Montana Contractor Taxes and Licensing Guide

Montana contractors don't charge sales tax on labor or materials, because the state has no general sales tax. The tax to know is the Contractor's 1% Gross Receipts Tax on public construction contracts over $80,000. Since January 1, 2026, construction contractors also need a state license from the Department of Labor & Industry.

Do Montana contractors charge sales tax?

No. The Department of Revenue (DOR) says "Montana does not have a general-use sales tax." There's no state sales tax to add to a remodel invoice, and no state sales tax on the lumber, wire or fixtures you buy at a Montana supply house. Labor vs. materials, the big question in most states, mostly doesn't come up here. Our labor vs. materials guide shows how much that differs from the rest of the country.

That doesn't make Montana tax-free for builders. The state leans on income tax, a gross receipts tax on public work, and resort taxes in a few tourist towns. And if you buy materials in a neighboring state, that state's rules still apply at its counter. Idaho, for example, has an exemption for materials headed to jobs in states with no sales tax, and its Tax Commission lists Montana as one. The details are on our Idaho page.

How does the 1% gross receipts tax on public jobs work?

DOR's page on the Contractor's 1% Gross Receipts Tax (CGR) says contractors "must pay a 1% tax on all public construction contracts over $80,000." It applies to prime contractors and subcontractors. The $80,000 threshold came from Senate Bill 253, signed May 22, 2023, and DOR says those changes took effect immediately. If a contract grows past $80,000 through change orders, the 1% applies to the higher price and can be caught up on later payments.

• Who sends the money. The public entity that awards the contract registers it within 10 days and files withholding returns within 30 days after each payment to you.
• Subs. A prime with a sub registers the subcontract within 10 days and files within 30 days after paying the sub, allocating funds from its own payments rather than remitting for the sub.
• Credit. You can claim CGR as a credit on your Montana individual or corporate income tax return, or get a refund against business personal property taxes and certain vehicle fees on Form CGR-3. The credit is available for the year paid plus 5 succeeding tax years.
• Late filings. A late CGR-2 withholding return draws a penalty of 10% of the 1% fee, plus normal penalties and interest.

What are Montana's income tax rates for 2026?

Profit from a sole proprietorship or pass-through business lands on your Montana personal return. DOR's notice on House Bill 337 lists two brackets for tax year 2026:

There's no sales tax to lean on, so income tax is where Montana collects from most small shops. Set aside for state and federal estimates at the same time with the quarterly estimated tax calculator. Corporations and S corps have their own filings; ask a CPA which one fits your setup.

What license does a Montana contractor need in 2026?

Montana changed the rules this year. DLI's program page says that effective January 1, 2026, construction contractors must be licensed, after House Bill 239 replaced the old registration framework. Contractors with an active registration on December 31, 2025, "have been converted to the new license." Under MCA 37-45-201, you can't do business as a construction contractor without a current license, and your application must include proof that you comply with workers' comp law.

MCA 37-45-104 lists who's exempt. It includes casual jobs under $2,500 a job that aren't part of a bigger operation, licensed Montana electricians and plumbers working within their license, and "an independent contractor who has no employees," who may register voluntarily. DLI's program page still also says contractors with employees "must register," so if you're a one-person shop, call DLI to confirm what applies to you. See our contractor license guide for how licensing works in general.

The plumbing board's FAQ adds two things worth knowing. A journeyman license doesn't let you pull permits or advertise as a plumbing business. And Montana's journeyman reciprocity covers only Oregon, Idaho, North Dakota and South Dakota, with no reciprocity for master licenses.

How does workers' comp work for Montana contractors?

DLI says the Workers' Compensation Act, with limited exceptions, requires employers to cover "full-time, part-time, seasonal, and occasional workers." Montana gives you three routes: approved self-insurance (Plan 1), a private insurer (Plan 2) or Montana State Fund (Plan 3). Owners who work on Montana jobsites without being covered under a Montana policy need an active ICEC. DLI says independent contractors "can be fined up to $5,000 per violation" for working without an ICEC or coverage.

If you run uninsured, the Uninsured Employers' Fund pays your hurt worker and bills you. DLI says you may be assessed "double the premium they would have paid" with a $200 minimum. DLI's contractor paperwork also says contractors from Wyoming, Idaho or South Dakota with an existing comp policy may ask for an extraterritorial agreement for temporary Montana work. Read more in workers' compensation.

Do any Montana towns charge a local tax?

• Resort taxes. DOR lists 3% resort taxes in Big Sky, Cooke City, Craig, Gardiner, Red Lodge, St Regis, Virginia City, West Yellowstone, Whitefish and Wolf Creek. They hit lodging, restaurants, bars, recreation and luxury goods, and DOR says it "does not administer the Local Resort Tax." Ask the town if your purchases are covered.
• Liens. Montana has its own notice rules for mechanics liens; read them before you start a big job.
• Neighbors. Crossing into Idaho or Wyoming? Each sets its own sales tax and licensing rules, so check the state page before you bid.