North Dakota Gross Receipts Taxes: 7% on Alcoholic Beverages and 3% on New Farm Machinery and Irrigation Equipment
North Dakota Gross Receipts Taxes: 7% on Alcoholic Beverages and 3% on New Farm Machinery and Irrigation Equipment
North Dakota taxes most retail sales at the 5% state sales tax rate, plus any city and county taxes. Two categories follow their own gross receipts rates instead. Retail alcoholic beverages are taxed at 7%. New farm machinery, new attachments and new irrigation equipment sold for exclusive agricultural use are taxed at 3%. If you sell either category, the rate on each transaction depends on what the item is, how it will be used and who is buying it. Getting that wrong means either underpaying the state or overcharging a customer.
This guide covers what each tax includes, what falls outside it, and when the 5% sales tax applies instead. It is a practical starting point for owners and staff, not a substitute for a professional review of your specific sales.
Informational content only: This article is general information about North Dakota tax law. It is not legal or tax advice. Tax rules apply to specific facts, so consult a qualified CPA or attorney before you make decisions based on this material.
Quick Reference: Which Rate Applies
| Product or sale | Tax treatment |
|---|---|
| Retail alcoholic beverages (any drink of 0.5% alcohol by volume or more), on or off premises | 7% gross receipts tax (NDCC 57-39.6-02) |
| New farm machinery, new attachments and new irrigation equipment sold for exclusive agricultural use, including leases and rentals | 3% gross receipts tax (NDCC 57-39.5-02) |
| New manufactured homes | Separate 3% tax |
| Other taxable sales, including equipment sold to contractors or for non-farm use | 5% state sales tax, plus any city and county tax |
All of these taxes are reported on the sales and use tax return you file with the North Dakota Office of State Tax Commissioner.
The 7% Gross Receipts Tax on Alcoholic Beverages
North Dakota imposes a 7% gross receipts tax on retail sales of alcoholic beverages under NDCC 57-39.6-02. The tax applies to any drink containing 0.5% alcohol by volume or more, and it applies whether the drink is consumed on the premises or taken away. A bar, restaurant, brewery taproom or package store all fall under the same rate.
The most common error is charging the 5% state sales tax on alcohol. Alcohol is not taxed at that rate. Your point-of-sale system should be set up so that alcohol items carry the 7% rate automatically and everything else carries the sales tax rate. Staff should not have to remember which rate to apply.
Retail alcohol sales also involve a licensing process. The Attorney General licenses alcoholic beverages, and retail sales require local approval. The gross receipts tax is a tax question and the license is a separate approval, so handling one does not handle the other.
Mixed tickets with food and nonalcoholic items
Restaurants and convenience stores often sell alcohol alongside food and nonalcoholic drinks on the same ticket. This guide does not set out a method for splitting mixed tickets, so confirm with the Office of State Tax Commissioner how those sales should be allocated. Set your register to record alcohol on separate lines so your records support whatever method the agency requires.
The 3% Tax on Farm Machinery and Irrigation Equipment
The 3% gross receipts tax under NDCC 57-39.5-02 covers three categories: new farm machinery, new attachments and new irrigation equipment, when sold for exclusive agricultural use. Leases and rentals of that same equipment for exclusive agricultural use are covered too. A dealer renting a new implement to a farm operation charges 3%, not 5%.
The key phrase is exclusive agricultural use. The rate depends on how the equipment will be used, not on the seller's line of business. A farm equipment dealer does not get the 3% rate on every machine it sells. Ask the buyer how the equipment will be used, write down the answer, and confirm with the Tax Commissioner what records it expects you to keep.
What falls outside the 3% rate
- Used equipment. Used equipment used exclusively for agriculture is exempt. Do not charge the 3% rate on it.
- Repair parts. Farm machinery repair parts used exclusively for agriculture are exempt. Tires are not included in that exemption, so confirm the treatment of tires with the Office of State Tax Commissioner before you quote a price.
- Sales to contractors or for non-farm use. Equipment sold to contractors or for non-farm use pays the 5% state sales tax.
Irrigation systems and accessories
Irrigation equipment is not always taxed at 3%. Components installed into real property, generally those below the pivot point, are taxed at 5%. Accessories such as radios and air conditioners are also taxed at 5%. Bill personal-property parts on separate lines from installed components, so the 3% rate applies only to the equipment that qualifies. A single bundled price makes the split hard to support if the state asks about it.
New manufactured homes
New manufactured homes carry a separate 3% tax. That is not the farm machinery rate. A dealer selling manufactured homes should treat those sales on their own terms and confirm the treatment with the Office of State Tax Commissioner.
Common scenarios
| Sale | Likely treatment |
|---|---|
| New combine sold for field use | 3% |
| New implement leased for exclusive agricultural use | 3% |
| Used grain auger used exclusively for agriculture | Exempt |
| Farm machinery repair parts used exclusively for agriculture | Exempt (tires not included) |
| New skid steer sold to a contractor | 5% state sales tax, plus any local tax |
| Irrigation components installed into real property (generally below the pivot point) | 5% |
| Radio added to a new tractor | 5%, billed on a separate line |
Home-Rule Cities May Add Their Own Taxes
Under NDCC 40-05.1-06, home-rule cities may levy their own farm machinery and alcohol gross receipts taxes. The state rate is not always the whole story. A sale inside one city may carry a local rate that a sale in a neighboring town does not.
Check the Local Taxes by Location guideline for the city where each sale takes place. If the city is not covered or the guideline does not answer your question, confirm the local rate with the Office of State Tax Commissioner before you quote a price. Cities license only specific activities, so a local tax question is separate from any local license question.
Registering to Collect: The Sales and Use Tax Permit
Any business making taxable sales must hold a sales and use tax permit from the Office of State Tax Commissioner. Apply through ND TAP, the agency's online system, about 30 days before you open for business. The 7%, 3% and 5% rates are all reported on the same sales and use tax return.
Forming your business is a separate step. Registering an LLC or corporation with the Secretary of State is a filing, not a license, and it does not replace the sales tax permit. North Dakota levies no franchise tax and issues no general statewide business license.
Common Mistakes to Avoid
- Charging the 5% sales tax on beer, wine or liquor instead of the 7% gross receipts tax.
- Applying the 3% rate to a sale to a contractor or any other non-farm buyer.
- Charging the 3% rate on used equipment that is exempt when used exclusively for agriculture.
- Putting irrigation components and accessories on the same invoice line as qualifying farm machinery.
- Forgetting that a home-rule city may add its own tax on top of the state rate.
- Skipping the sales tax permit because the business is small or sells only one type of product.
Official Resources
- North Dakota Office of State Tax Commissioner: https://www.tax.nd.gov/. Tax rates, guidelines and the Local Taxes by Location guideline.
- ND TAP sales tax permit application: https://tap.tax.nd.gov/?Link=Application
- North Dakota Secretary of State: https://www.sos.nd.gov/. Entity and trade name filings.
- North Dakota Attorney General: Retail alcohol licensing. Search the Attorney General's office for the current application process.
- North Dakota Small Business Development Centers: https://und.edu/ndsbdc/index.html, hosted by the University of North Dakota Nistler College of Business and Public Administration.
- U.S. Small Business Administration, North Dakota district: https://www.sba.gov/district/north-dakota
Next Steps
- Sort your products into three groups: alcohol, farm machinery and irrigation equipment, and everything else.
- Confirm each buyer's use before applying the 3% rate, and keep written records.
- Bill installed irrigation components and accessories on separate lines from qualifying equipment.
- Check the Local Taxes by Location guideline for every city where you sell.
- Apply for your sales and use tax permit through ND TAP about 30 days before opening.
Before you set final prices or file a return, have a CPA or attorney review your product mix. That matters most if you sell in several cities, handle rentals or leases, or regularly sell mixed invoices.
Reminder: This article is informational and is not legal or tax advice.