Montana Taxes for Small Businesses: The PTET and No Sales Tax

Here’s how each one works and what to watch.

1. No general sales tax

Montana is one of five states with no general sales tax, so most businesses don’t collect one. Three exceptions:

• Lodging: Stays under 30 days pay an 8% state tax.
• Rental vehicles: Rentals of 30 days or fewer pay a 4% state tax.
• Resort towns: Communities like Whitefish and Big Sky charge up to 3% in local resort tax, plus up to 1% in some areas.

If you’re in lodging, rentals, or a tourist town, check which apply.

2. The pass-through entity tax (PTET): Montana’s SALT-cap workaround

Created by Senate Bill 554, the PTET lets an S corporation or partnership elect to pay Montana income tax at the entity level, starting with tax year 2023. The entity deducts the tax federally, where the SALT cap doesn’t apply, and owners claim a refundable Montana credit.

3. The rate

The PTET is charged at Montana’s top individual income tax rate:

Montana PTET tracks the top individual income tax rate (Montana DOR).

4. How to elect

The entity elects each year on a timely filed Form PTE, including extensions. The election is irrevocable for that year and binds all owners. The tax covers each owner’s share of Montana source income. With the resident election, Montana-resident owners are taxed on their full share, including out-of-state income.

5. Who it helps

Profitable S corporations and partnerships benefit most when their owners can’t fully deduct state taxes, either because they hit the federal SALT cap or because they take the standard deduction. The election also replaces Montana withholding for nonresident individual owners, who don’t need to file a Montana return if this entity is their only Montana source income.

The Bottom Line

For many Montana pass-through owners, skipping the PTET leaves money on the table: it creates a federal deduction for Montana tax you would owe anyway. At the 2026 rate of 5.65%, every $100,000 of Montana income generates $5,650 of PTET to deduct federally. And most Montana small businesses never file a state sales tax return.

Wondering whether the Montana PTET election is worth it for your business? Or need help catching up on bookkeeping or taxes? Email [email protected], or get a bookkeeping estimate with our pricing estimator. No pressure at all on our end.

Frequently asked questions

Does Montana have a sales tax?

No general statewide sales tax. Most Montana businesses don’t collect sales tax, but lodging (8%), vehicle rentals (4%), and sales in resort communities like Big Sky (up to 4%) are taxed.

What is the Montana PTET rate?

It equals Montana’s top individual income tax rate: 5.9% for 2024 and 2025, 5.65% for 2026, and a scheduled 5.4% for 2027.

How do owners benefit?

The entity pays the tax and deducts it federally, and owners claim a refundable credit against their Montana tax. Owners limited by the federal SALT cap, or who take the standard deduction, get a federal deduction they would otherwise lose.

Related reading

• Bozeman Small-Business Accountant
• The Most Common Small-Business Tax Mistakes
• Small-Business Tax Preparation & Planning
• Estimate your price in about a minute

Sources

Figures verified against the Montana Department of Revenue:

• Montana DOR — Pass-Through Entity Tax (Publication 4)
• Montana DOR — Pass-Through Withholding

About the author

Jen Matson, CPA

Client Advisory, Acction Advisors

Jen is a CPA of more than 30 years who builds long-term client relationships rooted in trust and steady guidance.