## Sales tax nexus in North Dakota Before 2018, businesses only had to collect sales tax in states where they had a **physical presence** (offices, employees, warehouses). The Supreme Court's **Wayfair v. South Dakota (2018)** decision changed that — letting states require tax collection based on **economic nexus** (volume of sales). ### North Dakota sales tax - **Rates:** 5% state + local (avg combined ~6.97%) - **Economic-nexus threshold:** $100K sales (200-transaction prong removed 2019) ## What "nexus" means Nexus is the connection that makes you taxable in a state. Two main types: **Physical nexus:** - Office, warehouse, retail location - Employees in the state - Inventory in the state (FBA / Amazon warehouses count) - Salespeople / representatives - Trade-show attendance (some states) - Trucks / vehicles in the state **Economic nexus** (post-Wayfair): - Crossing dollar threshold of in-state sales - Crossing transaction-count threshold - Most states use $100K sales OR 200 transactions - Some states use higher thresholds (CA $500K, NY $500K + 100 tx, TX $500K) - Some states removed the transaction prong (ND, SD, TN, MN partially) ## Common physical-nexus traps - **Inventory in third-party warehouses** — Fulfillment by Amazon (FBA) creates physical nexus in every state where Amazon has a warehouse - **Affiliate / click-through nexus** — pre-Wayfair concept that some states still apply - **Marketplace facilitator laws** — Amazon, eBay, Etsy now collect on behalf of sellers in most states - **Drop-shipping** — physical presence at supplier creates issues - **Remote employees** — even one remote employee creates nexus - **Visiting on business** — extended visits, conferences, sales calls ## Marketplace facilitator laws Most states now require **marketplace facilitators** (Amazon, eBay, Walmart, Etsy, etc.) to collect sales tax on sales made through their platforms. This: - Shifts collection responsibility from individual sellers to the marketplace - Lets sellers cross thresholds without registering individually if all their sales go through marketplaces - Creates compliance simplification for many small sellers BUT — sales made off-marketplace (your own website, in-person, wholesale) still trigger nexus separately. ## Streamlined Sales Tax Project (SST) 24 states have signed onto the **Streamlined Sales Tax** initiative — providing simplified registration, uniform definitions, and free tax-calculation services. Member states include AR, GA, IN, IA, KS, KY, MI, MN, NE, NV, NJ, NC, ND, OH, OK, RI, SD, TN, UT, VT, WA, WV, WI, WY. ## What's taxable vs exempt **Generally taxable:** - Tangible personal property (most goods) - Some services (varies dramatically by state) - Software (varies — sometimes only canned, sometimes also custom) - Digital goods (varies — increasingly taxed) - Restaurant meals - Lodging **Often exempt:** - Groceries (varies; some states fully exempt, some reduced rate, some fully tax) - Prescription drugs - Medical equipment (varies) - Newspapers / magazines (varies) - Resale (B2B with valid certificate) - Manufacturing inputs (varies) - Casual / occasional sales (yard sales, etc.) - Sales to charitable organizations (with certificate) ## Sales tax compliance Once nexus is established: 1. **Register** with the state tax agency 2. **Charge correct tax rate** at point of sale (location-based; complex) 3. **Collect from customers** 4. **File returns** monthly, quarterly, or annually based on volume 5. **Remit collected tax** with returns 6. **Keep records** for 3-7 years depending on state 7. **Respond to audits** — sales tax audits are common, especially for ecommerce sellers ## Penalties for non-compliance - **Back taxes** — owed for entire period of unfounded liability - **Interest** — typically 5-12% annually - **Penalties** — often 5-25% on top of unpaid tax - **Personal liability** for responsible officers / owners (TX, CA, NY, others) - **Criminal charges** in willful cases ## Sales-tax software Modern compliance is generally tool-driven: - **Avalara** — comprehensive nexus tracking, calculation, filing - **TaxJar** — popular for ecommerce - **Vertex** — enterprise-level - **Sovos** — enterprise / complex - **State-provided free tools** — limited but helpful for small sellers ## What you should do If you sell into North Dakota from out of state — or you're a North Dakota seller wondering about your obligations elsewhere — review nexus carefully. Most North Dakota sales-tax issues benefit from a CPA or sales-tax-specialist consultation. Many state tax agencies offer voluntary disclosure agreements (VDAs) for catching up on past obligations with reduced penalties. --- *This guide is general information about North Dakota sales tax as of early 2026 and is not legal or tax advice. Sales tax law changes frequently and rates are updated. Consult a CPA or tax attorney for your specific situation.*