North Dakota Sales Tax Guide for Convenience Stores 

1. Introduction 

North Dakota's Office of State Tax Commissioner enforces both sales tax on retail transactions and use tax on untaxed business purchases. Even a small misunderstanding such as misclassifying prepared food, failing to apply a local city or county sales tax, or missing documentation for exempt sales can lead to costly penalties and audits. 

Each city and county in North Dakota may impose a local sales tax, collected in addition to the state's base rate of 5%. This means the total tax rate you charge varies depending on where your business is located and where goods are delivered. Local rates can vary significantly and are regularly updated. 

North Dakota Office of State Tax Commissioner - Sales and Use Tax 

For large chains or multi-store operators, maintaining correct tax rate assignments, item taxability codes, and audit-ready records across all stores ensures that every dollar of sales tax collected matches what's remitted. 

Who this guide is for 

• Owners and managers of gas stations with convenience marts or foodservice counters 
• Independent c-store operators selling groceries, tobacco, and prepared foods 
• Franchise groups operating across multiple North Dakota cities and counties 
• Retailers offering delivery or online ordering that must apply correct local tax rates 

By mastering North Dakota's sales and use tax rules, you protect your margins, strengthen internal controls, and minimize audit exposure. 

Why This Matters 

Convenience stores in North Dakota handle one of the most diverse product mixes in retail, ranging from groceries and beverages to taxable prepared foods, alcohol, cigarettes, and motor fuel. Each category falls under different sales tax and regulatory rules enforced by the North Dakota Office of State Tax Commissioner. 

Because sales tax and use tax both apply in North Dakota, c-store operators must not only collect tax on sales but also self-assess use tax on items purchased tax-free that are later used by the business (for example, cleaning supplies, paper cups, or store signage). 

Sales and Use Tax Overview 

Here's why precision matters: 

Prepared vs. unprepared food: Hot sandwiches, fountain drinks, and coffee are fully taxable, while sealed groceries, bottled water (without sweeteners), and milk are not. North Dakota follows the Streamlined Sales Tax Agreement definitions for food and food ingredients, making the distinction between grocery food and prepared food critical for accurate POS configuration. 

Fuel sales: Motor fuel is taxed under separate excise programs administered by the Office of State Tax Commissioner. Gasoline is taxed at 23 cents per gallon, while special fuels like diesel are also subject to excise taxes. These are separate from general sales tax. 

Tobacco and alcohol: Cigarettes and tobacco products are subject to both sales tax at the 5% state rate (plus local taxes) and separate excise taxes. Alcoholic beverages are subject to a gross receipts tax of 7% (not the standard 5% sales tax rate), plus additional licensing requirements. 

Mixed transactions: C-store POS systems must differentiate between exempt, locally taxable, and fully taxable sales categories to ensure accurate collection and remittance. 

Auditors frequently cross-reference convenience store data with third-party supplier records, especially from alcohol and tobacco distributors, to identify underreported sales. A single mismatch between your Office of State Tax Commissioner filings and distributor reports can trigger an audit. 

Ensuring accurate sales tax collection, documentation, and remittance not only prevents penalties but keeps your business operationally clean and financially secure. A proactive approach—regular reconciliation, accurate local tax setup, and organized record-keeping—is the most effective form of audit defense. 

2. Nexus 

a. Standard Nexus 

In North Dakota, nexus is created when a business has a physical presence or engages in substantial business activity within the state. If your convenience store operates from a fixed location in North Dakota, such as a gas station, retail storefront, commissary kitchen, or warehouse, you are required to: 

• Register with the North Dakota Office of State Tax Commissioner before making any taxable sales 
• Collect and remit North Dakota sales tax on taxable goods and services 
• File regular sales and use tax returns electronically through ND TAP (North Dakota Taxpayer Access Point) 

Physical presence includes: 

• Maintaining a store, warehouse, or stockroom in North Dakota 
• Having employees, contractors, or agents working in North Dakota 
• Owning or leasing vehicles that deliver goods into the state 
• Holding inventory stored in a North Dakota facility or third-party warehouse (including Amazon FBA inventory) 
• Having service people installing, repairing, or constructing goods in the state 
• Having representatives making sales, taking orders, or performing services in North Dakota 

Even a short-term presence such as a temporary kiosk or pop-up retail event can establish nexus if you make taxable retail sales. 

Sales and Use Tax - Nexus Guidance 

b. Economic Nexus 

Even without a physical presence, your business may still be required to collect and remit North Dakota sales tax under the economic nexus standard. 

As of October 1, 2018, out-of-state retailers and marketplace facilitators are required to collect North Dakota sales tax if, in the previous or current calendar year, they had: 

• Over $100,000 in taxable sales delivered into North Dakota 

Economic nexus applies to remote sellers, online platforms, and delivery-based operators, including c-stores offering direct-to-consumer sales, mobile ordering, or shipping from out-of-state warehouses. 

If your company meets this threshold, you must: 

1. Register using the North Dakota Office of State Tax Commissioner's ND TAP online system 
2. Collect North Dakota sales tax (and applicable local tax) at the rate where the product is delivered 
3. File and remit monthly, quarterly, or annual returns based on your assigned filing frequency 

Streamlined Sales and Use Tax - Remote Seller Information 

Example: 

A Montana-based c-store chain ships $150,000 worth of pre-packaged snacks and beverages to North Dakota customers via online orders. Even without a North Dakota storefront, that business must register and collect North Dakota sales tax once it crosses the $100,000 threshold. 

c. Franchise or Chain Operations 

If you manage a franchise, chain, or multi-location c-store in North Dakota, each individual location is considered a separate place of business and must be registered with the Office of State Tax Commissioner unless operating under a consolidated account. 

Because North Dakota's local sales tax rates vary across the state, each store must apply the correct combined rate based on its physical address or delivery location. 

To ensure accuracy: 

• Use the North Dakota Local Sales Tax Rate Locator to determine the correct local rate 
• Maintain separate accounting and reporting for each registered location 
• For multi-state operations, monitor cross-border deliveries and remote transactions that may trigger nexus in other states 

Local Sales Tax Rates by Location 

Key takeaway: 

For franchise networks, compliance consistency across locations is critical. A local tax error at one store can trigger a chain-wide audit if the Office of State Tax Commissioner identifies systematic under-collection or misreporting. 

3. Taxability Rules 

North Dakota's sales tax rules for convenience stores depend on what you sell, how you sell it, and where the sale occurs. Because c-stores often sell a mix of food, beverages, fuel, and taxable items in a single transaction, proper item coding and record-keeping are critical. North Dakota imposes a state sales tax rate of 5%, plus a local sales tax that varies througout the state, depending on the city or county. 

Sales and Use Tax Overview 

a. Grocery vs. Prepared Food 

North Dakota distinguishes between grocery-type food (generally exempt) and prepared food (taxable). Understanding this distinction is key to setting up your point-of-sale (POS) system correctly. North Dakota follows the Streamlined Sales Tax Agreement definitions for food taxability. 

Grocery Food (Exempt): Most staple foods sold for off-premises consumption—such as milk, bread, bottled water (without sweeteners), packaged snacks, and canned goods—are exempt from sales tax. Under North Dakota law, food and food ingredients are exempt unless they fall into specific taxable categories: alcoholic beverages, candy, dietary supplements, prepared food, soft drinks, or tobacco. 

Prepared Food (Taxable): Any food that is heated, mixed, or assembled for immediate consumption is fully taxable at the 5% state rate plus the local tax. This includes: 

• Hot coffee, cappuccino, and fountain drinks 
• Heated sandwiches, pizza slices, or burritos 
• Freshly prepared deli meals or breakfast items 
• Hot dogs, soups, or rotisserie items 
• Food sold in a heated state or heated by the seller 
• Food prepared by mixing or combining two or more food ingredients for sale as a single item 
• Food sold with eating utensils (plates, knives, forks, spoons, glasses, cups, napkins, or straws) provided by the seller 

Soft Drinks and Candy: Soft drinks are taxable in North Dakota. Soft drinks include non-alcoholic beverages that contain natural or artificial sweeteners, including fruit drinks with 50% or less fruit juice. Candy is taxable and is defined as a preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruits, nuts, or other ingredients. However, candy does not include any preparation containing flour or any item requiring refrigeration. 

Bottled Water: Bottled drinking water (including mineral, carbonated, and distilled water) is considered food and is exempt from tax. However, if the water contains natural or artificial sweeteners, it is considered a soft drink and is taxable. Flavored water without sweeteners would be considered food and exempt. 

Dietary Supplements: A product is subject to tax if the product label contains a "supplement facts" box. If the product label contains a "nutrition facts" box, the product is regarded as food and is exempt from tax. 

Ice: Ice is generally considered food and is not taxable, including ice sold by grocery, convenience, or similar stores. 

Guideline - Grocery Stores, Convenience Stores & Delicatessens 

N.D. Admin Code 81-04.1-03-03 - Food and Food Products 

Practical Tip: 

Audit errors often stem from treating hot prepared foods as exempt or failing to apply local tax rates to mixed food/beverage sales. Audit-proof your system by coding items based on temperature, preparation, and packaging. 

b. Alcohol & Tobacco 

All alcoholic beverages and tobacco products sold in North Dakota are taxable, but they follow special rules that differ from standard sales tax. 

Alcohol: 

Alcoholic beverages are subject to a gross receipts tax of 7%, not the standard 5% sales tax rate. This applies to all sales of beer, wine, mixed drinks, and other alcoholic beverages, whether consumed on or off the premises. Retailers may include the 7% gross receipts tax in the posted price of alcoholic beverages, provided they post a sign advising customers that the price includes the tax. 

Retail licensing for alcohol is managed by the North Dakota Attorney General's Office. Wholesale alcohol activities are subject to separate privilege taxes and licensing administered by the Office of State Tax Commissioner. 

Guideline - Bars, Lounges and Taverns 

Alcohol Tax Information 

Tobacco Products: 

Cigarettes and tobacco products are subject to the 5% sales tax plus applicable local taxes. In addition, they are subject to separate excise taxes.  If your store sells cigarettes or tobacco products, the excise tax should be paid by the distributor.  However, if it is not properly paid, liability could trickle down to the retailer.  

Cigarette and Tobacco Products Tax 

Compliance Tip: 

North Dakota's Office of State Tax Commissioner cross-checks retailer sales with distributor shipment data. If your reported taxable sales are lower than your supplier purchase volumes suggest, it may trigger an audit inquiry. 

c. Motor Fuel Sales 

Motor fuel is not subject to the general 5% sales tax but is instead governed by the Motor Fuel Tax system, which includes state excise taxes administered by the Office of State Tax Commissioner. 

Motor Vehicle Fuel (Gasoline and Gasohol): Taxed at 23 cents per gallon. 

Special Fuels: Include diesel, biodiesel, kerosene, compressed natural gas (CNG), liquefied natural gas (LNG), liquefied petroleum gas (LPG/propane), waste oil, and soy oil. Tax rates vary: 

• Undyed diesel, biodiesel, and kerosene used in licensed vehicles: 23 cents per gallon 
• Dyed (red) diesel, biodiesel, and kerosene for off-road use: 4 cents per gallon 
• CNG: Based on diesel gallon equivalent conversion 
• LNG: 1.7 gallons equals one diesel gallon equivalent 
• LPG for non-licensed vehicle use: 2% excise tax 

Aviation Fuel: Jet fuel and aviation gasoline are taxed at 8 cents per gallon. 

Retailers selling both fuel and general merchandise must keep fuel and retail sales records separate in their POS and reporting systems. Motor fuel taxes are reported and remitted separately from sales and use tax returns. 

Motor Fuel Tax Information 

North Dakota Fuel Tax Rates 

d. Car Wash / Air Pumps / Vacuums 

Ancillary services offered by convenience stores—such as coin-operated car washes, self-service vacuum stations, and air pumps—are generally taxable transactions under North Dakota law. 

• Coin or token-operated equipment: Taxable as the rental or use of tangible personal property 
• Automated car washes: Typically taxable at the point of sale 
• Self-service vacuum stations: Taxable at the combined state and local rate 

Pro Tip: 

Always apply the appropriate local sales tax for your county or city to these transactions and retain documentation of your machine income or service receipts. Total receipts from coin-operated vending machines and services are subject to sales tax after deducting the embedded tax. 

4. Exemptions 

North Dakota law provides several categories of sales tax exemptions that convenience store operators can apply, provided the correct documentation and record-keeping standards are followed. Because the Office of State Tax Commissioner routinely reviews exemption usage during audits, every exempt transaction must be verifiable, properly coded in your POS, and supported by official certificates or settlement reports. 

a. SNAP / EBT / WIC 

Sales paid with Supplemental Nutrition Assistance Program (SNAP), Electronic Benefit Transfer (EBT) benefits, or WIC food vouchers are exempt from North Dakota sales tax when used to purchase eligible food items under federal and state law. 

Eligibility rules: 

• Only grocery-type foods for off-premises consumption qualify  
• Exempt examples: packaged cereal, milk, bottled water (without sweeteners), canned vegetables 
• Non-exempt examples: hot coffee, fountain drinks, hot sandwiches, alcohol, cigarettes, candy, soft drinks 
• The POS must automatically separate taxable and exempt portions of mixed transactions 
• When purchases are made using Food Stamps or WIC food vouchers, no sales tax applies to such purchases 
• Maintain EBT batch settlement reports or equivalent electronic records for a minimum of three years to support the exemption during audit review 

Key risk: Some stores mistakenly treat all EBT sales as exempt. Only qualifying grocery food items are covered; any prepared or heated foods, candy, or soft drinks purchased with EBT must still have sales tax applied if the customer pays with non-EBT funds for those items. 

Guideline - Grocery Stores, Convenience Stores & Delicatessens 

b. Sales to Exempt Organizations 

Sales to properly exempt organizations are exempt from North Dakota sales tax when the organization has been granted an exemption by the Office of State Tax Commissioner. Unlike many states, North Dakota does not automatically exempt religious, charitable, or non-profit organizations from sales tax. 

Organizations that may qualify for exemption include: 

• Government entities (federal, state, and local) 
• Federal chartered corporations (e.g., American National Red Cross, Big Brothers Big Sisters of America) 
• Public and private non-profit schools and colleges (on qualifying purchases) 
• Hospitals, nursing homes, intermediate care, basic care, assisted living facilities, residential end-of-life facilities 
• Emergency medical providers licensed by the North Dakota Department of Health and Human Services (on qualifying purchases) 

Verification & Record-keeping: 

• The organization must hold a valid North Dakota Sales Tax Exemption Certificate (number beginning with E-0000) issued by the Office of State Tax Commissioner 
• Payment must be made directly from the organization's funds, not a personal credit or debit card 
• Keep a copy of the exemption certificate—paper or electronic—for three years 
• Verify the certificate using the Office of State Tax Commissioner's online verification system 

Important: Churches and other religious organizations are subject to sales and use tax in North Dakota. They must pay sales tax on all items purchased for final use except for food and other items expressly exempt. However, bibles, prayer books, hymnals, and religious textbooks purchased by churches are exempt by state statute. 

Sales and Use Tax - Exempt Organizations 

Application for Sales Tax Exemption Certificate 

Example: If a hospital with a valid exemption certificate (E-1234) purchases cleaning supplies for the facility using a hospital-issued purchase order and payment method, the sale is exempt. If a hospital employee pays personally and seeks reimbursement later, the transaction is taxable. 

c. Resale Transactions 

North Dakota allows retailers to make tax-exempt sales for resale if the purchaser provides a valid North Dakota Certificate of Resale (Form SFN 21950). 

Requirements for acceptance: 

• The certificate must show the buyer's legal name, business address, and North Dakota sales and use tax permit number 
• The sale must be for resale in the regular course of business, not for business consumption or personal use 
• The seller must confirm the certificate's authenticity via the Office of State Tax Commissioner's online verification system 

Acceptable certificates: 

• North Dakota Certificate of Resale (Form SFN 21950) 
• Multistate Tax Commission Uniform Sales and Use Tax Certificate 
• Certificate of Exemption authorized by the Streamlined Sales Tax Agreement (Form SFN 21999) 

Record-keeping: 

• Retain a copy of each certificate and the invoice showing the buyer's permit number 
• A new certificate is not needed for each sale if you maintain a blanket certificate on file 
• If you cannot produce these documents during audit, the Office of State Tax Commissioner may treat the sale as taxable and assess penalties plus interest 

Common Error: Convenience stores sometimes use their own resale certificate to purchase cups, napkins, or cleaning supplies tax-free. These are not resale items—they are taxable business inputs. Misuse can trigger audit assessments and possible civil penalties. 

Certificate of Resale (Form SFN 21950) 

Certificate of Exemption (Form SFN 21999) 

Example: Selling bottled soda to another convenience store operator for resale is exempt with a valid Certificate of Resale. Selling store equipment, uniforms, or coffee supplies under the same certificate is not and creates exposure for the seller. 

Key Takeaway: 

Exemptions in North Dakota are documentation-driven. The sale itself is only exempt when the paperwork (or digital verification) is complete and accurate. A missing certificate is treated as a taxable sale—no exceptions. 

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