How to Use and Accept Resale Certificates in North Dakota

What Is a Resale Certificate?

When a business buys products for resale, they can use a resale certificate to avoid paying sales tax on those purchases. Instead, the tax is collected when the item is sold to the final consumer.

Suppliers rely on the resale certificate to confirm that the buyer is a legitimate reseller. Misuse of the certificate, such as using it for personal purchases, can lead to penalties and tax liabilities. This helps to ensure taxes are collected only once, at the final point of sale.

Who Qualifies for a Resale Certificate in North Dakota?

To qualify for a resale certificate, a business must:

• Be registered with the North Dakota Office of State Tax Commissioner for sales tax purposes
• Sell tangible goods that are subject to sales tax when sold to consumers
• Intend to resell the items rather than use them for personal or operational purposes

If your business meets these requirements, you can apply for and use a resale certificate to purchase tax-free goods.

How to Get a Resale Certificate in North Dakota

Businesses must follow these steps to obtain a resale certificate:

1. Register for a Sales Tax Permit

Businesses must first register for a Sales Tax Permit with the North Dakota Office of State Tax Commissioner.

Once approved, the business will receive a Sales Tax Permit Number, which can be used to issue a resale certificate.

2. Understand the North Dakota Resale Certificate Rules

In North Dakota, businesses use their Sales Tax Permit Number along with a certificate form to claim tax-exempt purchases for resale.

The resale certificate form and Sales Tax Permit Number must be provided to suppliers when making tax-exempt purchases.

3. Provide Your Resale Certificate to Suppliers

When purchasing tax-exempt inventory for resale, businesses must provide a completed resale certificate form along with their Sales Tax Permit Number to suppliers.

4. Ensure Proper Use and Compliance

Businesses must only use the resale certificate for tax-exempt purchases of items intended for resale.

Suppliers may verify the validity of your certificate using the North Dakota Office of State Tax Commissioner’s resources.

Misuse of tax-exempt status can result in penalties, back taxes, and revocation of tax privileges.

If all of this feels too overwhelming, doola’s expert bookkeeping team can guide you through the process and ease the bureaucratic burden. 

What Are Differences from Other States?

• North Dakota requires a separate resale certificate form to be filled out by businesses in addition to providing a Sales Tax Permit Number for resale purchases.
• Each state has its own specific requirements and processes for obtaining resale certificates.

How to Accept a Resale Certificate as a Seller in North Dakota

When issuing goods for resale, follow these steps:

1. Request a completed resale certificate form and verify the buyer’s Sales Tax Permit Number before selling tax-exempt inventory.
2. Ensure that the items sold are intended for resale and not for personal or business use by the buyer.
3. Maintain records of all transactions involving resale certificates for tax audits and compliance.
4. Confirm that each buyer’s resale certificate is valid and acceptable under North Dakota state regulations.

Failing to follow these steps could result in denied exemptions, additional tax payments, or penalties.

Common Mistakes to Avoid

Using a resale certificate improperly can lead to audits, fines, and revoked tax-exempt status. Common mistakes include:

• Purchasing items for business use instead of resale
• Providing an expired or invalid certificate
• Failing to maintain proper records of tax-exempt purchases

To stay compliant, businesses should periodically review their resale certificate use and maintain proper documentation.

Sales Tax Rules and Exemptions in North Dakota

North Dakota’s resale tax exemption rules specify that certain products or services may not qualify for tax exemption under a resale certificate. It is essential for businesses to stay informed about these state-specific regulations to ensure proper compliance. Refer to state regulations for comprehensive guidance on taxable versus non-taxable resale items.

Resale Certificate vs. Sales Tax Permit

While a resale certificate allows businesses to make tax-exempt purchases, a sales tax permit enables them to collect and remit sales tax to the state. These two documents are closely linked:

Resale Certificate:
Used to buy inventory tax-free from suppliers

Sales Tax Permit:
Required to charge and collect sales tax from customers

Both are necessary for tax compliance, and businesses should ensure they are properly registered.

Penalties for Misusing a Resale Certificate in North Dakota

Misusing a resale certificate in North Dakota can lead to severe consequences, including fines and tax audits. Businesses have a responsibility to maintain compliance with sales tax laws, ensuring that resale certificates are used correctly and only for legitimate purposes. Violations can result in penalties that affect both the financial standing and reputation of the business.

FAQs About Resale Certificates in North Dakota

Do resale certificates expire? 

In North Dakota, resale certificates typically do not expire. However, businesses should periodically review them for accuracy.

Can out-of-state resale certificates be used in North Dakota?

Out-of-state resale certificates may be accepted if they comply with North Dakota’s resale certificate requirements; check with the state tax department for specific criteria.

Can a resale certificate be used for multiple states?

Resale certificates are generally state-specific, unless reciprocal agreements exist that recognize them across state lines.

How long is a resale certificate valid?

Resale certificates are typically valid indefinitely, but businesses should ensure compliance with any changes in state tax laws.

Staying Compliant With doola 

Resale certificates play a vital role in facilitating tax-free transactions for resellers, ultimately helping businesses manage their sales tax liability effectively. It is crucial for businesses in North Dakota to understand how to obtain and use these certificates correctly to avoid penalties and ensure compliance. For comprehensive financial solutions, including expert tax guidance, doola can provide guidance to ensure compliance with resale tax laws in North Dakota. By leveraging our team’s professional assistance, businesses can focus on what they do best while staying compliant with state regulations.