City sales tax change affects high-end buys
BISMARCK - Starting today, North Dakota shoppers who buy big-ticket items will pay more city sales tax on purchases over $2,500. But they can get some of it back by asking the state Tax Department for a rebate. Merchants such as furniture stores ...
BISMARCK - Starting today, North Dakota shoppers who buy big-ticket items will pay more city sales tax on purchases over $2,500.
But they can get some of it back by asking the state Tax Department for a rebate.
Merchants such as furniture stores and jewelers are among the retailers likely to have customers who make large purchases that will be affected.
"It is going to impact us because we have a lot of sales over $2,500," said Brad Wimmer of Wimmer's Diamonds in Fargo.
But he and Hom Furniture sales manager Doug Martin don't think the change will make much of an impression on customers.
"I really don't think it's going to be a real big issue," Martin said.
And to make it as painless as possible, Wimmer said, "We're going to supply them with the refund form," he said. "I don't think it's going to be monumental. There is no impact on the customer if he applies for the refund."
The change comes because virtually all of the 100-plus North Dakota cities that have local sales taxes have caps so the tax only applies to the first $2,500.
For instance, until today, a shopper who makes a $25,000 purchase in Fargo would have paid the 5 percent state sales tax on the full amount but only $37.50 (1.5 percent times $2,500) in city tax.
Today, the caps come off as North Dakota joins a nationwide project to simplify sales taxes. The $25,000 purchase will cost $375 in city sales tax at the cash register. But the buyer can get a rebate on the tax for the amount over $2,500, or $337.50.
State Tax Commissioner Cory Fong has another example. In cities with a 1 percent sales tax - and that is most of them - the cap means the customer never owes more than $25 in local sales tax on any purchase. Say a customer buys $6,000 worth of furniture in one of those towns. He will pay $60 in city tax now, instead of $25, but can apply for a rebate of $35.
Fong said notices of the law change went out this summer to retailers who collect sales taxes.
If a customer does not seek a refund, the excess city sales tax goes to the city, not the state.
The law does not affect vehicle sales. In North Dakota, motor vehicles sales are assessed an excise tax, not sales tax. It also doesn't apply to home sales, which are not subject to sales tax.
Wimmer, Fong and state legislators are among those who think the law is a very good thing because the Streamlined Sales and Use Tax Agreement will spur remote sellers - Internet and catalog merchants - to begin collecting and remitting state sales taxes. Fong said he is already getting inquiries from such merchants interested in getting a North Dakota sales tax permit.
"The purpose of the Streamlined Sales Tax Project is to collect taxes we don't collect now," said Sen. Dwight Cook, R-Mandan. He sponsored the bill in the 2005 session that moved North Dakota's effective date from Jan. 1, 2006, to today.
"It addresses the issue of fairness between main street businesses, who have no choice but to collect sales taxes, and remote businesses that currently are not required to collect sales taxes," he said.
North Dakota and 12 other states are the first to join the project. Others will continue to join, Fong said.
Readers can reach Forum reporter Janell Cole at (701) 224-0830