Tax rate by region North Dakota

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The information provided on this page is intended for general informative purposes only. It should not be interpreted as tax advice, nor is it meant to be. For advice on your particular tax responsibilities, consult with an experienced tax expert. PayPro Global does not assume any responsibility for any action taken or not taken based on the information presented here.

Navigating SaaS Sales Tax in North Dakota: A Detailed Guide

North Dakota boasts a business-friendly tax environment, with income tax rates ranging from 1.95% to 2.5%. This low tax burden, coupled with a 5% state sales tax, makes North Dakota an attractive location for businesses, including those in the booming Software as a Service (SaaS) industry. However, navigating the nuances of SaaS sales tax can be complex. This guide provides a comprehensive overview of key aspects, offering practical advice for businesses to ensure compliance and optimize their tax obligations.

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North Dakota

North Dakota’s income tax rates range from 1.95% to 2.5%, maintaining a low tax burden to attract businesses and residents.

Official government link: North Dakota Gov Tax

5.00%

E-products and services VAT/Sales tax rate

Certain items

Reduced tax rate

Exempted product categories

SaaS 

Reverse charge mechanism for B2B sales

Not applicable in the US

Tax ID validation required

Yes

When do you have to register

If you exceed $100,000 in sales.

Online registration possible

Yes

Registration procedure

Register with the North Dakota Office of State Tax Commissioner to obtain a sales and use tax permit.
File Form 40 (North Dakota Corporation Income Tax Return) if earning North Dakota-source income.
Appoint a North Dakota registered agent if necessary

List of digital and electronic services liable for tax

Prewritten/canned software

Penalties

5% of unpaid tax for each month, max 25% (Late Filing); 10% of unpaid tax after 30 days (Late Payment)

Registration threshold

$100,000.00

Filing interval

Monthly, Quarterly, or Annually

Filing deadline

LAST day of the month following the period

E-invoicing requirements

No state-wide e-invoicing mandate

Record keeping

Income tax returns and supporting documents: 3 years minimum

Local Rate Range

0% – 3%

How-To Guides: North Dakota SaaS VAT

Step: 1 Threshold

You’ll need to collect sales tax in North Dakota if you have nexus there. There are two ways that sellers can be tied to a state when it comes to nexus: physical or economic.

  • Physical nexus means having enough tangible presence or activity in a state to merit paying sales tax in that state.
  • Economic nexus means passing a states’ economic threshold for total revenue or the number of transactions in that state.

North Dakota uses a sales and use tax system (not VAT/GST). A remote seller must register if it makes more than USD $100,000 in gross taxable sales delivered into North Dakota in the current or prior calendar year. This economic nexus threshold is mandatory for registration and tax collection obligations.

Step: 2 Business Registration

Register with the North Dakota Office of the State Tax Commissioner by applying for a Sales & Use Tax Permit via the Taxpayer Access Point (TAP) online portal once nexus is met.

Step: 3 TIN/VAT Number

After registration, you receive a North Dakota Sales & Use Tax Account number (state tax ID) issued by the Office of the State Tax Commissioner; a Federal Employer Identification Number (FEIN) from the U.S. IRS is generally required to complete registration

Step: 1 Standard Rate

The North Dakota state sales tax rate is 5% for most retail sales. Local jurisdictions (cities/counties) may impose additional local sales taxes above the base rate.

Step: 2 Determine if you need to register.

To calculate your tax amount, use the following formula:

 

Tax Amount=Net Price×Combined ND Rate%

Step: 3 Reverse Charge (B2B)

North Dakota’s sales and use tax regime does not include a reverse charge mechanism akin to VAT/GST; sellers with nexus are responsible for collecting and remitting sales tax on taxable transactions.

Step: 1 Selling B2C

If a seller has nexus and the product/service is taxable, collect North Dakota state and local sales tax from private consumer customers based on the destination of the sale. (North Dakota sources sales to the destination location for tax purposes.)

Step: 2 Selling B2B

North Dakota does not apply a reverse charge to business buyers. For taxable transactions to other businesses, the seller with nexus must collect and remit applicable sales tax. While the seller is responsible for collection, if a business buyer provides a valid North Dakota Certificate of Resale, the sale is exempt. Without that certificate, you must collect tax even on B2B sales.

Step: 3 Invoice Requirements

The State does not mandate a specific VAT-style invoice template, but invoices for taxable sales should include:

  • Seller legal name;
  • North Dakota Sales & Use Tax Permit number;
  • invoice date;
  • sequential invoice number;
  • buyer name and address;
  • detailed description (e.g., SaaS service description);
  • taxable amount;
  • combined sales tax rate;
  • tax amount charged;
  • total amount;
  • currency.

Step: 1 Filing Interval

Sales tax filers in North Dakota will be assigned a frequency (typically monthly, quarterly, or annually) based on historical taxable volume once they register.

Step: 2 Filing Deadline

Returns are generally due by the last day of the month following the reporting period (e.g., return for June sales due by July 31).

Step: 3 Submission

File and remit via the North Dakota Taxpayer Access Point (TAP) portal; electronic filing and electronic payment options are provided for convenience and compliance.

Step: 4 Record Keeping

Maintain records supporting all sales tax filings (invoices, tax collected, exemptions) for at least four years to support compliance and in case of audit.

PayPro Global Solution: Simplified Registration & Fiscal Representation

Navigating North Dakota’s VAT registration and fiscal representation can be daunting. PayPro Global acts as your Merchant of Record, handling these complexities, including VAT registration and fiscal representation where needed, so you can focus on your business.

Learn more about our MoR services.

FAQ

Overwhelmed by SaaS sales tax compliance?

Our team of SaaS tax experts is here to help. Contact us today for a free consultation. 

 

 

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