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HB 1546

A BILL for an Act to create and enact a new section to chapter 57-39.2 of the North Dakota Century Code, relating to a sales and use tax exemption for purchases made by a contractor, subcontractor, or builder on behalf of the state of North Dakota; to amend and reenact section 57-40.2-03.3 of the North Dakota Century Code, relating to use tax on contractors; and to provide an effective date.

69th Legislative Assembly (2025-26) Introduced by Bert Anderson and 7 co-sponsors

The bill would grant a state sales and use tax exemption for tangible property purchased by licensed contractors for improvements to state-owned real property, with required author

Second reading, failed to pass, yeas 5 nays 88
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Bill Summary · HB 1546

Summary — HB 1546 (North Dakota)

A BILL to add a sales and use tax exemption for purchases made by contractors, subcontractors, or builders when those purchases are made on behalf of the State of North Dakota; to amend the use-tax provisions that apply to contractors; and to provide an effective date.

Main purpose / intent

The bill would create a statewide sales and use tax exemption for tangible personal property that a licensed contractor (including subcontractors or builders) acquires for use in performing a contract with the State of North Dakota (including state departments and agencies). The intent is to allow contractors to purchase materials tax‑exempt when the materials become part of state‑owned real property improvements and the proper pre‑authorization and documentation are obtained.

Key provisions

  • New exemption (chapter 57‑39.2):

    • A licensed contractor under chapter 43‑07 who acquires tangible personal property for use on a state contract is entitled to a state sales and use tax exemption.
    • To qualify the contractor must:
    • Hold a valid state sales tax permit;
    • Obtain a “purchasing agent authorization” letter from the state; and
    • Obtain a copy of the exemption certificate issued to the state by the Tax Commissioner prior to purchasing the property.
    • If the contractor is also a retailer, the exemption applies to inventory withdrawn for use on a state contract provided the contractor obtains the purchasing agent letter and the exemption certificate copy before withdrawal.
    • The exemption applies only to the extent the tangible property becomes part of an improvement to real property and the state owns the real property and the improvements.
    • The exemption does not apply to local sales or use taxes imposed under home‑rule authority by cities or counties.

  • Amendment to use‑tax on contractors (section 57‑40.2‑03.3):

    • The bill amends the statute governing use tax for contractors to reflect and accommodate the new exemption (text reorganizes/updates the existing contractor use‑tax provisions and preserves the general rule that contractors owe use tax on property used in contract performance unless exempt).

Who would be affected

  • Contractors, subcontractors and builders contracting with state agencies (they would be able to make tax‑exempt purchases under the conditions above).
  • Vendors and suppliers (they would accept exemption documentation from authorized contractors).
  • State agencies (would need to issue purchasing agent authorization letters and manage exemption certificates).
  • North Dakota Tax Commissioner (administration, issuance of exemption certificate).
  • State general fund (potential reduction in state sales/use tax revenues to the extent purchases shift from taxable to exempt). Local home‑rule taxes are unaffected by this state exemption.

Procedural / timeline status

  • Introduced: December 9, 2024.
  • Sponsors (from bill text): Representatives Berg, B. Anderson, Heinert, Meier, Pyle, Swiontek, Wagner, Weisz; Senator Sorvaag.
  • Status reported: Second reading — failed to pass (yeas 5, nays 88). Because the bill failed at second reading under the reported status, it did not advance to enactment in this legislative session.

Potential impacts / considerations

  • Fiscal: The state would likely see some reduction in sales/use tax revenue corresponding to exempted contractor purchases for state projects; the bill does not specify an estimated revenue impact.
  • Administrative: State agencies and the Tax Commissioner would need procedures to issue authorization letters and exemption certificates and to verify contractor compliance.
  • Limits: Exemption is narrowly tied to state ownership of the real property improvements and does not relieve contractors from local (home‑rule) taxes.

Compiled from official sources — confirm details with the bill’s official record.

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