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FAQ Articles

Are sales tax incentives available for businesses located in North Dakota?

Sales tax law provides sales tax incentives for manufacturing or recycling equipment, agricultural processing equipment and plant construction materials, primary sector businesses (excluding manufacturers and recyclers) computer and telecommunications equipment, and electrical generating facilities, gas gathering system, related gas processing facilities, improvements to oil refineries and the construction or expansion of telecommunications infrastructure, the production equipment for a new coal mine, the construction of liquid natural gas processing facility, the construction of a facility for coal gasification byproducts, enterprise information technology equipment and computer software used in a qualified data center, the materials used in recovery of oil or natural gas using carbon dioxide injection, and the construction of a fertilizer or chemical processing facility.

 

Manufacturing, Recycling or Agricultural Processing Plant
For manufacturing or recycling equipment or agricultural processing plant construction materials, this exemption only applies to new or expanding businesses located in North Dakota. To qualify for the exemption, the manufacturer must show that there is an increase in production volume, an increase in production types or employment of additional employees. Replacement equipment does not qualify for an exemption unless it creates an expansion.

Computer and Telecommunications Equipment
Sales and use tax incentives are available for computer and telecommunications equipment if the business has been designated as a primary sector business by the North Dakota Department of Commerce, Division of Economic Development and Finance. To qualify for the exemption, the business must be a new or expanding primary sector business (excluding manufacturers and recyclers) and must meet the qualifications stated above. The incentive is not extended to the purchase of replacement equipment, unless it creates an expansion.

Coal-powered Electrical Generating Facilities
Coal-powered electrical generating facilities may be granted a sales and use tax exemption for purchasing building materials, production equipment and other tangible personal property used in the construction of coal-powered electrical generating facilities. To qualify, the facility must convert coal from its natural form into electrical power and have at least one single electrical generation unit with a capacity of fifty thousand kilowatts or more.

Wind-powered Electrical Generating Facilities
Wind-powered electrical generating facilities may be granted a sales and use tax exemption for purchasing building materials, production equipment and other tangible personal property used in the construction of wind-powered electrical generating facilities. To qualify, the facility must have at least one single electrical energy generation unit with a nameplate capacity of one hundred kilowatts or more, and construction must be completed before January 1, 2017.

Other Electrical Generating Facilities
Electrical generating facilities, other than coal-powered or wind-powered may be granted a sales and use tax exemption for purchasing building materials, production equipment and other tangible personal property used in the construction of the electrical generating facilities. To qualify, the facility must produce electricity for resale or for consumption in a business activity and have at least one single generation unit with a capacity of one hundred kilowatts or more.

Oil Refineries
Oil refineries may be granted a sales and use tax exemption for purchasing building materials, equipment, and other tangible personal property used in the expansion or construction of an oil refinery. To qualify, the facility must have a nameplate capacity of processing at least 5,000 barrels of oil per day in this state. In addition, environmental upgrades which exceed $100,000 for reducing emissions, increasing efficiency, or enhancing reliability of equipment may also qualify for an exemption.

Gas Processing Facilities
Gas processing facilities may be granted a sales and use tax exemption for purchasing building materials, equipment, and other tangible personal property used in the expansion or construction of a gas processing facility. In addition, environmental upgrades which exceed $100,000 for reducing emissions, increasing efficiency, or enhancing reliability of equipment may also qualify for an exemption.

Compressing, Processing, Gathering, Collecting or Refining of Gas
A system used to compress, process, gather, collect or refine gas recovered from an oil or gas well may be granted a sales and use tax exemption. To qualify for the exemption the tangible personal property must be incorporated into a system or used to replace an existing system. Tangible personal property used to replace an existing system does not qualify unless it causes an expansion of the system.

Telecommunications Infrastructure Development
The development of telecommunications infrastructure may be granted a sales and use tax exemption for purchasing tangible personal property used to construct or expand infrastructure. To be exempt the tangible personal property must be installed into telecommunications service infrastructure owned by a telecommunications company.

Exemption Requests
Requests for sales tax exemptions must be made in writing to the Tax Commissioner and must include a description and cost of the equipment along with an explanation of how the equipment will enable the business to expand its operations. When a decision has been made, the Tax Commissioner will notify the taxpayer in writing if the project qualifies for an exemption.

New Coal Mine
Machinery or equipment used to produce coal from a new mine located in North Dakota is exempt.  The exemption for each new mine is limited to the first five million dollars of tax paid.  Replacement machinery or equipment is exempt if the capitalized investment in the new mine exceeds twenty million dollars.  Repair or replacement parts for existing machinery or equipment are not exempt.

Liquefied Natural Gas Processing Facility
Tangible personal property used to construct or expand a processing facility to produce liquefied natural gas is exempt.  The tangible personal property must be incorporated in the structure of the facility or used in construction to the point of no residual economic value.

Coal Gasification Byproducts Facility
Tangible personal property used to construct or expand a facility to extract or process byproducts associated with coal gasification is exempt.  The tangible personal property must be incorporated in the structure of the facility or used in construction to the point of no residual economic value.

Enterprise Information Technology Equipment and Software in a Qualified Data Center
Enterprise information technology equipment and computer software purchased for use by a qualifying business in a qualified data center are exempt.  The enterprise technology equipment or computer software must be incorporated into or physically located at the qualified data center.  Upgraded or replacement enterprise information technology equipment and computer software in a qualified data center is also exempt.

Qualified Data Center
A qualified data center is a newly constructed or substantially refurbished facility.  The facility must be certified by the Tax Commissioner as a qualified data center.  The exemption is limited to the first four qualified data centers processed in date-received order. 

CO2 – EOR
Tangible personal property used to construct or expand a system used to compress, gather, collect, store, transport, or inject carbon dioxide for enhanced recovery of oil or natural gas is exempt.  The tangible personal property must be incorporated into the system.  Tangible personal property used to replace an existing system is not exempt unless the replacement creates an expansion of the system. 

Fertilizer or Chemical Processing Facility
Tangible personal property used to construct a fertilizer or chemical processing facility and any component integral to the fertilizer or chemical processing plant are exempt.  The tangible personal property must be incorporated in the structure of the facility or used in construction to the point of no residual economic value.  As part of the application process, the owner of the fertilizer or chemical processing facility must obtain from the state department of health and present an air quality permit or a notice that the air quality permit application is complete.

For more information on business sales and use tax incentives and how to apply for the exemption, please refer to the North Dakota Tax Incentives for Business brochure.

nd.gov - The Official Portal for North Dakota State Government
North Dakota: Legendary. Follow the trail of legends

Ryan Rauschenberger
Tax Commissioner
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FAQ Articles

Are sales tax incentives available for businesses located in North Dakota?

Sales tax law provides sales tax incentives for manufacturing or recycling equipment, agricultural processing equipment and plant construction materials, primary sector businesses (excluding manufacturers and recyclers) computer and telecommunications equipment, and electrical generating facilities, gas gathering system, related gas processing facilities, improvements to oil refineries and the construction or expansion of telecommunications infrastructure, the production equipment for a new coal mine, the construction of liquid natural gas processing facility, the construction of a facility for coal gasification byproducts, enterprise information technology equipment and computer software used in a qualified data center, the materials used in recovery of oil or natural gas using carbon dioxide injection, and the construction of a fertilizer or chemical processing facility.

 

Manufacturing, Recycling or Agricultural Processing Plant
For manufacturing or recycling equipment or agricultural processing plant construction materials, this exemption only applies to new or expanding businesses located in North Dakota. To qualify for the exemption, the manufacturer must show that there is an increase in production volume, an increase in production types or employment of additional employees. Replacement equipment does not qualify for an exemption unless it creates an expansion.

Computer and Telecommunications Equipment
Sales and use tax incentives are available for computer and telecommunications equipment if the business has been designated as a primary sector business by the North Dakota Department of Commerce, Division of Economic Development and Finance. To qualify for the exemption, the business must be a new or expanding primary sector business (excluding manufacturers and recyclers) and must meet the qualifications stated above. The incentive is not extended to the purchase of replacement equipment, unless it creates an expansion.

Coal-powered Electrical Generating Facilities
Coal-powered electrical generating facilities may be granted a sales and use tax exemption for purchasing building materials, production equipment and other tangible personal property used in the construction of coal-powered electrical generating facilities. To qualify, the facility must convert coal from its natural form into electrical power and have at least one single electrical generation unit with a capacity of fifty thousand kilowatts or more.

Wind-powered Electrical Generating Facilities
Wind-powered electrical generating facilities may be granted a sales and use tax exemption for purchasing building materials, production equipment and other tangible personal property used in the construction of wind-powered electrical generating facilities. To qualify, the facility must have at least one single electrical energy generation unit with a nameplate capacity of one hundred kilowatts or more, and construction must be completed before January 1, 2017.

Other Electrical Generating Facilities
Electrical generating facilities, other than coal-powered or wind-powered may be granted a sales and use tax exemption for purchasing building materials, production equipment and other tangible personal property used in the construction of the electrical generating facilities. To qualify, the facility must produce electricity for resale or for consumption in a business activity and have at least one single generation unit with a capacity of one hundred kilowatts or more.

Oil Refineries
Oil refineries may be granted a sales and use tax exemption for purchasing building materials, equipment, and other tangible personal property used in the expansion or construction of an oil refinery. To qualify, the facility must have a nameplate capacity of processing at least 5,000 barrels of oil per day in this state. In addition, environmental upgrades which exceed $100,000 for reducing emissions, increasing efficiency, or enhancing reliability of equipment may also qualify for an exemption.

Gas Processing Facilities
Gas processing facilities may be granted a sales and use tax exemption for purchasing building materials, equipment, and other tangible personal property used in the expansion or construction of a gas processing facility. In addition, environmental upgrades which exceed $100,000 for reducing emissions, increasing efficiency, or enhancing reliability of equipment may also qualify for an exemption.

Compressing, Processing, Gathering, Collecting or Refining of Gas
A system used to compress, process, gather, collect or refine gas recovered from an oil or gas well may be granted a sales and use tax exemption. To qualify for the exemption the tangible personal property must be incorporated into a system or used to replace an existing system. Tangible personal property used to replace an existing system does not qualify unless it causes an expansion of the system.

Telecommunications Infrastructure Development
The development of telecommunications infrastructure may be granted a sales and use tax exemption for purchasing tangible personal property used to construct or expand infrastructure. To be exempt the tangible personal property must be installed into telecommunications service infrastructure owned by a telecommunications company.

Exemption Requests
Requests for sales tax exemptions must be made in writing to the Tax Commissioner and must include a description and cost of the equipment along with an explanation of how the equipment will enable the business to expand its operations. When a decision has been made, the Tax Commissioner will notify the taxpayer in writing if the project qualifies for an exemption.

New Coal Mine
Machinery or equipment used to produce coal from a new mine located in North Dakota is exempt.  The exemption for each new mine is limited to the first five million dollars of tax paid.  Replacement machinery or equipment is exempt if the capitalized investment in the new mine exceeds twenty million dollars.  Repair or replacement parts for existing machinery or equipment are not exempt.

Liquefied Natural Gas Processing Facility
Tangible personal property used to construct or expand a processing facility to produce liquefied natural gas is exempt.  The tangible personal property must be incorporated in the structure of the facility or used in construction to the point of no residual economic value.

Coal Gasification Byproducts Facility
Tangible personal property used to construct or expand a facility to extract or process byproducts associated with coal gasification is exempt.  The tangible personal property must be incorporated in the structure of the facility or used in construction to the point of no residual economic value.

Enterprise Information Technology Equipment and Software in a Qualified Data Center
Enterprise information technology equipment and computer software purchased for use by a qualifying business in a qualified data center are exempt.  The enterprise technology equipment or computer software must be incorporated into or physically located at the qualified data center.  Upgraded or replacement enterprise information technology equipment and computer software in a qualified data center is also exempt.

Qualified Data Center
A qualified data center is a newly constructed or substantially refurbished facility.  The facility must be certified by the Tax Commissioner as a qualified data center.  The exemption is limited to the first four qualified data centers processed in date-received order. 

CO2 – EOR
Tangible personal property used to construct or expand a system used to compress, gather, collect, store, transport, or inject carbon dioxide for enhanced recovery of oil or natural gas is exempt.  The tangible personal property must be incorporated into the system.  Tangible personal property used to replace an existing system is not exempt unless the replacement creates an expansion of the system. 

Fertilizer or Chemical Processing Facility
Tangible personal property used to construct a fertilizer or chemical processing facility and any component integral to the fertilizer or chemical processing plant are exempt.  The tangible personal property must be incorporated in the structure of the facility or used in construction to the point of no residual economic value.  As part of the application process, the owner of the fertilizer or chemical processing facility must obtain from the state department of health and present an air quality permit or a notice that the air quality permit application is complete.

For more information on business sales and use tax incentives and how to apply for the exemption, please refer to the North Dakota Tax Incentives for Business brochure.

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