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The 2024 North Dakota Use Tax

5.00%

2024 North Dakota state use tax

The ND use tax only applies to certain purchases

The North Dakota use tax is a special excise tax assessed on property purchased for use in North Dakota in a jurisdiction where a lower (or no) sales tax was collected on the purchase.

The North Dakota use tax should be paid for items bought tax-free over the internet, bought while traveling, or transported into North Dakota from a state with a lower sales tax rate.

The North Dakota use tax rate is 5%, the same as the regular North Dakota sales tax. Including local taxes, the North Dakota use tax can be as high as 3.000%.

What exactly is the North Dakota use tax?

The North Dakota Use Tax is a little-known tax that complements the regular North Dakota sales tax to ensure that purchases made outside of North Dakota are not exempt from the North Dakota sales tax.

Instead of taxing the sale of tangible property which takes place outside of North Dakota's jurisdiction (and thus cannot be taxed), the North Dakota Use Tax taxes the use or consumption of tangible property bought in other jurisdictions with a lower sales tax rate and brought back into North Dakota.

How Do I Calculate How Much Use Tax I Owe?

If you made any purchases online or outside of North Dakota for which you paid less then North Dakota's 5% in sales tax, you are responsible for paying North Dakota a use tax on those purchases equal to 5% of the total purchase price less any sales taxes already paid to other jurisductions.

Example 1: If $100 worth of books is purchased from an online retailer and no sales tax is collected, the buyer would become liable to pay North Dakota a total of $100 × 5% = $5.00 in use tax.

Example 2: If a $10,000 boat is purchased tax-free and then brought into a jurisdiction with a 3% sales tax rate, the buyer would become liable to pay North Dakota a total of (5% - 3%) × $10,000 = $500.00 in use tax.

Example 3: If $1,000 worth of goods are purchased in a jurisdiction with a 6% sales tax rate, no use tax is owed to North Dakota because the foreign jurisdiction's sales tax rate is greater then or equal to North Dakota's 5% sales tax.

How do I pay the North Dakota use tax?

In many states, an optional field for remitting use tax is included in the state income tax return. A use tax return form may also be available on the North Dakota Department of Revenue website for calculating and paying use tax.

Above: Example use tax field on a state income tax return

Use tax is a self-assessed tax with a very low public awareness rate, and as a result states have a very hard time enforcing use tax compliance. Only about 1.6% of taxpayers pay use tax each year, remitting an average of $69 in use taxes on total purchases averaging $929. ^[1]

Government studies have shown that a large percentage of use tax payments are made as the result of an audit or under the threat of an audit. If unpaid use tax is discovered by a North Dakota tax audit, significant underpayment fees and interest may apply.