North Dakota Sales Tax Guide
Chapter 8: Understanding North Dakota sales tax rules for shipping & handling
If you run an ecommerce store in North Dakota, it’s important that you stay up-to-date on the sales tax policies that affect your business. One of the biggest questions many ecommerce business owners ask is whether or not to charge sales tax on shipping or delivery charges for goods sent to North Dakota residents.
Here’s what you need to know.Is Shipping Taxable in North Dakota?
According to the State of North Dakota guidelines, delivery is defined as “freight, delivery, and other transportation charges,” and the taxing authority always considers those items as a part of the selling price. In other words, if you charge your buyers to deliver products, you should also charge sales tax on those fees.Impact of Delivery Methods
The North Dakota State Tax Commissioner Office requires retailers to collect sales tax for all methods of delivery they use to get products to customers. This is true whether the item is delivered via a common carrier, company truck, or a personal truck. As long as the retailer charges a delivery fee, that fee should include sales tax.
On the other hand, if the customer contracts with a third party delivery company, the retailer is under no obligation to charge sales tax. Other instances when sales tax should not be charged on delivery fees is when a product is delivered outside of North Dakota, is an exempt item such as prescription drugs, or when the buyer presents valid sales-tax exemption documentation.Shipping Tax Exempt Purchases
If you sell an item that is tax-exempt in North Dakota, the state does not require you to collect sales tax on the purchase or on the delivery.
But what happens if you ship a package that contains both taxable and exempt products? The state follows the formula many states do when it comes to figuring out which portion of the charge is taxable. Simply allocate which portion belongs to the taxable product and which part of the shipment contains the exempt products, and assign the correct charge to the taxable items. You can do this by price or weight. For example, if you ship a $10 prescription drug, which is exempt, and a $5 pill cutter, you should charge sale tax on one-third of the delivery fee.Local Taxability
According to the State Tax Department, an item cannot be exempt from only state or local tax: “Either the activity is exempt from both taxes or it is subject to both taxes.” For example, because prescription drugs are exempt from sales tax at a state level, they are also exempt at a local level.
Finally, keep in mind that these rules only apply to retailers selling within the state. If your customer is out of state, even if you agree to deliver the product to the customer or have someone else deliver it, you should not charges sales tax.