How to Get a Certificate of Exemption in North Dakota

If you have recently launched or are planning to launch a limited liability company (LLC) that will sell products or services in North Dakota, you may want to get a certificate of exemption, or several of them, before you start doing business, as this can save you a lot of time and money. 

This document is known as a resale certificate in most other states, and attaining one’s a relatively simple process, as detailed in this step-by-step guide. 

What is a Certificate of Exemption?

If your LLC has a valid certificate of exemption, you can buy goods from a wholesaler without paying sales tax, though you may pay a use tax. Depending on the size of your business, this can save you tens of thousands of dollars each year. 

The catch is that whenever you do use a certificate of exemption to purchase goods, you are legally bound to resell those items and collect sales tax when you do so. If you do not resell those items, or fail to collect sales tax, the punishment could be costly fines or potential jail time.

Keep in mind, each certificate of exemption, also known as a resale license, applies to a single vendor. This means you’ll need a certificate of exemption for each one of your vendors. 

You cannot use a certificate of exemption to buy items you do not intend to resell, such as a new computer for your business. This would be tax fraud, a felony offense. You are only able to buy items tax-exempt if you are going to collect sales tax on them later.

Not all wholesalers will accept certificates of exemption, nor do they have to. They may choose not to because of the risk of expired or false certificates, which would put the wholesaler on the hook for the sales tax.

How to Apply for a Certificate of Exemption in North Dakota

In North Dakota, you’ll need to obtain the form from the Office of State Tax Commissioner. Keep in mind that you do not need to file the certificate with the state, but just keep it in your files. 

In a few states, a seller’s permit, or sales tax permit, also serves as a certificate of exemption that applies to all vendors. But in most states, including North Dakota, you’ll need a seller’s permit as well as certificates of exemption for each of your vendors. 

The seller’s permit identifies you with your state as a collector of sales tax. If you sell tangible personal property or goods you are required to have a sales tax permit. In some states, even a service provider like a lawyer is required to have a sales tax permit and collect state sales tax.

The certificate of exemption applies to items that you buy for resale, or for parts that you buy to manufacture something for sale. 

How to Fill out the North Dakota Certificate of Exemption

In North Dakota, the Office of State Tax Commissioner handles the issuance of certificates of exemption. Start by visiting the website, then follow these simple steps:

1. On the Forms page, scroll down to the Sales and Use Tax Forms heading and click on the Streamlined Sales Tax Certificate of Exemption link to download the form. 

NOTE: North Carolina is one of a group of states who participate in the Streamlined Sales Tax Governing Board and use the same standardized form. 

2. In the first section, select whether or not the certificate is for a single purchase. If so, enter the appropriate invoice or purchase order number.
   

3. Next, enter your contact information along with the seller’s.
   

4. In the following section, check the box next to the category that best describes your business.
   

5. Under “Reason for exemption”, check the letter that best identifies the reason for the exemption.

6. In the next section, enter the state-appropriate ID number and reasons for exemption.

7. Lastly, sign and date the form and store in your files.

For assistance, contact the North Dakota Office of State Tax Commissioner at 701-328-7088. 

Does a North Dakota Certificate of Exemption Expire?

In North Dakota, certificates of exemption do not expire.

Conclusion

Certificates of exemption can be a bit of a hassle, but in North Dakota they are an absolute necessity. So take the time to get certificates for each of your vendors to ensure full compliance with your state’s tax regulations.