North Dakota Sales Tax Handbook

RATE OF SALES TAX:

5.00%

LOCAL & COUNTY MAXIMUM RATES:

3.50%

What Are the Taxable Goods and Services?

The first step in sales tax compliance is determining if the items or services your firm offers are taxable in North Dakota.

Traditional Products and Services

Physical property, such as furniture, household appliances, and automobiles, is subject to sales tax in North Dakota.

Prescription drugs, food, and fuel are all free from sales tax.

Digital Products and Services

A digital item or service is anything that is supplied electronically, such as a music downloaded from iTunes or a movie bought from Amazon.

Businesses in North Dakota are not required to collect sales tax on the sale of digital products or services.

North Dakota, however, has one exemption to this restriction. Businesses are required to collect sales tax on pre-written computer software offered online.

How to Register for Sales Tax in North Dakota

If you have concluded that you must charge sales tax on part or all of the products and services that your company sells, the next step is to apply for a seller’s licence.

This enables your company to collect sales tax on behalf of the municipal and state governments.

You will need the following information to register:

Personal identifying information (SSN, address, etc.)
Identification information for a business (EIN, address, etc.)
NAICS number for the kind of business entity (You can do a NAICS Code Lookup and find the NAICS Code for LLC that matches your industry.)
Description of business operation

A Resale Certificate might help you save money.

When acquiring items for resale, your firm does not have to pay sales tax if you obtain a resale certificate, also known as a reseller’s permit.

Sales Tax Collection

After obtaining your seller’s licence and starting your company, you’ll need to figure out how much sales tax to charge various consumers. It is critical for company owners to collect the right rate of sales tax to avoid penalties and the danger of expensive audits.

When computing sales tax, consider the following types of transactions:

Store Sales Shipping Within-State Sales Outside-State Sales

Retail Sales

For conventional company owners who sell products or services on-site, calculating sales tax is simple: all sales are taxed at the rate determined by the store’s location.

Here’s an illustration of how this situation may look:

In Minot, North Dakota, Mary owns and operates a bookshop. Because books are taxed in the state of North Dakota, Mary charges a flat 5.5% sales tax on all purchases. This includes North Dakota’s 5.0% state sales tax and Ward County’s 0.5% sales tax.

Sales inside the state

North Dakota has what is known as a destination-based sales tax regime. This implies that long-distance transactions inside North Dakota are taxed based on the buyer’s address. This regulation applies to sales taxes levied by the state, county, and city.

Consider the following scenario:

Steve operates his own eBay electronics company from his home in Williston, North Dakota. A buyer from Fargo, North Dakota discovers Steve’s eBay website and buys a $350 set of headphones. When computing the sales tax for this item, Steve uses the North Dakota state tax rate of 5.0%, plus 0.5% for Cass county and 2.0% for Fargo. The entire cost is $376.25 ($26.25 sales tax) at a total sales tax rate of 7.5%.

Out-of-State Purchases

Businesses in North Dakota must only pay sales tax on out-of-state sales if they have nexus in other states.

Nexus indicates that the company has a physical presence in another state.

Common nexus types include:

A physical place, such as an office, retail shop, or warehouse.
An employee who works from home or as a roaming sales representative.
An affiliate marketer
Dropshipping from a third-party vendor.
A temporary physical site, such as a festival or fair booth.

Submit Your Sales Tax Return

You’re ready to submit your sales tax return now that you’ve obtained your North Dakota seller’s permit and understand how to charge the correct amount of sales tax to all of your customers. You avoid penalties and fines, be sure to meet all filing dates.

How to File a Claim

Businesses in North Dakota are required to file sales tax forms and make sales tax payments online.

How Frequently Should You File?

The frequency with which you must submit is determined by the total amount of sales tax collected by your firm.

Annual filing: If your company earns less than $2,750 in monthly sales, you should submit returns on an annual basis.
Semi-annual filing: If your company pays between $2,750 and $6,666.66 in sales tax each month, you should submit returns on a semi-annual basis.
Quarterly filing: If your company pays between $2,750 and $6,666.66 in sales tax every month, you should choose to submit quarterly reports.
Monthly filing: If your company produces more than $6,666.66 in revenue each month, you need submit returns on a monthly basis.
Seasonal filing: If your company only operates at a certain period of year, you should choose to submit returns on a seasonal basis.

Deadlines for Filing

The deadline for all North Dakota sales tax returns is the 31st of the month, unless it is a weekend or federal holiday, in which case the deadline is postponed to the following working day. The filing deadlines for this year are shown below.

Check out the 2018 Tax Filing Calendar on the North Dakota Department of Revenue website for a comprehensive list of deadlines.

Penalties for Filing Late

North Dakota assesses a late filing penalty of 5% or $5 for the first month of late filing, plus an additional 5% every month or partial month up to a maximum of 25% of the tax stated on the tax return.

North Dakota additionally imposes a late payment penalty of $5 or 5% of the unpaid tax, whichever is greater.

For any unpaid tax or penalty, the state levies a compounding interest rate of 5% per year or 0.5% each month or partial month.