Is Shipping Taxable in North Dakota? North Dakota Sales Tax Rules for Freight, Delivery, and Transportation Charges

Is Shipping Taxable in North Dakota?

In North Dakota, freight, delivery, and other transportation charges, including shipping and handling charges, are generally considered part of the selling price. If the sale is taxable, those charges are taxable. If the product being delivered is exempt from sales tax, the freight, delivery, and other transportation charges are also exempt.

Delivery charges billed directly to the customer by delivery services that are not making the sale of tangible personal property remain exempt from sales and use tax.

Source: North Dakota Office of State Tax Commissioner, Freight, Delivery, and Other Transportation Charges https://www.tax.nd.gov/sites/www/files/documents/guidelines/business/sales-use/freight-delivery-other-transportation-charges.pdf

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General Rule: Transportation Charges Are Part of the Selling Price

Effective October 1, 2005, North Dakota treats freight, delivery, shipping and handling, and other transportation charges as part of the selling price.

For example:

Product price: USD 100 Shipping and handling: USD 8 Taxable selling price: USD 108

If the product is taxable, North Dakota sales tax generally applies to the full USD 108 amount.

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Shipping on Exempt Sales

If the product being delivered is exempt from sales tax, the related freight, delivery, and other transportation charges are also exempt.

Examples may include:

• exempt products;
• sales for resale;
• transactions supported by a valid exemption certificate;
• other exempt transactions under North Dakota law.

For example:

Exempt product price: USD 100 Delivery charge: USD 8 Total: USD 108

If the product is exempt, the related delivery charge is generally exempt as well. Sellers should retain exemption certificates, invoices, product classification records, and order details.

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Does Separately Stating Shipping Make It Non-Taxable?

Generally, no. Based on North Dakota’s guidance, transportation charges are part of the selling price. If the sale is taxable, the freight, delivery, shipping and handling, and other transportation charges are taxable even if separately stated.

For example:

Product price: USD 100 Freight charge: USD 8 Total: USD 108

If the product is taxable, the USD 8 freight charge is generally taxable.

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Exception: Delivery Services Billing the Customer Directly

North Dakota provides an important exception. Delivery charges billed directly to the customer by delivery services that are not making the sale of tangible personal property remain exempt from sales and use tax.

For example:

Product price paid to seller: USD 100 Delivery charge paid directly to independent delivery service: USD 8

If the delivery service bills the customer directly and is not the seller of the tangible personal property, the delivery charge is generally exempt.

However, if the seller charges the customer for delivery, freight, or shipping, the charge is generally part of the selling price and follows the taxability of the underlying sale.

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What Charges Are Included?

North Dakota’s rule applies to:

• freight charges;
• delivery charges;
• other transportation charges;
• shipping and handling charges.

For ecommerce sellers, this means charges labeled as shipping, freight, delivery, transportation, or shipping and handling should generally be included in the taxable amount when the underlying sale is taxable and the charge is seller-billed.

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Common Compliance Issues for Ecommerce Sellers

Assuming separately stated shipping is exempt

In North Dakota, separately stated shipping generally remains taxable when the underlying sale is taxable.

Taxing only the product price

If a seller excludes freight or delivery charges from taxable North Dakota sales, the seller may under-collect tax.

Confusing seller-billed delivery with third-party direct billing

Seller-billed delivery generally follows the underlying sale. Delivery billed directly by an independent delivery service may be exempt.

Not documenting exempt sales

If the seller treats freight or delivery as exempt because the product is exempt, proper documentation should be retained.

Applying another state’s rule to North Dakota

Shipping taxability varies by state. North Dakota should be configured separately from states where separately stated shipping is generally non-taxable.

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Practical Tips for Sellers Shipping to North Dakota

Sellers shipping taxable products to North Dakota customers should generally include freight, delivery, shipping and handling, and other transportation charges in the taxable selling price when those charges are billed by the seller.

Sellers should also distinguish seller-billed delivery from delivery services that bill the customer directly. For exempt sales, sellers should retain exemption certificates, resale certificates, invoices, carrier records, third-party delivery bills, order details, marketplace reports, and sales tax filing records.

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Conclusion

In North Dakota, freight, delivery, shipping and handling, and other transportation charges are generally part of the selling price. If the sale is taxable, those charges are taxable. If the product being delivered is exempt, the related transportation charges are also exempt.

Delivery charges billed directly to the customer by delivery services that are not making the sale remain exempt from sales and use tax. For ecommerce sellers, the key takeaway is clear: North Dakota shipping taxability follows the underlying sale unless a true third-party direct-billing exception applies.

Source: North Dakota Office of State Tax Commissioner, Freight, Delivery, and Other Transportation Charges https://www.tax.nd.gov/sites/www/files/documents/guidelines/business/sales-use/freight-delivery-other-transportation-charges.pdf