Montana Business Taxes Explained: Rates, Nexus & Exemptions

Business Taxes Basics in Montana

As one of the five NOMAD states (New Hampshire, Oregon, Montana, Alaska, and Delaware) that do not have sales and use tax rules and regulations in effect, Montana has several types of business taxes that are similar to those of Oregon's vehicle privilege and use tax, or Delaware's gross receipt tax.

These taxes include those similar to excise duties, which are taxes on specific goods or activities, such as Alcoholic Beverage Taxes, Tobacco and Nicotine Taxes, and specific other types of taxes, such as Contractor's Gross Receipts Tax, and Lodging Facility Sales and Use Tax, Retail Telecommunications Excise Tax, and Rental Vehicle Tax.

Montana Business Taxes Rates

The Alcohol Beverages Tax has several forms, including Brewery taxes, Distillery Excise and License Tax, Distributor and Wholesale Tax, Winery Tax, Hard Hider Tax, Beer Tax, Common Carrier Tax, and Cacramental Wine Tax. The rates of the Alcohol Beverage Tax vary from percentage-based to amount-based. 

For example, Brewery Taxes are amount-based taxes ranging from USD 1.30 per barrel to USD 4.30 per barrel, depending on the amount of barrels produced. In contrast, the Distillery Excise and License Tax is a percentage-based tax that varies from 2% if taxable persons do not produce more than 50,000 gallons of liquor to 10% if they produce over 200,000 gallons.

Similar to the Alcohol Beverages Tax, the Tobacco and Nicotine Taxes also have several forms, such as Cigarette Taxes, Moist Snuff Taxes, and Other Tobacco Product Taxes. Depending on the form of taxation, Tobacco and Nicotine Taxes are either percentage-based or amount-based. 

The Contractor's Gross Receipts Tax is set at 1% and applies to all contractors and subcontractors for all public construction contracts exceeding USD 80,000. Therefore, these taxable persons must pay or withhold 1% of their earnings on all construction work for a public agency with a total contract value exceeding the threshold.

Lodging Facility Sales and Use Tax applies to lodging accommodations, including hotels, motels, camping sites, resorts, hostels, bed-and-breakfasts (B&Bs), home vacation rentals, online hosting platforms, and short-term rental marketplaces. The tax rate is a combined 8%, consisting of 4% use tax and 4% sales tax.

Additionally, some local municipalities also impose a 3% Local Resort Tax, applicable to hotels, motels, and other lodging or camping facilities. Additionally, restaurants, fast food stores, other food service establishments, Taverns, bars, nightclubs, lounges, and other public places serving alcohol, as well as destination ski resorts and other destination recreational facilities, are subject to the Local Resort Tax.

Furthermore, a 3.75% Retail Telecommunications Excise Tax applies to services that enable the two-way transmission of voice, image, data, or other information originating or terminating at a Montana Service address.

Finally, rental vehicle users pay the 4% Rental Vehicle Tax. Rentals subject to this tax include vehicles rented for up to 30 days without a driver, pilot, or operator. Vehicles subject to this tax are those designed to transport a maximum of 15 people, including cars, vans, motorboats, motorcycles, trucks, trailers, or semi-trailers with a gross vehicle weight of less than 22,000 pounds, used to transport personal property.

Tax-Exempt Transactions

Several tax-exempt transactions in Montana can provide relief and potential cost savings. For instance, units or spaces rented for 30 continuous days or more to the same purchaser are exempt from Lodging Facility Sales and Use Tax. 

Additionally, some federal employees may have a credit card billed directly to the federal government, making these related transactions exempt from the Lodging Facility Sales and Use Tax. Furthermore, hospitals, restrooms, youth camps owned or operated by non-profits, and conference rooms are not required to collect the Lodging Facility Sales and Use Tax.

Regarding the Rental Vehicle Tax, transactions for renting farm vehicles, equipment, machinery, travel trailers, motorhomes, airplanes, snowmobiles, golf carts, and sailboards are exempt from this tax.

Nexus Rules in Montana

Since there is no sales and use tax in Montana, the only essential presence for establishing nexus is physical presence in the state.

Physical Nexus

A physical nexus is established by engaging in in-state activities, which generally include any activities performed in Montana other than the solicitation of sales of tangible goods. If taxable persons establish a physical nexus, they must comply with the state's tax-filing obligations. If businesses or individuals are uncertain whether they have nexus in Montana, they can submit a Nexus Questionnaire for review by a Nexus Auditor, who will provide a determination. 

Taxable Goods and Services in Montana

As can be concluded from the list of applicable taxes, Montana does not impose a state-wide or general sales tax. However, certain goods and services are subject to other types of taxes. Therefore, taxes are imposed on the sales of medical marijuana products, as well as sales and use tax on accommodations and campgrounds, a lodging facility use tax, and a limited sales and use tax on the base rental charge for rental vehicles.

E-Commerce Framework

The Wayfair decision did not impact remote or online sellers selling goods to consumers in Montana. However, if consumers from Montana purchase goods or services in other US states, with sales and use tax rules and regulations in place, they must examine whether the state's rules exempting non-residents from the tax apply to them.

Marketplace Rules

Retail sellers that use online marketplaces to offer and sell their goods and services are not required to collect and remit sales and use tax. However, sellers of lodging accommodations who rent out their locations by the night or the week must be registered with the Department and must collect and remit the taxes. 

Even though the responsibility for collecting and remitting Lodging Facility Sales and Use Tax lies with the online hosting platform or short-term rental marketplace, sellers or renters must verify this, as the liability and responsibility for taxes remain with the sellers of lodging accommodations.

Additionally, if online sellers make accommodation-related sales outside a short-term rental marketplace or online hosting platform, they must register for Lodging Facility Sales and Use and are liable for any taxes due on those sales.

Digital Goods and Services

Montana does not impose tax on digital goods and services. Consequently, this means that consumers can buy digital products and services without adding the cost of sales and use tax.

Digital Marketplace

Since the Wayfair ruling did not affect the Montana tax landscape, there are no general marketplace facilitator rules in place, except for those explicitly developed for online hosting platforms and short-term rental marketplaces, which are liable for Lodging Facility Sales and Use Tax.

Digital Platform Operator

Any person, whether an individual or a business, who offers an online application, software, website, or system that enables sellers to advertise, rent, or provide accommodations or rental vehicles, and allows buyers to arrange the use or lease of those accommodations or vehicles, qualifies as an online hosting platform. The definition also encompasses online travel companies and third-party reservation intermediaries that facilitate the sale or rental of accommodations or vehicles.

Regarding the short-term rental marketplaces, any individual or business that offers a platform that allows a seller or the seller’s authorized agent to list and offer short-term rental accommodations to occupants falls within this category.

Online hosting platforms and short-term rental marketplaces must register with the Montana Department of Revenue to obtain a Montana account ID and collect and remit Lodging Facility Sales and Use Tax on behalf of online sellers.

Filing and Payment Requirements in Montana

Tax filing and payment requirements and due dates depend on the applicable tax type. Therefore, the Lodging Facility Sales and Use, Rental Vehicle Tax, and Retail Telecommunications Excise Tax are reported and paid quarterly. 

However, there are notable differences in the reporting period. While the due dates for reporting and payments of Lodging Facility Sales and Use and Rental Vehicle Tax are the same, on the last day of the month following the reporting period, those are April 30 for Q1, July 31 for Q2, October 31 for Q3, and January 31 for Q4, the Retail Telecommunications Excise Tax has different due dates. 

Reports and payments of Retail Telecommunications Excise Tax are due 60 days from the end of the calendar quarter, with the following due dates: May 30 for Q1, August 29 for Q2, November 29 for Q3, and March 1 for Q4.

The Contractor's 1% Gross Receipts Tax must be reported and paid within 30 days after the contractor receives payment for their work.

Penalties for Non-Compliance with Business Taxes Requirements

Unlike the filing and payment requirements, which vary by tax type, all stated business taxes are subject to uniform penalties and interest. Late filing penalties are set at a minimum of USD 50 or 5% of the due taxes per month, whichever is greater. The maximum penalty amount is 25% of the due taxes.

Late payment of the due taxes results in a penalty of 0.5% per month, up to a maximum of 12% of the due taxes for Alcohol Beverages Tax, Tobacco and Nicotine Taxes, and Contractor's Gross Receipts Tax. Late payment penalties for Retail Telecommunications Excise Tax, Lodging Facilities Sales and Use Taxes, and Rental Vehicle Tax are set at 1.5% per month, up to a maximum of 15% of the due taxes.

Failure to file the required tax return or reports by the due date or within 60 days of receiving a notice from the Montana Department of Revenue, USD 1,000 penalty for pass-through entities, and 15% per month, up to a maximum of 75% of the due tax penalty for all other taxable persons. 

In addition to any penalties, an interest rate of 1%, computed daily at 0.030055% is also applicable. However, the interest rate depends on the year in which the tax is owed. The 11% rate is set for 2025, whereas the rates in previous years were 11.5% in 2024, 9.25% in 2023, 6.25% in 2022 and 2021, and 8% in 2020.