What is the sales tax rate in North Dakota?
North Dakota’s state sales tax rate is 5.0%, but local jurisdictions (cities and counties) can also impose additional sales taxes, making the total sales tax rate vary across different locations within the state. These local sales taxes are combined with the state sales tax to give the total tax rate in a particular location. The average local tax rate is around 1.74%, so the average combined tax rate is about 6.74%.
It’s essential to know the specific sales tax rate for your business’s location because you’ll need to apply it to your taxable sales. You can use the North Dakota Tax Commissioner’s website to look up the sales tax rate for a particular address or use a sales tax automation tool that integrates with your e-commerce platform or point-of-sale system.
It’s important to note that North Dakota is a destination-based sales tax state, meaning the tax rate applied depends on the buyer’s location if the sale is a shipped order. For in-person sales at a physical location, the tax rate of the business’s location is applied.
When should your business collect Sales Tax in North Dakota?
In North Dakota, businesses with a “nexus” in the state must collect sales tax. Nexus is a connection or presence that requires a business to comply with the state’s sales tax laws. In North Dakota, there are two types of nexus: physical and economic.
A business has a physical nexus in North Dakota if it has a physical presence in the state, such as an office, store, warehouse, or employee. A business has an economic nexus in North Dakota if it exceeds a certain threshold of sales or transactions in the state, even without a physical presence.
Once your business has established a nexus in North Dakota, you must register for a sales tax permit, collect sales tax on taxable sales, and file sales tax returns with the North Dakota Office of State Tax Commissioner.
North Dakota Physical Sales Tax Nexus
Sales Tax Physical Nexus checklist for North Dakota
A business has a physical nexus in North Dakota if it meets any of the following criteria:
- Has a physical location in the state (office, store, warehouse, etc.)
- Employs residents of North Dakota
- Stores inventory in the state
- Uses a third-party fulfillment service that has a presence in North Dakota
- Participates in trade shows or other events in the state
- Has affiliates in North Dakota who refer sales to the business
If your business meets any of these criteria, you have a physical nexus in North Dakota and must collect sales tax on taxable sales to customers in the state.
North Dakota Economic Nexus Threshold: Revenue, Thresholds and Transactions
North Dakota’s economic nexus law, also known as “remote seller nexus,” requires businesses without a physical presence in the state to collect sales tax if they exceed a certain threshold of sales or transactions. In North Dakota, the economic nexus threshold is $100,000 in gross sales or 200 separate transactions in the previous or current calendar year.
Once your business meets this threshold, you are required to register for a sales tax permit, collect sales tax on taxable sales, and file sales tax returns with the North Dakota Office of State Tax Commissioner.
Which services are taxable in North Dakota?
In North Dakota, most services are not subject to sales tax. However, some services are considered taxable. These include:
- Lodging and related services
- Telecommunication services
- Lease or rental of tangible personal property
- Admission fees for places of amusement, athletic events, and recreational areas
It’s crucial to verify whether your specific service is taxable in North Dakota, as tax laws and regulations can change. Consult the North Dakota Office of State Tax Commissioner for the most up-to-date information on taxable services in the state.
North Dakota Sales Tax on Products: How to Calculate What Your Business Should be Charging
To calculate the sales tax you should be charging in North Dakota, follow these steps:
Determine if your product or service is taxable: Check the North Dakota Office of State Tax Commissioner’s website or consult a tax professional to verify if your product or service is subject to sales tax.
Identify the correct tax rate: Find the combined state and local tax rate for your business location or the buyer’s location if it’s a shipped order. Remember, North Dakota is a destination-based sales tax state.
Apply the tax rate to the taxable amount: Multiply the combined tax rate by the total taxable amount (product price plus any taxable services or fees) to calculate the sales tax owed.
Collect the sales tax: Add the calculated sales tax to the customer’s total invoice or receipt.
How much is the North Dakota clothing tax?
In North Dakota, clothing and apparel are generally subject to the same sales tax rate as other taxable items. The state sales tax rate is 5.0%, but local taxes can increase the total tax rate. Since North Dakota is a destination-based sales tax state, the rate you should charge depends on the buyer’s location for shipped orders or your business location for in-person sales.
North Dakota Online Sales Tax: Are SaaS and Digital Services Taxable?
In North Dakota, sales tax applies to tangible personal property and some services. Software as a Service (SaaS) and digital services are generally not subject to sales tax in North Dakota. However, this may change as tax laws evolve, and it’s crucial to keep an eye on updates from the North Dakota Office of State Tax Commissioner.
SaaS Sales Tax North Dakota: Is SaaS subject to tax in North Dakota?
No, not yet. As of now, businesses do not need to charge North Dakota SaaS sales tax. However, it is crucial to stay updated on any changes in tax laws, as states frequently update their policies regarding the taxation of digital goods and services.
How can a business get a sales tax permit in North Dakota?
To get a sales tax permit in North Dakota, follow these steps:
Gather necessary information: Prepare your business details, including your EIN, business structure, NAICS code, and estimated monthly sales.
Apply online: Visit the North Dakota Office of State Tax Commissioner’s Taxpayer Access Point (TAP) website and complete the online application form.
Wait for approval: After submitting your application, wait for approval and your sales tax permit.
Display your permit: Once you receive your sales tax permit, display it prominently in your business location.
Collecting Sales Tax in North Dakota as a Business
After determining your nexus, calculating and collecting the correct rate, and finally remitting the correct amounts to the applicable revenue departments, you need to ensure that you file your sales tax returns correctly and on time.
North Dakota Tax Return Due Dates Explained
The frequency of filing sales tax returns in North Dakota depends on your monthly sales tax liability. Businesses with higher sales tax collections typically file more frequently. In North Dakota, the filing frequency can be monthly, quarterly, or annually.
However, the filing date always falls on the last day of the month following the reporting period:
- Monthly filers: the last day of the month following the reporting period.
- Quarterly filers:
Quarter 1 (Jan – Mar): April 30
Quarter 2 (Apr – Jun): July 31
Quarter 3 (Jul – Sep): October 31
Quarter 4 (Oct – Dec): January 31
- Annual filers: January 31 of the following year.
What is the required frequency for sales tax returns in North Dakota?
The required frequency for sales tax returns in North Dakota is based on your monthly sales tax liability:
- Monthly: If your monthly sales tax liability is more than $417
- Quarterly: If your monthly sales tax liability is $417 or less
- Annually: If your monthly sales tax liability is less than $80
Note that if your sales tax liability changes, the North Dakota Office of State Tax Commissioner may adjust your filing frequency.
