Remote sales generate $15 million in N.D. sales taxes
North Dakota has collected nearly $15.4 million in sales tax from out-of-state merchants since a U.S. Supreme Court ruling gave states authority to collect online sales, according to the State Tax Department.
A newly released report from the department lists the state portion of collections at $11.78 million since June 21, 2018, while local governments shared in $3.6 million. The state portion is distributed to the state General Fund and State Aid Distribution Fund, which goes to cities and counties.
The state’s 2019-21 biennium forecast includes $25 million from remote sellers. The state levies a 5% sales tax. The City of Minot is estimating collections of $100,000 to $250,000 in 2020 from its 2% tax. Ward County also levies .5%.
The state report indicates 4,823 sales tax permit applications have been filed by remote sellers since June 21, 2018.
Myles Vosberg, compliance director with the tax department, said the state started contacting known sellers after the Supreme Court ruling to let them know of the obligation to collect beginning Oct. 1, 2018.
“We took a proactive approach to contact all the ones we were aware of,” he said. “It’s difficult to identify all of them and to contact all of them, but that’s somewhat true of sales tax in general. They need to come forward and let us know they are doing business in North Dakota.”
However, the state does engage in efforts to identify companies that need to come into compliance. The trigger for a company is annual sales of $100,000 within the state. Once a company reaches that threshold, it has 60 days to register for a permit with the state.
Failure to do so can lead to a penalty of 5% of the tax plus 1% in interest for each month overdue.
Vosberg said the response by businesses in registering when required has been generally good.
North Dakotans now pay the sales tax on online purchases if buying from online companies whose sales reach the $100,000 threshold. One of the largest online sellers, Amazon, may have some products that are taxed and others that are not, depending on the volume of secondary sellers and whether sellers fulfill their orders through Amazon or on their own. Amazon, which had a fulfillment center in Grand Forks, paid sales tax in North Dakota prior to 2018. It closed its fulfillment center last year, encouraging employees to work from home.
For online buyers, sales tax is determined by the delivery point. Buyers accepting shipment or making a pickup within Minot pay a 7.5% sales tax.