When making sales to customers in North Dakota, it’s important to know if you’re obligated to collect and remit sales tax to the state. Although the regulations surrounding sales tax share some similarities from one state to the next, each state also has its own specific guidelines that can impact exactly who must collect sales tax and at what rate. North Dakota is not exception to this, and whether your business is based in North Dakota or you ship to customers from out-of-state, it’s important to stay up to date on all state and local rates and requirements.
The state sales tax rate for most purchases of tangible personal property in North Dakota is 5%, and local governments can impose their own taxes as well. That means the effective rate across the state can vary substantially, with the combined state and local rate in some places reaching 8.5%.
North Dakota also imposes sales tax at a rate of 7% on purchases of alcoholic beverages, whether intended to be consumed on-site or off the premises. Purchases and rentals of new farm machinery are taxed at a 3% rate by the state, and all of these may be subject to additional local taxes as well.
The effective sales tax rate your charge your customers will depend on the final destination of the goods, or the place where the purchaser takes possession. That means that, if you have a physical store where purchases are made, you’ll charge sales tax at the combined state and local rate applicable in that jurisdiction.
However, because local sales tax rates only apply in North Dakota if you have a nexus in that specific jurisdiction, shipping to another part of the state where you have no physical presence will only require the collection of sales tax at the 5% state rate. This is also the case if you ship from out-of-state and you have no local nexus at the final destination of the goods.
Any retailer maintaining a place of business in North Dakota is considered to have a significant presence in the state, and so is obligated to register to collect and remit sales tax on all applicable purchases with the state. For the purposes of establishing a sales tax nexus in North Dakota, the state interprets the phrase “retailer maintaining a place of business in the state” to include anyone engaged in solicitation of sales of taxable goods on a regular or systemic basis through various means. These include but are not limited to radio or television media, catalogs, advertising flyers, telephone, and periodicals.
Other conditions that can trigger a nexus on both a statewide and local level include:
Amazon does have a customer service center in North Dakota, so if you use fulfilment through Amazon, that physical location creates a statewide nexus for you.
North Dakota is also one of a number of states that has recently passed some form of economic nexus regulation. This law would require any seller who has more than $100,000 in gross receipts of taxable sales into North Dakota in a year, or who completes sales of taxable goods in more than 200 discrete transactions into North Dakota to collect and remit sales tax from North Dakota customers even if the seller has no physical presence in the state. The law will go into effect if and when the Supreme Court overturns its previous decision in Quill Corp v North Dakota.
Purchases subject to sales tax in North Dakota generally include those of tangible personal property, magazines and other periodicals, and admission for recreational activities. Rentals and leases of tangible personal property, as well as that of hotel and similar accommodations, are also taxable.
Many services, including communication services, are taxable, with specific exemptions including janitorial services, medical services and transportation services. Certain tangible goods are also exempt, and this list includes groceries, medical devices, prescription drugs, custom software, newspapers and digital products.
North Dakota does recognize organizations and entities like schools if they’re public or non-profit private, skilled nursing facilities, federally chartered corporations, assisted living facilities, hospitals, emergency medical providers, and basic care facilities. To qualify, however, these organizations must obtain a Certificate of Exempt Status from the state and present it at the time of purchase. It’s important to note as well that this certificate must be issued by North Dakota, and not the federal government, to qualify.
Charges for shipping, transportation and delivery are taxable in North Dakota as long as the item being shipped is taxable, and labor charges related to the production or installation of a taxable item are taxed as well as long as they’re included in the initial purchase price.
If you make regular sales of tangible personal property to customers in North Dakota, or you are in direct competition with in-state retailers, you must submit an application to collect and remit sales tax to the state. The application is free, although you may be required to make a bond payment before your permit is issued. This bond is eligible for refund after two years as long as you have made timely and accurate payments throughout that period.
You can register by mail or online, and you may also need to obtain a Certificate of Authority from the state if your company was legally established under the regulations of another state. If you choose to file online, you may make payments that way as well. If you file by mail, only payment by mail will be accepted. All relevant forms can be found on the state website.
North Dakota is also a member of the Streamlined Sales Tax Registration System, which allows you to register with all participating states at once, and that’s worth looking into particularly if you make sales into multiple states or plan to in the future. If you do choose to go this route, it’s important to note that you must register with all states covered under the agreement at once.
Depending on your total average sales tax liability for the previous year, or your estimated liability if you’re just beginning to make sales into North Dakota, you may be assigned a monthly, quarterly, or annual filing frequency by the state. In general, you will be required to file monthly if your annual sales tax liability exceeds $25,000. Quarterly filing may be assigned to sellers with an annual liability up to $25,000, although the state will use its discretion to assign annual or semi-annual filing frequencies to sellers with lower total tax liabilities, seasonal sales, or other special circumstances.
Regardless of filing frequency, these payments are due on the last day of the month following the close of the period in question.
|January – March (Q1)||April 30|
|April – June (Q2)||July 31|
|July – September (Q3)||October 31|
|October – December (Q4)||January 31|
If you only need to file a North Dakota sales tax return once a year, your filing and payment deadline will be January 31st of the following year. When these due dates fall on a weekend or holiday, payments will be considered timely as long as they’re made online or postmarked by the next business day.
North Dakota does require the filing of zero returns, which means that if you hold a permit to collect sales tax in the state, you must file a return whether you have an actual tax liability for the period in question or not. Penalties for failing to file or pay on time include a charge of 5% or $5, whichever is more, for the first month, with an another 5% added on for each subsequent month before payment is made in full. There is no interest charge for the first month, but interest will accrue at a rate of 1% of the total tax due for each additional month the payment is delinquent.
One particular challenge to keeping compliant with sales tax regulations in North Dakota is the technicality of the nexus laws at both the state and local level. As a result of these statutes, you may or may not have to collect local sales tax on top of the state sales tax when you ship to different parts of the state. Using a software tool designed to manage these types of transactions can be a great help in this situation, and TaxTools has exactly the combination of features you need to streamline your sales and record-keeping processes.
The TaxTools program automatically assigns the applicable rate to any purchase, keeps detailed records of all sales organized by state with location data, and will ensure your returns are filed on time. You can also quickly access a trove of sales and other data through the system, and TaxTools monitors changes to local and state sales tax laws regularly to make sure you’re always up to date and following the proper procedures for all transactions. This can greatly simplify your business processes, and it’s especially convenient if you make sales into multiple states on a regular basis. TaxTools also integrates smoothly with all eCommerce platforms, so you don’t have to change anything else about the way you do business.
If you’re ready to learn more about how TaxTools can help you grow your business while staying on top of ever-changing state sales tax regulations, click here to sign up for a free trial today.