If you run an Ecommerce or CPG business in North Dakota, securing a North Dakota Resale Certificate is a smart move to protect your margins and streamline operations.
This certificate allows you to purchase inventory and raw materials, or components that become an integral part of a product you ultimately sell tax-free, helping you lower upfront costs, stay competitive in pricing, and remain compliant with North Dakota sales tax laws.
Understanding Resale Certificates in North Dakota
What is a North Dakota Resale Certificate?
In North Dakota, a Certificate of Resale is a document issued by the North Dakota Office of State Tax Commissioner that allows businesses to:
- Purchase goods without paying sales tax, as long as they intend to resell those goods to customers during regular business operations.
- Make tax-exempt purchases of inventory and materials for processing, where such materials, through fabrication, compounding, manufacturing, producing, or germination, become an integral or ingredient part of the products they sell by presenting a valid resale certificate to their suppliers.
The purpose is to prevent double taxation once at the wholesale level and again at the point of retail sale.
However, a North Dakota resale certificate is not a blanket exemption from all sales tax obligations. Businesses must still collect and remit sales tax on taxable sales to final consumers.
Why do you need a Resale Certificate in North Dakota?
Obtaining a resale certificate in North Dakota offers several significant advantages for businesses that purchase goods for resale.
Here are some key benefits:
- Avoid Paying Sales Tax on Inventory: You can buy inventory and materials without paying sales tax upfront if you plan to resell them.
- Maintain Competitive Pricing: By not paying sales tax on the cost of goods, businesses have more flexibility in setting competitive prices for products in the North Dakota market. This can be a crucial advantage, especially in price-sensitive industries.
- Legal Compliance: Possessing and using a valid resale certificate for eligible purchases ensures businesses comply with North Dakota’s sales tax laws and regulations to avoid penalties.
In North Dakota, the specific form required for a resale certificate for multiple and recurring purchases is the Certificate of Resale (Form SFN 21950).
When filling out Form SFN 21950, a purchaser must include their Sales and Use Tax permit number to identify that it is registered with the North Dakota Department of Revenue and authorized to make tax-exempt purchases for resale.
Resale Certificate vs. Sales Tax Permit: What’s the Difference?
A North Dakota Sales and Use Tax Permit authorizes your business to collect and remit sales tax on taxable sales to customers. A North Dakota Resale Certificate (Form SFN 21950), on the other hand, allows you to purchase goods tax-free from suppliers if those goods are intended for resale. To use a resale certificate, you must have an active sales tax permit.
Who Can Use a Resale Certificate in North Dakota?
Businesses that purchase goods for resale can use a North Dakota Resale Certificate. To do so, the business must actively sell taxable tangible products and hold a valid North Dakota Sales and Use Tax Permit.
How to Get a Resale Certificate in North Dakota: A Step-by-Step Guide
Getting a resale certificate in North Dakota is simple, but you’ll need to meet a few key requirements first. Here’s how to do it:
1. Make Sure You’re Eligible: Your business must be engaged in the business of selling, leasing, or renting tangible personal property and be registered with the North Dakota Office of State Tax Commissioner. Only businesses with a valid North Dakota Sales Tax Permit can use a resale certificate.
2. Get a North Dakota Sales Tax Permit: If you don’t already have one, apply for a North Dakota Sales and Use Tax Permit through the North Dakota TaxPayer Access Point (ND TAP) website. You need this permit before you can use a resale certificate. Need help? Read our blog: How to Get a Seller’s Permit in North Dakota
3. Gather Your Business Information: You’ll need basic business details to complete the resale certificate, including:
- Your state of origin
- Your North Dakota Sales and Use Tax permit number
- Your business name and address.
- A clear description of the type of business conducted (e.g., selling, leasing, or renting)
- The name of the specific seller from whom the tax-exempt purchase is being made.
- A formal declaration affirming that the tangible personal property being purchased is solely for resale.
- A declaration concerning taxable use, explicitly stating that the buyer will report and remit any sales or use tax, along with any applicable penalties, if the purchased items are ultimately used or consumed by the business rather than resold.
- Your authorized signature and date of issue
4. Complete the Form SFN 21950: Download and fill out the North Dakota Certificate of Resale (Form SFN 21950) from the North Dakota Office of State Tax Commissioner website. You’ll present this form to your suppliers when making tax-exempt purchases.
5. Submission: No submission required in North Dakota. You don’t submit the resale certificate to the state. Instead, give the completed form directly to your suppliers when buying items for resale.
6. Pay Any Applicable Fees: There’s no cost to use Form SFN 21950, but you’ll need a valid North Dakota Sales and Use Tax Permit.
7. Understand Renewal Requirements: While the North Dakota resale certificate (Form SFN 21950) itself doesn’t specify an expiration date, it remains valid only as long as your sales tax permit is active and in good standing.
Suppliers may, however, periodically request an updated form (e.g., every few years) to ensure their records are current. Your North Dakota Sales and Use Tax Permit stays valid unless you cancel it or the state revokes it.
If you’re a registered retailer, you must keep up with all sales tax filings and payments to stay in good standing. If there are any changes to your business details or exemption status, you should give your suppliers an updated Form SFN 21950.
How to Use a Resale Certificate in North Dakota
To properly utilize your resale certificate in North Dakota when making tax-exempt purchases for resale, you’ll need to present a valid copy of your North Dakota Sales and Use Tax Resale Certificate to your supplier at the time of purchase.
North Dakota generally does accept certain out-of-state resale certificates. However, there might be specific conditions:
- Good Faith Acceptance: Vendors in North Dakota will typically accept an out-of-state resale certificate in good faith, provided it contains all the necessary information (buyer’s name, address, seller’s permit number from the issuing state, reason for exemption, etc.) This often refers to the Uniform Sales and Use Tax Certificate (Multijurisdictional) or the Streamlined Sales Tax Exemption Certificate.
- Reciprocity: The acceptance might be based on reciprocal agreements with the state that issued the certificate, and North Dakota also participates in the Streamlined Sales Tax Agreement (SSTA), which facilitates acceptance of a uniform certificate such as the Streamlined Sales Tax Exemption Certificate.
It’s always a good idea to confirm the vendor’s policy on accepting out-of-state certificates beforehand.
For more information regarding sales tax exemption laws in North Dakota, you may visit the state website.
Multi-Jurisdictional Resale Certificates
A multi-jurisdictional resale certificate simplifies tax-exempt purchases for businesses that buy goods for resale across state lines.
Unlike a single-state resale certificate, a standardized multi-jurisdictional form allows multiple states to recognize the purchase as tax-exempt because it’s intended for resale.
However, it’s crucial to understand that not all states accept these multi-state forms, and acceptance can come with specific conditions.
There are two primary types of multi-jurisdictional resale certificates that a business operating in or selling to vendors in North Dakota might encounter:
- Uniform Sales & Use Tax Resale Certificate – Multijurisdiction Form: This is a widely recognized form accepted by a significant number of states (though not all). North Dakota accepts this form, provided it is properly completed. For North Dakota-based buyers, it should include their North Dakota Sales Tax Permit number. Out-of-state purchasers should include their home state’s registration number where indicated. You can find this form on the Multistate Tax Commission (MTC) website.
- Streamlined Sales Tax (SST) Certificate of Exemption: The state of North Dakota became a full member of the Streamlined Sales Tax on October 1, 2005. As such, it accepts the SST Certificate of Exemption for qualifying resale purchases. Businesses using either certificate must ensure they meet all North Dakota-specific requirements. You can find more information about the SST and its member states on the Streamlined Sales Tax Governing Board website.
Businesses need to verify whether North Dakota accepts these multi-jurisdictional certificates and if there are any specific requirements or limitations on their use within the state. This is to avoid any audit issues.
Responsibilities When Using or Accepting a Resale Certificate in North Dakota
Buyer Responsibilities
If you use a North Dakota resale certificate, ensure it’s only for tangible personal property you plan to resell. Using it for personal or business items, like office supplies or equipment, is illegal and may result in penalties. It can lead to unpaid tax liability, interest, and other applicable penalties.
- North Dakota-based buyers: Provide a fully completed Form SFN 21950 to your suppliers for qualifying purchases.
- Out-of-state buyers: North Dakota vendors will accept out-of-state resale certificates, provided that they are properly completed and comply with North Dakota’s requirements. Acceptable forms include the Uniform Sales and Use Tax Certificate – Multijurisdiction Form and the Streamlined Sales Tax (SST) Certificate of Exemption.
Seller Responsibilities
As a North Dakota seller, you must verify and keep documentation for tax-exempt sales using a resale certificate. Also, you must:
- Accept the certificate in good faith
- Ensure it includes all required information: buyer’s name, address, sales tax permit number (or equivalent), reason for exemption, and signature.
- Reject the certificate if the items aren’t for resale (e.g., personal or business use)
Keep records for at least 3 years: A properly completed resale certificate is your official proof of why sales tax wasn’t collected. Keep the resale certificate for at least three years and three months in case of a sales tax audit.
Frequently Asked Questions About the North Dakota Resale Certificate
Are There Penalties for Misusing a Resale Certificate in this State?
Yes. Improper use of a resale certificate, such as using it for personal or non-resale purchases, can result in serious penalties.
If a resale is misclassified and later deemed taxable, the buyer must pay the tax and any penalties. Also, a buyer who submits a false resale certificate to a seller is liable for any resulting taxes and penalties.
Always use Form SFN 21950 correctly and only for qualified resale purchases to avoid issues.
Does a North Dakota Resale Certificate Expire?
North Dakota Certificate of Resale (Form SFN 21950) does not expire unless the information on the certificate changes. Form SFN 21950 is valid only while the buyer continues to resell the items listed on the certificate.
The certificate doesn’t expire, but sellers may request an updated one to keep records accurate and up to date. The state also recommends updating your Certificate of Resale.
How Do I Verify a North Dakota Resale Certificate?
If you’re a seller in North Dakota, online verification is not available. Here’s how to validate a buyer’s resale certificate:
1. Ask the buyer for a completed Form SFN 21950 and review it for accuracy and good faith resale intent.
2. Go to the NJDOR On-Line Business Registration Certificate Service website.
3. Scroll down to the Lookups and Inquiries section and select Sales & Use Permit Inquiry.
4. Enter the required permit number and select Search.
How TaxHero Can Help
Managing sales tax compliance and resale certificates in North Dakota doesn’t have to be complicated. TaxHero simplifies the process, from keeping your North Dakota Sales and Use Tax Permit active to ensuring you use resale certificates correctly.
Save time. Avoid penalties. Stay compliant.
Schedule a Demo to see how TaxHero can streamline your North Dakota resale certificate process today!