Anti-sales tax sentiment is strong in Montana. During the 2016 gubernatorial election, both candidates insisted they were against a statewide sales tax. New Gov. Steve Bullock said during his campaign that he wanted to “end the debate on a statewide sales tax for good,” and that he would try to permanently ban a statewide sales tax. He didn’t address local option sales taxes.
Cities throughout Montana have long called for an alternative source of revenue, and many support a local option sales tax. Officials in Helena, Kalispell, and Missoula have all spoken in favor of a local option sales tax and have even expressed a desire for “self-determination” — amending state law so localities can put local option sales taxes on the ballot.
A bill that would authorize localities to adopt a local option infrastructure tax has now been introduced. House Bill 577 (Senate Bill 331) seeks to allow consolidated city-counties, counties, and municipalities to levy a local option tax on luxury goods and services. Revenue raised would be used primarily for the construction, improvement, and maintenance of critical infrastructure projects, such as drinking water systems, wastewater treatment facilities, streets, etc. It would also provide some property tax relief.
“Luxury goods and services” is defined as “a gift item, luxury item, rental motor vehicle, or other item or a service normally sold to the public or to transient visitors or tourists.” The term does not include “any necessities of life” or the following:
- Appliances, hardware supplies, or tools
- Food purchased unprepared or unserved
- Medicine or medical supplies or services
- Motor vehicles (sales)
- Utilities or utility-like services, such as the provision of electricity, natural gas, water, etc.
The measure calls for the rate to be established by election petition or resolution, but it may not exceed 4 percent. All local option taxes would have to be approved by popular vote.
A handful of towns and unincorporated areas with small populations and high rates of tourism already levy local resort taxes on food, lodging, and retail sales. Localities wishing to impose the local option infrastructure tax would have to first elect to terminate their existing resort taxes.
City officials want the local option tax
Chuck Stearns, the recently retired city manager of Whitefish, backs the bill. He says Whitefish’s local resort tax is popular among voters. Officials from Bozeman, Colstrip, Glendive, Great Falls, and other cities also back the bill. Bozeman City Manager Chris Kukulski said residents often ask him why the city doesn’t somehow tax the millions of tourists who visit every year (Bozeman Daily Chronicle).
Small businesses oppose the local option tax
HB 577 is opposed by many of the state’s small business and retail associations. Brad Griffin of the Montana Retail Association says, “The biggest reason why you should not pass this bill is it doesn’t tax online sellers. … “[W]e’re going to give them a 4-percent head-start on every single sale right out of the gate.”
Opponents also say the bill is confusing, and that the tax would create “a patchwork tax structure across the state.”
Tax automation software facilitates sales and use tax compliance throughout the United States. Learn more.