Montana proposal would tax many purchases and fund school tax relief

The proposal would impose a 4% tax on many retail goods, digital products, and services, plus a use tax on many taxable purchases used in Montana. The sales tax covers many goods, electronically delivered products, and services. The use tax covers taxable purchases used, stored, or consumed in Montana. Many exemptions are listed, including certain food and medical items, and some services. Retailers may add the tax to the price charged to customers. These tax provisions would take effect January 1, 2026, and apply to tax years beginning after December 31, 2025.

Sales and use tax revenue would go into a state account for school funding and property tax reduction. The account would support school equalization and could reduce school district and countywide school property tax levies. County commissioners would request account money before levying specified school property taxes, and the state treasurer would distribute available funds in the listed order. School funding distributions from the account depend on legislative appropriation. The proposed tax provisions would take effect January 1, 2026, and apply to tax years beginning after December 31, 2025.

The proposal would repeal several listed school funding laws, including laws for county school equalization taxes. The repealer names county equalization taxes, a state equalization levy, and related school funding provisions. The bill also directs sales and use tax revenue to a school equalization and property tax reduction account. The proposed repeals would take effect July 1, 2026.

Certain out-of-state sellers and online marketplaces would collect and send Montana sales tax. The rules cover sellers without a physical presence in Montana and marketplace providers that meet the listed sales tests or facilitate covered sales. A seller without a Montana physical presence would be covered if its Montana sales exceed $100,000 or it makes at least 200 separate sales in the current or prior calendar year. Marketplace providers would collect tax on covered sales they make or help arrange. Smaller noncollecting retailers and auction websites would be exempt from the notice rules. These proposed provisions would apply to tax years beginning after December 31, 2025.