North Dakota Sales Tax Penalties and Interest
Checklist
Understanding Sales Tax Penalties and Interest
Sales and use tax penalties and interest are additional charges applied to unpaid or late sales tax obligations in North Dakota. Penalties are fixed percentages imposed when returns are filed late or remain unpaid, while interest accrues monthly on outstanding balances. The North
Dakota Office of State Tax Commissioner automatically calculates these charges from the due date until full payment is received under North Dakota law.
Why North Dakota Imposes These Charges
The Office of State Tax Commissioner applies penalties and interest to encourage timely compliance and ensure consistent state revenue collection for sales and use taxes. Late filings disrupt budget planning and reduce funds available for public services and infrastructure improvements. The North Dakota Administrative Code authorizes these charges as standard collection procedures, and they apply automatically unless the taxpayer qualifies for specific abatement relief through the Department of Revenue.
What Happens If You Ignore the Notice
Unpaid penalties and interest continue to accumulate each month, significantly increasing your total tax liabilities and outstanding balance. The state may escalate collection actions, including wage garnishment, bank levies, or property liens against business assets. The longer balances remain unpaid, the more difficult the resolution becomes and the greater your financial exposure under state regulations grows.
Sales Tax Registration and Nexus Requirements
Before addressing penalties, understanding your sales tax registration obligations helps prevent future issues with the Department of Revenue. Businesses with a physical presence or economic nexus in North Dakota must obtain a North Dakota seller’s permit and collect sales and use taxes. Economic nexus applies when your sales volume exceeds one hundred thousand dollars in taxable sales into the state during the current or prior calendar year under the Wayfair Law.
Step-by-Step Checklist
Step 1: Review the Notice Completely
Read the entire notice from the North Dakota Office of State Tax Commissioner, including all attachments and detailed explanations regarding your tax liabilities. Identify the tax period, amount owed, due date, and any response deadlines clearly stated on the Notice of
Determination or assessment document.
Step 2: Verify Your Filing Status
Check your records to confirm whether you filed a sales and use tax return for the period shown on the notice. Review your TAP system account or email confirmations to verify the filing date and submission status for the tax period in question.
Step 3: Confirm Payment Records
Review your business bank statements and electronic funds transfer records to verify whether payment was submitted for the tax period. Check your TAP system portal for payment confirmations, and note the payment date and amount if submitted through the online system.
Step 4: Identify Applicable Charges
Review the notice to determine which charges apply, including Failure to File Penalties, Failure to Pay Penalties, or interest on unpaid balances. Note that late filing penalties start at 5 percent or $5 for the first month and increase monthly to a maximum of 25 percent of the tax due.
Step 5: Determine Penalty Abatement Eligibility
Contact the North Dakota Office of State Tax Commissioner to inquire about penalty abatement based on good cause criteria under the North Dakota Administrative Code. Good cause means maintaining a cooperative attitude during the audit process and demonstrating a history of correct filing and timely compliance with state regulations.
Step 6: Calculate Your Total Balance
Add the original unpaid sales and use tax amount to the penalties and interest charges shown on the notice to determine your total obligation. Record the payment due date and note that interest accrues at one percent monthly, or 12 percent annually, but is not collected for the first month after the filing deadline.
Step 7: Choose Your Response Action
Determine whether you will pay the full balance immediately, request a payment plan, or contest the assessment based on your specific circumstances. If you believe the charges are incorrect, prepare written documentation explaining why the assessment contains errors before contacting the Department of Revenue for review.
Step 8: Submit Payment or Contact the Department
Pay online through the TAP system portal or mail a check payable to the North Dakota Tax
Commissioner to the address shown on your notice. Include your notice number or sales tax permit number with any payment, and use certified mail or tracking for mailed payments to ensure proper crediting.
Step 9: Request Review If You Disagree
Call the North Dakota Office of State Tax Commissioner at 701-328-7088 with your notice, sales tax permit number, and supporting documents ready for discussion. Explain clearly why you believe the penalty or amount is incorrect and request written confirmation of any corrections or explanations provided by the sales tax auditor.
Step 10: Explore Payment Plan Options
Ask the Department of Revenue whether a payment plan is available for your balance and inquire about monthly payment amounts, terms, and any additional administrative costs. Do not assume approval without receiving written confirmation from the state specifying the payment plan terms and schedule for your tax liabilities.
Step 11: Document All Communications
Save copies of all correspondence sent to the Department of Revenue, including payment receipts, confirmation numbers, and written responses from state representatives. Maintain these records for 3 to 5 years to protect yourself in case of future questions or disputes during a potential sales tax audit.
- Ignoring the notice completely: Failing to respond allows penalties and interest to
- Using incorrect payment methods: Sending payments without a clear reference to
- Missing follow-up deadlines: If the Department of Revenue requests documentation or
- Assuming automatic payment plan approval: Payment plans require formal requests
- Confusing state and federal systems: North Dakota uses the TAP system for state
- Filing incomplete or zero returns incorrectly: Even when no taxable sales occur, you
- State tax notice review and response
- Penalty and interest reduction options
- Payroll and trust fund tax assistance
- Payment plan and relief eligibility review
- Representation with state tax agencies
Step 12: Review Filing Frequency Requirements
Verify your assigned filing frequency with the TAP system to ensure future returns are submitted correctly and on time to avoid additional penalties. Filing frequency may be monthly, quarterly, or annual, depending on your sales volume, and will be determined at the time you obtain your sales tax permit.
Common Mistakes to Avoid continue growing while increasing the risk of aggressive collection actions by the
Department of Revenue. The balance will not disappear without action, and enforcement measures may follow quickly under North Dakota law. your notice number or sales tax permit may delay crediting to your account. Always include identifying information, and consider using the TAP system for faster processing
and immediate confirmation of electronic funds transfer. responses by specific dates, missing those deadlines may close your opportunity to dispute charges. Set calendar reminders and submit materials well before any stated deadlines to ensure timely receipt and consideration by the sales tax auditor. and written approval from the North Dakota Office of State Tax Commissioner before they become effective. Never stop making payments or assume installment arrangements without receiving official written confirmation of approved terms from the
Department of Revenue. sales and use tax payments, not EFTPS, which handles only federal tax obligations.
Using the wrong system will result in payments not being applied to your state sales tax account or sales tax permit obligations. must file your returns indicating zero taxable activity rather than skipping the filing completely. Failure to submit a zero filing of return results in late filing penalties even when no tax is due for that period.
Understanding Sales Tax Collection Obligations
Businesses holding a North Dakota seller’s permit must collect sales and use taxes on all taxable items sold within the state or delivered to North Dakota customers. The sales tax rate includes the state rate plus any local rates applicable in local jurisdictions where sales occur.
Marketplace facilitators operating online marketplaces must also collect and remit taxes on behalf of sellers using their platforms under the Streamlined Sales and Use Tax Agreement.
Frequently Asked Questions
Can Penalties Be Removed or Reduced Under North Dakota Law?
The North Dakota Office of State Tax Commissioner has the authority to abate penalties for good cause under the North Dakota Administrative Code, which includes cooperative behavior during the audit process and a demonstrated history of correct filing. You must contact the
Department of Revenue directly to request an abatement and provide supporting documentation for your circumstances and tax liabilities.
How Is Interest Calculated on Unpaid Balances?
Interest is calculated at one percent per month, or 12 percent annually, on unpaid sales and use tax from the filing deadline until full payment. Interest is not collected for the first month a return is filed late, and it continues to accrue until all taxes, penalties, and interest are paid, according to state regulations.
What if I cannot pay the Full Amount Immediately?
Contact the North Dakota Office of State Tax Commissioner at 701-328-7088 to request a payment plan for your outstanding tax liabilities and discuss available options. Payment plans allow installment payments over time but require approval and written confirmation before becoming effective, and may include additional administrative costs or terms.
What Is the Lookback Period for Sales Tax Audits?
The standard lookback period for sales tax audits in North Dakota is 3 years from the due or filing date of the return. However, if the sales tax auditor determines that a 25 percent discrepancy occurred in a single reporting period, the audit report may extend the lookback period to up to 6 years under North Dakota Century Code provisions.
Do I Need Exemption Certificates for Tax-Exempt Sales?
Yes, businesses must obtain and retain valid exemption certificates from purchasers claiming sales tax exemptions on items such as medical devices, farm machinery, or other exempt categories. Exemption certificates should be obtained at least every two years and kept in your files to substantiate exempt sales during any sales tax audit by the Department of Revenue.
Received a State Tax Notice?
If you’ve received a state tax notice and aren’t sure how to respond, we can help you review your options and next steps.
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