This post is all about what you as an online seller need to know about when and how to collect sales tax in North Dakota. The following examples go through the most common types of online businesses that we see at TaxJar. If your particular case is more unique than what I’ve outlined, be sure to contact a tax professional.
You’re an online seller but you don’t live in North Dakota
If you live in New Mexico (or any state other than North Dakota for that matter) and operate your online business through your house or office then you’re not required to collect sales tax on orders shipped to North Dakota addresses.
You live and/or operate your business in North Dakota
If you’re like a lot of online sellers and your home and business location are the same thing and that location is in North Dakota, then you’re business has nexus in North Dakota. That means you’re required to collect sales tax on orders you ship to addresses in the state.
If you’re going to collect sales tax, make sure your business has a sales tax permit no less than 30 days before you open up for business. Here’s a link to the form to fill out to register.
You’re an online seller, live out-of-state, and use a fulfillment service
Besides living in North Dakota, this is the other common way an online seller gains nexus in the state. Let’s say that you live in Arkansas and use a fulfillment service that stores or warehouses your inventory in North Dakota. Even if you’ve never had the pleasure of visiting North Dakota, your inventory creates enough presence that the state requires you to collect sales tax on items shipped to addresses in North Dakota. For more info you can read ND’s helpful Out of State Retailer’s Guide (PDF).
Collecting the correct sales tax rate
First, a bit of high-level background on North Dakota sales tax. As an online seller, the rate you charge customers is a sum of the state sales tax (5.00%) plus additional local taxes.
The tax rate you’re supposed to use for a transaction is based on where the item is being delivered. For example, let’s say you;re business is based in Ashley, ND and you sell a taxable item to a customer in Cando. The rate effective in Cando (as I write this it’s 7.00%) is what you should charge your customer. That’s 5.00% for the state and 2.00% for the local sales tax.
The second scenario that’s worth going through is if you’re an out-of-state seller with nexus because your inventory is stored in North Dakota. In this case, the amount of sales tax you need to collect is calculated the same way. It’s based on where the item is being delivered.
Summary: if your business has nexus, collect based on shipping address
If you have zero ties to North Dakota, then you don’t need to collect sales tax from customers in the state. If you live or operate your online business in the state or of your have inventory stored or warehoused there, then you need to collect sales tax on items delivered to ND addresses. The sales tax rate used on an order is based on where the item is being delivered.
Have any questions? Feedback? Tell me about your experience selling in North Dakota in the discussion section below.
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