North Dakota Sales Tax Guide
Chapter 1: An introduction to North Dakota sales tax management
Learn about sales tax automation
Introducing our Sales Tax Automation 101 series. The first installment covers the basics of sales tax automation: what it is and how it can help your business.
Sales tax is a tax paid to a governing body (state or local) for the sale of certain goods and services. First enacted in the United States in 1921, sales tax dates back to ancient Egyptian times where paintings depict the collection of tax on commodities. North Dakota first adopted a general state sales tax in 1935. Since that time, the rate has risen to 5. In the second quarter of 2015, the North Dakota Office of State Tax Commissioner reported $361,913 in revenue from taxes on general sales and gross receipts; 27% of total North Dakota state taxes.
As a business owner selling taxable goods or services, you act as an agent of the state of North Dakota by collecting tax dollars from purchasers and passing it along to the state and local tax authority. This is an important point worth emphasizing. Any sales tax collected from residents belongs to the North Dakota Office of State Tax Commissioner. As a business owner, it is your responsibility to manage the taxes you collect to remain in compliance with state laws and avoid penalty and interest payments.When does North Dakota sales tax need to be collected?
In North Dakota, sales tax is collected on the sale of tangible goods and some services. The tax is collected by the seller and remitted to state and local tax authorities. The seller acts as a pseudo-tax collector.Do I need to collect sales tax in North Dakota?
To better understand whether you need to collect sales tax in North Dakota, we've created a simple three step checklist you can use to get a better feel for your North Dakota tax situation:
- Do I have nexus in North Dakota?
- Am I selling taxable goods or services to North Dakota residents?
- Is my buyer required to pay sales tax?
If the answer to all three of the questions above is "Yes", then you are required by the North Dakota Office of State Tax Commissioner to collect, file, and remit sales tax.Does sales tax accept out-of-state resale certificates?
Yes! At the time of publication, the North Dakota Office of State Tax Commissioner is accepting out-of-state resale certificates.What happens if I don't collect any sales tax?
If you meet the criteria for collecting sales tax (nexus in North Dakota and selling taxable goods or services to taxable residents) and choose not to collect sales tax, you will be held responsible for the tax due. As such it is extremely important that you set up tax collection at the point of sale. Attempting to contact customers to collect sales tax after the fact is time consuming and unlikely to be fruitful.Is North Dakota a Streamlined Sales Tax (SST) state?
At this time, North Dakota is a full member of the Streamlined Sales Tax (SST) Agreement.What state sourcing rules apply to North Dakota?
North Dakota is a destination-based state. Destination-based states are those where the transaction location is defined as the customer delivery location rather than the shipping location of the business. As a seller in North Dakota, this means you are responsible for applying the sales tax rate determined by the ship-to address on all taxable sales.