North Dakota – Sales Tax Incentives for Businesses

SALT Report 3103 – The North Dakota Office of Tax Commissioner released guidance regarding the various tax incentives available to businesses in the state.  The sales and use tax incentives are as follows:

Agricultural Commodity Processing Plant Construction Materials

Construction materials used to construct an agricultural commodity processing facility are exempt from sales and use taxes.

Coal Gasification Byproducts

A sales and use tax exemption is available for purchases of tangible personal property used to construct or expand a facility that will extract or process byproducts associated with coal gasification.

Coal Mine Machinery or Equipment

A sales and use tax exemption and refund is available for machinery or equipment used to produce coal from a new mine. The exemption for each new mine is limited to the first $5 million of sales and use tax paid. The exemption will extend to replacement machinery or equipment if the capitalized investment in the new mine exceeds $20 million.

Computer and Telecommunications Equipment

A sales and use tax exemption is available for purchases of computer and telecommunications equipment. To qualify for the exemption, the equipment must be an integral part of a new primary sector business or create an economic expansion of an existing business, that is certified by the Department of Commerce Division of Economic Development and Finance. The exemption does not extend to the purchase of replacement equipment.

Electrical Generating Facilities – Coal Powered

A sales and use tax exemption is available for purchases of building materials, production equipment and other tangible personal property used in the construction or expansion of coal-powered electrical generating facilities. To qualify, the facility must convert certain coals from its natural form into electrical power and have at least one electrical generation unit with a capacity of 50,000 kilowatts or more.

Electrical Generating Facilities – Wind Powered

A sales and use tax exemption is available for purchases of building materials, production equipment, and other tangible personal property used in the construction or expansion of wind-powered electrical generating facilities before July 1, 2017. To be eligible, the facility must have at least one single electrical energy generation unit with a nameplate capacity of 100 kilowatts or more.

Electrical Generating Facilities – Other

A sales and use tax exemption is available for purchases of building materials, production equipment and other tangible personal property used in the construction or expansion of an electrical generating facility other than a coal or wind-powered facility. To qualify, the facility must produce electricity for resale or for consumption in a business activity and have at least one electrical generation unit with a capacity of 100 kilowatts or more.

Gas Processing Facilities

A sales and use tax exemption is available for purchases of building materials, equipment, and other tangible personal property used in the expansion or construction of a gas processing facility. Also, tangible personal property used to construct or expand a system to compress, process, collect, or gather gas recovered from oil or gas wells and purchases of machinery, equipment, and facilities for environmental upgrades that exceed $100,000 that will reduce emissions, increase efficiency, or enhance reliability of equipment may also qualify for the exemption.

Liquefied Gas Processing

A sales and use tax exemption is available for purchases of tangible personal property used to construct or expand a processing facility that produces liquefied natural gas.

Manufacturing, Agricultural, or Recycling Equipment

A new or expanding plant may purchase machinery or equipment exempt from sales and use taxes if it is:

  • Used primarily for manufacturing or agricultural processing, or
  • Used solely for recycling

The expansion must increase production volume, employment, or the types of products that can be manufactured or processed.

Oil Refineries

A sales and use tax exemption is available for building materials, equipment, and other tangible personal property used to expand or construct an oil refinery. To qualify, the facility must have a processing capacity of at least 5,000 barrels of oil per day. In addition, purchases for environmental upgrades that exceed $100,000 and that reduce emissions, increase efficiency, or enhance reliability of equipment may also qualify for the exemption.

Telecommunications Infrastructure

A sales and use tax exemption is available through December 31, 2017, for purchases of tangible personal property used to construct or expand telecommunications service infrastructure. To qualify, the property must be incorporated into a telecommunications service infrastructure owned by a telecommunications company.

Biodiesel Equipment

Sales of equipment that will enable a facility to sell diesel fuel containing at least 2% biodiesel fuel or green diesel fuel by volume is exempt from sales tax

Carbon Dioxide for Enhanced Oil and Gas Recovery

The sale of carbon dioxide to be used for enhanced recovery of oil or natural gas is exempt from sales and use tax.

Hydrogen Generation Facility

Sales of hydrogen used to power an internal combustion engine or fuel cell are exempt from sales tax. Equipment that is used directly and exclusively in the production and storage of hydrogen by a hydrogen generation facility is also exempt from sales tax.

For Further Information

North Dakota Office of State Tax Commissioner – Tax Incentives for Business