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Sales and Used Tax

SALES AND USE TAX REQUIREMENTS - In order to promote a better understanding of the North Dakota sales, use and gross receipts tax laws; the Office of State Tax Commissioner provides the following general information. Special guidelines for certain types of businesses also are available and may be obtained by contacting the Sales Tax Compliance Section of the Office of State Tax Commissioner or by viewing the guidelines on our tax department's website at:  www.nd.gov/tax.

Imposition and Rates - Sales & Use Tax - Sales tax is paid by the purchaser and collected by the retailer.   Information on sales tax levied can be found at: www.nd.gov/tax/user/businesses  

Permits and Reporting - Any business or institution making taxable retail sales of tangible personal property or services is required to hold a North Dakota sales, use and gross receipts tax permit. An application to obtain a permit must be submitted to the Registration Section of the Office of State Tax Commissioner. The reporting and paying of North Dakota state and local sales, use and gross receipts taxes can also be completed using the state's electronic sales, use and gross receipts tax filing system, which may be used as an alternative to filing information located at www.nd.gov/tax/user/businesses.

These returns must be filed each period whether tax is due or not. If no tax is due, the return must be filed indicating that no taxable sales or reportable purchases were made for that period. If the return is not filed, the Sales Tax Compliance Section will notify the permit holder that the return is delinquent and that a penalty is due.

Penalties - For returns filed late, a minimum penalty of 5 percent of the tax due or $5.00, whichever is greater, will be added to the tax due for the first month the return is late. If a person submits a false North Dakota certificate of resale to a seller, the person submitting the false certificate is liable for any tax and penalties which may become due. Certificates of resale should be obtained from retailers at least every two years. 

Retail Sales-Sales for Resale - A retail sale is the sale of tangible personal property to a person who will be the final user and consumer of the goods. The seller or supplier in this instance is required to collect sales tax on the sale of the final user.  

Purchases Subject to Use Tax - Individuals and businesses that purchase supplies and equipment for use in running a business or for personal use must pay a sale or use tax on these purchases, based on the cost of the items being purchased. If these items are purchased from a firm that does not collect North Dakota sales tax, the purchaser must report the purchase on the Items Subject to Use Tax line of the sales, use and gross receipts tax return and pay use tax on the purchase price.

Rentals of Tangible Personal Property - The term sale also includes the leasing or renting of tangible personal property leased or rented for final use or consumption within this state. Certain vehicles subject to the motor vehicle excise tax imposed by the North Dakota Century Code Ch. 57-04.3  also will be subject to sales tax if the vehicle is rented in this state for less than 30 days

Delivery to Out of State Residents
- Delivery to a customer out of state constitutes a sale in interstate commerce and is not a taxable sale in North Dakota. For example, if a retailer in North Dakota sells merchandise to an out-of-state resident and, as a condition of the sale, agrees to deliver the merchandise or to have the merchandise delivered to the customer at a point in another state, North Dakota sales tax does not apply.

Delivery Charges Taxable - Freight, delivery, and other transportation charges, including shipping and handling charges and setup charges, are always considered to be part of the selling price. If the sale is taxable, the freight, delivery, and other transportation charges are taxable. If the product being delivered is exempt from sales tax, then the freight, delivery and other transportation charges are also exempt.

Sales to Nonprofit Organizations are Taxable - The total receipts from sales of tangible personal property to nonprofit organizations for their own use are subject to sales tax. Such organizations include Boy Scouts, Girl Scouts, F.F.A., Chamber of Commerce, Lions Clubs and other civic organizations, as well as churches and religious groups.

Sales to Residents of Montana  - North Dakota sales tax law contains an exemption for residents of Montana, defined by ND Century Code 57-39.2-04(12)  as an individual and not a business, from paying  sales tax when purchasing tangible personal property within North Dakota. The prescribed certificate of purchase for use in making sales to Montana residents may be obtained from the Office of State Tax Commissioner or from their website www.nd.gov/tax.  

Sales to Canadian Residents - Sales to residents of Canada are not exempt from North Dakota sales tax; however, in some cases the Canadian buyer may obtain a refund of North Dakota sales tax paid.   For more information: http://www.nd.gov/tax/salesanduse/canrefund/

 Sales to Contractors - North Dakota sales and use tax law regards any contractor who incorporates tangible personal property into real property as the final user and consumer of the property.  As a final user and consumer, the contractor is liable for sales or use tax on the purchase price of that property.  

If a contractor furnishes the seller of construction materials with a completed contractor certificate containing the contractor's license number assigned under the provisions of NDCC Ch.43-07 and the contractor's sales and use tax number assigned by the State Tax Commissioner, the seller is not required to collect tax on the sale.  Any contractor furnishing such a certificate must report those purchases on the sales and use tax return for the reporting period in which the purchases are made and pay the tax to the Office of State Tax Commissioner with that return. If a contractor or subcontractor is also engaged in retail trade and part or all of the machinery, equipment, material or supplies used in carrying out a construction contract are taken from stock that was purchased for resale; the contractor must pay a use tax on his cost of materials. The purchase price or value of the machinery, equipment, materials or supplies used or consumed in carrying out the construction contract must be reported on the Items Subject to Use Tax line of the sales and use tax return.

Local Sales and Use Tax - In addition to state sales, use and gross receipts taxes, various cities also impose local sales, use and gross receipts taxes. Information:  http://www.nd.gov/tax/salesanduse/gis/

Streamlined Sales & Use Tax Agreement - North Dakota is a member state that is in compliance with the Streamlined Sales and Use Tax Agreement. It is the purpose of this agreement to simplify and modernize sales and use tax administration to reduce the burden of tax compliance. For more information:  http://www.nd.gov/tax/salesanduse/streamlinetax/

Shooting Preserves, Game Farms, and Hunting Clubs - Shooting preserves, game farms and hunting clubs are in the business of permitting individuals the privilege of hunting in designated areas for a fee. This fee is regarded as a charge for nontaxable service. Charges for lodging, meals and sales of tangible personal property are subject to tax. Information: http://www.nd.gov/tax/salesanduse/pubs/guide/gl-21922.pdf

Taxable Charges Information: http://www.nd.gov/tax/salesanduse/pubs/guide/    
Sales Tax Hotels & Motels - http://www.nd.gov/tax/salesanduse/pubs/guide/gl-21816.pdf - Hotels and Motels: A hotel or motel must pay sales or use tax on the purchase price of all items of equipment, including beds, furniture, television sets, room furnishings and other similar items. They also are responsible for sales or use tax on supplies furnished to guests or used in the operation of the hotel or motel.

Sales Tax Restaurants - http://www.nd.gov/tax/salesanduse/pubs/guide/gl-21809.pdf  -Bars and lounges, restaurants and cafes and coin-operated vending machines, amusement sales, employee meals and purchase subject or sales use tax.  
Sales Tax Bars, Lounges and Taverns - http://www.nd.gov/tax/salesanduse/pubs/guide/gl-21829.pdf   Sales Tax Rental and Leasing Companies - http://www.nd.gov/tax/salesanduse/pubs/guide/gl-22082.pdf

OTHER INFORMATION    ---      Six Ways to Reduce Liability
source: Jeff Rotering, Attorney at law, Hettinger, ND      
1. Formulate objectives of the program so customers know what to expect.
2. Disclose all risks in a variety of ways.
3. State that safety is not assured and customers participate at their own risk.
4. Make other literature about the activities available.
5. Don't pressure people to participate.
6. Don't emphasize only the fun.
7. Obtained signed release.
8. Allow participants to make decisions to participate or not. All aspects of the experience must be optional.
9. Parents of minors must be involved.
10. More risk if you guide; less risk of you send them out on their own.
11. Don’t have a specific list of safety rules or procedures. Emphasize reasonable care.
12. Participants should have their own vehicles and medical insurance. Require proof of insurance.
13. Consider monitoring or restricting alcohol use.
14. Reasonable standard of care must be emphasized. Be overly cautious and use common sense.
15. Be a friend to your customers.
16. Positively reinforce safe behaviors.
BUT, IF AN ACCIDENT OCCURS - don’t minimize; be compassionate and caring to victim and victim's family. Don't make promises. Document what people say immediately after the accident; document conditions and named of witnesses. If serious, get written statements of witnesses. Take pictures immediately. Make sure the victim is treated. Be a friend to the victim and victim's family.  Visit victim in the hospital.

SAMPLE RELEASE LANGUAGE-  WEBSITES:  http://www.rocknwater.com  /  http://www.nelsonrocks.org

ENTITY CHOICES: Sole proprietorship, Partnership, Limited partnership, Corporation, Cooperative, Limited Liability Company (LLC), Limited Liability Partnership (LLP) and Limited Liability Limited Partnership (LLLP)   
Legal Considerations - I. Liability Exposure Risks: Injuries to guests and contractual obligations; i.e. "Puffing" - guest expectations.    Agency Law: Liability for employees' negligence.
II. Entity Choice: Tax consequences, liability limitations, control and management, succession planning, sole proprietorship, general partnership, corporation (s-corporation / c-corporation) and Limited Liability Company.
III. Risk Management: Insurance, waivers, identifying risks, choice of venue, safety discussions/manual, personal injury, property damage, emergency procedures, training of employees and signs/warnings.  IV. Licensing/Regulatory Scheme:  July 1, 1998 legislative changes; Definitions: guest ranch, bed and breakfast, outfitting, guiding and seasonal establishment (applicable Rules and Regulations).

Standard – Negligence - Negligence is the lack of ordinary care and diligence required by the circumstances. It is the lack of such care as persons of common sense and ordinary prudence usually exercise under the same or similar circumstances.  Duty owed when a person is lawfully on the premises. A possessor of land owes a duty to a lawful entrant upon the premises to use reasonable care to warn the entrant in order to protect the entrant from an unreasonable risk of harm caused by the condition of the premises while the entrant is on the premises.

In determining the reasonable care of the landowner, the following factors may be considered: (1). The purpose for which the entrant entered the premises; (2). The circumstances under which the entrant entered the premises; (3). The use to which the premises is put or expected to be put; (4). The foresee ability or possibility of harm; (5). The reasonableness of the inspection, repair or warning; and (6). The opportunity and ease of repair or correction or the giving of the warning.

Limited Liability for Owner of Recreation Lands - (Chapter 53-08) - -53-08-02. Duty of care of landowner.  Subject to the provisions of section 53-08-05, an owner of land owes no duty of care to keep the premises safe for entry or use by others for recreational purposes, or to give any warning of a dangerous condition, use, structure, or activity on such premises to persons entering for such purposes."

Exception - if you charge for coming onto your property. NDCC 53-08-05.  Insurance - Important to have liability insurance and to know what is/is not covered by the insurance.

Limited Liability Companies -Licensing - whether licensing is required is largely dependent upon the type of business you operate. Examples of licensing requirements.  Check out North Dakota Century Code Chapter 23-09. - Restaurant, hotel, boarding house licenses; bed and breakfast facility license and campgrounds. Private Shooting Preserves (NDCC Chapter 20.1012);  Guides and Outfitters (NDCC 20.1-03-12) and  Boating (NDCC 20.1-13-04-Licensing Watercraft for Hire)

Taxation: Income and sales tax  
Other legal concerns for business owners - Real estate matters, employment matters, policies, discrimination, wages, etc. and contract matters
Financial and Banking -  notes, mortgages, guarantees
Printed with permission from: Timothy A. Priebe - https://www.ndcourts.gov/court/lawyers/04384.htm  

ND Department of Commerce Tax Credit Certification: http://www.business.nd.gov/forms/certification-forms/   - North Dakota offers many attractive tax incentives to new and expanding business. To qualify for these incentives, businesses must first complete a certification process. Partners are encouraged to work with businesses interested in their communities to achieve certifications available to their industry. Certification forms are available for the various incentives listed below, and are subject to review and approval or rejection from the director of the Economic Development & Finance Division www.business.nd.gov of the North Dakota
Department of Commerce. www.commerce.nd.gov/.  Fillable forms for all certifications listed are available for download at www.ndbusiness.com.  A complete listing of North Dakota business tax incentives is available for download at www.nd.gov/tax/genpubs/business-incentives.pdf     

 

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