Sales & Use Taxes Frequently Asked Questions
- Special Events Organizer
- Special Events Vendors
- Application of Sales and Use Tax
Special Events Organizers
Special Events Vendors
Application of Sales and Use Tax
My business is located in a city or county with a local sales and use tax, but we sell and deliver goods to customers in other cities and counties with local taxes. Which city or county local tax applies to the sale?
Special Events Organizers
Q: Who is considered an Event Organizer?
A: Any individual or organization who promotes or organizes an event with vendors is an Event Organizer.
Q: What reporting responsibilities do Event Organizers have under House Bill 1074 passed during the 2007 legislature?
A: Event Organizers are required to provide a list of the participants to the Office of State Tax Commissioner within 20 days following the event, if the event has 10 or more vendors.
Q: I have received a letter requesting a vendor list for an event with less then 10 vendors, am I required to provide the list?
A: The Event Organizer is not required to provide a list in this case, but we ask the Event Organizer to inform the Tax Department that the event does not have a reporting responsibility.
Q: : Do Event Organizers have to verify or require vendor permit numbers?
A: No, Event Organizers only need to request that the vendors provide the information necessary to complete the Special Event Vendor Listing. Event Organizers may submit the Special Event Vendor Listing to our office using paper or electronic format.
Q: Where can I obtain the forms to submit the list of vendors to the Tax Department?
A: The Special Event Vendor Listing forms can be downloaded from our web site or requested by calling 701.328.1246.
Special Events Vendors
Q: Do I need to get a sales tax permit?
A: A sales tax permit is needed by anyone who makes retail sales of tangible personal property on a regular basis in North Dakota. If you make sales of tangible personal property and you are in direct competition with other licensed retailers, you should contact our office at 701.328.1241for further instructions.
Q: How does one get a sales tax permit?
A: Our office has an application form that can be down loaded from our web site. The application can be completed online but must be printed and signed before submitting to our office.
Q: How much does a permit cost?
A: There is no fee for our application. However, a bond may be required before the permit will be issued.
Q: Is that bond refundable?
A: Taxpayers with 2 years of accurate and timely filing can request a review of their account and the bond may be refunded.
Q: What is the Tax Rate?
A: The state sales tax rate for North Dakota is 5% for most retail sales. Gross receipts tax is applied to sales of Alcohol at 7% and to sales of New Farm Machinery and Mobile Homes at 3%. There may be additional city or county taxes based on the location of the sales. Please refer to our guideline Local Option Taxes by Location.
Q: How do I pay the taxes?
A: Taxes are to be remitted on the forms prescribed by our office or by using our WebFile system. A return form will be mailed for all paper filers and an e-mail reminder for all web filers based on the filing frequency assigned at the time of registration.
Q: Do I need to apply for a permit each year?
A: An application is not required each year you conduct business. Permits remain active until the taxpayer requests the cancellation.
Q: What sort of records do I need to keep?
A: Inventory records, daily cash sheets, cash register tapes, credit card receipts, bank deposit slips, purchase invoices, sales receipts and supplier lists, income tax returns and depreciation schedules. Auditors may stop at your location and request to see these records.
Q: If I start a new retail business or purchase an existing retail business, what are my sales, use and gross receipts tax responsibilities?
A: If you open a new retail business or purchase an existing retail business, you must obtain a North Dakota Sales, Use, and Gross Receipts Tax Permit from the Tax Commissioner. You also must file a sales, use and gross receipts tax return according to the filing status assigned to your business when the permit is issued. North Dakota law also requires a business operating under a trade or business name to register the name with the North Dakota Secretary of State. To register a name, please contact the Secretary of State at (701) 328-4284.
To obtain a sales, use, and gross receipts tax permit, complete an application and submit it to our office no less than 30 days prior to opening for business. If you purchase an existing business, you must apply for a new sales tax permit, as permits are not transferable.
The sales, use, and gross receipts tax return is used to report the sales and remit the sales and use tax for the reporting period preprinted on the form sent to you. A return must be filed even if no sales were made during the reporting period.
Q: If I start a new service-related business or purchase an existing service-related business, what are my sales and use tax responsibilities?
A: A service-related business may be required to obtain a North Dakota sales, use, gross receipts tax permit. Even though, as a service provider your services may not be subject to sales tax, you may have a use tax obligation on purchases made to operate the business if you did not pay sales tax to your supplier (in or out of state) at the time the equipment, supplies and materials were purchased. If the business purchases all equipment, supplies and materials from retailers that collect North Dakota tax and applicable local tax, no permit is required.
Any business operating under a trade or business name should register the name with the North Dakota Secretary of State. To register a name, please contact the Secretary of State at 701.328.4284.
Q: Does a change in ownership or purchase of an existing business require a new sales tax permit?
A: Sales tax permits are not transferable and a new permit must be obtained if a business has a change in ownership. A change in ownership may include changing from a sole proprietor to a partnership or corporation, a change of partners, purchasing an existing retail or service-related business, or reorganization resulting in a change of the federal identification number (Fed ID#). If a corporation’s officers change, but the Fed ID# remains the same, a new permit is not required, but the business must complete and mail a corporate officer update form to our office.
Q: What is the sales and use tax responsibility for an out-of-state company doing business in North Dakota?
A: An out-of-state company with sufficient physical presence in North Dakota doing retail or wholesale business in the state must obtain a North Dakota Sales, Use, and Gross Receipts Tax Permit and must file returns according to the filing status assigned at the time the permit is issued.
Corporations, limited liability companies, limited partnerships and limited liability partnerships organized under the laws of a state other than North Dakota are considered foreign companies. All foreign companies having a physical presence in North Dakota must obtain a Certificate of Authority from the North Dakota Secretary of State.
Companies without sufficient physical presence may voluntarily collect tax as a service to their customers after they have applied for a North Dakota sales tax permit.
Contractors please see the following questions:
- I am a contractor bidding jobs in North Dakota. What are my obligation for sales or use tax?
- I am a contractor bidding jobs outside of North Dakota. What are my obligations for sales or use tax?
Q: When is a permit required and how do I get it?
A: A sales tax permit is required if you make retail sales. The sales tax permit application is available on our website. The application may be completed on-line, but must be printed and signed, and mailed, faxed (701.328.0332) or E-mailed to our office.
Q: Do I need a North Dakota sales, use, gross receipts tax permit to sell seasonal items such as fireworks or Christmas trees from a retail location?
A: All individuals or organizations selling fireworks or Christmas trees from a retail location are retailers and must obtain a sales tax permit before they may sell seasonal items. To obtain a sales tax permit you must contact our office in writing at least 30 days before you begin your sales.
Q: Can I pay my paper ST form electronically?
A: Only sales tax permit holders filing their return electronically by WebFile may pay electronically. Please see the next question.
Q: Can I file my sales tax return over the Internet?
A: The Tax Commissioner does provide a secure method for filing your state and local sales tax return using the Internet. Web File is a free, web-based PC program that allows sales tax permit holders to file on our web site. For more details on WebFile, please review the Sales Tax WebFile guideline (PDF format).
Q: Is my sales, use tax and gross receipts return filed on time if it is postmarked by the due date? What if the due date falls on a weekend or holiday?
A: Sales tax returns must be postmarked by the U.S. Postal Service on the due date to be considered filed on time. Check with your local U.S. Postal Service to determine the last mail collection time on the due date. Returns are due the last day of the month following the tax reporting period. If the last day of the month falls on a weekend or legal holiday, the due date is the next business day.
Q: What is the procedure for correcting an error made on a sales, use, and gross receipts tax return?
A: Sales, use and gross receipts tax returns may be amended to report additional tax due or to request a refund of tax paid in error. For instructions on obtaining and completing an amended sales tax return, please contact our office. If you receive a calculation worksheet for a currently filed return, the correction should be made on the worksheet and returned to our office.
Q: What are my sales tax responsibilities if I close or sell my business?
A: When a business is sold or closes, you must file a final North Dakota Sales, Use, and Gross Receipts Tax return within 15 days following the closing or selling of the business. Please contact our office to request a final return. Your permit card should be returned to our office when you submit the final return. If you have a current return to file, you may also complete the information in the upper right corner of the form indicating your last day of business, and the new owner if the business has been sold.
Application of Sales and Use Tax
Q: What is subject to sales tax in North Dakota?
A: Generally, tangible personal property sold or bartered for a consideration is subject to tax. In addition, receipts from retail sales of communication services, magazines, other periodicals sold over the counter, cigarettes and tobacco products, admission tickets for recreational activities, rental of hotel and motel accommodations and leasing of tangible personal property are subject to tax.
While charges for labor generally are exempt from sales and use taxes, labor charges separately stated or lump sum billed in connection with the sale of a fabricated item are subject to sales tax.
Freight, delivery and other transportation charges associated with a sale become part of the selling price of the item being sold if the seller bills the purchaser for the freight. These charges are only taxable if the merchandise being sold is taxable. Lump sum freight charges related to the sale of tangible personal property should be prorated when the charge applies to both taxable and nontaxable personal property.
Q: How long must I retain my records?
A: Under North Dakota Law, records must be retained for a period of not less than three years and three months. These records include, but are not limited to, books of account maintained by a business with all bills, receipts, invoices, cash register tapes, other documents of original entry supporting the entries in the books of account and all schedules or working papers used in the preparation of the tax returns. See the Model Recordkeeping Regulation for further information on the retention of records.
Important note: If it is determined that in a single reporting period a 25 percent discrepancy has occurred, audit assessments can be made in the period the discrepancy occurred. This assessment period extends to six years from the date the return was due or filed whichever period expires later.
Q: Which organizations are eligible for an exemption and how do they apply?
A: Government entities and organizations specifically exempt by statute qualify for sales tax exemption in North Dakota. North Dakota law does not exempt religious, charitable or non-profit organizations. Purchases made by churches are subject to tax; however, bibles, prayer books, hymnals and religious textbooks purchased by churches are exempt by state statute.
Exempt organizations include:
- Government entities
- Federal chartered corporations
- Public and private non-profit schools
- Hospitals, nursing homes, intermediate, basic care, assisted living facilities, and emergency medical providers licensed by the North Dakota Department of Health and Human Services (on qualifying purchases)
- Qualifying voluntary health organizations
To apply, organizations must complete, sign, mail or fax an application to the Tax Commissioner requesting an exemption certificate. An application may be found on our website.
Upon approval of the application, the exempt organization will receive a Certificate of Exempt Status – Exempt Organization containing a number beginning with an E followed by a four-digit number. A copy of the North Dakota sales tax exemption certificate must be presented to the supplier when purchases are made. North Dakota does not recognize exemption certificates or numbers issued by other states, government entities or a Federal Employer Identification Number as a valid exemption number. A qualifying out of state entity may apply for a North Dakota Exemption number.
Q: I have customers that claim they are exempt from sales tax. How do I know if my customers are exempt and what type of records do I need to document exempt sales?
A: Generally, the type of document presented by the customer determines if the customer is exempt from sales tax or if they are purchasing for resale. In North Dakota, most tax-exempt entities other than some U.S. government agencies (see below) receive a Certificate of Exempt Status – Exempt Organization issued by the Tax Commissioner. A copy of the sales tax exemption certificate must be presented to the retailer at the time the exempt organization makes a purchase. The retailer must keep the certificate on file in case of an audit. Exemption certificates do not expire and do not have to be renewed or reissued like a Certificate of Resale. A Federal Employer Identification Number is not a valid exemption number, nor is having a Federal Income Tax exemption status of a non-profit organization as recognized in 501 c 3. North Dakota does not recognize exemption certificates or numbers issued by other states or government entities or a Federal Employer Identification Number as a valid exemption number. An application should be completed and submitted to the office for review to determine if you are eligible for a North Dakota Sales Tax Exemption Certificate.
Exempt organizations include all government entities, schools (public and nonprofit private), federally chartered corporations, hospitals, skilled nursing facilities, basic care facilities, assisted living facilities, and emergency medical providers licensed by the North Dakota Department of Health and Human Services and qualifying nonprofit voluntary health organizations.
The United States government and its agencies, the state government and all of its political subdivisions are exempt from paying sales tax provided payment for the purchase is made directly by a government warrant, government check or a government credit card that is paid directly by the government agency. Individuals who represent any of these agencies while on government business are subject to sales tax in this state if they pay by personal check, personal credit card, or with a government credit card that is billed to the individual and paid for by the individual who then is reimbursed by the government agency.
Customers buying for resale must present a Certificate of Resale to the seller at the time of the sale. A copy of a retailer’s sales tax permit or providing only the sales tax permit number may not be used as a resale certificate. We accept the North Dakota Certificate of Resale with the permit holder’s home state and sales tax number entered on the form or the Multi-Jurisdiction Uniform Sales & Use Tax Certificate. For more information regarding the Certificate of Resale and the purchase of goods for resale, please refer to the Requirements for Sales and Use Tax.
Q: Are sales made by nonprofit organizations taxable?
A: Under certain conditions, gross receipts from sales made by nonprofit organizations may be exempt from sales tax. The conditions for this exemption are:
- If net proceeds from the sale are used for charitable, educational or religious purposes; and
- If sales are not on a regular, on-going basis; and
- If the sales are made in a privately owned facility, or
- If the event is held in a publicly owned facility and the gross receipts are less than $10,000 per event.
- The receipts in excess of $10,000 are taxable for sales tax purposes.
For more details regarding sales made by nonprofit organizations, please consult our Special Events guideline.
Q: Are Churches and nonprofit organizations required to pay sales tax on purchases made for their own use?
A: Purchases made by churches, religious, charitable and nonprofit organizations for their own use are subject to tax. The tax-exempt status nonprofit organizations have for income tax purposes does not exempt them from paying sales tax on purchases for their own use. State law does allow an exemption for churches purchasing bibles, prayer books, hymnals and religious textbooks.
Goods purchased for resale for fund raising purposes by a religious, charitable or nonprofit group may be purchased tax-free. The organization should provide the retailer a properly completed Certificate of Resale if they have a sales tax permit or a letter of authorization obtained from the Sales Tax Compliance Section allowing the goods to be purchased for resale.
Q: Are retail sales to American Indians subject to sales tax?
A: Retail sales to American Indians are taxable if possession of the goods takes place off the reservation.
If the retailer delivers the goods to an American Indian who is an enrolled member residing on any federally recognized Indian reservation or trust property, the goods are not subject to sales tax. American Indians who take possession of the goods on the reservation without paying the tax are required to pay use tax on the purchase price of the goods if the goods are removed from the reservation for use elsewhere.
Effective July 1, 2009, American Indian Tribal governments are exempt from the payment of sales tax if they provide their sales tax exemption certificate to the retailer at the time of purchase. The exemption applies to tribal government agencies, instrumentalities, or political subdivisions that perform essential government functions.
The exemption does not apply to business entities owned by the tribe or tribal agencies with the primary purpose of operating a business entity.
Q: When is a mail-order company responsible for the collection of North Dakota sales tax?
A: If a mail order company has sufficient physical presence in North Dakota, sales tax must be applied to all sales of tangible personal property delivered into North Dakota. This includes sales made through the company’s Internet web site. Purchases delivered outside of North Dakota are sales in interstate commerce, which are not subject to North Dakota sales tax.
Mail order and Internet sales made to North Dakota customers by a company located outside of North Dakota are subject to sales or use tax in North Dakota if the company has sufficient physical presence in the state either on a temporary or permanent basis. Sufficient presence to register and collect the tax may include, but is not limited to, owning property (i.e., warehouse, repair facility, lease or rental equipment) or having employees or agents working in this state.
A purchaser located in North Dakota is required to remit use tax on the cost of an out-of-state purchase even though the vendor did not collect any appropriate tax. The purchaser should report use tax on a One-Time Remittance Form and should also refer to the Local Option Taxes Guideline for determining if local tax applies to the purchase.
Q: Are sales of tangible personal property to out-of-state residents subject to North Dakota sales tax?
A: Sales of tangible personal property shipped by the seller to out-of-state customers are not subject to North Dakota sales tax. The sales are reported on the North Dakota Sales, Use, and Gross Receipts Tax Return as nontaxable sales.
Sales of over-the-counter goods picked up in North Dakota by the buyer are subject to North Dakota sales tax even though the goods are removed from the state for use outside the state. An exception is made for qualifying purchases made by persons from Montana who sign a Certificate of Purchase.
The North Dakota retailer may be aware the purchased goods will be shipped to an out of state destination, even though the purchaser’s designated agent takes title to the goods in North Dakota, but the goods are transported to a destination outside of this state. The North Dakota retailer when making such a sale should reference the out of state destination on their sales invoice.
North Dakota retailers that deliver goods to customers outside of North Dakota may be required to collect tax on behalf of the state into which the retailer delivers. Retailers who make deliveries into other states should contact that state for details regarding sales tax due in that state. If the retailer is not required to collect that state’s sales tax, the buyer may be required to remit a use tax to the state where delivery is made if that state has a use tax law.
Q: Is the sale of food subject to sales tax?
A: Generally, food sold for home consumption is exempt from sales tax while prepared food is taxable. For example, meals or prepared snacks purchased at a restaurant, convenience store or concession stand are subject to sales tax even if the prepared food is taken out and consumed elsewhere.
Most food products purchased in grocery stores are exempt from sales tax. The sales of candy, chewing gum, soft drinks, flavored water, including fruit drinks containing less than 50 percent pure fruit juice are taxable. Bakery items are exempt from sales tax unless they are sold in a heated state and served with eating utensils. All catered food is prepared food and is subject to tax.
Please refer to the Grocery Stores, Convenience Stores and Delicatessens guideline for additional information regarding food sales.
Q: Are Freight, delivery or other transportation charges subject to sales tax?
A: Effective October 1, 2005, all freight, delivery and other transportation charges are considered a part of the selling price. If the sale is taxable, the freight, delivery and other transportation charges that are part of the sale when billed by the seller are always taxable. This includes other transportation charges such as “shipping and handling” charges or fuel surcharges. If the product being delivered is exempt from sales tax, then the freight, delivery, and other transportation charges are also exempt. Lump sum freight charges related to the sale of tangible personal property should be prorated when the charge applies to the shipment of both taxable and nontaxable personal property. A retailer not prorating the freight charges for taxable and non taxable changes will cause all the freight charges to be taxable.
Delivery charges billed directly to the customer by a third party delivery service that are not making the sale of tangible personal property remain exempt from sales and use tax.
Q: Are amounts billed for computer software maintenance agreements subject to sales tax?
A: The fees for computer software maintenance agreements for prewritten software are subject to tax if the maintenance agreement is mandatory, or if the maintenance agreement is optional but includes computer software updates which are not separately stated.
If the maintenance agreement for prewritten software is optional, includes updates to the software and the update charges are separately stated, the maintenance agreement is not subject to tax but the software updates are subject to tax.
The fees for computer software maintenance agreements are not subject to tax if the software is a custom program.
Q: Are licensed motor vehicles subject to state and local sales tax?
A: Sales: The sales of licensed motor vehicles, including trailers and semi-trailers, are subject to a 5 percent motor vehicle excise tax instead of state and local sales taxes. Licensed motor vehicles are not subject to local option taxes.
The motor vehicle excise tax is imposed on the purchase price of any motor vehicle that must be registered in North Dakota for use on the highways and streets of this state. The purchaser of a motor vehicle is responsible to license the vehicle and pay the motor vehicle excise tax to the Motor Vehicle Division of the North Dakota Department of Transportation at the time of registration if the dealer did not collect the tax as a convenience for the customer.
Off-highway vehicles including snowmobiles and all-terrain vehicles (ATVs) that will be used on land other than that owned or leased by the owner must be registered with the Motor Vehicle Division and will be subject to the 5 percent motor vehicle excise tax at the time of registration.
Snowmobiles and ATVspurchased at retail that will not be registered with the Motor Vehicle Division are subject to the state and local sales tax, which should be collected by the retailer at the time of the sale.
Lease: Motor vehicles with an actual vehicle weight of 10,000 pounds or less and placed into lease service for periods of one year or more are subject to the 5 percent motor vehicle excise tax. Local taxes do not apply to the lease of motor vehicles. The owner or lessor is responsible to pay the tax based on the total consideration of the lease. Vehicles with an actual vehicle weight of more than 10,000 pounds or are leased for periods of less than one year are subject to the 5 percent motor vehicle excise tax based on the lessor’s purchase price.
Please refer to our Lease or Rental of Motor Vehicles guideline for additional information on the lease of motor vehicles.
Rental: Motor vehicles purchased for the purpose of rental are subject to the 5 percent motor vehicle excise tax at the time the vehicles are licensed with the Motor Vehicle Division. In addition to the Motor Vehicle Excise Tax, a 5 percent sales tax and 3 percent rental surcharge are imposed on rentals of motor vehicles if the vehicle is rented for periods of less than 30 days and the motor vehicle has a gross vehicle weight of 10,000 pounds or less.
Several cities in North Dakota collect a 1% Motor Vehicle Rental Tax on the rental value of a motor vehicle. To qualify as taxable, the vehicle must be either picked up at the airport or the customer is picked up at the airport and taken to an off-site rental location.
Please refer to our Lease or Rental of Motor Vehicles guideline for additional information on the lease of motor vehicles.
Q: Are sales tax incentives available for businesses located in North Dakota?
A: 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.
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, 2015.
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 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, or Refining of Gas
A system used to compress, process, gather 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.
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.
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.
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.
Q: My business is located in a city or county with a local sales and use tax, but we sell and deliver goods to customers in other cities and counties with local taxes. Which city or county local tax applies to the sale?
A: Where the customer takes possession of the goods determines which local tax is collected. Customers, or their agents, who take possession of goods at the retailer’s business location pay the local tax due in the city and county where the retailer is located. If the retailer delivers goods to a customer who lives outside the city limits in a county that does not have a local tax, no local tax is due, whether the retailer delivers in the company’s vehicle or hires a third party shipper to make the delivery. If the retailer delivers goods to a customer who lives outside the city limits in a county that has a local use tax, the retailer does not collect the city tax but must collect the county use tax.
Retailers, who have sufficient physical presence in a city or county other than the city or county where the retail business is located, are required to collect the local tax of the location where the delivery is made. If the retailer does not have a physical presence at the point of delivery, the retailer is not required to collect the local tax, but the customer will be responsible to pay use tax on the cost of the goods purchased if the location has a local use tax ordinance.
The Local Option Taxes by Location guideline (PDF format) lists the cities and counties that have imposed local sales and use taxes. The guideline gives a brief summary of the local option taxes for each location.
Q: Are purchases made by Canadian residents exempt from North Dakota sales tax?
A: Purchases made by Canadian residents are not exempt from North Dakota sales tax. Canadian residents shopping in North Dakota must pay the tax at the time of purchase. Canadian residents (individuals only) may obtain a refund of the sales tax paid on qualifying purchases. Goods consumed in North Dakota, including motel rooms, restaurant meals, and admission to events, are not eligible for a refund. Canadian residents are not eligible for a refund of tax on the purchase of a motor vehicle in this state since motor vehicle excise tax is due and not sales tax. Qualifying purchases include goods purchased to be removed from North Dakota for exclusive use outside the state, taxable purchases are $25.00 or more per receipt and the refund request is $15.00 or more per calendar year. Refund requests must be submitted within three years of the purchase date on the receipt.
To apply for the sales tax refund, Canadian Residents need to submit the sales tax refund claim online using a secure electronic form. The electronic method is accessed by: Canadian Requests for Refund of North Dakota Sales Tax
Q: What is use tax?
A: Use Tax is a complementary tax to the sales tax and is applied at the same rate. Use tax applies to the purchase of tangible personal property by an individual or business not taxed at the time of purchase for storage, use or consumption in North Dakota. If North Dakota sales tax has been assessed on the purchase, use tax does not apply. Out-of-state retailers who have a North Dakota sales tax permit and make retail sales here also are collecting use tax.
Q: When am I responsible for the payment of state and local use tax?
A: When purchasing tangible personal property through the mail, by catalog or over the internet for use, storage or consumption in the state of North Dakota, you are responsible for North Dakota use tax on the cost of the purchases. If the seller does not collect North Dakota use tax on the invoice, the purchaser is responsible to remit the use tax directly to the Tax Commissioner. Purchases picked up in another state and taxed in that state are taxable in North Dakota only if the tax paid is less than the tax due in North Dakota. The use tax due in North Dakota is the applicable state and local use tax less the tax properly paid to the other state.
- Examples of items subject to use tax purchased by individuals could include clothing, sporting goods, carpet, art, tobacco products, furniture, cameras or any other types of merchandise. Other items purchased by individuals subject to use tax could include exempt clothing purchased in Minnesota and returned to North Dakota, or purchases made in states with no sales tax like Montana, Oregon, Alaska, New Hampshire or Delaware.
- Examples of items subject to use tax purchased by businesses could include office supplies, uniforms, computer software upgrades, tools, equipment or cleaning supplies. Building materials purchased by a contractor and brought into North Dakota for installation are subject to use tax if another state’s sales or use tax has not been paid on the materials or if the tax paid was not equal or greater than the North Dakota rate.
Businesses with an active sales tax permit must report purchases subject to use tax on the use tax line of the sales and use tax return in the period in which the goods are received. Individuals or businesses without a sales tax permit that have a use tax obligation should complete the use tax return to report their purchases and pay the tax due. The One-Time Sales and Use Tax Return is available on our website.
Out-of-State retail businesses that have sufficient physical presence in North Dakota, out-of-state businesses that voluntarily collect North Dakota tax or out-of-state contractors working in North Dakota must regularly report their use tax collections on their sales and use tax return.
Q: I am a contractor bidding jobs in North Dakota. What are my obligations for sales or use tax?
A: Contractors and subcontractors are regarded as the final users of all tangible personal property incorporated into real property. As the final user, the contractor may pay sales tax at the time of purchase on the cost of materials purchased or accrue the use tax on the cost of the materials when the materials are taken out of inventory and installed into real property. Cost of materials may include freight and delivery, and other transportation charges.
Contractors installing materials on projects owned by exempt entities are subject to use tax based on the cost of the materials installed. Please review the Contractors guideline for more information regarding contractors and their sales and use tax responsibilities.
Q: I am a contractor bidding jobs outside of North Dakota. What are my obligations for sales or use tax?
A: Materials received in North Dakota but removed from North Dakota for installation into real property in other states are subject to North Dakota Sales or Use tax. There is an exception, however, for construction materials purchased in North Dakota by a contractor and installed by contract into real property in a state that does not impose a sales or use tax, such as Montana. The contractor is not responsible for payment of North Dakota sales or use tax on materials purchased in North Dakota for installation into real property in Montana or in any other state where the project is regarded as a non taxable installation contract.
Q: If I purchase a watercraft in another state, what are my responsibilities?
A: Proof that sales tax was paid on watercraft purchased at retail in another state must be furnished to the North Dakota Game and Fish Department before the watercraft may be licensed. A copy of the sales invoice must accompany the license application. If tax was paid equal to or greater than the North Dakota rate in the state where the watercraft was purchased, no additional tax is due. If tax was not paid in another state, the One-Time Sales and Use Tax Return should be completed and the state and any applicable local tax remitted to the Tax Commissioner. The local tax rate is based on where the watercraft is stored.
Watercraft purchased from a private party is considered a casual sale and is not subject to state and local taxes. If the watercraft was purchased from a private party, please attach a copy of the receipt for the sale to the watercraft license application submitted to North Dakota Game and Fish. The receipt should include the seller's name, address, description and purchase price of the watercraft and the seller’s signature.