Montana, along with Alaska, Delaware, New Hampshire, and Oregon, is one of five states with no state sales tax. Generally speaking, if you are selling goods or products over the Internet to customers located in Montana, sales tax for those customers should be a non-issue.
However, the federal government is now considering legislation that would affect large Internet retailers and how online sales taxes are collected in all states. The proposed federal law, called the Marketplace Fairness Act of 2013, would allow states to require sellers not physically located in their state to collect taxes on online and catalog sales made to people in their state. Sellers that make $1 million or less in annual sales and have no physical presence in the state would be exempt from this requirement. States would have to meet certain criteria to simplify their sales tax laws and make sales tax collection easier before they could require sellers to collect the tax. Internet sellers in Montana with sales of over $1 million would have to start collecting sales tax on sales made to customers in other states under the new law.
Below is an article on the current rules on Internet sales tax in Montana. The new federal law scheduled to be voted on in May 2013 would affect all state Internet sales tax laws so be sure to check for updates in this area. (We will continue to keep you updated as well.)
Sales Tax Statements from the Montana DOR
The Montana Department of Revenue (DOR) has a well-written, informative webpage specifically covering sales tax. Among other things, the webpage gives a helpful explanation of the tax situation when a Montana resident buys from an out-of-state Internet seller. In short, with some unlikely exceptions, there is no sales tax involved for sales from out-of-state Internet retailers to Montana consumers.
For States That Do Have Sales Tax
The current default rule throughout the United States is that you must collect sales tax on Internet sales to customers in those states where your business has a “physical presence”—assuming, of course, that the state involved has a sales tax. The physical-presence rule is based on a 1992 United States Supreme Court decision, Quill Corp. v. North Dakota, that addressed the obligations of mail-order businesses to collect sales tax on out-of-state sales; the decision has been extended to include online retailers. Generally speaking, a physical presence means such things as:
- having a warehouse in the state
- having a store in the state
- having an office in the state, or
- having a sales representative in the state.
As you might expect, the corollary to the physical-presence rule is that, if you do not have a physical presence in the state, you generally are not required to collect sales tax for an Internet-based sale to someone in that state.
However, because Montana has no state sales tax, these rules are not relevant to sales you make to Montana customers.
If you find yourself wondering if anything has changed regarding Montana sales tax, you can always check the Montana Department of Revenue’s website. For more general information on taxes on Internet sales, see Nolo's article Sales Tax on the Internet. And, for information on the rules about collecting sales tax for Internet sales in any other state, see Nolo’s article, 50-State Guide to Internet Sales Tax Laws.