What Is the Sales Tax in North Dakota?

Sales tax is a consumption tax applied to the sale of goods and certain services. Governments levy this tax on transactions to generate revenue, which often supports various public services such as infrastructure, education, and public safety. North Dakota imposes a sales tax on retail sales, which is paid by the purchaser and collected by the seller.

North Dakota Sales Tax Rates

North Dakota has a statewide sales tax rate of 5% for most retail sales.

Local jurisdictions, including cities and counties, may impose additional sales taxes. The total combined state and local sales tax rate can range from 5% to 8.5%.

To determine the accurate sales tax rate, it is necessary to identify both the state and any applicable local rates for that precise location. For example, if a city has a 2% local tax, the combined rate with the 5% state tax would be 7%. Many state tax resources and online tools can help identify the correct combined rate based on a street address.

Goods and Services Subject to Sales Tax

Sales tax in North Dakota applies to the retail sale of tangible personal property. This includes items such as clothing, electronics, vehicles, and furniture. If shipping and handling charges are not itemized separately on an invoice, they are considered part of the taxable sales price and are subject to sales tax.

North Dakota also taxes a range of specific services. Taxable services include the leasing or renting of tangible personal property. Telecommunication services, excluding internet access, are also subject to sales tax.

Admission fees for places of amusement, entertainment, or athletic events are taxable, as are charges for participating in such activities. Lodging and related services, such as hotel or motel room rentals for periods of less than 30 consecutive days, are also subject to sales tax. Additionally, services like vulcanizing, recapping, and retreading tires are taxable.

Sales Tax Exemptions

North Dakota provides specific sales tax exemptions for certain goods, services, or transactions. Most food and food products for home consumption are exempt from sales tax. However, prepared food for immediate consumption, candy, soft drinks, and dietary supplements remain subject to sales tax.

Prescription drugs sold under a doctor’s prescription are exempt from sales tax. Over-the-counter medicines purchased without a prescription are taxable. Durable medical equipment, including repair and replacement parts for home use, is also exempt if it meets specific criteria.

Other exemptions include sales of new farm machinery and new mobile homes, which are subject to a lower gross receipts tax rate of 3% instead of the general sales tax rate. Sales to certain qualified nonprofit organizations and government entities are also exempt, provided they have the necessary exemption certificates. Additionally, items purchased for resale by a business are exempt if the buyer provides a valid resale certificate.

Understanding North Dakota Use Tax

Use tax in North Dakota is a complementary tax to sales tax, designed to ensure tax equity on purchases where sales tax was not collected at the point of sale. This tax applies when tangible personal property is purchased outside North Dakota, or from a seller not required to collect North Dakota sales tax, and the item is subsequently used, stored, or consumed within the state. For example, if an individual purchases furniture online from a retailer that does not collect North Dakota sales tax, and then brings that furniture into North Dakota for use, use tax would be owed.

The use tax rate is the same as the sales tax rate that would have applied had the item been purchased in North Dakota. If sales or use tax was paid in another state, North Dakota use tax is owed only if the tax paid was less than the North Dakota rate plus any local taxes. Individuals and businesses are responsible for self-reporting and paying use tax on their sales and use tax returns, which can be done through the state’s online portal, ND TAP.