Montana LLC Taxes

Forming a limited liability company (LLC) in Montana involves understanding a variety of taxes — many of which will depend on your tax election, industry, and exact location. 

In this Montana LLC taxes guide, we cover the various taxes that could impact your LLC at a local, state, and federal level, delineate how you can go about paying them, and break down everything you need to know to ensure you stay compliant with the state. 

Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes. 

How Is an LLC Taxed in Montana?

Taxation in Montana isn’t applied in the same way to all LLCs – instead, it varies depending on a number of factors, such as an LLC’s nature, locality, and tax election.

While LLCs typically benefit from pass-through taxation by default, they can elect to be taxed as one of the following:

• C Corporation: The LLC is treated as a separate entity to its owners and must pay corporate income tax rates on its total profit while the owners also pay income taxes on any distributions they take using their individual returns.
• S Corporation: In return for paying owners a “reasonable salary,” the LLC’s remaining profits are distributed among members without a need to pay self-employment tax or FICA tax on them.

The following sections go into the various tax responsibilities of your LLC at local, state, and federal levels in Montana to help you ensure your LLC navigates them effectively.

Montana Local Taxes

Cities and counties in Montana are allowed to impose local-level taxes in addition to state and federal taxes. Below, we have outlined the most common ones in order to assist your business in understanding its potential tax obligations.

Local Resort Tax

Montana’s local resort tax is a variable local option sales tax, with rates capped at 3%. This is set by local authorities for designated resort areas, and affects LLCs in sectors like lodging, food service, alcohol sales, recreational services, and luxury retail operating within these areas.

Note: For a comprehensive list of current resort areas in Montana and their respective tax rates, visit the Montana ServiceNow Citizen Portal.

Cannabis Tax

Counties in Montana can enact a local option tax on cannabis in addition to the state-level tax, which can be up to 3% on medical or adult-use of marijuana sales. 

For LLCs operating cannabis businesses, it's important to understand that these local taxes only apply at the retail level and on end-user purchases.

Note: For detailed information on per-county cannabis tax rates in Montana, see the Department of Revenue’s Cannabis Tax Guide.

Motor Vehicle Tax

The local motor vehicle tax is either up to 0.7% of the vehicle's value or as a flat fee, in addition to standard registration fees. 

This tax is significant for LLCs that operate vehicles within these counties, as it adds to the overall cost of vehicle ownership and operation. The tax is collected alongside the vehicle registration fee, which generally streamlines the payment process.

Property Taxes

Property taxes for LLCs in Montana are calculated by multiplying the market value of the property by a tax rate which is set by the state and then by the mill levy.

The mill levy rate, which varies by locality, significantly influences the total property tax amount. These taxes are billed annually and managed by county treasurers, with payments typically due in two separate installments.

Note: For more detailed information on Montana property taxes, take a look at the Montana Legislature Property Tax Information. 

Recommended Service: Schedule a free consultation with 1-800Accountant to ensure your business remains legally compliant.

Montana State Taxes

Every state has its own regulations and rules that dictate how it taxes individuals and businesses. Below is a list of the most relevant state-level taxes for LLCs in Montana. 

Montana State Income Tax

If your LLC operates under pass-through taxation, you will need to pay Montana income tax on your business earnings. The current rates range from 1% to 6.75%, depending on your taxable income. Keep in mind that these rates will change slightly in 2024 (to between 4.7% and 5.9%.). 

Montana LLCs taxed as a C corporation must comply with corporate income tax requirements.The standard tax rate stands at 6.75% of net income, with a minimum payment of $50 needing to be paid. 

Having said that, small businesses are eligible for an alternative tax rate of 0.5% on gross sales if:

• Their only business activity in Montana is sales-related
• They don’t rent or own property (real estate or tangible personal property)
• They have less than $100,000 in annual revenue

Note: Corporate income tax returns must be filed by May 15 of each year, which needs to be done online unless your total annual revenue is less than $750,000 (or unless you have obtained a waiver).

Lodging Taxes

For LLCs in Montana's lodging sector, the state mandates both a 4% lodging facility use tax and a 4% lodging sales tax. These are collected from customers and remitted to the Montana Department of Revenue. As mentioned above, designated “resort” financial districts can impose an additional local option tax on top of this state tax.

For example, the City of Whitefish is considered a “resort community” by the state. As such, it collects the maximum 3% local resort tax from applicable businesses. Those businesses are then responsible for a combined total of 11% in lodging-related taxes.

Vehicle Rental Taxes

If your LLC is involved in vehicle rentals, it may be subject to a 4% sales tax. 

This tax applies to vehicles that transport 15 or fewer passengers, and that are rented for 30 days or less without a driver. This means that they are particularly relevant for vehicles rented under insurance and/or warranty contracts.

Note: Keep in mind that the tax is levied on all applicable rental businesses, including third-party platforms and peer-to-peer services like Uber and Lyft. 

Cannabis Tax

Montana imposes a tax on cannabis sales, with different rates for medical and adult-use marijuana. The state tax for medical marijuana is set at 4%, while the tax for adult-use cannabis sales is higher, at 20%. These taxes are applicable only at the retail level on end-user purchases.

LLCs involved in Cannabis sales will be required to collect and remit these taxes as part of their sales process; keep in mind that this tax needs to be paid in addition to any local taxes that may be levied by individual counties. 

Note: For more information on Montana's cannabis tax and related regulations, visit the Montana Department of Revenue's Cannabis Tax page.

Federal Taxes

Regardless of where your business is located, if you run an LLC in the US, there are a number of federal taxes you’ll need to pay. Below are some of the main types your LLC may be required to pay for federal tax purposes:

Income Tax

By default, the Internal Revenue Service (IRS) will not treat single and multi-member LLCs as separate entities from you for tax purposes. What this means is that you’ll need to report your share of your LLC’s profits on your IRS Form 1040 and pay federal income taxes on them at the personal rate of your tax bracket.

Having said that, keep in mind that LLCs can also elect to be taxed as C corps or S corps, which changes how these taxes are levied in different ways.

Self-Employment Tax

In addition to federal income tax, members of single- and multi-member LLCs will need to pay federal self-employment taxes on the share of the business’s profits that they report on their personal tax return at the end of the year.

This tax is levied at a flat rate of 15.3% against businesses with net earnings that exceed $400, though it is applied slightly differently to LLCs that have elected to be taxed as S corps or C corps.

Employer Taxes

If your LLC hires any employees, it will need to withhold a portion of their salaries to cover various types of taxes on your employees’ behalf – including Social Security, Medicare (FICA), and payroll taxes.

Furthermore, the members of any LLCs that have elected to be taxed as an S corp will be required to pay employment taxes on their salaries. However, in return for this, the remainder of the business’s profit after these salaries have been distributed will be safe from both self-employment and FICA taxes.

Excise Tax

If your LLC engages in certain types of business (such as the sale of alcohol and tobacco or operating a heavy highway vehicle, among others), it may need to pay federal excise taxes in order to do so legally. Each excise tax comes with its own set of rules, rates, and filing obligations you’ll need to be aware of.

Understanding and fulfilling these federal tax obligations is crucial for keeping your LLC compliant and avoiding unnecessary financial penalties and/or fines.

How to File LLC Taxes in Montana

Below, we’ve outlined the general process an LLC in Montana will need to follow in order to file their tax return correctly. Note that the specificities of each step will vary slightly depending on how your LLC is organized and the specific locality it’s based in. 

Step 1: Gather Your Documentation

To ensure accurate tax filing, thorough record-keeping is essential. Begin by collecting your personal information, including:

• You and your partner’s Social Security number, date of birth, and residential address
• The previous year’s tax returns
• Your LLC’s Federal Tax Identification Number or Employer Identification Number (EIN)

Then, you’ll need to gather all documentation related to your business’s income, such as:

• Invoices you’ve issued
• Sales transaction logs
• Electronic payment reports from services like PayPal or Stripe

Lastly, assemble all records pertaining to your business expenses, which should cover:

• Lease receipts for your business premises
• Bills for utilities
• Records of office supplies purchases
• Documentation of business-related travel
• Payroll records for employees

Note: Depending on how your LLC is organized and its tax election, you may need different information for your tax return. 

Step 2: Find The Right Tax Forms

Once you've gathered all necessary documents, the next step is to select the correct tax forms for your LLC based on its organization:

• Single-Member LLCs: The business’s total income and expenses are reported on a Schedule C form, which is attached to the owner’s personal tax return and due by April 15 or the following business day if it lands on a weekend or holiday.
• Multi-Member LLCs: File an information return using Form 1065. Members must fill out a Schedule K-1 showing their individual earnings or losses by March 15 or the next business day.
• C Corporations: File a corporate tax return using Form 1120 by the April 15 deadline or on the next business day if it's a weekend or holiday.
• S Corporations: Use Form 1120-S for the corporate tax return and distribute Schedule K-1 forms to shareholders for reporting their shares of profits or losses. The deadline for filing taxes using 1120-S is March 15 or the following business day.

Since state and local taxes will have their own individual forms and requirements, we recommend contacting your municipality or hiring an accountant for guidance.

With the appropriate documentation gathered and the correct tax forms for your business entity on hand, you’ll be ready to fill them out and submit them.

Step 3: File Your Taxes

The majority of businesses choose electronic filing for its speed, enhanced security, and reliability compared to paper filing, which can be slower and more prone to errors. Here’s how it works:

• Federal Tax Returns: The IRS provides two electronic services for tax submission: Free File for businesses with an AGI below $72,000 and Free Fillable Forms for those above the threshold.
• State Tax Returns:  Businesses can file taxes through the state's TransAction Portal (TAP), which offers tools for calculating taxes, making payments, and keeping track of filing deadlines.
• Local Tax Returns: The process and platform for electronic filing of local taxes may vary depending on the county or city jurisdiction in question. This means that you should check in with your local tax authority for the specific filing procedure you will need to follow.

Note: These electronic filing tools are best suited for those who are already confident in handling their LLC taxes as if filling out a paper form. 

For new business owners, we recommend opting for the expertise of a tax professional in order to ensure both accuracy and compliance in your tax filings. 

Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes. 

Keep Your Montana LLC Compliant

While LLCs are generally easier to maintain than corporations, there are certain state and local formalities your LLC must satisfy in order to remain compliant. 

Montana LLC Annual Report

Montana's state law requires all LLCs annually file a report with the Montana Secretary of State Business Services. The report includes details such as the initial state of business formation, registered agent information, and names and addresses of officers, directors, or members. Most of this information can be found in your Montana LLC operating agreement.

The deadline for submitting the Montana annual report and paying the $20 fee is April 15 each year. A $15 penalty fee is imposed for late filings. 

Licensure and Tax Requirements

In Montana, almost all businesses are required to obtain various licenses and permits at the local, state, and federal levels. Below, we’ve broken down three of the most common types your LLC may need:

• Local Business Licenses: LLCs in Montana may be required to obtain local business licenses, depending on their specific location and type of business activity. These licenses are typically issued by city or county authorities and are necessary for legal operation in many industries, including retail, services, hospitality, and more.
• Professional Licenses: LLCs operating in regulated professions such as healthcare, law, engineering, and accounting are required to obtain professional licenses which are typically issued by the respective state regulatory boards. The Montana Department of Labor and Industry provides guidance and resources for navigating these licensing requirements.
• Environmental Permits: LLCs in Montana involved in activities that emit pollutants, handle hazardous materials, or participate in significant land development need to secure environmental permits. The Montana Department of Environmental Quality handles the issuance of these permits, which are vital for businesses in manufacturing, waste management, or construction.

Note: For detailed information on licenses and permits required for your LLC in Montana, visit the Montana Small Business Development Center's licensing page. 

Montana LLC Taxes FAQs