North Dakota Office of State Tax Commissioner

Guideline - Sales Tax: Exemptions

North Dakota has sales and use tax exemptions for specific products and services, qualifying
organizations, and exemptions based on specific conditions and incentives. These exemptions allow a
person, organization, or business to purchase items without sales or use tax due. For purposes of this
guideline, “sales tax” includes “sales and use tax.”

Products Exempt from Sales Tax

A. Prescription Drugs: The gross receipts from sales of drugs that are sold under a doctor’s
prescription for use by a person are exempt from sales tax. Medicine purchased without a
prescription is subject to North Dakota sales tax. Medical marijuana does not qualify for this
exemption and is subject to sales tax.

B. Oxygen and Anesthesia Gases: The gross receipts from sales of oxygen to any person for
medical purposes, if sold under a doctor’s prescription, are exempt from sales tax. Sales of
anesthesia gases to hospitals, clinics, and similar institutions are also exempt because these
gases are administered under the order of a doctor.

C. Medical Devices, Equipment, and Supplies: The gross receipts from sales of certain medical
devices, equipment, and supplies are exempt from sales tax.
•
Durable Medical Equipment means equipment for home use, including repair and
replacement parts. This does not include mobility-enhancing equipment. To qualify for the
sales tax exemption, the equipment:
1. Can withstand repeated use;
2. Is primarily used to serve a medical purpose;
3. Generally, is not useful to a person in the absence of illness or injury; and
4. Is not worn on or in the body.
•
Mobility-Enhancing Equipment means equipment sold under a doctor’s written prescription,
including repair and replacement parts. This does not include durable medical equipment. To
qualify for the sales tax exemption, the equipment:
1. Is primarily used to provide or increase the ability to move from one place to another
and is appropriate for use either at home or in a motor vehicle;
2. Is not generally used by persons with normal mobility; and
3. Does not include any motor vehicle or equipment on a motor vehicle normally
provided by a motor vehicle manufacturer.
•
Prosthetic Device means a replacement, corrective, or supportive device sold under a
doctor’s written prescription, including repair and replacement parts for such a device, worn
on or in the body. To qualify for the sales tax exemption, the device must:
1. Artificially replace a missing portion of the body;
2. Prevent or correct a physical deformity or malfunction; or
3. Support a weak or deformed portion of the body.

tax.nd.gov | [email protected]
600 E. Boulevard Ave., Dept. 127 | Bismarck, ND 58505-0599
Phone: 701-328-1246 | TTY: 800-366-6888
Guideline - Exemptions

• Supplies for Diabetes, Ostomy Care, or Bladder Dysfunction

The following items qualify for the sales tax exemption:
1. Supplies designed or intended for ostomy care and management, including
collection devices, colostomy irrigation equipment and supplies, skin barriers or skin
protectors, and other supplies especially designed for use of ostomates.
2. Supplies to be used exclusively by a person with bladder dysfunction, including
catheters, collection devices, incontinent pads and pants, and other items used for
the care and management of bladder dysfunction.
3. Sales of insulin in all its forms dispensed pursuant to the direction of a physician, all
sales of glucose usable for treatment of insulin reactions, all sales of urine and blood
testing kits and materials, and all sales of insulin measuring and injecting devices,
including insulin syringes and hypodermic needles.

D. Commercial Fertilizer: The gross receipts from sales of commercial fertilizers when sold to a
farmer, rancher, or commercial vegetable garden grower are exempt from sales tax. Sales of
commercial fertilizer for lawns, landscaping, or gardens are subject to sales tax.

E. Livestock and Poultry Feed: The gross receipts from sales of feed for livestock or poultry and
the sales of feed for draft or fur bearing animals are exempt from sales tax. The word “feed”
includes generally recognized animal feeds, as well as drugs that are used as part of a feed
ration for animal health purposes.
Dog food, cat food, bird seed, fish food, and other foods normally sold as pet foods are not
livestock feed and are subject to sales tax.

F. Agricultural By-Products for Manufacture or Generation of Steam or Electricity: The gross

receipts from sales of agricultural byproducts for use in the manufacture or generation of steam
or electricity are exempt from sales tax.

G. Agrichemical Tank Cleaners and Foam Marker: The gross receipts of agrichemical
tank cleaners and foam marker when sold to agricultural producers, commercial vegetable
producers, or commercial applicators are exempt from sales tax.

H. Fungicides, Herbicides, and Insecticides: The gross receipts from sales of fungicides, seed
treatments, inoculants, fumigants, herbicides, insecticides, and chemicals used to protect or
preserve agricultural crops that are sold to commercial applicators, agricultural producers, or
commercial vegetable producers are exempt from sales tax. This includes adjuvants necessary
for the application of these chemicals.

I. Farm Machinery and Irrigation Repair Parts: The gross receipts from sales of new or used
farm machinery repair parts and new or used irrigation parts intended for farm machinery or
irrigation equipment used exclusively for agricultural purposes are exempt from sales tax. New
farm machinery and new irrigation equipment used exclusively for agricultural purposes are
subject to the 3% farm machinery gross receipts tax. Used farm machinery and used irrigation
equipment used exclusively for agricultural purposes are exempt from the gross receipts tax.
See the Guideline - Farm Machinery and Farm Irrigation Equipment for more information -
www.tax.nd.gov/guidelines.

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Guideline - Exemptions

J. Seeds for Planting: The gross receipts from sales of seeds, roots, bulbs, and small plants
to users or consumers for planting or transplanting commercial vegetable gardens or for
agricultural purposes are exempt from sales tax. Sales of flower seeds, vegetable garden
seeds, roots, bulbs, and small plants to a person for personal gardens are subject to sales tax.

K. Food and Food Products: The gross receipts from sales of food and food products for human
consumption are exempt from sales tax. Examples of food and food products are eggs, bread,
and milk.
This exemption does not include “prepared food.” Prepared food means
1. Food sold in a heated state or heated by the seller,
2. Two or more food ingredients mixed or combined by the seller for sale as a single
item, or
3. Food sold with eating utensils provided by the seller. Examples of eating utensils include
plates, knives, forks, spoons, glasses, cups, napkins, or straws.
This exemption also does not include candy, chewing gum, and fruit drinks that contain
50 percent or less fruit juice. These items are subject to sales tax. Sales of food through coin-
operated vending machines are subject to sales tax. Finally, this exemption does not include
tobacco or alcoholic beverages.
All food or food products, including otherwise taxable soft drinks and candy purchased with
food coupons issued by the United States Department of Agriculture are exempt from sales tax.
Qualifying Department of Agriculture coupons, including food stamps and purchase vouchers
issued by the Women, Infants and Children (WIC) Program are exempt from sales tax.

L. Bibles, Hymnals, Textbooks, and Prayerbooks: The gross receipts from sales of bibles,
hymnals, textbooks, and prayerbooks when sold to a nonprofit religious organization and
nonprofit groups within a church are exempt from sales tax. Purchases paid by clergy or other
individuals do not qualify.

M. Carbon Dioxide: The gross receipts from sales of carbon dioxide used for enhanced recovery
of oil or natural gas or secure geologic storage are exempt from sales tax.

N. Coal: Coal subject to coal severance tax and the initial sale of beneficiated coal are exempt
from sales tax.

O. Electricity: The gross receipts from sales of electricity are exempt from sales tax.

P. Gasoline and Combustible Fuels: The gross receipts from sales of gasoline, heating fuel,
diesel fuel, propane, kerosene, aviation fuel, jet fuel, and other similar combustible fuels subject
to motor fuels tax or special fuels tax are exempt from sales tax.

Q. Liquified Natural Gas: The gross receipts from sales of liquified natural gas used for
agricultural, industrial, or railroad purposes as defined in North Dakota Century Code (N.D.C.C.)
§ 57-43.2-01 are exempt from sales tax.

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Guideline - Exemptions

R. Potash: The gross receipts from sales of potash and byproducts specified under N.D.C.C.
Ch. 57-65 are exempt from sales tax.

S. Water: The gross receipts from sales of water, including bottled water, are exempt from sales
tax. However, sales of bottled water through coin-operated vending machines are subject to
sales tax. Also, water sold as prepared food in a restaurant, bar, convenience store, or similar
venue is subject to sales tax.

T. Magazine Subscriptions: The gross receipts from sales of magazine subscriptions are exempt
from sales tax. Magazines sold at newsstands or over the counter are subject to sales tax.

U. Newspapers - Newsprint and Printers’ ink: The gross receipts from sales of newspapers are
exempt from sales tax. Newsprint and printers’ ink used in the publication of a newspaper are
exempt from sales tax when purchased by the newspaper publisher.

V. Coin-Operated Machines: The gross receipts from sales through coin-operated amusement or
entertainment machines are exempt from sales tax.

W. Commemorative Memorial Coins: The gross receipts from sales of commemorative memorial
coins as defined in N.D.C.C. § 37-18-15 are exempt from sales tax.

X. Money: The gross receipts from sales of money, including domestic or foreign legal tender
coins, currency, and precious metal bullion that has been refined to a purity of not less than nine
hundred ninety-nine parts per one thousand are exempt from sales tax.

Y. Digital Products: The gross receipts from sales of items transferred electronically, including
specified digital products are exempt from sales tax. Transferred electronically means the
purchaser received the product without tangible storage media. Examples of tangible storage
media include USB flash drives, compact discs (CD’s), and external hard disk drives.
1. Specified digital products means:
• Digital Audio-Visual Works: A series of related images which impart an impression
of motion when shown in succession, together with accompanying sounds, if any.
• Digital Audio Works: Works that result from the fixation of a series of musical,
spoken, or other sounds, including ringtones.
• Digital Books: Works that are generally recognized in the ordinary and usual
sense as books.
2. This exemption does not apply to prewritten computer software.

Z. Flight Simulators: Gross receipts from sales of flight simulators or mechanical or electronic
equipment for use in association with a flight simulator are exempt from sales tax.

AA. Used Manufactured Homes: The gross receipts from the sales of a used manufactured home
are exempt from sales tax. A trade-in allowance for a used manufactured home traded in on a
new manufactured home does not reduce the taxable price of the new manufactured home.

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Guideline - Exemptions

Services Exempt from Sales Tax

A. Transportation and Delivery Services: The gross receipts from the sale, furnishing, or
service of passenger transportation are exempt from sales tax. Public transportation companies
providing passenger services by means of bus, train, taxi, and air transport are not required to
collect and remit sales tax on these services.
Gross receipts of common carriers engaged in the business of transporting personal property
are exempt from sales tax. “Common carriers” include truck lines, railroads, air freight,
and moving vans. This exemption does not extend to freight and delivery charges that are
associated with the sale of a product.

B. Hospital and Nursing Home Services: The gross receipts from the sale of services furnished
to any patient or occupant of a hospital, infirmary, sanitarium, nursing home, or home for the
aged to any patient or occupant are exempt from sales tax.

C. Repair Services: Repairing, altering, restoring, or cleaning tangible personal property that
belongs to others is a service, and the receipts for providing that service are exempt from sales
tax. Tangible personal property sold or used in connection with a repair is subject to sales or
use tax.

D. Furnishing Steam: The gross receipts from furnishing steam used to process agricultural
products are exempt from sales tax.

Organizations or Institutions Exempt from Sales Tax

Certain organizations qualify for a sales tax exemption on their purchases. Exempt organizations may
include governmental units, schools, and qualifying health care providers. See the Guideline - Exempt
Organizations for more information - www.tax.nd.gov/guidelines.

Conditional Exemptions
A. Motor Vehicles: The gross receipts from sales of a motor vehicle to be used on the streets
and highways of North Dakota are exempt from sales tax provided that the vehicle has been
subjected to the motor vehicle excise tax.

B. Rental of Hotel and Motel Accommodations: The gross receipts for hotel, motel, and tourist
court accommodations occupied by the same person or persons for residential housing for
periods of 30 or more consecutive days are exempt from sales tax.

C. Rental of Manufactured Homes: The gross receipts from leasing or renting manufactured
homes for residential purposes are exempt from sales tax. Leases or rentals of manufactured
homes that are used for offices or purposes other than residential housing are subject to sales
or use tax.

D. Film Rental: The gross receipts from leasing or renting a film to a movie theater are exempt
from sales tax, provided the tickets or admissions to the movie showing are subject to sales tax.

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Guideline - Exemptions

E. Casual Sales: Sales made by individuals who do not make regular and recurring sales are
exempt from sales tax. Examples include household, estate, and farm auctions and garage
sales. To qualify, an auction must disclose the owner of the goods on all promotional materials.

F. Sales for Processing or Resale: Tangible personal property sold for processing or resale
is exempt from sales tax. A certificate of processing or a certificate of resale is required to
purchase tax free.
• The exemption for processing applies only when the property will become an integral
ingredient or component part of other tangible personal property to be sold at retail,
by means of fabrication, compounding, manufacturing, producing, packaging, or
germination.
• The gross receipts from the sales of tangible personal property for the purpose of resale
by the purchaser are exempt from sales tax. The seller should maintain a valid certificate
of resale or certificate of exemption from the purchaser that is buying for resale.

G. Sales to Residents of Montana: Residents of the state of Montana are exempt from North
Dakota sales tax on purchases made in North Dakota provided all the following conditions are
met:
• Purchases must equal or exceed $50.
• The resident of Montana must be in North Dakota for the express purpose of making a
purchase and not as a tourist or temporary resident.
• The property purchased must be removed from North Dakota for use exclusively outside
the state.
•
The purchaser must provide to the North Dakota seller a Certificate of Purchase –
Exempt Sales to a Person from Montana (Form 21854) containing sufficient facts
establishing the exempt status of the sale. These certificates are available at
www.tax.nd.gov/salesanduse.

H. Sales to Native Americans: In general, the State may not impose a sales tax on sales made
within the boundaries of any reservation in North Dakota to an individual who resides within the
boundaries of any reservation in North Dakota and who is an enrolled member of a federally
recognized Indian tribe. Any seller whose place of business is outside the boundaries of a
reservation, but who makes deliveries onto a reservation to an enrolled member living within
the boundaries of a reservation, may exempt those sales provided that the seller maintains
adequate records supporting the exempt status of each sale. Native Americans are subject to
sales or use tax in North Dakota when taking possession of goods or using goods outside of a
reservation.

I. Admission Receipts: The gross receipts from admissions to entertainment, amusement, or

athletic events held by a charitable, religious, or educational organization are exempt from sales
tax if the net receipts are used entirely for educational, religious, or charitable purposes and the
event is held in a privately owned facility. If the event is held in a publicly owned facility and the
gross receipts from the event are over $10,000, the first $10,000 of gross receipts is exempt

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Guideline - EXEMPTIONS

from sales tax and gross receipts over $10,000 are subject to sales tax. If the event activity is
regular retail sales that are in competition with other sellers, including sales made online, the
gross receipts are subject to sales tax.

J. Finance Leasing Agreements: The gross receipts from leasing or renting of any tangible
personal property under a finance leasing agreement are exempt from sales tax if North Dakota
sales or use tax has been paid on the purchase price.

K. Recreational Travel Trailers: The gross receipts from sales of recreational travel trailers not
exceeding eight feet in width or 32 feet in length designed to be used principally as temporary
vacation dwellings are exempt from sales tax. This exemption applies only if the sale is made
to a resident of another state that imposes an excise tax when the recreational travel trailer is
registered.

L. Nonprofit Music or Dramatic Arts Organizations: The gross receipts from admissions
charged for public performances by a nonprofit music or dramatic arts organization are exempt
from sales tax. To qualify, the organization must be organized and operated for the presentation
of live public performances of musical or theatrical works on a regular basis. Examples of
qualifying organizations include a community theater group or local symphony or orchestra.

Incentive Exemptions
Refer to the Tax Incentives for Businesses for additional information - www.tax.nd.gov/publications.

Contact Information
If you have questions, please contact the Sales Tax Compliance Section at [email protected] or
701-328-1246.

21814
(Revised January 2022)

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