Sweeping tax-reform legislation replacing Montana’s income tax with a 4% sales and use tax narrowly won preliminary approval by the state House of Representatives last week. (Wednesday) The vote was 52-48.
Final approval of the legislation, An Act Generally Revising Taxation; Enacting a 4% Sales and Use Tax (HB-636) which is estimated to raise $563 million in the first year, is expected later this week. Approval would send the measure to the Senate for consideration and approval before being submitted to voters in November. A similar proposal was defeated eight years ago.
The bill would subject goods and services sold by catalog, direct mail, by phone, including toll-free numbers, through television shopping services, the Internet or other electronic means to being taxed at 4%.
The tax would not apply to government purchases or those made on Indian reservations within the state.
Both in-state and out-of-state sellers, those with even the slightest presence in the state, no matter how temporary, would be required to obtain a state issued business license and collect the tax from their customers, forwarding it periodically to the state treasurer’s office according to the 114 page legislation.
Catalogers and other direct marketers maintaining office or warehousing space or with temporary agents in Montana would be viewed under the measure as having a physical presence in the state.
The legislation would prohibit both in-state and out-of-state companies from including, absorbing or refunding the sales price of goods and services or advertising that they would do so.
Sellers, whether remote or within the state, that fail to pay sales and use taxes on time initially face graduated civil penalties of between 5% and 25% of the unpaid balance plus interest.
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