I Should Have Collected North Dakota Sales Tax But I Didn’t
Many of our competitors suggest Filing aVoluntary Disclosure Agreement
in each state. This is a one-size-fits-all solution that isn’t always the best.Our sales tax professionals will work with you to determine your business’s best and most cost-effective solution.
If you determine your business has nexus, but you have not collected North Dakota sales tax, here are your options:
1. Register and pay back taxes, penalties, and interest, or
2. Complete a VDA to cut penalties .
Here is what you need to know about each option to make the best decision for your business:
Option 1: Register to Pay Back Taxes, Penalties, and Interest.
A VDA is not cost-effective if the past liabilities and penalties are minimal. Sometimes the best resolution for a business is to register with North Dakota and pay back taxes, penalties, and interest.
Be wary of the tax professionals recommending a VDA in these cases. They want to make a buck rather than look out for your best interests.
When to consider registration and payment:
- If you established nexus less than 3 or 4 years ago.
- The sales tax penalty is LESS than the professional fees charged for the VDA.
- Your business does NOT have a sales tax collected issue.
Beware: Registering does not generally end past liabilities.
If you’re unsure what your past liabilities are, contact us. Our state tax professionals work with you so you can make the right choice for your business.
North Dakota Sales Tax Exemptions
What is included with North Dakota Sales Tax Exemptions?
The state of North Dakota levies a 5% state sales tax on the retail sale, lease or rental of most goods and some services. Local jurisdictions impose additional sales taxes up to 3%. The range of total sales tax rates within the state of North Dakota is between 5% and 8%.
Use tax is also collected on the consumption, use or storage of goods in North Dakota if sales tax was not paid on the purchase of the goods. The use tax rate is often less than the corresponding sales tax rate in that jurisdiction. Returns are to be filed on or before the last day of the month following the month in which the purchases were made. For example, purchases made in the month of January should be reported to the state of North Dakota on or before the last day of February.
Do You Have Nexus In North Dakota
The word ânexusâ refers to a commercial connection in the state. Nexus determines the following questions for a state tax agency: Do you do business here, what kind, and how much? And when you do have nexus, that means youâre obligated to collect tax on your sales there.
So the first question for you to answer is whether you have nexus in North Dakota.
You probably have nexus in North Dakota if any of the following points describe your business:
- A physical presence in North Dakota: a store, an office, a warehouse or distribution center, storage space, you, an employee, a representative, etc.
- A significant amount of sales in North Dakota within twelve months. *
* This is called an economic nexus, a sales tax nexus determined by economic activity, i.e. – the amount of sales you make in a particular state. Any kind of economic activity could trigger the nexus, once your total sales reach a certain threshold amount.
The threshold in North Dakota is $100,000 in annual sales. To learn more about how this works, check out the Ultimate Guide to US Economic Nexus.
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How To Collect Sales Tax In North Dakota
Now itâs time to tackle the intricate stuff! Tax rates can vary based on the location of your business and the location of your customer, plus the levels of sales tax that apply in those specific locations.
The state-wide sales tax in North Dakota is 5%.
There are additional levels of sales tax at local jurisdictions, too.
North Dakota has a destination-based sales tax system, * so you have to pay attention to the varying tax rates across the state. Charge the tax rate of the buyerâs address, as thatâs the destination of your product or service.
* Important to note for remote sellers: While this is generally true for North Dakota, some state have peculiar rules about tax rates for remote sellers. Contact the stateâs Department of Revenue to be sure.
North Dakota Nexus Regulations
Any retailer maintaining a place of business in North Dakota is considered to have a significant presence in the state, and so is obligated to register to collect and remit sales tax on all applicable purchases with the state. For the purposes of establishing sales tax nexus in North Dakota, the state interprets the phrase retailer maintaining a place of business in the state to include anyone engaged in the solicitation of sales of taxable goods on a regular or systemic basis through various means. These include but are not limited to radio or television media, catalogs, advertising flyers, telephone, and periodicals.
Other conditions that can trigger a nexus on both a statewide and local level include:
- Having service people installing, repairing, or constructing goods in the state
- Making deliveries with a personal or company vehicle, as opposed to through a common carrier
- Owning property in the state or local jurisdiction
- Having a representative or other agent making sales or deliveries, or taking orders for taxable goods
- Having any type of business location within the state or local jurisdiction
Amazon does have a customer service center in North Dakota, so if you use fulfilment through Amazon, that physical location creates a statewide nexus for you.
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Office Of State Tax Commissioner Extends Hours On April 18
Thursday, April 7, 2022 – 01:30 pm
The North Dakota Office of State Tax Commissioner will extend office hours until 7 p.m. CDT on Monday, April 18, which is the individual income tax filing deadline.
Tuesday, February 22, 2022 – 10:00 am
In North Dakota, we’re on track for processing returns and refunds.
What Transactions Are Generally Subject To Sales Tax In North Dakota
In the state of North Dakota, sales tax is legally required to be collected from all tangible, physical products being sold to a consumer. Some examples of items that exempt from North Dakota sales tax are prescription medications, some types of groceries, some medical devices, and machinery and chemicals which are used in agriculture.This means that an individual in the state of North Dakota who sells school supplies and books would be required to charge sales tax, but an individual who owns a store which sells groceries is not required to charge sales tax on all of its products.
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What Creates Tax Nexus With The State Of North Dakota
Having nexus, also known as “sufficient business presence, with North Dakota means your business has established a taxing connection with a state. When this happens, you are required to collect and remit sales tax in North Dakota because you created a sales tax Nexus.
Even if your business maintains its main headquarters in another state, you may still have to charge and pay sales tax to the North Dakota State Tax Commissioner even if you never step foot in North Dakota.
So, how do you create sales tax nexus in North Dakota?
A business establishes a nexus in North Dakota by:
- having a business location in North Dakota
- having property stored in North Dakota
- employing any person in North Dakota
- contracting with a salesperson or other agent in North Dakota
- leasing equipment used in North Dakota
- performing services in North Dakota
- licensing the use of intangible property in North Dakota, or transporting property in North Dakota using the taxpayers vehicles.
Lets talk a bit more specifically about where your goods are stored, such as in the instance of an Amazon warehouse.
Filing When There Are No Sales
Once you have a North Dakota seller’s permit, youre required to file returns at the completion of each assigned collection period regardless of whether any sales tax was collected. When no sales tax was collected, you must file a “zero return.
Failure to submit a zero return can result in penalties and interest charges.
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When Is The Budget Approved And How Can I Participate In This Process
The City budget is prepared during the summer months and a preliminary budget is presented in August. There is a public opportunity to voice your opinion about the preliminary budget before it is finalized by October 7th. You will be provided the opportunity to speak directly with the City Commissioners and staff with any questions or concerns about the budget.
What To Expect During An Audit
The typical audit process is shown in this flowchart. Detailed guidance for each North Dakotaaudit process stage follows in the sections below.
North Dakota regularly audits businesses required to charge, collect, and remit various taxes in the state. Many audits begin with a call from a North Dakota Department of Revenue sales tax auditor. Shortly after the call, your business will receive aNotification of Intent to Audit. This notification confirms that you were lucky enough to be chosen for a North Dakota sales tax audit.
A Notice of Determination stating the reason for the assessment and the amount will be sent to you by the Tax Commissioner no later than 12 months from the commencement of the audit.
It is good to start with getting a state and local tax professional involvedto prepare for the audit.
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North Dakota’s Sales Tax By The Numbers:
North Dakota has alower-than-average sales tax, includingwhen local sales taxes from North Dakota’s 214 local tax jurisdictions are taken into account.
Rankings by Average State + Local Sales Tax:
Ranked 39th highest by combined state + local sales tax
Ranked 4th highest by per capita revenue from state + local sales taxes
Rankings by State Sales Tax Only:
Ranked 12th highest by state sales tax rate
Ranked 2nd highest by per capita revenue from the statewide sales tax
North Dakota has a statewide sales tax rate of 5%, which has been in place since 1935.
Municipal governments in North Dakota are also allowed to collect a local-option sales tax that ranges from 0% to 4.5% across the state, with an average local tax of 0.96% .The maximum local tax rate allowed by North Dakota law is 3%.You can lookup North Dakota city and county sales tax rates here.
This page provides an overview of the sales tax rates and laws in North Dakota. If you are a business owner and need to learn more about things like getting a sales tax permit, filing a sales tax return, or making tax-exempt purchases for resale see the North Dakota Sales Tax Handbook’s Table of Contents above.
What Happens If I Lose A North Dakota Sales Tax Exemption Certificate
Hmm… Obviously this issue is best to be avoided! Imagine finding out youll be audited and discovering you cannot produce an exemption certificate for a buyer! That nightmare scenario would mean you could be held liable to pay all taxes on behalf of the buyer. This is a bad scene and can be avoided by taking proper care with your paperwork which happens to be one of our specialties! 🙂
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Is North Dakota A Streamlined Sales Tax State
Yep! Since October, 2005 North Dakota has been a full member of Streamlined Sales Tax.
If you are planning on taking advantage of the Streamlined Sales Tax as a business, it is recommended you use a Certified Service Provider though businesses may opt to register themselves without a CSP. Ultimately the aim of streamlined sales tax is to simplify payment to multiple different states of sales and use tax. It isnt required that you utilize them, but it can significantly reduce complexity to do so, especially if your business sells in multiple states.
More effectively manage your tax needs by keeping this guide handy.
You and your business can be better equipped to avoid situations like paying fines, paying back taxes that you did know you had to pay in the first place, or facing an audit by the tax authorities in North Dakota.
Exemptions To The Sales And Use Tax
The City sales and use tax guidelines follow the State of North Dakota sales and use tax guidelines. Therefore, if an item is exempt under state rules it would be exempt from city tax. For questions on whether the purchase you are considering would be taxable, please contact the State Tax Department.
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Settling A North Dakota Sales Tax Liability
After any critical notices are issued, settling your North Dakota sales tax case with the North Dakota Department of Revenue is possible by filing a North Dakota Offer in Compromise. The business must meet specific criteria to qualify, but you can get better results negotiating here than with the auditor. However, knowing a fair settlement from an unreasonable settlement will be challenging without experience and knowledge of North Dakota tax laws.
DO NOT attempt to negotiate a settlement without an experienced North Dakota state and local tax lawyer or other professional.
What Innovative And Unique Programs Are Operated By Fargo
There are several projects including, conversion of landfill gas to electricity, providing recycled wastewater to an ethanol plant, being a regional utility provider to neighboring communities, operating hybrid transit coaches and specialized pre-treatment of roadway to minimize snow pack. This City has been a leader in advancing innovative ideas that produce positive results.
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I Received A North Dakota Sales Tax Audit Notice What Should I Do
Businesses that receive a sales tax audit notice need to consider the following questions:
- If you donât have sales tax audit experience, how can you trust that the state’s auditor abides by the rules and follows proper procedures?
- How will you know when to provide documents or when to push back?
- Do you thoroughly understand your sales and use tax areas of exposure?
- Controlling the audit is paramount to limiting exposure and shaping the results. Are you confident in doing that on your own?
Unless you can confidently answer these questions, hiring a professional is most likely to be the best option.
Contact usto learn how our sales tax professionals can give you the peace of mind and confidence youâll need during your audit.
Visit our resource pages for more information to help you make critical decisions during your North Dakota sales and use tax audit.
Which Agencies In North Dakota Do I Need To Additionally Register With
You may need to check with some of the following agencies or resources:
Youll want to give this some thought and do a little research or investigating since every business is unique, and there are such different rules, regulations, and laws that may apply.
We suggest contacting the North Dakota State Tax Commissioner to verify which additional government agencies you may be required to register with.
You are now prepared to register for your North Dakota sales tax permit in North Dakota.
Lets summarize what we have covered:
- Have all the required information easily accessible before registering online.
- Acquire a tax ID or EIN before registering for a North Dakota sales tax permit.
- Register online at the North Dakota Taxpayer Access Point website.
- Look into what other agencies you may have to additionally register with.
Registering for your North Dakota sales tax permit will be stress free as long as you are prepared. We recommend organizing all the essential information in a folder, preferably using a system like Box.com or Dropbox .
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Common Exemptions From North Dakota Sales And Use Tax:
- Commemorative Memorial Coins.
- Digital Products: Sales of items transferred electronically, including specified digital products, are exempt from sales tax. Transferred electronically means the purchaser received the product without tangible storage media. Examples of tangible storage media include USB flash drives, compact discs , and external hard disk drives.
Specified digital products are:
- Digital Audio-Visual Works: A series of related images imparting an impression of motion when shown in succession and accompanying sounds, if any.
- Digital Audio Works: Works that result from the fixation of a series of musical, spoken, or other sounds, including ringtones.
- Digital Books: Works generally recognized in the ordinary and usual sense as books.
- This exemption does not apply to prewritten computer software.
- Repair Services: Repairing, cleaning, altering, or restoring tangible personal property that belongs to others is a service, and the receipts for providing that service are exempt from sales tax. Tangible personal property sold or used in a repair is subject to sales or use tax.
What Information Do I Need To Register For A North Dakota Sales Tax Permit
Before you sign up for North Dakota sales tax permit youll want the following information on hand:
- NAICS code that best matches the business
- Federal Employer Identification Number
- List of business officers, partners, managing members, and/or trustees
Dont forget! Preparation is key. When you have all this information ready, you can go online and register for your permit at the North Dakota Taxpayer Access Point site.
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