Montana vacation rental tax guide

With a bounty of popular destinations including Bozeman, Big Sky, and Glacier National Park, Big Sky Country offers ample opportunity for short-term rental (STR) businesses.

But these opportunities come with tax obligations. Like hotel stays, STR stays in Montana are subject to lodging taxes. Failure to comply with state and local tax laws can result in fines and interest penalties. Tax jurisdictions are increasingly making STR tax compliance a priority, so it’s important to address compliance before tax authorities address it for you. 

Avalara MyLodgeTax put together this guide to help you comply with Montana lodging tax laws at the state level. Local jurisdictions may have their own lodging tax rules. For more information on the tax rates and jurisdictions that apply to your rental’s specific location, use our lodging tax lookup tool.

No lodging tax guide is a substitute for professional tax advice. Consider this an asset to help you understand and prioritize your lodging tax questions and concerns. Questions pertaining to specific situations or out-of-the-ordinary conditions are best solved with a certified tax professional familiar with Montana tax laws.

Lodging tax basics

Lodging tax is calculated as a percentage of the cost of your guest’s stay and added to the price on the bill. The guest pays the tax, but the STR operator is responsible for collecting and paying it to the proper tax authority.

What’s the definition of “short-term rental” in Montana?

Reservations of less than 30 consecutive days are subject to Montana state lodging taxes.

Who’s required to collect and file lodging taxes on short-term rentals in Montana?

If you collect payment from short-term guests renting out a room, apartment, house, or other dwelling, you’re likely responsible for collecting, filing, and remitting lodging taxes to Montana tax authorities. You’re not required to collect lodging taxes if a third party, such as an online marketplace, collects lodging taxes for you.

Location is key to compliance

The location of your rental is a crucial piece of information for lodging tax compliance. Your address determines which tax jurisdictions you’re required to report to, which taxes you need to collect, and the appropriate tax rates.

Use our lodging tax lookup tool to get a rate report specific to your Montana rental’s address. The report includes the estimated total tax rate to collect from guests, number of required registrations, number and frequency of returns per year, and minimum number of rented days to qualify as a taxable stay.

It should be noted that tax rates and the rules governing them change frequently. Please consider your tax rate report to be informative rather than authoritative.

Local short-term rental regulations

STR operators in Montana should be aware of the local regulations that apply to them, including rules covering:

• Legality
• Permits, licenses, and registration
• Zoning
• Advertising
• Neighborhood notification
• Building and housing standards

Homeowner associations (HOAs), condominium communities, co-ops, and landlords may also have specific rules regarding vacation rentals. It’s your responsibility to be aware of STR policies that apply to your property.

Registering with tax authorities

Before you can begin collecting taxes on your STR in Montana, you’re legally required to register with the Montana Department of Revenue. You can register online to receive a lodging facility sales and use tax account. Depending on your jurisdiction, you may also be required to register with your local tax authority and file local lodging tax returns.

Collecting lodging taxes

Once you’ve registered with tax authorities, you’re ready to start collecting lodging taxes, which you’ll add to your guest’s bill when they pay for their stay.

Which lodging taxes apply to Montana short-term rentals?

In Montana, a number of different lodging taxes may apply to your STR, depending on your location. These can include:

Tax rates

Before you can begin collecting lodging taxes, you need to know the correct rate to charge to avoid compliance issues. Our lodging tax lookup tool can give you a rate report specific to your Montana address.

What charges are taxable?

In Montana, all charges paid to use the accommodations are subject to lodging taxes. This includes items such as cleaning fees, pet fees, rollaway bed fees, extra person fees, etc. Meals, transportation, entertainment, laundry services, or similar charges are not subject to lodging taxes as long as they’re stated separately.

What happens when my short-term rental marketplace (such as Airbnb or Vrbo) collects lodging taxes for me?

In Montana, STR marketplaces are required to collect state lodging taxes from guests when a rental is paid for. Marketplaces may not collect locally administered taxes. If taxes aren’t being collected for you, you’re responsible for collecting and remitting lodging taxes to state tax authorities.

Are guests ever exempt from taxes?

There are situations in which you aren’t required to collect lodging taxes in Montana. For example, a guest who rents for a long term rather than a short term is exempt from short-term lodging taxes. Charges for accommodations billed directly to and paid by the federal government, accommodations on an Indian reservation rented to an enrolled member of the same reservation, rental charges billed to a diplomat who presents a tax-exempt card issued by the U.S. State Department, and accommodations purchased by other qualified organizations are exempt from state lodging taxes.

Filing lodging tax returns

After you’ve collected taxes from your guests, it’s time to file your tax returns with the Montana Department of Revenue. In Montana, you can file returns and pay tax online. The Montana Department of Revenue allows credit card payments, but you may be charged convenience fees.

When do I need to file my returns?

You’ll be assigned a filing frequency and due dates when you register with the tax authority. For filing with the Montana Department of Revenue, state lodging facility sales and use tax due dates are as follows:

I didn’t rent my property during this filing period. Am I still required to file a lodging tax return with the Montana Department of Revenue?

Yes. STR operators registered with the Montana Department of Revenue are required to file returns each assigned filing period, regardless of whether you had short-term rental income or collected lodging taxes. Such returns are commonly known as “zero dollar returns.” Local tax authorities may have their own requirements.

Are there penalties for filing taxes late?

Whether you choose to offer STRs through a marketplace like Airbnb or Vrbo, or directly to guests, you open the door to tax liability at the state and local level. As tax revenue is a major source of local funding, tax authorities are becoming more aggressive in their efforts to identify individuals and businesses violating tax laws. Failure to register with tax authorities and file lodging tax returns in Montana on time may result in late fees, interest payments, and in extreme cases, legal action.

I’ve been offering short-term rentals without collecting lodging tax. What options do I have?

If you’re already operating an STR but not collecting lodging taxes, you may be in violation of Montana tax laws. Take the time to review your legal responsibility (with a tax professional, if necessary) and understand the risk of continuing to not collect tax.

STR hosts in Montana may be able to take advantage of a voluntary disclosure agreement (VDA). A VDA offers an opportunity for hosts to proactively disclose prior period tax liabilities in accordance with a binding agreement with the Montana Department of Revenue. VDAs are offered to encourage cooperation with state tax laws and may result in some or all penalty and interest payments being waived.

Are there options for outsourcing lodging tax filing?

Yes. Many STR operators in Montana file several state and local lodging tax returns every year. Filing solutions such as Avalara MyLodgeTax can relieve this burden.