Montana is known for its wide-open spaces, rugged mountains, and one rare financial perk: no statewide sales tax. That’s right, sales tax in Montana doesn’t apply to most purchases, making it a shopper’s dream.
But while the Treasure State skips this common tax, there are still a few cases where you might pay extra charges on specific purchases.
This guide breaks down everything you need to know about Montana, one of the five states that do not have a sales tax. By the end of this comprehensive guide, you’ll understand Montana’s unique sales tax regulations with confidence and ease.
Is There Sales Tax in Montana?
If you plan to start a business in Montana, you may wonder whether the state imposes a sales tax. The short answer? Montana does not have a statewide sales tax.
Montana is one of only a few states in the U.S. that have chosen not to implement a general sales tax.
This policy dates back decades, with voters consistently rejecting proposals to implement a sales tax. The result is a tax-friendly environment for both residents and local businesses.
While the lack of a sales tax may sound like a break for businesses and consumers, it doesn’t mean there are no tax-related responsibilities for Montana business owners.
Beyond Montana Sales Tax: Other Taxes You Should Know
While you won’t be charging your customers a general sales tax, there are other tax types to keep in mind as a business owner in Montana.
Corporate Income Tax
Montana imposes a corporate income tax on corporations that conduct business or derive income within the state.
It’s designed to capture a fair share of taxes from corporations that benefit from Montana’s infrastructure and services, while also addressing the complexities associated with multi-state and international business operations.
The standard tax rate is 6.75%, with the option for corporations to elect using the water’s-edge method, which focuses taxation on US-based income and specific foreign sources, at a slightly higher rate of 7%.
This approach aims to prevent profit shifting to low-tax jurisdictions by requiring combined reporting of income from all entities within a unitary business, unless the water’s-edge election is made.
Mineral Royalty Withholding Tax
The
Montana Mineral Royalty Withholding Tax is a state income tax requirement that mandates withholding on certain mineral royalty payments.
Specifically, when mineral royalties are paid from Montana-based production to nonresident individuals or out-of-state business entities, the payer, referred to as the “remitter,” must withhold 6% of the net royalty amount.
This withholding applies regardless of the recipient’s business structure, including individuals, trusts, partnerships, or corporations.
Remitters are required to register with the Montana Department of Revenue and comply with specific filing obligations. These include:
The withheld amounts are considered trust funds held on behalf of the state, and remitters remain liable for proper withholding and reporting, even if they use third-party accounting services.
For royalty owners, the withheld tax can be claimed as a refundable credit against their Montana income tax liability. This information is typically reported on Form 1099-MISC (Box 15) or a Montana Schedule K-1, depending on the nature of the payment.
Natural Resource Tax
Montana collects taxes on natural resources harvested in the state, including coal, metal, oil, and natural gas.
- Bentonite Production Tax
- Cement and Gypsum Producers License Tax
- Coal Gross Proceeds Tax
- Coal Severance Tax
- Electrical Energy Producers License Tax
- Metal Mines Gross Proceeds Tax
- Metal Mines License Tax
- Micaceous Mineral Mines License Tax
- Mineral Royalty Withholding Tax
- Miscellaneous Mines Net Proceeds Tax
- Oil and Natural Gas Production Tax
- Resource Indemnity Trust & Ground Water Assessment Tax
- Wholesale Energy Transaction (WET) Tax
Miscellaneous Tax
Montana has several taxes covering specific businesses, services, or locations. These taxes include telecommunications, tobacco, tourism, cannabis, and health care facilities.
- Alcohol Taxes
- Cannabis Tax
- Cigarette Taxes
- Consumer Counsel Fee (CCT)
- Contractor’s Gross Receipts Tax (CGR)
- Emergency Telephone System Fee
- General Sales Tax
- HELP Entity Fee (HEF)
- HELP Integrity Fee (HIF)
- Hospital Facility Utilization Fee (HUF)
- Intermediate Care Facility Utilization Fee (ICFUF)
- Local Resort Tax
- Lodging Facility Sales and Use Tax
- Moist Snuff Taxes
- Nursing Facility Utilization Fee (NFBT)
- Opioid Seller’s License
- Other Tobacco Product Taxes
- Public Service Regulation Fee (PSR)
- Rental Vehicle Tax (RVT)
- Retail Telecommunications Excise Tax (RTE)
- TDD Telecommunications Service Fee
- Unclaimed Property Holders
- Universal Systems Benefits Programs
- Unlocatable Mineral Trusts
Montana and Remote Sellers
Montana does not impose a statewide sales tax, and there are no economic nexus standards for sales tax in the state.
This means that out-of-state sellers are not required to collect or remit Montana sales tax on sales to Montana customers.
However, Montana does follow an economic presence standard for corporate income tax.
A business is considered to have nexus for income tax purposes if it is “engaged in business” in Montana, which is broadly defined as any activity carried out for profit.
Additionally, Montana applies the Joyce Rule, which states that only in-state activities conducted by or on behalf of the company can establish income tax nexus.
While Montana sales tax does not apply to in-state transactions, Montana-based businesses that sell to other states may still have sales tax obligations in those states.
If a business has a physical presence in another state, it may trigger physical nexus, requiring sales tax registration and collection.
Therefore, although Montana sales tax laws are minimal, businesses operating from Montana must still be proactive in understanding how multistate nexus laws affect their overall tax compliance.
To make life easier, consider using sales tax software or consulting a tax professional, like TaxHero, to ensure accurate tax calculations and collections. Understanding these tax rules helps you stay compliant, whether you’re in-state or out-of-state.
Business Compliance Obligations in Montana
Just because there’s no sales tax doesn’t mean you can skip registration. If you’re running a business in Montana, you may still need to:
You can check the state’s official business registration site to get started and ensure you’re meeting your obligations.
Conclusion
Montana may not have a general sales tax, but that doesn’t mean business owners are exempt from taxes and compliance.
From corporate income tax to potential nexus in other states, understanding your responsibilities and staying compliant is key to staying on the right side of the law.
To ensure your business stays tax compliant even in a no-sales-tax state, you can make things easier by consulting tax professionals like TaxHero.
Schedule a call with our CEO, who will personally walk you through the intricacies of sales tax compliance in every state.
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