Montana - Taxation



Montana's 10-bracket personal income tax, which has been indexed to inflation since 1981, ranges from 2% to 11%. The corporate income tax is 6.75% on net income, with a minimum tax of $50; for small business corporations, $10. The rate for corporations filing on a water's-edge-basis (that is, only counting its operations within the boundaries of the US plus a number of tax havens and not its operations other foreign jurisdictions) is 7%. There is no state sales and use tax, but Montana imposes a full array of excise taxes covering motor fuels, tobacco products, insurance premiums, public utilities, alcoholic beverages (the state controls all sales), amusements, pari-mutuels, and other selected items. In 2002, the state tax on gas was raised from $0.27 a gallon to $0.2775¢ a gallon. Montana's estate tax, with a maximum rate of 32%, is tied to the federal exemption for state death taxes, and is therefore set to be phased out in tandem with the phasing out of the federal estate tax credit by 2007, unless the state takes positive action to establish an independent estate tax. Montana's revenue losses from the phasing out of its estate tax are estimated at -$900,000 for 2002/03, -$2.7 million for 2003/04 and -$3.9 million for 2006/07. Death and gift taxes accounted for 0.9% of state collections in 2002. Severance taxes in Montana include a coal severance tax, a metalliferous mines license tax, oil and gas producers' severance tax, a micaceous minerals license tax, a cement license tax and a mineral mining tax. Severance taxes constituted 6.2% of state taxes collected in 2002. Other state taxes include various license fees and a state property tax, although property taxes are also collected at the local level. In Montana's relatively centralized state tax system, 64.5% of all state and local taxes were collected at the state level.

The state collected $1.443 billion in taxes in 2002, of which 35.8% came from individual income taxes, 25.7% from selective sales taxes, 13.8% from license fees, 12.5% from state property taxes, and 3.5% from corporate income taxes. In 2003, Montana ranked 37th among the states in terms of combined state and local tax burden, which amounted to about 9.1% of income.

The following table from the US Census Bureau provides a summary of taxes collected by the state in 2002.

Montana

  ($000) PER CAPITA
Total Taxes 1,442,731 1,586.37
Property taxes 181,501 199.57
Sales and gross receipts 370,801 407.72
General sales and gross receipts (X) (X)
Selective sales taxes 370,801 407.72
Alcoholic beverage 18,388 20.22
Amusements 43,673 48.02
Insurance Premiums 51,084 56.17
Motor fuels 191,440 210.5
Pari-mutuels 115 0.13
Public utilities 31,251 34.36
Tobacco products 13,281 14.6
Other selective sales 21,569 23.72
Licenses 199,479 219.34
Alcoholic beverages 2,153 2.37
Amusements 3,977 4.37
Corporation 1,692 1.86
Hunting and fishing 33,013 36.3
Motor vehicle 127,164 139.82
Motor vehicle operators 4,343 4.78
Public utility 5 0.01
Occupation and business, NEC 25,991 28.58
Other 1,141 1.25
Other taxes 690,950 759.74
Individual income 517,568 569.1
Corporation net income 68,173 74.96
Death and gift 13,816 15.19
Documentary and stock transfer (X) (X)
Severance 88,882 97.73
Other 2,511 2.76


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