Sales & Use Taxes Frequently Asked Questions
Question Categories
- Special Events Organizer
- Special Events Vendors
- Registration
- Reporting
- Application of Sales and Use Tax
Special Events Organizers
Who is considered an Event Organizer?
What responsibilities do Event Organizers have under House Bill 1074?
Do Event Organizers have to verify permit numbers of the vendors?
Where can I obtain the forms to submit the list of vendors to the Tax Department?
Special Events Vendors
Do I need to get a sales tax permit?
How does one get a sales tax permit?
Do I need to apply for a permit each year?
What sort of records do I need to keep?
Registration
Does a change in ownership or purchase of an existing business require a new sales tax permit?
When is a permit required and how do I get it?
Reporting
Can I file my sales tax return over the Internet?
What is the procedure for correcting an error made on a sales and use tax return?
What are my sales tax responsibilities if I close or sell my business?
Application of Sales and Use Tax
What is subject to sales tax in North Dakota?
How long must I retain my records?
Who is eligible for exemption and how do exempt organizations apply?
Are sales made by nonprofit organizations taxable?
Are retail sales to American Indians subject to sales tax?
When is a mail-order company responsible for the collection of North Dakota sales tax?
Are sales of tangible personal property to out-of-state residents subject to North Dakota sales tax?
Is the sale of food subject to sales tax?
Are Freight, delivery or other transportation charges subject to sales tax?
Are amounts billed for computer software maintenance agreements subject to sales tax?
Are licensed motor vehicles subject to state and local sales tax?
Are sales tax incentives available for businesses located in North Dakota?
Are purchases made by Canadian residents exempt from North Dakota sales tax?
When am I responsible for the payment of use tax?
I am a contractor bidding jobs in North Dakota. What are my obligations for sales or use tax?
If I purchase a watercraft in another state, what are my responsibilities?
Special Events Organizers
Q: Who is considered an Event Organizer?
A: Any individual or organization who hosts an event with multiple vendors is an Event Organizer.
Q: What responsibilities do Event Organizers have under House Bill 1074?
A: Event Organizers are required to provide a list of the participants to the Office of State Tax Commissioner if their 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 Tax Department does not require the Event Organizer to provide a list in this case. We ask that the Event Organizer voluntarily provide a list of participants to our office or inform our office that this event does not have a responsibility under House Bill 1074.
Q: : Do Event Organizers have to verify permit numbers of the vendors?
A: No, Event Organizers are to take whatever information that is provided by the vendor and submit it to our office using the paper or electronic options for submitting the form.
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 701.328.3470.
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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 in North Dakota.
Q: How does one get a sales tax permit?
A: Our office has an application form that is downloadable 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 rate for North Dakota is 5% for most retail sales. Alcohol is taxed at 7% state, New Farm Machinery and Mobile Homes are taxed 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 point 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. Auditors may stop at your location and request to see records.
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Registration
Q: If I start a new retail business or purchase an existing retail business, what are my sales and use tax responsibilities?
A: If you open a new retail business or purchase an existing retail business, you must obtain a North Dakota Sales and Use Tax Permit from the Tax Commissioner. You also must file a sales and use 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 and use tax permit, complete an application and submit it to our office no more 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. North Dakota corporations, limited liability companies, limited partnerships and limited liability partnerships must register with the North Dakota Secretary of State before a sales tax permit may be issued.
The sales and use 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 not be required to obtain a North Dakota sales and use 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 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. If occasional purchases are made from out-of-state vendors that do not collect the appropriate taxes you will be required to report the purchases and remit the use tax using our One-Time Sales and Use Tax Return.
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.
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 and Use 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 before a sales tax permit may be issued.
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 on a regular basis. If your sales are made occasionally, you should contact our office for instructions.
The sales tax permit application may be requested from our office or is available on our website. The application may be completed on the computer, but must be printed, signed and mailed to our office.
Q: Do I need a North Dakota sales and use tax permit to sell seasonal items such as fireworks or Christmas trees?
A: All individuals or organizations selling fireworks or Christmas trees 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. Upon approval of your application, our office will mail you a temporary permit card and a sales tax return to report your sales and remit the tax collected.
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Reporting
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. WebFile is a free, web-based PC program that allows sales tax permit holders to file sales tax returns using the Internet. To use WebFile, you must register by completing the WebFile application, which is available on our web site, or by contacting our office. For more details on WebFile, please review the Sales Tax WebFile instruction booklet (PDF format).
Q: Is my sales tax 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 before midnight on the due date to be considered filed on time. 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.
Returns postmarked through a private metering machine will be considered timely only if they reach the Tax Commissioner by the due date.
Q: What is the procedure for correcting an error made on a sales and use tax return?
A: Sales 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.
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 and Use Tax return within 15 days following the closing or selling of the business. Please contact our office to request a final return.
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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 and delivery services associated with the sale of goods for final use may be subject to sales tax depending on the conditions of the sale. Handling charges in conjunction with a retail sale are subject to sales tax.
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.
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.
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Q: Who is eligible for exemption and how do exempt organizations 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 and basic care facilities licensed by the North Dakota Department of Health (on qualifying purchases)
- Voluntary health organizations
To apply, organizations must complete, sign and mail an application to the Tax Commissioner requesting an exemption certificate. Please contact our office to obtain the appropriate application.
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 or government entities.
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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 US 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 audit. Exemption certificates do not expire and do not have to be renewed or reissued like a Certificate of Resale. North Dakota does not accept exemption certificates issued by other states. A Federal Employer Identification Number is not a valid exemption number.
Exempt organizations include all government entitles, schools (public and nonprofit private), federally chartered corporations, hospitals, skilled nursing facilities and basic care facilities licensed by the North Dakota Department of Health 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 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 Multijurisdiction 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.
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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 $5,000 per event.
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 Section allowing the goods to be purchased for resale.
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Q: Are retail sales to American Indians subject to sales tax?
A: Retail sales to American Indians or to an Indian Tribe are taxable if possession of the goods takes place off the reservation.
If the retailer delivers the goods to an Indian tribe or an American Indian residing within the boundaries of the enrolled member’s 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.
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.
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 by common carriers are not subject to North Dakota sales tax. The sales are reported on the North Dakota Sales and Use Tax Return as nontaxable sales and itemized as sales in interstate commerce.
Goods picked up in North Dakota by the buyer or the buyer’s agent 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 Montana residents who sign a Certificate of Purchase
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.
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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 purchased for immediate consumption on or near the premises 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, including fruit drinks containing less than 70 percent pure fruit juice; powdered drink mixes; coffee; tea; cocoa beverages and water sold in containers less than one gallon are taxable. Bakery items are exempt from sales tax unless they are sold for immediate consumption on the merchant’s premises. All catered food is considered for immediate consumption 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: Freight, Delivery and Other Transportation Charges Effective October 1, 2005, all freight, delivery and other transportation charges are considered to be part of the selling price. If the sale is taxable, the freight, delivery and other transportation charges that are part of the sale and billed by the seller are always taxable. This includes other transportation charges identifi ed 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.
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.
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Q: Are amounts billed for computer software maintenance agreements subject to sales tax?
A: The fees for computer software maintenance agreements are subject to tax if the maintenance agreement is not optional or if the maintenance agreement is optional but includes computer software updates which are not separately stated.
If the maintenance agreement 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.
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 ATVs purchased 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.
Please refer to our Lease or Rental of Motor Vehicles guideline for additional information on the lease of motor vehicles.
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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 wind-powered electrical generating facilities.
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.
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, 2011.
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.
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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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 common carrier 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. Guidelines for each city and county with a local tax are available upon request from our office.
Q: Are purchases made by Canadian residents exempt from North Dakota sales tax?
A: Canadian residents shopping in North Dakota must pay the tax at the time of purchase. Canadian residents may apply for a refund of the sales tax paid on qualifying purchases. Qualifying purchases are goods that are consumed or used permanently outside of North Dakota, such as appliances, jewelry, clothing, etc. Purchases, such as hotel rooms, restaurant purchases, and admission to events, are not eligible for a refund of sales tax. Only purchases made in North Dakota qualify.
Qualifying purchases must meet minimum dollars thresholds. Each receipt must be for a minimum of $25.00 in taxable purchases. The receipt may include multiple items in order to reach the $25.00 minimum. Your refund request must be for a minimum of $15.00 of refundable tax. The $15.00 minimum tax amount is based on a calendar year and 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
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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 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 is the applicable North Dakota 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 or may be obtained from our office.
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 report their use tax collections on their regular sales and use tax return.
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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 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 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.
For more information regarding contractors and sales and use tax, please review the Contractors guideline and the Requirements for Sales and Use Tax guideline.
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.
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