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Operating Costs

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North Dakota is home to emerging business opportunities and companies with strong roots in our state like Marvin Windows.
Locating and expanding your business is easier in North Dakota where land, building, utility and labor costs are extremely competitive. Learn more about the costs of operating your business here:  
 

Site Facility Costs

North Dakota has competitive facility and construction costs, making it easier to find the right location for your business.

In addition, our communities are willing to work with new and expanding businesses to create build-to-suit and lease options to meet your needs. Many communities are able to match local money with various federal, state and local programs to lower infrastructure costs for business expansions.

 


Utility Costs

Cost and availability of energy are key factors in business location decisions. North Dakota boasts some of the most affordable utility rates in the United States. With abundant supplies of coal, oil and other natural resources, North Dakota is in the nation's top ten producers of energy.

 
Electricity
(Cents per Kilowatt hour)
North Dakota U.S. Average
Average Utility Prices
Residential 9.86 12.69
Commercial 8.85 10.67
Industrial 8.37 6.98
Natural Gas
(Dollars per Thousand Cubic Feet)
   
Residential NA 10.47
Commercial 7.19 8.04
Industrial 3.28 4.00
Source: Energy Information Administration, YTD September 2015
















 


Labor Costs

North Dakota companies report significant savings in labor costs as a result of extremely low absenteeism and turnover rates.  This creates business savings in recruitment, replacement and re-training.

To review labor costs for North Dakota, visit the Bureau of Labor Statistics or Job Service North Dakota for Businesses.

 


Taxes

As a result of North Dakota's tax incentives, our state is ranked as one of the lowest tax states in the nation.  Our tax rates also reflect the state's desire to continue that reputation.

CORPORATE INCOME TAX

Graduated rate of 1.41% to 4.31% applies:
  • Over $0, but not over $25,000  = 1.41% of taxable income
  • Over $25,000, but not over $50,000  =  $352 + 3.55% of the amount over $25,000
  • Over $50,000  =  $1,240 + 4.31% of the amount over $50,000
 
The state has traditionally used an equally-weighted, three-factor apportionment formula consisting of property, payroll, and sales.  Beginning in the 2016 tax year, North Dakota is phasing in the allowance of a single sales factor apportionment formula for purposes of computing income tax using the following phase-in election schedule:
 
  • Tax Years 2016 and 2017:  Sales – 50%, Property – 25%, and Payroll – 25%
  • Tax Year 2018:  Sales – 75%, Property – 12½%, and Payroll – 12½%
  • Tax Year 2019 and following years:  Sales – 100%
 
Once the election is made, it is binding for the following five tax years. A taxpayer may then make an election to continue using the sales-only apportionment formula. If a taxpayer fails to renew this election, the taxpayer will be required to go back to using the equally-weighted three-factor apportionment formula for the following three tax years, after which an election to use the alternative apportionment formula may be made again.
 

INDIVIDUAL INCOME TAX

Individuals, Estates and Trusts, 2016 Tax Year
 
1.10 percent to 2.90 percent is applied to federal taxable income with state adjustments
 
  Taxable Income Brackets
Single Married, Joint* Head of Household
Bracket Rate Over Not Over Over Not Over Over Not Over
1 1.10% $0 $37,650 $0 $62,900 $0 $50,400
2 2.04% 37,650 91,500 62,900 151,900 50,400 130,150
3 2.27% 91,150 190,150 151,900 231,450 130,150 210,800
4 2.64% 190,150 413,350 231,450 413,350 210,800 413,350
5 2.90% 413,350 - 413,350 - 413,350 -
 
  Taxable Income Brackets
Married, Separate Estate or Trust
Bracket Rate Over Not Over Over Not Over
1 1.10% $0 $31,450 $0 $2,550
2 2.04% 31,450 75,950 2,550 5,950
3 2.27% 75,950 115,725 5,950 9,050
4 2.64% 115,725 206,675 9,050 12,400
5 2.90% 206,675 - 12,400 -
 
* Also applies to Qualifying Widow(er).


PERSONAL PROPERTY TAX

For the most part, personal property is exempt from property tax in North Dakota. Personal property of utilities companies that are assessed by the State Board of Equalization is subject to property tax. Household personal property, inventories, and machinery and equipment used in trade or manufacturing are exempt from property taxes. Machinery and equipment used in refining products from oil or gas extracted from the earth is deemed to be real property and therefore subject to property taxes. A mobile home used as a residence or place of business is also subject to a property tax.

PROPERTY TAX

Determined by multiplying the taxable value of real property -- land and buildings -- by the local mill rate. North Dakota commercial property tax is calculated by multiplying true and full value of commercial property, which the local assessor establishes, by 50 percent to reach assessed value; then multiplying assessed value by 10 percent to reach taxable value; and then multiplying taxable value by the local mill rate.
 
Example (for reference only):

Market Value   Assessed Value   Taxable Value Mill Levy Rate Property Tax
$1,000,000 x 50% = $500,000 x 10% = $50,000 x .31732 = $15,866
  • In the 2016 Tax Foundation ranking for property tax, North Dakota ranked third best among states.*
  • The Lincoln Institute of Land Policy evaluated the commercial property tax for the largest city in each state in 2015. 
    • They calculated for the effective tax rate for a $1-million valued commercial property with $200k in fixtures.  The results of the study placed Fargo, ND, at 46th lowest out of 53 with an effective tax rate of 1.14%.
    • They did the same with industrial property using a $1-million valued property plus $1 million in personal property.  This time Fargo was ranked 49th with an effective rate of 0.68.

STATE SALES TAX
  • State: 5% 
  • Average local rate: 1.77%*

* 2016 State Business Tax Foundation



Unemployment Rates

2016 Unemployment Insurance Tax Rate Schedule

Non-Construction: 1.62 percent (maximum wage cap 2016 - $37,200)
New Employers are: Non-Construction covered after June 30, 2014

When employers become liable for unemployment insurance, they are classified as "new employers" and are assigned a new employer rate. Tax rates are determined for each calendar year based on the employer's history as of the preceding October.

If prior to October, then "non-construction" employers have at least six quarters of coverage and they are classified as "experience-rated employers" beginning that calendar year. Otherwise they continue as "new employers." Experience-rated employers are assigned rates based on their record of unemployment insurance taxes paid and benefits charged.

The rates vary each year depending on the employer's individual history and the condition of the state's unemployment compensation trust fund. The maximum amount of each worker's wages subject to taxation each year is 70 percent of the statewide average annual payroll.
 


Workers' Compensation Rates

The state office for Workforce Safety and Insurance, is the sole provider and administrator of worker's compensation coverage in North Dakota. Insurance is financed entirely through employer premiums. A company's premium is determined by applying the rate for a job classification to the amount of taxable payroll in that classification.

The maximum taxable payroll for each employee is capped at 70 percent of the state's average annual wage. The current cap is $37,200 (July 1, 2016). Companies may also be eligible for discounts on their premium based on the company's "experience rating" or approved safety incentive program participation.
  Class Base
Rate
Max Annual Charge
@ Wage Cap
Workers Compensation Rate Examples as of July 1, 2016
Food Processing 2014 $3.82 $1,421.04
Mfg of Light Metal/Non-Metal 3124 $1.91 $710.52
Foundries - Implement and/or Equip 3504 $4.61 $1,714.92
Computer/Electronics/Assembly 3685 $1.07 $398.04
Trucking and Hauling 7215 $8.39 $3,121.08
Wholesale Warehouse 8016 $2.56 $952.32
Professional/Business Reps 8747 $0.55 $204.60
Clerical Office Employees 8805 $0.27   $100.44
Source: ND Workforce Safety & Insurance
                       


For more information on North Dakota's taxes, visit the Office of State Tax Commissioner.

 
 
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