WHICH GOODS AND SERVICES ARE TAXABLE?
Determining whether or not the products or services your company sells are taxable in North Dakota is the first step in sales tax compliance.
Traditional Goods or Services
Goods that are subject to sales tax in North Dakota include physical property, like furniture, home appliances, and motor vehicles.
Prescription medicine, groceries, and gasoline are all tax-exempt.
Digital Goods or Services
A digital good or service is anything electronically delivered, such as an album downloaded from iTunes or a film purchased from Amazon.
North Dakota does not require businesses to collect sales tax on the sale of digital goods or services.
However, North Dakota has one exception to this policy. Businesses must collect sales tax on pre-written computer software that is sold online.
HOW TO REGISTER FOR NORTH DAKOTA SALES TAX
If you determined that you need to charge sales tax on some or all of the goods and services your business sells, your next step is to register for a seller's permit. This allows your business to collect sales tax on behalf of your local and state governments.
In order to register, you will need the following information:
Save Money with a Resale Certificate
With a resale certificate, also known as a reseller's permit, your business does not have to pay sales tax when purchasing goods for resale.
COLLECTING SALES TAX
After getting your seller's permit and launching your business, you will need to determine how much sales tax you need to charge different customers. To avoid fines and the risk of costly audits, it's important for business owners to collect the correct rate of sales tax.
When calculating sales tax, you'll need to consider the following kinds of sales:
- Store Sales
- Shipping In-State
- Out-of-State Sales
For traditional business owners selling goods or services on site, calculating sales tax is easy: all sales are taxed at the rate based on the location of the store.
Here's an example of what this scenario looks like:
Mary owns and manages a bookstore in Minot, North Dakota. Since books are taxable in the state of North Dakota, Mary charges her customers a flat-rate sales tax of 5.5% on all sales. This includes North Dakota’s state sales tax rate of 5.0% and Ward county’s sales tax rate of 0.5%.
The state of North Dakota follows what is known as a destination-based sales tax policy. This means that long-distance sales within North Dakota are taxed according to the address of the buyer. This policy applies to state, county, and city sales taxes.
Consider the following example:
Steve runs his own business selling electronics on eBay out of his home in Williston, North Dakota. A customer living in Fargo, North Dakota finds Steve’s eBay page and purchases a $350 pair of headphones. When calculating the sales tax for this purchase, Steve applies the 5.0% state tax rate for North Dakota, plus 0.5% for Cass county’s tax rate and 2.0% for Fargo’s city tax rate. At a total sales tax rate of 7.5%, the total cost is $376.25 ($26.25 sales tax).
North Dakota businesses only need to pay sales tax on out-of-state sales if they have nexus in other states. Nexus means that the business has a physical presence in another state.
Common types of nexus include:
- A physical location, such as an office, store, or warehouse
- An employee who works remotely or who is a traveling sales representative
- A marketing affiliate
- Drop-shipping from a third party seller.
- A temporary physical location, including festival and fair booths.
FILE YOUR SALES TAX RETURN
Now that you’ve registered for your North Dakota seller's permit and know how to charge the right amount of sales tax to all of your customers, you are all set to file your sales tax return. Just be sure to keep up with all filing deadlines to avoid penalties and fines.
Recommended: Hiring a business accountant can help your business file tax returns as well as issue payroll and manage bookkeeping. Schedule a consultation with a business accountant today to save thousands of dollars on your taxes.
How to File
North Dakota requires businesses to file sales tax returns and submit sales tax payments online.
How Often Should You File?
How often you need to file depends upon the total amount of sales tax your business collects.
- Annual filing: If your business makes less than $2,750 in sales per month then your business should elect to file returns on an annual basis.
- Semi-Annual filing: If your business makes between $2,750 and $6,666.66 in sales tax per month then your business should elect to file returns on a semi-annual basis.
- Quarterly filing: If your business makes between $2,750 and $6,666.66 in sales tax per month then your business should elect to file returns on a quarterly basis.
- Monthly filing: If your business makes more than $6,666.66 in sales per month then your business should elect to file returns on a monthly basis.
- Seasonal filing: If your business is doing business only during a specific time of year, then your business should elect to file returns on a seasonal basis.
Note: North Dakota requires you to file a sales tax return even if you have no sales tax to report.
All North Dakota sales tax return deadlines fall on the 31st day of the month, unless it is a weekend or federal holiday, in which case the deadline is moved back to the next business day. Below is a list of this year’s filing deadlines.
For a complete list of deadlines, check out the 2018 Tax Filing Calendar on the North Dakota Department of Revenue website.
Annual filing: January 31, 2020
- Q1 (Jan. - Mar.): Due April 31
- Q2 (April - June): Due July 31
- Q3 (July - Sept.): Due October 31
- Q4 (Oct. - Dec.): Due January 31
Monthly filing: The 31st of the following month, or the next business day, e.g. April 31st for the month of March, or May 31st for the month of April.
Seasonal filing: Businesses doing business only during a specific time of year, e.g., firewood vendors or Christmas tree sales. You must indicate month(s) for which you will be filing and file for those respective months on a monthly basis.
Penalties for Late Filing
North Dakota charges a late filing penalty of 5% or $5 for the first month that the filing is late with an additional 5% per month or partial month up to a maximum of 25% of the tax that is reported on the tax return.
North Dakota also charges a late payment penalty that is equal to $5 or 5% of the tax that is unpaid; whichever is higher.
The state assesses the indebted tax with a compounded interest rate of 5% per year or 0.5% per month or partial month for any unpaid tax or penalty.
North Dakota Helpful Resources
Sales and Use Tax Help Phone Number:
701 - 328 - 1246