Starting a business in Montana: the $125 certificate
Montana settles the employee-or-contractor question with a $125 certificate, and it means it. If someone works for you as a contractor away from their own fixed business address, the state expects them to hold an Independent Contractor Exemption Certificate — and says in terms that a 1099 and a signed agreement do not establish contractor status. Without the certificate they are your employee, with your injury claim and penalties of up to $5,000 per violation. That is the one thing to get right here. Almost everything else in Montana is cheap and quiet.
Every state has a test for whether the person invoicing you is really a contractor, and in most of them the test is a list of factors that gets applied after something has gone wrong. Montana turns it into a document you can hold up. The Independent Contractor Exemption Certificate is issued by the Department of Labour & Industry, costs $125, and belongs to the worker rather than to the business hiring them.
Which means it points both ways, and this is the part people miss. If you are a one-person business in Montana invoicing other businesses for work you do at their premises or on their jobs, you are the person who probably needs the certificate. If you hire people that way, you are the person who needs to check that they have one.
- Sales tax
- None — nothing to register, collect or file
- Local income tax
- None
- State business licence
- Not required statewide
- Workers' comp from
- 1 employee
- Formation approved in
- Filed through the Montana Secretary of State's business portal. Montana publishes no guaranteed standard turnaround for online filings.
- First 90 days, all in
- $150–$900 · $35 of it to the state
Official portals: Montana Secretary of State — Business Services · Montana Department of Revenue — business taxes (no general sales tax) · Montana DLI — Independent Contractor Exemption Certificate. Figures checked September 2026; the portal always wins.
Who needs one, and what the state will not accept instead
The trigger is working for someone else as a contractor away from your own fixed business address. A shop with its own premises taking work in is not the situation the rule is aimed at; a person who turns up at somebody else's site, or somebody else's office, and does work there is exactly the situation it is aimed at.
The reason the certificate exists is that the usual paperwork does not settle anything. Montana states plainly that a 1099 and a signed independent contractor agreement do not establish contractor status. So the two documents most businesses rely on — the tax form and the contract — are, on their own, worth nothing here.
- What does not prove contractor status
- A 1099. A written contract calling them a contractor. The worker having their own LLC. Being paid by invoice rather than payroll. Montana names the first two specifically.
- What does
- The Independent Contractor Exemption Certificate, held by the worker, issued by the Department of Labour & Industry. $125.
- Who applies
- The worker, not the hiring business — so if you are the one doing the work, this is your $125 and your application.
- What the hirer should do
- Ask for a copy and keep it on file before the first day, the same way you would ask a subcontractor for a certificate of insurance.
What happens if nobody has one
The consequence is not an administrative fine you shrug off. If the person working for you should have held a certificate and did not, Montana treats them as your employee — which reclassifies the whole relationship retrospectively.
The injury claim lands on you
An employee's workplace injury is a workers' compensation claim against the employer. If you did not think you had an employee, you do not have a policy covering them, and the claim comes out of your own money.
Penalties of up to $5,000 per violation
Per violation — so the exposure scales with the number of people, not with the size of the job.
And it is not curable after the fact
A certificate obtained afterwards does not retrospectively make somebody a contractor for work already done. The $125 only helps if it was in place first.
Workers' compensation itself is required from the first employee, bought from private carriers or from Montana State Fund, which competes with them — Montana is not monopolistic. One useful detail if your work crosses state lines: Montana State Fund policies follow the worker, covering Montana residents whose duties are controlled from Montana even while they are temporarily out of state.
No sales tax — except in about a dozen towns
The Department of Revenue is unambiguous that Montana has no general-use sales tax, and the operating consequence is simple: your quote is your invoice. The number you give a customer is the number they pay. There is no tax line to add, no monthly return sitting behind your takings, and no version of your bookkeeping in which sales tax is a category. People who move a business here from Washington or South Dakota usually notice it first in how much shorter the month-end is.
The carve-out is the resort tax, and it is narrow in two directions at once. Only small communities can levy it — incorporated towns under 5,500 people and unincorporated resort areas under 2,500 — and it only reaches certain kinds of sale:
- Who can levy it
- Resort communities: Whitefish, Red Lodge, Virginia City, West Yellowstone among them. Resort areas: Big Sky, St Regis, Seeley Lake.
- The maximum rate
- Up to 3%, set by the town.
- What it covers
- Lodging and camping, restaurants and food service, alcohol by the drink, destination recreation, and goods the town classes as luxuries.
- Who you deal with
- The town. You register with it, collect its rate and remit to it — the Department of Revenue is not in the loop.
So a consultancy in Missoula or a contractor in Billings will never touch this. A café in Whitefish or a guiding business in Big Sky deals with it from the first day, and it is the main local registration anywhere in the state. Most Montana towns ask nothing at all of a service business.
$35 to form, $20 a year to stay
Montana charges $35 to file the Articles of Organization, which is among the lowest filing fees in the country, and $20 a year for the annual report, due 15 April. There is no franchise tax, no entity tax and no general state business licence, and nothing local sits on top of the state income tax, which tops out at 5.65%. The fifty-state fee table is on the hub page.
Licensing is by profession through the Business Standards Division, and construction and trucking carry their own registration requirements on top. If your trade is not licensed, there is nothing to apply for.
Two honest gaps, because guessing at them would be worse than naming them. The wage threshold at which unemployment insurance liability begins could not be confirmed from a state source at this check — confirm it with the Department of Labour & Industry before your first payroll. And Montana offers 24-hour and 1-hour expedited filing but the current fees were not confirmed either, so check the Secretary of State's schedule before assuming a number.
Common questions
What is the Montana Independent Contractor Exemption Certificate?
A certificate from the Department of Labour & Industry, costing $125, held by a worker who does contract work away from their own fixed business address. Montana states that a 1099 and a signed independent contractor agreement do not establish contractor status — the certificate does. Without it, the state treats the worker as the hiring business's employee.
Do I need the certificate if I am the contractor?
Usually yes. The certificate belongs to the person doing the work, not the business hiring them, so a one-person business invoicing other businesses for work done at their premises or on their sites is normally the one who needs it, and the $125 is yours to pay.
What happens if a contractor I hire doesn't have one?
Montana treats them as your employee. That means a workplace injury becomes a workers' compensation claim against you — with no policy covering it, because you did not know you had an employee — plus penalties of up to $5,000 per violation. Getting a certificate afterwards does not fix work already done.
Does Montana have a sales tax?
No general-use sales tax anywhere in the state, so there is nothing to register for, collect or file. The exception is the resort tax: small towns under 5,500 people and unincorporated resort areas under 2,500 may levy up to 3% on lodging and camping, restaurants and food service, alcohol by the drink, destination recreation and luxuries. Whitefish, Red Lodge, West Yellowstone and Big Sky are among them, and you register with the town.
When does workers' compensation become compulsory in Montana?
From the first employee. Cover comes from private carriers or from Montana State Fund, which competes with them, so Montana is not monopolistic. What catches people out is not the headcount but the contractor rule — a worker without an Independent Contractor Exemption Certificate counts towards it.
How much does a Montana LLC cost to keep?
$35 to file the Articles of Organization and $20 a year for the annual report, due 15 April. There is no franchise tax, no entity tax and no general state business licence, which makes Montana one of the cheapest states in the country to keep a company in.
$125 before the work starts, not after.
Describe your business and Velofound lays out Montana's short list — the $35 filing, 15 April, the contractor certificate the moment your plan involves paying someone off payroll — beside a live website taking card payments. Free to start.
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