GuidelineGuideline
                                                                                                   Sales Tax

                                                                         Exempt Organizations

Cory Fong                                                                                          January 1997
Tax Commissioner

Exempt Organizations
The Offi ce of State Tax Commissioner issues sales tax exemption certifi cates, containing exemption numbers, to 
organizations which are exempt from the payment of North Dakota sales tax.  Retailers making sales to exempt 
organizations should request a copy of the exemption certifi cate, and retain the copy in the retailer’s fi les to support 
the exempt sales.

Exempt organizations may include governmental units, schools, nursing homes, hospitals, intermediate and basic 
care facilities, and voluntary health associations.  

1.   Government Units
     Sales, rentals, and/or leases of tangible personal property to the United States government, state government, its 
     departments and institutions, and political subdivisions are exempt from sales tax.  

     Contractors performing a contract for the United States government, state government, its departments and 
     institutions, or political subdivisions in North Dakota are not exempt from payment of sales or use tax on 
     materials and supplies used or consumed in carrying out such contracts.  In these cases, the contractor is required 
     to fi le returns and pay sales and use tax just as required for contracts with private parties.

3.   Native American Tribal Governments
     Gross receipts from all sales otherwise taxable to an Indian tribe are exempt from sales tax.  An Indian tribe 
     means a tribal government agency, instrumentality, or political subdivision that performs essential government 
     functions.

3.   Schools
     Public Schools are considered instrumentalities of state government and as such are entirely exempt from North 
     Dakota sales and use tax on all purchases made by them.  For sales to public schools to be exempt, the sales 
     must be paid by a school district check or warrant.  

     Private or parochial schools are exempt from sales tax when purchasing items to be used exclusively in the 
     operation of their school.  These items include textbooks, yearbooks, school supplies and items purchased by 
     the school for use in classrooms, gymnasiums, athletic fi elds and offi ces.  It also includes items such as offi ce 
     supplies, school equipment, school supples furnished but not sold to students, utility services, janitorial supplies, 
     building maintenance supplies, and ground maintenance supplies associated with the operation of the school.

4.   Nursing Homes, Hospitals, Intermediate/Basic Care, Assisted Living Facilities, Emergency Medical 
     Services Provider and Voluntary Health Associations
     Sales to nursing homes, hospitals, intermediate/basic care, assisted living facilities licensed by the North Dakota 
     Health Department and emergency medical service providers licensed by the North Dakota Human Services are 
     exempt from sales tax.

     Sales to “voluntary health associations,” which are recognized by the Internal Revenue Service, the National 
     Health Council, the State Tax Commissioner, and the North Dakota Secretary of State as a nonprofi t 
     organization, are exempt from sales tax.

Organizational Exemptions for Sales Activity
In addition to exemptions provided for certain goods and services, North Dakota sales tax law also provides that 
some otherwise taxable activi ties are exempt from tax when conducted by qualifying organizations. Pursuant to 
North Dakota Century Code § 57-39.2-04(4), the following are exempt from sales tax (1) the gross receipts from 
sales of tickets, or admissions to state, county, district, and local fairs, (2) the gross receipts from educa tional, 
religious, or charitable activities, unless the activities are held in a publicly owned facility, where the entire amount 
of net receipts is expended for educational, religious, or charitable purposes, (3) the gross receipts derived by any 
public school district if the receipts are expended in accor dance with N.D.C.C. § 15-29-13.

22081

                                 North Dakota Offi ce of State Tax Commissioner
600 E. Boulevard Ave., Dept. 127                     701.328.1246                                       salestax@nd.gov
Bismarck, ND 58505-0599                              TDD: 1.800.366.6888                                               www.nd.gov/tax

Exempt Organizations Guideline                                                                                 Page 2

However, the law also states that these exemptions do not apply to regular retail sales that are in direct competition 
with retailers. “Regular retail sales” include all recurring, regularly scheduled, or ongoing retail sales made in the 
ordinary course of business other than those made on an isolated or occasional basis.  “Direct competition” means 
activity wholly or substan tially similar to existing sales, taxable goods, or services competing for the same customer 
market. As indicated, the exemption for sales by public schools and associated school groups applies only when 
the income is spent as provided by N.D.C.C. § 15-29-13 which requires extracurricular income to be deposited in 
a special fund. Expenditures from this fund may only be made by warrant checks signed by the president and clerk 
of the school board. Extracurricular sales income which is not administered by the school board is subject to tax, as 
is all sales activity which occurs outside the school in other publicly owned facilities as this is considered to be in 
direct competition with other retailers.

Under these provisions, nonprofi t groups which operate ongoing businesses in direct competition with other 
retailers, such as thrift stores or restaurants, must always collect and remit sales tax regardless of the use of the net 
sales receipt. In addition, groups which operate on a more limited basis at craft shows, street fairs, county fairs, etc. 
are also subject to sales tax whenever these events occur in publicly owned facilities such as civic centers, public 
schools, government fairgrounds, state capital grounds, etc.

Pursuant to N.D.C.C. § 57-39.2-04(40), an exemption is provided for the gross receipts from sales of tickets or 
admissions to, or sales made at, an annual church supper or bazaar held in a publicly owned facility. For purposes of 
this subsection, annual means occurring not more than once in any calendar year.

Organizations which make regular retail sales must hold a North Dakota sales and use tax permit and collect and 
remit applicable tax on a regular basis. Organizations operating on a limited basis in publicly owned facilities need 
not hold a tax permit but should contact this offi ce prior to making taxable sales and obtain a “one time remittance” 
tax return. This return should be fi led and the tax paid within 15 days of the organization’s taxable activity.

Organizational Exemptions for Purchase Activity
North Dakota sales and use tax law does not exempt purchases made by nonprofi t organizations.  Instead, the 
law details specifi c organizations which are exempt from sales and use tax.  Examples of taxable and nontaxable 
organizations are shown below:

Nontaxable                                                  Taxable
Federal, state, and local government units                  Churches and church groups
Schools (public and private)                                Service clubs
Hospitals, nursing homes, intermediate/basic                Social clubs
  care facilities licensed by Dept. of Health               Veterans groups
Nonprofi t voluntary health groups (recognized by            Trusts
  National Health Council)                                  Recreation groups
State and local fairs                                       Youth groups
Nonprofi t meal delivery groups, but only on items           Labor organizations
  which pass to the fi nal consumer of the                   Fraternities and sororities
  meal, including containers, packages, and                 Professional associations
  wrapper.                                                  Private, for profi t schools

Note:  Sales to nonprofi t charitable, educational, and religious organizations are generally not exempt from sales 
tax on purchases of tangible personal property.  Many nonprofi t organizations may be exempt from federal and state 
income taxes, however, this exemption does not include an exemption from sales tax.

Exemption Certifi cate Registration and Use
Those groups that are exempt from North Dakota sales and use tax should contact the Offi ce of State Tax 
Commissioner to obtain an “Exemption Certifi  cate.” This certifi cate should be presented to the supplier when a retail 
purchase is made and serves to exempt the purchase from sales tax. Only groups possessing this certifi cate may buy 
goods without the imposition of sales or use tax. In the absence of this certifi cate, the retailer is obligated to charge 
sales tax. Exemption certifi cates are available upon application to the Offi ce of State Tax Commissioner.