North Dakota has a 5% statewide sales tax that applies to most transactions involving tangible personal property. Some cities and counties also collect local sales taxes that can raise the total sales tax rate to as high as 7.5% in some areas of the state.
North Dakota sales tax is collected by retailers at the point of sale. Use tax, which compensates for sales tax that should have been paid but was not, is also collected in North Dakota.
In this comprehensive guide, we will cover everything you need to know about North Dakota sales tax, including:
- North Dakota sales tax rates
- What transactions are taxable
- Exemptions
- How to calculate sales tax
- Collecting and remitting sales tax
- Sales tax licenses
- Use tax
- Local taxes
- Sales tax holidays
Let’s get started understanding the ins and outs of North Dakota sales tax.
North Dakota Sales Tax Calculator
Calculating North Dakota sales tax is straightforward once you know the tax rate and any exemptions or local taxes that apply. Here are the basic steps:
- Start with the amount of a taxable purchase or transaction.
- Check if any exemptions apply that would eliminate sales tax.
- Determine the applicable sales tax rate:
- 5% state sales tax rate
- Plus any local sales tax rate for that area
- Multiply the taxable purchase amount by the applicable sales tax rate.
- Round the sales tax amount to the nearest $0.01.
You can also use this sales tax calculator to calculate North Dakota Sales Tax.
North Dakota Sales Tax Calculator
North Dakota Sales Tax Calculator
North Dakota State Sales Tax Rate
The North Dakota state sales tax rate is 5%. This applies to most taxable sales of tangible personal property and certain services in the state.
The 5% sales tax rate has been in effect since 1987. North Dakota has a single statewide sales tax rate; there are no separate state or local sales tax rates. However, some cities and counties do collect local sales taxes on top of the statewide tax.
Here are some key facts about North Dakota’s state sales tax rate:
- State sales tax rate is 5%
- Has remained unchanged since 1987
- Single statewide rate – no separate state and local rates
- Local taxes in some cities and counties add to total rate
Some examples of 5% sales tax amounts:
- $50 purchase – $2.50 tax
- $100 purchase – $5 tax
- $250 purchase – $12.50 tax
Next, we’ll look at what types of transactions are subject to North Dakota sales tax.
What Transactions are Taxable in North Dakota?
North Dakota sales tax applies to retail sales and leases/rentals of most tangible personal property and some services. Some major categories of taxable transactions include:
- Retail sales of items like clothing, electronics, furniture, appliances, etc.
- Prepared food and drinks
- Hotel rooms and accommodations
- Short-term motor vehicle rentals
- Admissions to amusement/entertainment events
- Purchases, leases, or rentals of taxable goods or services by businesses
Some services that are taxable include:
- Repair and installation services
- Landscaping and lawn care services
- Cable TV and streaming media services
- Wrecker and towing services
There are some exemptions to North Dakota sales tax which we will cover next.
Exemptions to North Dakota Sales Tax
While most goods and some services are taxable, North Dakota provides exemptions for certain types of transactions. Some major exemptions include:
Food and Food Ingredients
- Most groceries and food ingredients are exempt from the sales tax. This includes items like meat, produce, bread, cereal, milk, etc.
- Prepared food is still taxable in North Dakota. This includes food sold in a heated state or food sold with eating utensils.
Medical Products
- Prescription drugs and over-the-counter medications are exempt from sales tax.
- Medical equipment and supplies are also exempt when purchased by licensed healthcare facilities.
Agriculture and Farming
- Farm equipment, agricultural chemicals, seeds, and fertilizers used in commercial farming are exempt.
- Livestock purchased for breeding stock is exempt.
Manufacturing Equipment
- Machinery or equipment used directly for manufacturing or recycling is exempt.
Government and Non-profits
- Purchases made by the federal government, North Dakota state government, and North Dakota local governments are exempt.
- Qualifying purchases by schools, hospitals, religious and charitable organizations are also exempt.
There are more detailed rules around these and other exemptions. We’ll cover some common questions later in the FAQ section.
Next, let’s look at how to calculate North Dakota sales tax.
Registering for a North Dakota Sales Tax License
Retailers making taxable sales in North Dakota must register for a sales tax license through the North Dakota Office of State Tax Commissioner. This includes both in-state retailers with physical store locations in ND as well as out-of-state retailers who have sales to North Dakota customers (online, catalog, etc).
To register for a North Dakota sales tax license:
- Apply online through the North Dakota OneStop Business Registration System
- Provide business information including owners/managers and physical and mailing addresses.
- There is no fee to obtain a North Dakota sales tax license.
- Out-of-state retailers may need to pay a $50 tax bond.
Once registered, retailers will receive a Sales and Use Tax Permit Number to collect and report North Dakota sales tax.
Some key sales tax license requirements:
- Retailers must display the permit in their place of business.
- Permits are not transferable – a new owner must register for a new permit.
- Lost or destroyed permits can be replaced for $5.
Next we’ll go over how to file and pay North Dakota sales tax.
Collecting and Remitting ND Sales Tax
Retailers must collect sales tax from customers on taxable sales and remit those taxes to the state. Here are key steps in the sales tax remittance process:
Collect Sales Tax at Time of Sale
- At the point of sale, retailers should add applicable state and local sales tax rates to customers’ purchases and collect the tax.
- Sales tax can be separately stated on the receipt/invoice. Combined tax rates are also acceptable (e.g. 6.5%).
Keep Detailed Sales Records
- Retailers must keep detailed records of gross sales, exempt sales, taxable sales, sales tax collected, and other transactions.
- These records must be kept for at least 3 years in case of audit.
File Sales Tax Returns
- Generally, sales tax returns are filed electronically on a monthly or quarterly basis.
- Returns report total gross sales, exempt sales, taxable sales, and sales tax due.
- Quarterly filing is available to retailers owing less than $600 per quarter. All others must file monthly.
Remit Sales Tax Payment
- Along with the return, retailers must remit sales tax that was collected from customers during that period.
- Payment deadlines match the due dates for returns (monthly or quarterly).
In sum, retailers serving customers in North Dakota should register for a sales tax license, collect tax on taxable transactions, keep detailed records, file periodic returns, and remit sales tax payments to the state.
Who Collects North Dakota Use Tax?
North Dakota imposes a use tax that corresponds to the sales tax. Use tax generally applies to purchases made out of state and brought back into North Dakota for use.
For example, if a North Dakota resident visits Minneapolis and buys a $500 TV tax-free (because Minnesota does not have sales tax), they owe North Dakota use tax when bringing it back home.
Use tax is paid by the purchaser directly to the state when sales tax was not collected at the time of sale. Use tax prevents buyers from avoiding North Dakota sales tax by making out-of-state purchases.
The use tax rate is identical to the sales tax rate (5% statewide plus any local taxes). Use tax is due on the purchase price of taxable goods or services.
North Dakota residents must report and pay use tax for applicable out-of-state purchases when filing their individual income tax return. The reporting and payment are part of the income tax return process.
Out-of-state sellers registered to collect North Dakota sales tax are also responsible for collecting use tax on items delivered into North Dakota. Consumers do not need to pay use tax twice (to both the seller and on their income tax return) in cases where use tax is properly collected by the seller on the original purchase.
Use tax is essentially equivalent to sales tax and ensures consistent taxation of goods purchased in North Dakota, whether acquired in-state or out-of-state. Proper payment of use tax levels the playing field for North Dakota businesses.
Local Sales Taxes in North Dakota
In addition to the 5% statewide sales tax, some cities and counties in North Dakota have local option sales taxes that supplement the state tax.
As of November 2023, here are the local sales tax rates in effect in North Dakota:
City Sales Taxes
| City | Sales Tax Rate |
|---|---|
| Bismarck | 1.5% |
| Devils Lake | 1% |
| Dickinson | 1% |
| Fargo | 1.75% |
| Grand Forks | 1.75% |
| Jamestown | 1% |
| Mandan | 1% |
| Minot | 1.5% |
| Valley City | 1% |
| Williston | 1.5% |
County Sales Taxes
| County | Sales Tax Rate |
|---|---|
| Divide County | 0.5% |
| McKenzie County | 0.5% |
| Stark County | 0.5% |
| Ward County | 0.5% |
| Williams County | 0.5% |
In areas with local sales taxes, the state and local rates combine to determine the total sales tax rate. For example, the total sales tax rate in Minot is 6.5% – 5% state plus 1.5% city taxes.
Sellers in these jurisdictions are responsible for collecting the additional local taxes and remitting them along with the state tax. Consumers are responsible for paying the applicable local tax rate based on where the goods are purchased or delivered.
Local sales tax rates in North Dakota range from 5% to 7.5%. However, most jurisdictions only have the 5% statewide tax.
North Dakota Sales Tax Holidays
North Dakota provides two annual sales tax holidays where state (but not local) sales taxes are waived for certain purchases:
Clothing Sales Tax Holiday
- Held every August before the start of the school year
- Exempts most articles of clothing and footwear costing under $100
- Does not apply to accessories, sports equipment, or specialty clothing
Energy Star Sales Tax Holiday
- Held every February
- Exempts certain ENERGY STAR certified products like air conditioners, clothes washers, and refrigerators
- Also includes light bulbs, furnaces, boilers, and water heaters that meet efficiency standards
Retailers must follow special rules on advertising, record keeping, and exempt products during the sales tax holidays. Dates vary each year and exclusions may apply, so check the North Dakota Office of State Tax Commissioner website for current details.
The sales tax holidays provide a brief and limited break on sales taxes for North Dakota shoppers making certain purchases.
North Dakota Sales Tax Administration
The North Dakota Office of State Tax Commissioner administers sales and use tax collections for the state. Their responsibilities include:
- Providing information and guidance on sales tax rules and procedures
- Registering companies for sales tax licenses
- Processing sales and use tax returns and payments
- Auditing taxpayers and reviewing records
- Assessing tax deficiencies and penalties for non-compliance
The Office of State Tax Commissioner offers resources on their website to assist taxpayers, including:
- Sales and Use Tax Guide outlining taxability rules
- Current sales and use tax rates by location
- Online sales tax account lookup tool
- Forms and instructions for returns and registrations
- Frequently asked questions
Contact information for sales tax questions or help with returns:
North Dakota Office of State Tax Commissioner
600 E. Boulevard Ave.
Bismarck, ND 58505
- Phone: (701) 328-3470
- Email: [email protected]
- Website: www.nd.gov/tax
Outreach offices are also located in Fargo, Grand Forks, Minot, and Williston for in-person assistance.
The state tax department provides resources to support North Dakota businesses in understanding and complying with sales tax requirements.
North Dakota Sales Tax Frequently Asked Questions
Here are answers to some common questions about North Dakota sales tax:
1. Do I need to collect sales tax on shipping and handling charges?
Yes, if the charges are included in the sales price of a taxable item, sales tax applies to delivery charges. Handling fees are also taxable.
2. Is clothing taxable in North Dakota?
Clothing is generally taxable, except during the sales tax holiday in August. Some exemptions also apply for safety equipment, uniforms, and specialty clothing.
3. Is sales tax due on returned merchandise?
If sales tax was charged on the original purchase, the retailer should issue a credit or refund of the same sales tax amount when an item is returned.
4. Can sales tax be refunded for bad debts that are written off?
Yes, North Dakota allows retailers to take a deduction for sales tax paid on accounts that become worthless. Certain rules and limitations apply.
5. Do churches need to pay sales tax on items they purchase?
Qualifying religious organizations can obtain a sales tax exemption certificate to purchase items without paying sales tax.
6. Does North Dakota tax digital goods like ebooks or music downloads?
Yes, specified digital products and subscriptions are subject to North Dakota sales tax when sold to consumers.
7. Can I look up a business’ tax ID number online?
Yes, the North Dakota Office of State Tax Commissioner provides an online business license lookup to verify a sales tax permit.
8. Are non-profits automatically exempt from sales tax?
No, non-profits must apply for a “Certificate of Exemption” from North Dakota to qualify for sales tax exemption.
9. Is sales tax collected on shipping costs for items purchased online?
If an online retailer has nexus in North Dakota, shipping charges are included in the taxable amount whether listed separately or not.
This FAQ guide covers some of the most common sales tax questions in North Dakota. Reach out to the state tax department for guidance on more complex situations.
Conclusion
Complying with North Dakota sales tax rules does require some effort by retailers in registering properly, integrating tax calculations at checkout, filing returns, and remitting payments on time. However, the process becomes routine with the right software and procedures in place.
Some key takeaways for North Dakota sales tax:
- The statewide tax rate is 5%, with 1-2% local taxes added in some jurisdictions. Total rates reach up to 7.5%.
- Taxable transactions include retail sales of most goods as well as certain services like repairs, lodging, and meals. Exemptions apply to items like groceries and medical products.
- Retailers operating in North Dakota must obtain a sales tax license and collect tax from customers on taxable sales.
- Use tax at the same rates is due on purchases brought into North Dakota when sales tax was not charged at the time of sale.
- Sales tax holidays in August and February temporarily suspend sales tax on some items. But restrictions and exclusions apply, so check details.
- The Office of State Tax Commissioner provides resources and guidance for North Dakota sales and use tax questions. Reach out to them by phone or email if you need assistance.
Following North Dakota sales tax laws and using the right tools to automate calculations, reporting, and payments can simplify compliance. With a sound understanding of the regulations and exemptions, retailers can properly collect and remit sales taxes as required.
