Registering a business in Montana 

Businesses will need to register with the Montana Secretary of State and will also need to register for a Montana Tax ID Number with the Montana Department of Revenue. The Montana Office of Economics Development provides links and additional information to registering your business. You can find more information here

S-Corporation Income Tax

Montana recognizes the federal S-election, and Montana S corporations are not required to pay income tax to the state. However, individual S corporation shareholders will owe state tax on their share of the company’s income. S corporations must file Form CLT-4S.

LLC/Partnership Income Tax

Not required to pay income tax to Montana. Business income is passed to partners who pay Montana income tax on their personal return. Partnerships must file Form PR-1.

Composite Tax 

Partnerships and s corporations may file a composite return and pay the tax owed for eligible owners. Owners included in a composite are not required to file a Montana individual income tax return. 

Shareholders and partners are eligible if the following apply: 

  • They are nonresident individuals, trusts, or estates
  • Foreign C corporations
  • A pass through entity 
  • Do not have other Montana source income 
  • Have completed power of attorney giving the corporation the right to file on their behalf

Composite tax is taxed at the same rate as individual income. Income brackets can be found below. Composite returns are filed using the appropriate s corporation or partnership mentioned above. 

Pass Through Withholding Tax 

Partnerships, s corporations and disregarded entities must withhold income for owners if  the owners share of income is at least $1,000 and the owner is a nonresident individual, estate, or trust. Tax exempt entity administered outside Montana. A foreign C corporation or second tier pass through entity. 

Pass through entities must withhold nonresident individuals, estates, trusts and second tier pass through entities at a rate of 6.9%. 

Foreign C corporations and tax exempt entities administered outside Montana must withhold at a rate of 6.75%.

Individual Income Tax

Individual income tax varies based on income. Tax rates are as follows.

Due Date

S corporation and partnership returns are due on the 15th day of the third month following the close of the tax year. For calendar year taxpayers, this will be March 15th. 

Individual income tax returns are due on the 15th day of the fourth month following the close of the tax year. For most people this will be April 15th. 

If the due date falls on a weekend or holiday, the due date is extended to the next business day. 

Estimated Payments

A partnership or S corporation must make estimated tax payments if it expects to owe at least $500 in composite income tax. S corporations use Form-SB. Partnerships use Form-PR.

Individuals who estimate they will owe more than $500 in tax will also need to make quarterly estimated payments. Individuals use Form-IT.

Filing an Extension 

Montana grants all s corporation, partnership, and individual tax returns an automatic six month extension to file a return. The extension only applies to the filing of the return. Taxpayers must still pay any tax liability by the due date to avoid penalties and interest. 

Penalties 

S corporations and partnerships which fail to file a timely return will be subject to a late filing penalty. The penalty is $10 per each member for each month that the entity does not file the return. The penalty is calculated for up to five months and may not exceed $2,500.

Individuals who fail to file a timely return will also be subject to a late filing fee. The late payment penalty is equal to 0.5 percent per month, calculated daily, on the unpaid amount from April 15, 2019, until it is paid. The daily rate is 0.0164 percent. Your late payment penalty will never exceed 12 percent (24 months x 0.5 percent) of the unpaid tax.

Additional Information

If your business was formed or is located in another state, but generates income in Montana, it may be subject to Montana taxes. The rules for taxation of multistate businesses, including what constitutes nexus with a state for the purpose of various taxes, are complicated. If you run such a business, you should consult with a tax professional.

Montana Secretary of State:

https://sosmt.gov/ 

Montana Department of Revenue:

https://mtrevenue.gov/

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