How to Register for a Sales Tax Permit in North Dakota

When it comes to career goals, few rank higher than being your own boss, running your own business, having the financial freedom to provide for your family, as well as the ability to work when you want. While these goals often are unattainable for many, this does not mean you should not try to achieve them. It also has to be said that these achievements come only after you put in a lot of hard work. But how many times have you spent extra hours working to get a project done in time for someone else? How many times did you think that the job could have been done better, or you had to obey orders even if you knew the thing you did was wrong? How many times have you come home exhausted because you don’t actually enjoy the job you are doing? This can all take a turn for the better if you take that step and try to go alone.

Let’s say you have been working in retail in North Dakota and know the ropes of the business. You have seen the opportunity to start a small business of your own, buying cheap wholesale merchandise to resell online, before expanding the operation and growing your company. Resale is the business you see yourself in, something you enjoy, so this type of work would actually be like a hobby for you. You already know a lot about the market and the business in general, but you have never actually started and run a business on your own. There are many things you have to complete and certain legal requirements to comply with. There is a lot of preparatory work that has to be done, even before you begin the legal business registration process with the relevant authorities.

This article aims to lay down the steps needed to set up a business in North Dakota and apply for a sales tax permit. However, while it provides guidelines, we urge you to consult an attorney or a professional business advisor or head to your local office for detailed information to avoid any problems.

Preparing to Start a Business in North Dakota

Even before you head to the relevant authorities to register your business, there is a lot of preparatory work that has to be done. This includes market research, product and audience selection, business plan development, financial calculations, and predictions. Without this, starting a business would be a shot in the dark, a risk many would say is not worth taking.

To minimize risks, it is best to look into your target market, check the dynamics, the supply and demand balance and look closer into the conditions. This research is an essential part of the build-up process. It will allow you to gather insight into the market conditions and provide you with a perspective on the potential direction you could take your business. Your dreams might include creating a large company and potentially growing it into a liquidation platform that will tie with leading manufacturers and retailers, but the dream might not be feasible in the current market.

Research will provide you with information on which products are in demand, which markets are actually oversupplied and whether there are any narrow, niche segments you could explore. These niche markets are actually considered as the best starting point for an aspiring entrepreneur. They provide several advantages. Niche, specialized markets often are undersupplied. While the demand can’t compare to larger markets in terms of volume it is a better place in terms of steady demand and lower competition levels. It is something you should always take into consideration. This means that your business will have a higher chance of turning a profit if you start small.

Now, this does not mean that you have to remain in the segment and keep operating a small business. You should actually use the opportunity to learn the ways of the business and how to run a company in a less competitive environment, grow a reputation and build a customer base. Once you have established a name among customers it will be easier to expand your offerings in terms of products and services.

Research will also show you whether your business model is sustainable in the current market environment. It will allow you to assess possible costs, estimate your budget and carry out further calculations based on the findings of the research. A well-planned business plan includes cost, revenue, profit and other financial projections. These are an essential part of the process of establishing a business. It will also be the first thing a bank or any other financial institution will ask for if you go looking for additional funds to support your business. Without a well-developed business plan, no financial institution will agree to invest in your business.

So, once you have completed all the steps mentioned above, you have pinpointed the market, products and have completed all the calculations, it is time to turn to the next stage of establishing a business: complete the legal business registration process with the authorities of the state of North Dakota.

Registering a New Business in North Dakota

The legal registration process in North Dakota starts with the office of the Secretary of State. The steps that follow are similar to any other state in the US, and according to the Secretary of State, it starts with choosing a business name. This is an essential part of a business’ identity and creates a potential connection with the customers. Once you have chosen a name, you should always check for the availability of the name with the Secretary of State. If the name is available, file with the SOC for approval which secures your business name. However, how this process is completed depends on the business structure you choose for your business.

Business structures are an essential part of business registration as they determine a number of important aspects of your business. These range from sole proprietorships to corporations. Each structure has its advantages and disadvantages, but this largely depends on the size of your business. The Secretary of State, while being the relevant authority for registering your business with, cannot provide legal advice. This is why new entrepreneurs are urged to work with an attorney or a professional business advisor in order to fully grasp the differences and the characteristics of each of the structures, which bring separate filing, transaction, finance and tax requirements.

The simplest of all structures is the sole proprietorship, which is actually the most common form in North Dakota, the least regulated and the easiest to set up. In legal terms, and for tax purposes, there is no difference between the business and the owner. This means that the owner is liable for losses and profits of the business. A sole proprietorship has no administrative requirements; however, it is required to obtain the relevant business license and register a trade name.

The next batch of business structures are the partnerships. There are several kinds of partnership in North Dakota: general partnerships, limited partnerships, limited liability partnerships, limited liability limited partnerships and professional limited liability partnerships. A general partnership is created by the association of two or more people or business entities. A partnership can be informal or formalized with a partnership agreement that outlines the responsibilities and invested capital. In terms of liabilities, each general partner has joint liability for obligations of the general partnership. Such a partnership can choose to file statements with the Secretary of State but is obligated to obtain necessary licenses and register a Partnership Fictitious Name Certificate if such a name is employed.

A limited partnership is also formed by two or more partners. However, general partners have management powers and all the responsibility for partnership obligations, while limited partners take a share in profit, can invest in the LP and, most importantly, are not liable for the debts of the LP. To form a limited partnership, a limited partnership certificate has to be filed with the Secretary of State. All other forms of partnerships are formed similarly by filing adequate documentation with the Secretary of State and differ in obligations and liabilities of general and limited partners.

Next on the list are Limited Liability Companies (LLCs), which are established by filing the articles of organization with the North Dakota Secretary of State. Once approved, an LLC becomes a separate legal entity with its own rights, privileges and liabilities. The advantage of an LLC over partnerships or a larger corporation is the fact it provides limited liability for its members, like a corporation, while it can be taxed under flexible partnership rules.

The last option in terms of legal structures available in the state of North Dakota is the corporation. It is also formed by filing articles of incorporation with the Secretary of State. It is a separate entity with its own rights, privileges, and liabilities, distinct from those of its shareholders. Ownership can be transferred, it provides limited liability, has certain tax advantages and can outlast any of its shareholders and only ceases to exist if dissolved.

Starting a business in North Dakota is fairly streamlined as the government has set up its official portal for new business registration. Besides business structure information, the portal provides information on specific license requirements, and the next step, which is very important: tax requirements.

North Dakota Sales Tax Permit

To avoid any potential issues with the state further down the line, it is essential that you check whether you are required to register for a sales tax permit. As we noted previously, you might be interested in buying cheap wholesale merchandise to resell online. In this case, you should determine whether you have a sales tax nexus in the state of North Dakota. This means having a place of business, permanent or temporary in the state, an employee or an agent or if you are leasing or renting tangible personal property. If you do have a sales tax nexus, the next step is to determine whether the products you sell are taxable. In general, tangible products are taxable. However, unlike other states, North Dakota taxes many services, although there are certain exceptions.

According to the North Dakota Office of State Tax Commissioner, “any business or institution making taxable retail sales of tangible personal property or certain services is required to hold a North Dakota sales, use and gross receipts tax permit.” The state has set up its Taxpayer Access Point, enabling its tax payers to make payment inquiries about sales and use tax permits or look up for other tax-related information.

If you have determined that you do have a sales tax nexus in North Dakota and that the products you sell are taxable, your next step is to apply for the sales tax permit. You are also required to obtain a Federal Employer Identification Number (FEIN), which is completed through the Internal Revenue Service (IRS).

During the sales tax permit registration process, you will have to provide personal identification information as well as the business information. Business information includes the legal entity type, your North American Industry Classification System (NAICS) code and a description of your business’ activities. Applying for a sales tax permit is free of charge and once you are granted a permit, you do not have to renew it again.

Sales Tax Exemptions in North Dakota

Like many other states, North Dakota provides the option to purchase products without paying tax. According to the North Dakota Office of the State Tax Commissioner, “if a business or institution purchases materials, supplies or equipment for resale, the business or institution should not pay the tax to the supplier”.

In order to complete a tax-free purchase, you have to submit a Multistate Tax Commission Uniform Sales and Use Certificate, or a Streamlined Sales Tax Agreement Certificate of Exemption. The office does not require the seller to send the certificates; however, these must be retained in the files to substantiate sales claimed as sales for resale.

Contact Details

Secretary of State

State of North Dakota
600 E Boulevard Avenue Dept 108
Bismarck ND 58505-0500
Telephone: 701-328-2900

Office of State Tax Commissioner

Business Registration
600 E. Boulevard Ave., Dept 127
Bismarck, ND 58505-0599

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