Montana Small Business Taxes: The Employer’s 2023 Guide

Feli Oliveros

Because cash flow is critical to the success of a new venture, where you choose to start your business matters more than you think. 

So if you’ve got big dreams but limited funds, consider making Montana the home for your new startup. Although the Treasure State got its nickname from its substantial mineral resources, today its competitive tax rates attract entrepreneurs. 

If you want to start a business in Montana (or if you have one already), here’s what you need to know about the state’s business taxes: 

What business taxes do you pay in Montana?

Most new business owners already expect to pay income taxes on their business income, so they’re able to plan ahead for these expenses. However, there are a lot of other taxes that small businesses in Montana are responsible for, including withholding taxes, industry-related taxes, and local taxes.

The bright side? Compared to most other states, companies that do business in Montana don’t have to pay franchise taxes, state sales and use tax, or local sales tax. 

Let’s dive into the business taxes most Montana businesses are obligated to pay, as well as how to file returns and make payments for each one. 

Montana personal income tax

Sole proprietorships, partnerships, and limited liability companies (LLCs) are known as pass-through entities. These types of businesses don’t pay income taxes themselves—instead, their business owners pay taxes on the profits through their personal tax returns. 

In 2023, the Montana state income tax rate ranges from 1% to 6.75%.

How to file and pay

Montana individual income tax returns (Form 2) and payments are due by the 15th day of the fourth month following the end of the fiscal year. For businesses that follow the calendar year, this deadline falls on April 15. 

The Montana Department of Revenue encourages all taxpayers to file their returns electronically using one of these methods. If you prefer to file by mail, send your return to the appropriate address indicated in these tax form instructions

Business owners who expect to owe $500 in income taxes for the year are required to make quarterly estimated tax payments by April 15, June 15, September 15, and January 15. Both regular tax payments and estimated tax payments can be made online through the TransAction Portal (TAP) or by check along with a payment voucher (Form IT) mailed to this address: 

Montana Department of Revenue
PO Box 6309
Helena, MT 59604-6309

To learn more about the Montana individual income tax, visit the Department of Revenue website. If you’d like more information on making estimated tax payments, visit their website instructions. 

Montana pass-through entity tax

Instead of having their owners or shareholders pay income taxes on their personal tax returns, the state of Montana allows partnerships and S corporations to be taxed as a business entity if they elect to do so. This tax is called the pass-through entity tax (PTET).

Pass-through entities that make this election pay a 6.75% tax on their taxable income. 

How to file and pay

To make this election, businesses should submit the Pass-Through Entity Tax Return (Form PTE) by the extended due date of the PTE return. 

The tax filing deadline for electing pass-through entities is the 15th day of the third month after the end of the fiscal year (or March 1 for calendar filers). The Department of Revenue encourages businesses to file electronically, either through an authorized software provider or an authorized tax professional. If you prefer to file by mail, send your return to the following address:

Montana Department of Revenue
PO Box 8021
Helena, MT 59604-8021

Companies that elect to pay the PTET must also make quarterly estimated tax payments via TAP by April 15, June 15, September 15, and January 15. 

To learn more about the Montana pass-through entity tax, review these tax form instructions from the Department of Revenue. 

Montana corporate income tax

Corporations that incorporate or do business in Montana are charged a corporate income tax on taxable net income attributable to the state. 

Montana’s corporate income tax rate is 6.75%, with a minimum tax of $50. 

Businesses that don’t rent or own property in Montana can pay an alternative tax of 0.5% of their gross state sales. However, their only activity in the state must consist of receipts and gross sales that do not exceed $100,000.

How to file and pay

Montana corporate income tax returns (Form CIT) are due by the 15th day of the fifth month after the end of the fiscal year. For corporations that follow the calendar year, this due date is May 15. 

Corporations can file their tax returns electronically through an authorized software provider or tax professional. Alternatively, those who want to submit their return by mail should send their tax return to this address:

Montana Department of Revenue
PO Box 8021
Helena, MT 59604-8021

Corporations that expect to owe $5,000 or more in taxes must make estimated tax payments quarterly. These payments should be made by April 15, June 15, September 15, and December 15 via the TAP system. Make sure to register your business with the platform if you plan on paying your taxes with this method. 

If you need more information on filing and paying Montana corporate taxes, read these tax form instructions provided by the Department of Revenue.

Withholding tax

Montana employers are required to withhold income from each employee’s paycheck and submit it to the Department of Revenue. These taxes are known as withholding taxes or employment taxes

How much you withhold from each paycheck depends on your company’s pay frequency and the employee’s income. In 2023, the Montana withholding tax rate ranges from 1.8% to 6.6% of an employee’s wages. 

How to file and pay

Before you can pay withholding taxes to the state of Montana, you’ll need to create a business account through TAP—especially if you plan to pay or are required to pay electronically. 

Once your business is registered with the Department of Revenue, you’ll be assigned a monthly or yearly filing frequency. Your filing frequency is determined by your withholding tax liability during the lookback period, which runs from July 1 of last year to June 30 of this year:

  • Employers with a withholding amount between $1,200 and $11,999 are assigned a monthly payment schedule and pay their taxes by the 15th of the following month
  • Employers that withhold $1,199 or less during the lookback period are assigned a yearly payment schedule and pay by January 31st of the following year
  • Businesses that withhold $12,000 or more during the lookback period follow the federal withholding schedule 

However, new employers are typically assigned a monthly payment frequency until the following year. 

Businesses pay their withholding taxes online via TAP or by mail. Note that withholding payments of $500 or more must be submitted electronically. If you don’t meet this threshold and want to submit payment by mail, send it along with payment voucher MW-1 to the address below:

Montana Department of Revenue

PO Box 6309

Helena, MT 59604-6309

No matter your filing frequency, you’ll also need to file an annual withholding tax reconciliation (Form MW-3) by January 31. Make sure to include copies of all your Forms W-2 and 1099. 

For more details on the state’s withholding taxes, review the withholding tax guide from the Department of Revenue.

Unemployment tax

Montana imposes a state unemployment insurance tax on employers as well. These taxes are used to fund unemployment benefits for eligible workers who have left the company. 

The unemployment tax rate for new Montana employers is 1% to 2.2% of the first $40,500 of each employee’s wages. Eligible employer tax rates range from 0% to 1.42%, while deficit employers can expect to be assigned a tax rate between 2.92% and 6.12%. More details on the UI contribution rates for the 2023 tax year can be found online. 

How to file and pay

To pay state unemployment taxes, employers must first register with the Department of Labor and Industry. Sign up on the platform, which is called UI eServices for Employers (or eServices for short). 

Once you’ve registered for a tax account, you file quarterly wage and contribution reports and pay any taxes by April 30, July 31, October 31, and January 31. 

Although you can file these reports by mail, the Department of Labor and Industry encourages all employers to file online via eServices. Note that businesses with over 20 employees during any quarter of this year or the previous one are required to file online, either through eServices or another approved electronic filing method. 

Learn more about the Montana unemployment tax by reviewing this employer handbook from the Department of Labor and Industry. 

Other industry-related and local taxes

Unlike some states, Montana doesn’t impose any local sales taxes on its businesses. However, companies might be responsible for taxes or duties on certain products, services, and business activities. For instance, some municipalities charge a tax on fuel, alcohol, medical marijuana, and tobacco. 

Because these taxes depend on the nature and location of your business, talk with your tax advisor or accountant to get a clear picture of your state and local tax obligations. 

Montana business tax breakdown by business type

With so many tax obligations to keep track of, use the chart below as a reminder of what taxes your business is responsible for. 

Keep in mind that pass-through entities like sole proprietorships, partnerships, and LLCs don’t pay federal income taxes because those taxes flow through to the personal tax returns of their business owners. 

Business typeIndividual income taxPass-through entity taxCorporate income taxWithholding taxUnemployment taxFederal income taxes
C corporationNo No Yes Yes, if you hire employeesYes, if you hire employeesYes
S corporationDepends if it takes the PTE electionYes, if it takes the electionNo Yes, if you hire employeesYes, if you hire employeesYes (pass-through)
LLCDepends on how it’s structured and if it takes the PTE electionDepends on how it’s structured and if it takes the electionDepends on how it’s structuredYes, if you hire employeesYes, if you hire employeesYes (pass-through)
Partnership Depends if it takes the PTE electionYes, if it takes the electionNo Yes, if you hire employeesYes, if you hire employeesYes (pass-through)
Sole proprietorshipYes No No Yes, if you hire employeesYes, if you hire employeesYes, by way of individual income tax

File your Montana small business taxes with Gusto

If you’re worried about staying on top of all of these filing deadlines and guidelines, consider using software that does some of the heavy lifting for you. Not only does Gusto’s powerful platform take care of your payroll in minutes, but it files your payroll taxes with the right tax authorities automatically too. 

Discover how Gusto can help you run your business better by creating your free account today. 

Feli Oliveros Feli Oliveros is a freelance finance and business writer with experience covering personal and small business finance. In 2015 she graduated from UCLA, where she earned her bachelor’s degree in English and minored in Anthropology.
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