For businesses offering Software as a Service (SaaS) in Montana, knowing the tax rules is crucial. Montana stands out by not imposing a general sales tax, which means SaaS is typically not subject to sales tax.
However, businesses should be aware of any local tax rules and exceptions that could apply. This guide will answer the question “Is SaaS Taxable in Montana?”. We will explain the state’s classification of digital products and provide details on how to stay compliant with state regulations.
2025 SaaS Sales Tax Rates for Montana
Montana’s tax system for SaaS differs from many other states, as it does not impose a general sales tax. However, it’s crucial to understand how local taxes, exceptions, and specific SaaS regulations apply to your business.
This means that businesses offering Software as a Service (SaaS) in Montana need to be aware of what is considered taxable versus non-taxable.
Unlike most other states, Montana’s absence of a statewide sales tax simplifies tax calculations for SaaS businesses. Still, businesses should ensure they are compliant with any other local taxes or regulations that may be applicable to their products and services.
Is SaaS Taxable in Montana?
For businesses offering Software as a Service (SaaS), it is vital to understand whether such services are taxable in the state. The answer to “Is SaaS taxable in Montana?” is no. Montana does not impose a sales tax on SaaS.
Since SaaS is categorized as a service rather than a tangible product, it is exempt from sales tax in Montana. The state does not impose taxes on the sale of remote software services.
However, businesses should be aware of other potential taxes that could apply depending on their business model or delivery method. That said, businesses should ensure they monitor any changes in tax law to maintain full compliance.
How Does Montana Define SaaS and Digital Products?
In order to answer “How does Montana define SaaS and digital products?”, it’s important to know how the state defines different digital products. Here’s a breakdown of the key product categories:
- SaaS (Software as a Service): SaaS is treated as a service, not a tangible product. Since there is no transfer of ownership, SaaS is not subject to sales tax in Montana.
- Digital Products: Products like e-books, digital music, and downloadable software are typically considered taxable in other states. However, in Montana, the absence of a general sales tax eliminates the need to tax such digital goods.
Understanding how these product types are classified helps businesses avoid misunderstandings and ensures they meet the Montana SaaS service tax rules accurately.
Sales Tax on Software in Montana
There is no sales tax on SaaS in Montana, and understanding the taxability of other types of software is important for businesses. Here’s how various software types are treated in Montana:
| Software Type | Taxability in Montana | Explanation |
| SaaS (Software as a Service) | Not Taxable | SaaS is treated as a service, exempt from sales tax. |
| Prewritten Software | Not Taxable | Prewritten software, whether delivered digitally or on tangible media, is not subject to sales tax in Montana. |
| Custom Software | Not Taxable | Custom software is exempt as it does not fit the definition of prewritten software. |
| Subscription Software | Not Taxable | Even subscription-based software is treated the same as SaaS, exempt from sales tax in Montana. |
Understanding Montana SaaS software taxability and local regulations can be complex, but Commenda simplifies the entire process. Click here to learn how we can streamline your compliance in Montana.
How to Determine if Your Product is Taxable in Montana?
Determining if your product depends on the nature of the product and the delivery method. Here’s what you need to consider:
- Delivery Method: For SaaS, software delivered remotely over the internet is not taxable in Montana, as it does not involve a transfer of tangible property.
- Licensing Model: SaaS subscriptions and other software licenses are not subject to sales tax in Montana.
- Customization: Custom software customized specifically to a client’s needs is not taxable in Montana.
- Bundled Services: Since there is no statewide sales tax, bundling SaaS or software with other products does not create a sales tax obligation at the state level.
- Nexus Rules: There are no economic nexus thresholds for sales tax in Montana because there is no sales tax.
Are Digital Goods Taxable in Montana?
The taxation of digital goods in Montana differs from that in other states. Here’s one answer to the question “Are digital goods taxable in Montana?”:
- Prewritten Software: While most other states tax prewritten software, Montana does not impose sales tax on it.
- Digital Products (e-books, digital music, etc.): These types of digital products are also exempt from sales tax in Montana.
- Implications for SaaS: Since SaaS is delivered remotely, it too is exempt from tax in Montana, making it advantageous for SaaS businesses operating in the state.
Sales Tax Exemptions in Montana
Montana does not have a general statewide sales tax, so there is generally no need for sales tax exemption certificates for resale, nonprofit status, or custom software. Here are some common exemptions:
- Resale Exemption: Montana buyers purchasing goods outside of Montana for resale may provide a Montana Business Registry Resale Certificate to the out-of-state seller.
- Nonprofit Organizations: Since there is no general sales tax, nonprofit organizations do not need a sales tax exemption certificate for purchases in Montana
- Custom Software: There is no sales tax on custom software or other software in Montana, so no exemption is needed
Because there is no general sales tax, businesses in Montana do not need to maintain documentation for sales tax exemptions as they would in other states.
Consequences of Non-Compliance with SaaS Tax Rules in Montana
In accordance with Montana tax rules for SaaS businesses, there is no taxation in the state. Here’s what businesses should know about penalties and audits:
- Tax Audits: Since SaaS is not taxable, businesses will not face sales tax audits or penalties related to SaaS sales in Montana.
- Penalties for Underpayment: There are no penalties, interest, or reassessments for failing to collect or remit sales tax on SaaS, because such a tax does not exist in Montana.
Businesses must still comply with other state and local tax requirements (such as income tax or employer withholding tax). Non-compliance with those may result in audits or penalties. However, these are not related to SaaS sales tax.
Ensuring timely and accurate sales tax compliance with Montana’s SaaS tax regulations helps businesses avoid these consequences.
Filing and Remitting Montana Sales Tax
In Montana, businesses are required to file and remit sales tax according to their assigned filing frequency. Here’s a quick overview of the remitting and filing:
Filing Requirements for Montana Sales Tax
- General Sales Tax:
- Montana does not impose a general sales tax.
- There are no monthly, quarterly, or annual sales tax filing requirements for most businesses.
- Specific-Use Taxes:
- Some specialized local or use taxes exist in Montana, such as the lodging facility use tax, rental car sales tax, and local option resort taxes.
- Only businesses operating in industries or locations subject to these specific taxes must register, file, and remit returns for those taxes.
- Filing frequency and due dates for these specific-use taxes are determined by the Montana Department of Revenue and may vary by tax type and locality.
How and Where to File?
- Online Filing: If your business is subject to a specific-use tax, you must file returns electronically through the Montana Department of Revenue’s TransAction Portal (TAP).
- Zero Returns: If you are registered for a specific-use tax, you must file a return for every reporting period, even if no tax is due (“zero return”).
All sales tax returns must be filed electronically via the Montana Department of Revenue’s website. Paper filings are no longer accepted unless a waiver is granted.
Common Sales Tax Challenges for SaaS Companies in Montana
SaaS businesses in Montana face several challenges in adhering to sales tax regulations. Some common issues include:
- Nexus Confusion: Montana does not have a statewide sales tax, so for most SaaS companies operating only in Montana, sales tax nexus is not an issue.
- Bundled Services: Since Montana does not have a statewide sales tax, there is no state-level requirement to determine the taxability of bundled SaaS services.
- Exemption Management: Exemption management for sales tax is not relevant for most SaaS companies in Montana, as there is no state sales tax to exempt from.
- Multi-State Compliance: Businesses operating in multiple states must navigate different tax rules and ensure US sales tax compliance in each jurisdiction.
Simplify Montana SaaS Sales Tax Compliance with Commenda
Treading through Montana’s SaaS sales tax rules can be complex, but Commenda simplifies the process with its comprehensive tax management tools. Our sales tax platform efficiently calculates taxes based on real-time customer data, ensuring accurate reporting and minimizing errors.
Commenda also helps with filing and remitting taxes, ensuring compliance with Montana’s tax laws. With real-time updates and automated filings, Commenda ensures you get to answer the question “Is SaaS taxable in Montana?” with ease.
The platform seamlessly integrates with your existing systems and tracks physical nexus status, making your tax responsibilities clear and manageable.
Ready to make your SaaS sales tax filing effortless in Montana? Book a demo with us today!
FAQs About Montana SaaS Sales Tax
Q. Is SaaS taxable in Montana if my business doesn’t have a physical office there?
No, Montana has no statewide sales tax, so SaaS is generally exempt regardless of physical presence. Commenda simplifies multi-state nexus tracking and compliance if you sell beyond Montana.
Q. How does Montana classify SaaS products for sales tax purposes?
Montana treats SaaS as a non-taxable service since there’s no state sales tax and no tangible property transfer. Commenda keeps you updated on any local exceptions that might apply.
Q. Do I need to collect sales tax in Montana if I only sell subscription-based SaaS?
Subscription-based SaaS is not taxable at the state level. For rare local taxes, Commenda helps monitor applicable jurisdictions to ensure compliance.
Q. Are setup fees or bundled SaaS services taxable in Montana?
No statewide tax applies to setup fees or SaaS bundles. Commenda’s platform helps analyze bundles to apply taxes correctly if local option taxes exist.
Q. What are the penalties for not charging sales tax on SaaS in Montana?
Since there is no state sales tax on SaaS, there are no penalties specific to SaaS. Commenda supports compliance with other applicable tax obligations to avoid risks.
Q. Does Montana provide exemptions for SaaS sold to nonprofit or government entities?
SaaS is not taxable in Montana, so exemptions aren’t needed. Commenda assists with exemption management for states where taxes do apply.
Q. How often do SaaS businesses need to file sales tax returns in Montana?
Most SaaS businesses don’t file returns in Montana due to lack of state sales tax. Local filings depend on jurisdiction, and Commenda automates filing schedules for you.
Q. What’s the easiest way to automate SaaS sales tax compliance in Montana?
For Montana itself, automation is generally unnecessary for state sales tax, as SaaS is not taxable. However, if you sell to customers in other states, using Commenda helps you automate tax calculation, filing returns, and stay updated on regulatory changes.
