Running a business in North Dakota means keeping up with more than just your customers. It also means staying on top of sales tax compliance. The Peace Garden State imposes a 5% statewide sales tax, with cities and counties authorized to add their own local rates. That means total sales tax rates can vary depending on where your business operates. Add in special rates for restaurants, lodging, alcohol, and vehicle rentals, and managing sales tax can get complex quickly.
Understanding how sales tax works in North Dakota, from what’s taxable to filing deadlines, is essential to staying compliant and avoiding costly penalties. Below, we’ll break down everything you need to know about sales tax rates, exemptions, filing, payments, and how DAVO by Avalara can simplify the process for your business.
What is the North Dakota sales tax rate?
North Dakota’s base sales tax rate is 5% for most retail transactions. But that’s just the starting point. Local counties and cities can add their own additional taxes, pushing the total rate higher depending on where the sale occurs.
For example, in Bismarck, there’s a 2% city sales tax and a 1% county sales tax. That makes the combined rate inside Bismarck city limits up to 8%. In Fargo, the city imposes an additional 2.25% on top of the state rate, plus 0.50% for Cass County, resulting in a total rate of 7.75%. Always refer to the North Dakota Office of State Tax for the most up-to-date local tax rates.
Beyond the base and local additions, some products and services get special treatment. Alcohol, lodging (hotel/motel) charges, vehicle rentals, and restaurant meals frequently carry different tax rules. They may be taxed at different rates, subject to local excise charges, or handled under separate local ordinances. That means a meal or a hotel room can be taxed differently from a retail sale of clothing or electronics.
How to calculate North Dakota sales tax?
Calculating sales tax in North Dakota is fairly simple once you know your total rate. Start by adding together the statewide 5% sales tax with any applicable local city or county tax. Then, multiply that combined rate by the total taxable sale amount.
If you’re a restaurant or lodging operator, keep in mind that your tax rate may be higher than the standard retail rate. Meals, alcohol, and room rentals can be taxed differently depending on your city or county. Double-check your local rates before calculating to ensure you’re charging customers correctly and staying compliant.
Use our sales tax calculator
If you want your prices to include sales tax, for example, if you’d like to charge customers a clean, round number like $10 for a sandwich, our calculator makes that easy. Simply enter your desired final price (the amount you want the customer to pay, tax included) and the sales tax rate. The sales tax calculator will automatically work backward to show you the pre-tax price of the item. That way, when tax is added, the total still comes out to your target price.
What goods are subject to sales tax in North Dakota?
In North Dakota, most tangible goods and some services are subject to the state’s 5% sales tax, plus any applicable local tax. This includes items like clothing, furniture, electronics, and household goods. On the other hand, some items are exempt from sales tax, including prescription drugs, groceries, and most agricultural products.
If you’re a business owner, it’s important to understand which products or services you sell are taxable. Even if your business provides both taxable and non-taxable goods or services, you’re still responsible for collecting and remitting sales tax on the taxable portion of your sales.
Does North Dakota have sales tax on food?
If your business sells food in North Dakota, it’s important to understand which items are taxable and which are not. Generally, most grocery-type food and food ingredients are exempt from sales tax. That means if you’re selling unprepared food items, like fruits, vegetables, dairy products, or meat, you don’t need to collect sales tax at the register.
However, some food items are still subject to sales tax, including:
- Prepared foods, such as meals sold by restaurants, delis, or convenience stores
- Soft drinks
- Candy
- Dietary supplements
- Alcoholic beverages
If you’re a restaurant, convenience store, or any business that sells prepared food or drinks, managing sales tax in North Dakota can get complicated. Between the different tax rates for prepared food, beverages, and alcohol, as well as local add-ons from cities and counties, it’s easy for things to get confusing.
That’s where DAVO comes in. DAVO automatically sets aside the sales tax you collect each day, files your returns, and makes payments on time. You never have to worry about missing a deadline or miscalculating your tax owed. It works seamlessly with popular POS systems, taking sales tax management completely off your plate.
Are services subject to sales tax in North Dakota?
In North Dakota, certain services are subject to sales tax. This includes:
- Admissions to recreational or entertainment events
- Lodging and hotel accommodations
- Restaurant meals and prepared food
- Motor vehicle rentals
- Fabrication and production of custom-made items
- Installation labor combined with the sale of tangible personal property, unless contracted and billed separately
- Digital goods and software
However, not all services are subject to sales tax. Most professional and personal services, such as legal advice, medical services, and haircuts, are not taxable.
How to manage tax-exempt sales in North Dakota?
While most goods and services sold in North Dakota are taxable, there are a few important exemptions to know about.
Sales to Government Entities and Certain Organizations
North Dakota law exempts government entities and certain organizations from paying sales tax on purchases they make. However, religious, charitable, and nonprofit organizations are not automatically exempt. For example, purchases made by churches are still subject to sales tax, but items like Bibles and prayer books purchased by churches are specifically exempt under state law.
Sales to Native Americans
A non-Native American retailer operating on a tribal land cannot collect sales tax on sales made to enrolled native customers. However, the retailer must collect and remit North Dakota sales tax on all sales to non-Native American customers, even when the sale occurs on the reservation. All sales to Native Americans outside of tribal land are subject to sales tax.
Montana Resident Exemption
There’s also a special exemption for Montana residents, since Montana does not have a sales tax. A sale of tangible personal property to a person from Montana is exempt from North Dakota sales tax if:
- The purchase is made in person in North Dakota
- The purchase is $50 or more
- The buyer removes the item from North Dakota for use exclusively outside the state
This exemption applies to both individuals and Montana-based businesses whose owners or partners are residents or registered business entities from Montana.
North Dakota sales tax registration
Any business operating in North Dakota that sells taxable goods or services must complete North Dakota sales tax registration before beginning operations. Businesses can apply online through the state’s official portal, and it’s recommended that you submit your application at least 30 days prior to opening. This ensures you have your sales tax permit in place when you begin collecting taxes.
Even if you purchase an existing business, a new sales tax permit is required, as permits are not transferable between owners. Completing your registration on time helps you stay compliant, avoid penalties, and ensure your business is ready to collect and remit sales tax correctly from day one.
How to file a North Dakota sales tax return?
Once you’ve completed your North Dakota sales tax registration, the next step is understanding how to file your returns. Filing frequency (monthly, quarterly, or annually) depends on the volume of your sales and is determined when your permit is issued. If your business circumstances change, you can contact the Office of the State Tax Commissioner to request a different filing schedule.
All sales tax returns in North Dakota are now filed electronically through the state’s online portal, North Dakota Taxpayer Access Point (ND TAP). Paper returns are no longer accepted, so it’s important to set up your online account and submit your filings through the portal. Using the portal ensures your filings and payments are processed efficiently and accurately, keeping your business compliant and avoiding late penalties.
Make your sales tax less taxing with DAVO.
How to pay North Dakota sales tax?
Once your return is ready, North Dakota offers several convenient ways to pay your sales tax through the ND TAP portal. You can submit electronic payments directly from a checking or savings account, or use a credit/debit card (note that fees may apply for card payments). For those who prefer traditional methods, you can print a payment voucher and mail it to the Office of the State Tax Commissioner.
ND TAP also allows you to request a payment plan for recurring electronic payments or submit an ACH credit. For foreign or domestic taxpayers needing to make larger transfers, wire transfers are accepted as well. With these options, North Dakota provides flexibility while ensuring your sales tax is paid accurately and on time.
When are North Dakota sales tax due dates?
In North Dakota, sales tax returns and payments are generally due on the last day of the month for the previous month’s sales. If the due date falls on a weekend or a legal holiday, it is automatically moved to the next business day. Businesses should always refer to the North Dakota Office of State Tax Commissioner for the most current tax filing deadlines to stay compliant and avoid penalties.
North Dakota Sales Tax Compensation Discount
Businesses that file and pay on time can take advantage of a 1.5% collection allowance on the state portion of sales tax they remit, capped at $110 per month. This helps offset the administrative costs of collecting and submitting taxes. For more details on discounts offered by other states, see our state sales tax discount guide. With DAVO, this collection allowance is returned to the business in full, sometimes covering the full subscription cost to DAVO.
What are the penalties?
Failing to file sales tax returns or pay taxes on time in North Dakota can quickly become costly. If a return isn’t filed by the due date, a late filing penalty of 5% of the tax due (or $5, whichever is greater) is assessed for the first month. Each additional month the return remains unfiled adds another 5% to the penalty, up to a maximum of 25% of the tax owed.
If taxes aren’t paid on time, a late payment penalty of 5% (or $5, whichever is greater) applies. Interest accrues at 12% per year, starting from the filing deadline until the full amount of tax, interest, and penalties is paid. Note that interest is not applied during the first month of a late filing.
Continued failure to comply can trigger further enforcement actions by the North Dakota Office of Tax Commissioner. This may include issuing an assessment for estimated taxes, penalties, or interest, placing a lien on personal property, or revoking your sales and use tax permit. Liens are public records and can negatively affect your credit, while permit revocation could temporarily prevent your business from legally collecting sales tax. If a revocation hearing is scheduled, you’ll have the opportunity to present your case to discuss your situation.
Simplify North Dakota sales tax with DAVO
Managing sales tax can feel like one more thing on your already full plate, especially when every city or county can set its own rates. Between tracking deadlines and ensuring you file on time, it’s easy for small details to slip through the cracks. That’s where DAVO comes in.
DAVO takes the stress out of sales tax by automating the entire process. Once connected to your POS system, DAVO automatically sets aside the sales tax you collect daily, files your return, and makes your payment on time and in full, every time, guaranteed. No more worrying about penalties, interest, or missed deadlines.
Whether you’re running a restaurant in Fargo or a boutique in Bismarck, DAVO ensures your North Dakota sales tax is handled accurately and securely, so you can focus on growing your business, not managing tax paperwork.
Get started today by selecting your POS system to learn how DAVO can help simplify your North Dakota sales tax compliance.
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North Dakota Tax Information:
701-328-7088
