Two things decide whether a job in North Dakota makes you money: getting the license your work needs, and setting aside the right tax. North Dakota licenses its contractors and taxes their profit, so both are worth getting right before you take work on.
Each section below points to a tool that runs your exact numbers for North Dakota.
Tax in North Dakota
North Dakota has a graduated state income tax that runs up to 2.5% at the top, on top of your federal taxes. Graduated means the rate climbs as your profit does, so a good year costs proportionally more. You owe federal income tax and self-employment tax as well, and you make estimated payments to both North Dakota and the IRS through the year.
On sales tax, North Dakota follows the usual rule for the trades: your labor is not taxed, and you pay sales tax on your materials when you buy them rather than charging it to the customer.
Work out what to hold back on the Tax Set-Aside Calculator, which runs the federal and self-employment numbers for North Dakota.
Getting paid: liens and retainage
A mechanic's lien is the tool that actually gets a North Dakota contractor paid, and in North Dakota you generally have to record it within 90 days of your last day of furnishing. Miss it and you lose the lien, so the dates matter.
Enforcing it has its own clock. 3 years from recording, and you must record a LIS PENDENS as well as sue - no lis pendens and the lien is deemed satisfied (35-27-25). WATCH THIS: on the owner's written demand, delivered to you and filed with the recorder, that 3 years collapses to 30 DAYS to both sue and record the lis pendens, or the lien is forfeited. The statute adds that the 30 days is the same however the demand was delivered, so no extra time for post. Work out your dates on the Lien Deadline tool, and if they are close, get an attorney to confirm them against the statute (N.D.C.C. 35-27-02, 35-27-13, 35-27-14, 35-27-25).
On money held back as retainage, here is where North Dakota lands:
- Private work: 10% of each estimate presented, being the estimated value of labor and material furnished plus material on the ground for use in the contract.
- Public work: 10% of each partial payment estimate.
- Release: Private: no number of days is set at all. It falls due on the statute names no event and sets no period. Public: no number of days is set at all. It falls due on completion of all work, acceptance of the project by the governing body, and provision of the necessary releases.
- Prompt pay: On public work a business must pay a subcontractor or supplier within 45 days of being paid by the agency, and interest runs after that, though this one CAN be varied by the subcontract. Late public payment carries the Bank of North Dakota prime rate less two points.
Whether the rule covers your job at all is a separate question from the percentage. Private: contracts between persons, except those already covered by the municipal or public-improvement sections, and except contracts governed by federal rules requiring different retention.
And the step-down is not the same thing as a right. North Dakota cuts the rate to 0% when the project is 50% complete. That drop is automatic once the condition is met, so it is money you are entitled to have back before the end of the job. No reinstatement provision, and unlike the public section there is no unsatisfactory-progress proviso either.
Heads up: State highway, county road and Public Service Commission projects are excluded from the public-improvement definition by §48-01.2-01(21), and no NDDOT retainage percentage was found in Title 24.
Check the Retainage Calculator before you sign a contract that holds back more.
Free North Dakota retainage letters
Three letters written for North Dakota's rules, with the state's own release clock and its statutory citation already in them. Fill one in on screen and download it as a PDF or a Word file.
- Retainage Release Request (North Dakota), for when the job is done and the money has not come back
- Retainage Overdue: Demand for Payment (North Dakota), for when the release date has passed and nothing has arrived
- Retainage Held Above the Cap: Challenge Letter (North Dakota), for when more is being held than the state appears to permit
Do you need a license in North Dakota?
North Dakota requires a state contractor license to take building work on. The threshold that triggers it: Above $4,000 per job. Working unlicensed when your job needs a license is the expensive mistake here. Only TWO exceptions exist, at 43-07-08: government representatives, and materials suppliers who do not install. The owner-builder exemption is acknowledged only IMPLICITLY at 43-07-24. Classes cap contract value once licensed: D up to 100,000, C up to 300,000, B up to 500,000, A unlimited. Public contracts are SWEPT INTO coverage, not exempted. The license comes from North Dakota Secretary of State, acting as statutory registrar (there is no contractor licensing board). North Dakota accepts the NASCLA commercial exam, useful if you work across state lines.
Trade licenses for electrical, plumbing and HVAC are usually separate and often required even where a GC license is not. See what applies to your trade on the Contractor License Checker.
Building codes and permits
North Dakota has no single statewide building code, so the edition you build to and whether you need a permit depend on your city or county. Do not assume the town next door adopted the same code or the same amendments.
- Homes: 2024 (effective 1 January 2026), but only in jurisdictions that have elected to enforce a building code
- Electrical: 2026 (effective 1 July 2026)
- Energy: 2024 (effective 1 January 2026), on the same elective basis as the building code
- Plumbing: 2018 UPC (published as the North Dakota Plumbing Code, effective 1 April 2020)
North Dakota publishes a State Building Code covering building, residential, mechanical, fuel gas, existing buildings and energy, and a city, county or township that chooses to enforce a building code must enforce that one and may only add local amendments. But choosing to enforce is optional: where a jurisdiction has elected nothing, no building, residential or energy code applies to new construction at all, and nothing fills the gap. Electrical and plumbing are different, running through the state electrical and plumbing boards and their licensing regimes, so those reach the whole state whatever the local position. Note the plumbing edition is considerably older than the rest of the stack.
Source: NDCC chapter 54-21.3, in particular §54-21.3-03 and §54-21.3-03(6), Department of Commerce Division of Community Services with the Building Code Advisory Committee; North Dakota State Electrical Board under NDCC chapter 43-11; NDAC §62-03.1-01, State Plumbing Board, under NDCC chapter 43-18. Read against that source on 2026-08-25.
Check a specific job on the permit tool.
Pay and workers' comp
The minimum wage in North Dakota is the federal $7.25 an hour. That is the floor for anyone you put on the books, and it is worth confirming against the state labor department each year because several states step their rate mid-year. Check a rate on the minimum-wage tool.
On workers' comp, North Dakota is monopolistic: buy directly from Workforce Safety & Insurance (the lowest-cost state fund in the US). Construction runs roughly $2 to $10 per $100 of payroll. Get a range on the Workers' Comp Estimator.
If a client will not pay
If a client will not pay, you can sue for up to $15,000 in North Dakota's Small Claims Court (District Court). That covers most unpaid-invoice disputes for a small outfit; a bigger claim goes to regular civil court where you will probably want an attorney. Walk through whether filing is worth it on the Small Claims checker.
The clock runs the other way too: a client generally has 6 years to sue you over the work under a written contract in North Dakota, with an absolute cutoff 10 years after the job is substantially complete. Work out your exposure on the Warranty & Claim Deadline tool.
Common questions
How much state income tax will I pay in North Dakota?
North Dakota has a graduated rate up to 2.5% state income tax on your profit, on top of federal income tax and self-employment tax. Use the Tax Set-Aside Calculator to see what to hold back.
Do I need a contractor's license in North Dakota?
Yes. North Dakota requires a state contractor license. The threshold: Above $4,000 per job. It is issued by North Dakota Secretary of State, acting as statutory registrar (there is no contractor licensing board).
What is the small claims limit in North Dakota?
You can sue for up to $15,000 in North Dakota's Small Claims Court (District Court). The filing fee is typically $10 to $55. Larger claims go to regular civil court.
Where do I buy workers' comp in North Dakota?
North Dakota is a monopolistic state, so you buy workers' comp directly from North Dakota WSI. Private carriers cannot write it here.
How long do I have to file a mechanic's lien in North Dakota?
Generally 90 days from your last day of furnishing. Miss it and you lose the lien. Work your own dates out on the Lien Deadline tool.
How much retainage can be held back in North Dakota?
Private: 10% of each estimate presented, being the estimated value of labor and material furnished plus material on the ground for use in the contract. Public: 10% of each partial payment estimate. The condition on it, in the statute's own terms: Private: contracts between persons, except those already covered by the municipal or public-improvement sections, and except contracts governed by federal rules requiring different retention. Run your own figure on the Retainage Calculator.
Are there free North Dakota contract and payment forms?
Yes. This page links 3 retainage letters written to North Dakota's own release clock and carrying its statutory citation. They are free, there is no sign-up, and you fill one in on screen and download it as a PDF or a Word file.
The honest bit
These are the 2026 rules for North Dakota as they stood when this guide was written, and they change: legislatures move thresholds, deadlines and rates every year. Treat this as general guidance to point you in the right direction, not legal, tax or financial advice. Verify anything you rely on at the source (the IRS, the North Dakota tax and licensing agencies, and your local building department) or with a professional. Where North Dakota does something unusual, the detail is called out above rather than glossed over.
Related: Tax Set-Aside Calculator · Mechanic's Lien Deadline · Contractor License Checker · Small Claims checker · Working in Your State
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Templates you might need
Sources
- North Dakota contractor licensing authority · North Dakota contractor licensing authority. Who must hold a contractor or trade license in North Dakota, and the licensing instrument (NDCC 43-07-02(1))
- North Dakota Legislative Branch · Mechanics lien notice, filing and enforcement deadlines in North Dakota: N.D.C.C. 35-27-02, 35-27-13, 35-27-14, 35-27-25. Verified against this authority on 2026-08-15.
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