionment formula, which historically included property, payroll, and sales. However, legislative changes have shifted the emphasis. Effective for tax years beginning on or after January 1, 2013, North Dakota transitioned to a single-factor sales apportionment formula for most businesses. This means that a company’s North Dakota taxable income is determined solely by the ratio of its sales in North Dakota to its total sales everywhere. The purpose of this shift was to promote economic development and to create a more favorable tax environment for businesses with significant in-state operations relative to their overall business. The calculation involves determining the sales factor by dividing the total sales of the taxpayer in North Dakota by the total sales of the taxpayer everywhere. This factor is then multiplied by the taxpayer’s total income to arrive at the portion of income apportioned to North Dakota. The underlying principle is that income should be taxed where the economic activity generating that income occurs. For instance, if a company has \( \$1,000,000 \) in total income and \( \$200,000 \) of that is attributable to sales within North Dakota, the North Dakota taxable income would be \( \$1,000,000 \times \frac{\$200,000}{\$1,000,000} = \$200,000 \). This single-factor approach simplifies the apportionment process and aligns with the state’s goal of attracting and retaining businesses. It is important to note that specific industries or types of income might have different apportionment rules or exceptions as defined by statute or administrative rules.

North Dakota’s approach to taxing certain business activities, particularly those involving digital goods or services, often hinges on the concept of nexus. Nexus refers to the sufficient connection a business has with a state that allows that state to impose its taxes. For sales and use tax purposes, nexus can be established through physical presence, economic presence, or other means. In North Dakota, as in many states, the economic nexus standard has evolved, particularly following the South Dakota v. Wayfair, Inc. Supreme Court decision. This decision affirmed that states can require out-of-state sellers to collect and remit sales tax even without a physical presence, provided the seller meets certain economic thresholds. For North Dakota, this generally means that if a business, regardless of its physical location, exceeds a specified annual sales revenue or transaction count within the state, it establishes economic nexus and is therefore obligated to collect and remit North Dakota sales and use tax on taxable sales into the state. The specific thresholds are key to determining when this obligation arises. For North Dakota, the threshold is generally \$100,000 in gross sales or 200 separate transactions within the calendar year. If a business meets either of these criteria, it must register with the North Dakota Office of State Tax Commissioner and begin collecting and remitting sales tax on taxable sales made to North Dakota customers. This is a crucial aspect of compliance for businesses operating in or selling into North Dakota.

North Dakota’s corporate income tax structure, as outlined in North Dakota Century Code Chapter 57-38, imposes a tax on the net income of corporations. For businesses operating both within and outside of North Dakota, the state employs an apportionment formula to determine the portion of income subject to North Dakota taxation. This apportionment is crucial for ensuring fairness and preventing double taxation. The standard apportionment formula in North Dakota, for many years and as generally applied, considers three equally weighted factors: property, payroll, and sales. The property factor is calculated by dividing the average value of the taxpayer’s real and tangible property within North Dakota by the average value of all the taxpayer’s real and tangible property everywhere. The payroll factor is determined by dividing the total compensation paid to employees in North Dakota by the total compensation paid to all employees everywhere. The sales factor is calculated by dividing the total sales of the taxpayer in North Dakota by the total sales of the taxpayer everywhere. Each of these factors is then averaged to arrive at the overall apportionment percentage. For instance, if a company has a property factor of 0.20, a payroll factor of 0.30, and a sales factor of 0.40, the apportionment percentage would be \(\frac{0.20 + 0.30 + 0.40}{3} = 0.30\), or 30%. This 30% of the corporation’s total net income would then be subject to North Dakota’s corporate income tax rate. It is important to note that specific industries, such as financial institutions or transportation companies, may have modified apportionment rules as provided by statute. The underlying principle is to allocate income based on the business activity within the state.

North Dakota’s corporate income tax system, like many states, is based on a business’s net income. For businesses operating both within and outside of North Dakota, the state employs an apportionment formula to determine the portion of that business’s total income subject to North Dakota taxation. This formula typically considers three key factors: sales, property, and payroll. Each factor is weighted to arrive at a single apportionment factor. For instance, if a company’s sales in North Dakota represent 20% of its total sales, its property in North Dakota is 10% of its total property, and its payroll in North Dakota is 15% of its total payroll, the apportionment factor would be calculated as the sum of these percentages divided by the number of factors used. In this hypothetical scenario, if all three factors are used, the calculation would be \( (20\% + 10\% + 15\%) / 3 = 45\% / 3 = 15\% \). Therefore, 15% of the company’s total net income would be subject to North Dakota corporate income tax. This method ensures that only the income reasonably attributable to the economic activity within the state is taxed, aligning with principles of fairness and preventing double taxation. The specific weighting and inclusion of factors can vary by state and by industry, but the general principle of allocating income based on economic presence remains consistent. North Dakota, in its tax code, specifies how these factors are to be calculated and applied, ensuring a standardized approach for all businesses.

North Dakota law, specifically under Chapter 57-38 of the Century Code, addresses the taxation of income derived from oil and gas production. While the state imposes a general income tax on individuals and corporations, the extraction of natural resources, particularly oil and gas, is subject to a gross production tax. This tax is levied on the value of the produced minerals at the wellhead. The rate of the gross production tax varies depending on the type of mineral and the volume produced, with specific provisions for oil and gas. For oil and gas, the tax is generally a percentage of the gross value of the production. Importantly, the gross production tax is intended to be in lieu of other property taxes on the mineral interests themselves, but not necessarily on the surface rights or improvements. The net proceeds tax, also known as the severance tax, is another layer of taxation that applies to the net profits derived from the extraction of oil and gas. This tax is calculated after deducting specified costs and expenses associated with production. The rate for the net proceeds tax is also set by statute. A key distinction is that the gross production tax is paid by the producer at the point of extraction, while the net proceeds tax is levied on the profitability of the operation. Understanding the interplay between these taxes and their application to different types of production income is crucial for compliance and tax planning within North Dakota’s energy sector. The question focuses on identifying which tax is levied directly on the value of the extracted minerals at the point of production, before consideration of operational costs.

In North Dakota, the taxation of intangible personal property is governed by specific statutes, primarily focusing on its situs for tax purposes. Intangible personal property, such as stocks, bonds, and promissory notes, is generally considered taxable in the state where the owner is domiciled. However, if the intangible property has acquired a business situs in a state other than the domicile of the owner, it may be subject to taxation in that business situs state. A business situs is established when the property is used in connection with a business conducted in that state, and the owner or their agent has the power to manage, control, and dispose of the property in that state. For North Dakota, this principle means that even if a North Dakota resident owns intangible assets, if those assets are actively managed and controlled by a business entity operating in another state, and that business situs is clearly established, North Dakota may not assert primary taxing jurisdiction over those intangibles. Conversely, if a non-resident owns intangible property that is integral to a business operation conducted within North Dakota, and that property is managed and controlled within the state, then North Dakota may have a basis to tax that property. The key determinant is the degree of business activity and control exercised over the intangible asset within the state’s borders, rather than mere ownership by a resident.

North Dakota’s corporate income tax structure, as governed by North Dakota Century Code Chapter 57-38, levies a tax on the net income of corporations operating within the state. For businesses with nexus in North Dakota, the apportionment of income is a critical aspect of determining the tax liability. The state utilizes a three-factor apportionment formula, which considers sales, property, and payroll within North Dakota relative to the total amounts of these factors for the entire business. Specifically, the sales factor is calculated as the ratio of sales in North Dakota to total sales everywhere. The property factor is the ratio of the average value of tangible property in North Dakota to the average value of all tangible property everywhere. The payroll factor is the ratio of compensation paid in North Dakota to total compensation paid everywhere. The state has a statutory provision that allows for a modification of this standard apportionment formula under certain circumstances where the standard formula does not fairly represent the extent of the taxpayer’s business activity in North Dakota. This modification can involve the elimination of one or more factors or the use of a different apportionment method. For instance, if a business’s property or payroll in North Dakota is negligible, a statutory provision may permit its exclusion from the apportionment calculation to prevent distortion. The intention behind such provisions is to ensure that the tax burden is equitably distributed based on actual economic activity within the state.

The North Dakota Century Code, specifically Chapter 57-38, governs income taxation. For the purposes of determining the net income of a business entity for state income tax purposes, North Dakota generally follows the federal definition of taxable income with certain modifications. One significant modification relates to the treatment of net operating losses (NOLs). North Dakota law permits a business to carry forward an NOL incurred in a taxable year to offset taxable income in subsequent years. However, the duration and specific limitations on this carryforward are crucial. North Dakota law allows an NOL to be carried forward for a period of twenty years. Furthermore, the amount of NOL that can be used to offset income in any given taxable year is limited to 50% of the taxpayer’s taxable income for that year, after all other deductions and modifications have been applied. This 50% limitation is a critical aspect of how NOLs are utilized. Therefore, if a business in North Dakota incurs an NOL in 2021 and has taxable income in 2022, the amount of the 2021 NOL that can be used in 2022 is capped at 50% of the 2022 taxable income. Any unused portion of the NOL can then be carried forward to subsequent years, up to the twenty-year limit.

North Dakota’s corporate income tax structure, as governed by the North Dakota Century Code, specifically Chapter 57-38, addresses the allocation and apportionment of business income for corporations operating both within and outside the state. For a business with a physical presence and economic activity in multiple states, including North Dakota, determining the portion of its net income subject to North Dakota taxation requires a specific methodology. This methodology typically involves a three-factor formula, which is a common approach in many states, including North Dakota, for apportioning business income. The three factors are usually the property factor, the payroll factor, and the sales factor. Each factor is calculated as a ratio of the taxpayer’s North Dakota activity to its total activity everywhere. The property factor is generally the ratio of the average value of the taxpayer’s real and tangible property in North Dakota to the average value of its real and tangible property everywhere. The payroll factor is the ratio of the taxpayer’s compensation paid in North Dakota to the compensation paid everywhere. The sales factor is the ratio of the taxpayer’s gross sales in North Dakota to its total gross sales everywhere. For a corporation where the sales factor is significantly more indicative of the market for its products or services, North Dakota, like some other states, may permit or require a modification to the standard three-factor apportionment formula. This modification often involves a “throwback” rule or a weighting of the sales factor. In North Dakota, for a business whose sales are predominantly in interstate commerce, the state may allow for a doubled sales factor and a single property and payroll factor, effectively making the sales factor 2/3rds of the apportionment, with property and payroll each representing 1/6th. This approach recognizes that sales activity is the most significant driver of income for such businesses. Consider a hypothetical North Dakota corporation, “Prairie Innovations Inc.,” whose business is primarily the sale of specialized software licenses and related consulting services. Prairie Innovations Inc. has significant operations in North Dakota, including its headquarters, research and development facilities, and a substantial portion of its sales force. However, it also has sales representatives and provides consulting services to clients in Minnesota and Montana, and its software is accessed by customers nationwide. The company’s total net income before apportionment is $10,000,000. For the tax year, Prairie Innovations Inc. meets the criteria for a modified apportionment formula due to the predominantly interstate nature of its sales. The company’s property located in North Dakota represents 20% of its total property value nationwide. Its payroll in North Dakota constitutes 30% of its total payroll nationwide. Crucially, its sales receipts sourced to North Dakota represent 70% of its total sales receipts nationwide. Under the modified apportionment formula, where the sales factor is doubled, the apportionment percentage is calculated as: Apportionment Percentage = [ (Property Factor / 1) + (Payroll Factor / 1) + (Sales Factor * 2) ] / 4 Substituting the given percentages: Apportionment Percentage = [ (0.20 / 1) + (0.30 / 1) + (0.70 * 2) ] / 4 Apportionment Percentage = [ 0.20 + 0.30 + 1.40 ] / 4 Apportionment Percentage = [ 1.90 ] / 4 Apportionment Percentage = 0.475 or 47.5% Therefore, the portion of Prairie Innovations Inc.’s net income subject to North Dakota corporate income tax is: North Dakota Taxable Income = Total Net Income * Apportionment Percentage North Dakota Taxable Income = $10,000,000 * 0.475 North Dakota Taxable Income = $4,750,000 This calculation reflects how North Dakota tax law aims to allocate income based on the economic nexus of a business within the state, with a particular emphasis on sales activity for businesses engaged in interstate commerce. The use of a doubled sales factor is a key feature that can significantly impact the tax liability of such businesses, acknowledging that the market for their services or products is primarily driven by sales. This method ensures that the state captures revenue from economic activity that benefits from the state’s infrastructure and business environment, even if the ultimate consumption of the service or product occurs elsewhere.

North Dakota’s corporate income tax structure includes provisions for net operating loss (NOL) carryforwards. For tax years beginning after December 31, 2017, federal law, specifically the Tax Cuts and Jobs Act of 2017 (TCJA), introduced significant changes, including the elimination of NOL carrybacks for most taxpayers and the imposition of a taxable income limitation for NOLs generated in tax years beginning after December 31, 2017. This limitation restricts the NOL deduction to 80% of taxable income, calculated before the NOL deduction. North Dakota generally conforms to federal treatment of NOLs, but it’s crucial to understand how this conformity applies to state-specific nuances. For North Dakota, a business that incurred an NOL in a tax year beginning after December 31, 2017, can carry that loss forward indefinitely. However, when applying the carryforward to a future North Dakota tax year, the deduction is limited to 80% of the North Dakota taxable income for that year, after apportionment and before the NOL deduction. This 80% limitation is a direct adoption of the federal rule. Therefore, if a company has a North Dakota taxable income of $100,000 in a subsequent year and a carryforward NOL of $150,000, the deductible amount of the NOL would be limited to 80% of $100,000, which is $80,000. The remaining $70,000 of the NOL would then be carried forward to the next tax year.