In order to protect yourself and your customers from unexpected sales or use tax liabilities and penalties, the Midwest Border States Compact suggests that you register to collect sales or use tax for the states in which you are making sales.
What is the Midwest Border States Compact?
The Midwest Border States Compact is a group of states that has been working together to eliminate unfair competition and increase compliance by informing consumers about use tax and seeking registration from out-of-state businesses. State governments are becoming more aggressive in searching out taxpayers who may owe outstanding tax liabilities. These states exchange information and cooperate in enforcement efforts.
In recent years, the number of companies engaging in multistate commerce has multiplied. Yet many of these companies are not registered and paying taxes to states in which they do business. Millions of dollars in taxes owed to states are lost when goods are bought from out-of-state merchants who do not collect and remit the use tax.
Which States are Involved?
- North Dakota
- South Dakota
Why should you register to collect sales or use tax for another state?
If you have business presence for tax purposes ("nexus"), you are required by law to register.
Examples of nexus activities include:
- having a representative, agent, or salesperson in the state for the purpose of selling or taking orders
- leasing tangible personal property or licensing rights for use within the state
- maintaining a business location within the state
- making delivery of goods with company owned vehicles
- performing services or installation, construction, or repairs
- stocking inventory in a public warehouse or on consignment
Even if you do not have nexus, your registration will prevent the inconvenience of having your customers contacted directly by state tax authorities seeking to collect use tax. Consumers are responsible for remitting use tax on purchases bought from unlicensed out-of-state vendors. The states will bill them for the unpaid use tax plus penalty and interest.
If you have no sales in a state, you do not need to register in that state. However, once you begin making sales to customers in another state, you should then apply for a license.
How do you register for a sales tax license / permit in another state?
Contact the appropriate state tax agency for forms and instructions to help you comply with filing requirements. Addresses and phone numbers are listed on the back of this brochure.
Will registration automatically subject you to other taxes?
No. However, if you should have been paying other taxes anyway, you will still be expected to pay those taxes.
Will registration automatically subject you to past use taxes?
No. Registration alone does not subject you to liability for failure to collect past sales or use taxes. Liability depends on whether or not you had nexus with the state in question in the past and the laws and policies of each state.
How to Contact Other States
Illinois Department of Revenue
Central Registration Section
PO Box 19030
Springfield IL 62794-9030
Kansas Department of Revenue
Business Tax Bureau
Docking State Office Building
915 SW Harrison Street
Topeka KS 66625-1712
785-368-8222 in Topeka
Minnesota Department of Revenue
Taxpayer Information Division
Technical Support Services
Mail Station 3320
St. Paul MN 55146-3320
Missouri Department of Revenue
Taxpayer Administration Bureau
PO Box 3300
Jefferson City MO 65105-3300
Nebraska Department of Revenue
PO Box 94818
Lincoln NE 68509-4818
North Dakota Office of State Tax Commissioner
600 E Boulevard Avenue
Bismarck ND 58505-0599
South Dakota Department of Revenue
445 East Capital
Pierre SD 57501-3100
Iowa Department of Revenue
Hoover State Office Building
Des Moines IA 50319