Montana Corporate Tax Rate: Everything You Need to Know
Most businesses and corporations registered and operating in Montana are subject to its unique corporate income tax requirements.3 min read
What is the Montana corporate tax rate? Most businesses and corporations registered and operating in Montana are subject to its unique corporate income tax requirements. Comparable to Montana's personal income tax bracket system, businesses and corporations file an annual tax return reporting qualified expenses, income, and eligible deductions.
What Is Montana's Corporate Tax Rate and What Type of Corporations Does It Apply To?
Unlike other states, Montana does not subject businesses to a franchise or privilege tax for the sole purpose of conducting business in the state. It does, however, tax businesses a corporate income tax rate on their gross income.
Similar to other states, Montana taxes corporate or business income in two ways, depending on the federal tax classification of the business or corporation: via the corporate flat tax rate for traditional corporations or via personal income tax for pass-through entities such as limited liability corporations (LLC's) and S Corporations.
My Business Is a Traditional Corporation, at What Rate Will I Be Taxed?
Traditional corporations, also known as C corporations, are businesses that are taxed separately from their owners and/or shareholders. Because both the individual shareholders and the corporation are taxed based on the corporation's income, traditional businesses and corporations operating in Montana are subject to double taxation.
For businesses registered and operating in Montana, the corporate flat tax rate for 2018 is 6.75 percent, with a minimum income tax of $50. For example, if your business income is $100,000 then your tax due would be $6,750.
For businesses who only conduct sales of less than $100,000 and do not have property in Montana have the option of paying the alternative tax rate of 0.5 percent. Montana's corporate income tax returns are due annually on May 15th. Traditional corporations use Form CLT – 4 to report business income.
What If My Business Is a Pass-through Entity or Not Subject to the Corporate Tax Rate?
Corporations and businesses classified as S corporations, limited liability companies (LLCs), partnerships, and sole proprietorships are not subject to the corporate tax rate and instead are subject to personal income tax requirements. The requirements vary depending on the federal tax classification of the business/corporation:
- S Corps - S corporations, which are pass-through entities, do not pay a separate federal income tax on business income. Instead, the individual shareholders are responsible for paying their portion of the federal business income taxes and reporting them on their individual personal income tax returns. S corporations use Form CLT4S to report business income.
- LLCs - LLCs are not classified as traditional corporations, and are also pass-through entities similar to S corporations, where the individual partners or shareholders report the business income on their individual income tax returns and pay their portion of the state and federal income taxes. Although LLCs are primarily classified as partnerships, owners can choose to operate as a traditional corporation. With that election, the LLC would then be subject to Montana's corporate income tax at the flat rate.
- Partnerships - Partnerships are taxes similar to LLCs with the individual partners reporting their portion of the business income on their personal federal and state income tax returns. Form PR-1 is used by partnerships and LLCs to report business income.
- Sole Proprietorships - The income from sole proprietorships are reported on the business owner's personal income tax returns. Business owners then pay the applicable state tax on that income. Sole proprietorships and Individuals utilize Form 2 (or 2EZ for non-residents) to report business income.
Now That I Know My Classification, How Do I File and Where Do I Send My Forms?
The Montana Department of Revenue can be reached via phone at:
- Toll-Free: 866-859-2254
- Telephone: 406-444-6900
Businesses and individuals can file their tax returns and applicable forms in two ways: via the Montana Department of Revenue's online transaction portal or via mail:
Montana Department of Revenue
Sam W. Mitchell Building
125 N. Roberts, 3rd Floor
Helena, MT 59623
Understanding Montana's corporate and personal income tax rate can help you and your business avoid penalties and fees and benefit from the various deductions and credits, putting and keeping your corporation on the right foot.
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