By Clayton Murphy | UM Legislative News Service and Jenn Rowell | The Electric
HELENA — Montana towns and cities could have the option of a local, tourism-economy-based sales tax if a bill in the Legislature can gain traction. It’s a different and at times unpopular angle of attack against rising property taxes — a departure from other proposed fixes like tax credits and property tax restructuring.
Rep. Greg Oblander, R-Billings is carrying House Bill 489. An optional sales tax is not a new idea. Sen. Christopher Pope, D-Bozeman, tried it in 2023. His bill didn’t even make it out of committee.
Oblander’s bill hit the House Local Government Committee on Feb. 20. He argued a solution to affordability won’t come from internal mechanics.
“ We all know that property tax-wise, as that teeter-totter gets shifted, we give a benefit to one taxpayer, it shuffles to the other side and those taxpayers end up paying more,” Oblander said. “This is designed to not do that.”
The bill has so far been heard in the local government and taxation committees, according to the state’s bill tracker.
Under the proposal, the question of implementing a local option tax could be place on the ballot by a local governing body on an even numbered year’s general election.
For any affirmative vote to be adopted in the local community, for example Cascade County, at least 40 percent of qualified electors must vote in the election.
For local voter turnout context, according to the Cascade County elections office:
- 2024 federal general election: 73 percent turnout in Cascade County
- June 2024 federal primary election: 53 percent turnout
- November 2023 municipal election: 58 percent
- June 2023 library levy election: 41 percent
- Movember 2022 federal general election: 58 percent
The tax could only be applied to tourism-focused items like outfitting and guiding services and bar or restaurant purchases.
The following categories would be eligible for local taxation under the proposed bill and local governing bodies may choose which categories to tax and the rate of taxation up to 4 percent per category:
- purchases at restaurants and retail drinking establishments
- outfitter and guide services
- airport landings
- non-SNAP grocery items, apart from pet food, soap, paper products, cleaning supplies, hygiene supplies and medicine
According to the U.S. Department of Agriculture, food eligible for SNAP includes fruits and vegetables, meat, poultry, fish, dairy products, breads and cereals, snack foods and non-alcoholic beverages, and seeds and plants, which produce food for the household to eat.
Cascade County Commissioner Joe Briggs supports the legislation, which would create “a system where the tourists who use our roads and place a burden on our public safety also help pay.”
He said it’s designed to target visitors rather than residents, but it would apply to residents when they go out to eat, Briggs said.
According to bill sponsors, and supporters, 12.5 million visitors spent $5.45 billion in Montana in 2023, citing numbers from a University of Montana study.
The bill, if approved, wouldn’t change the bed tax other than the portion of those dollars that currently go to the state’s general fund would instead be transferred into property tax reduction, Briggs told The Electric, and it won’t affect the tourism promotion dollars that fund tourism regions.
Briggs said supporters view HB 489 as a companion to Gov. Greg Gianforte’s comstead and homestead legislation and is needed since the governor’s bills don’t expand the pool of entities paying taxes, rather move the burden from one class of property to another.
Briggs said the legislation wouldn’t increase revenue for state or local governments, but other than the quarter of a percent that businesses collecting the tax would receive for administration, the rest of the funds collected creates a credit on property tax bills.
Based on estimates, Briggs said that if Cascade County were to implement a 4 percent local option tax under the proposed legislation, there could be a $500 credit on a tax bill for a house with a market value of $500,000.
Briggs told The Electric that he didn’t think that was representative of the average home in Cascade County, but that the legislation could create tax savings for local property owners.
As proposed, the legislation would allow local governing bodies where voters adopt the local option tax to choose up to three days annually as tax holidays with no sales tax collected.
Critics argued the bill would close the door to all future attempts at a general state sales tax. Brad Griffin, president of the Montana Retail Association, used a similar situation in Alaska as an example.
“Alaska allowed their local communities to pass local option taxes,” Griffin said. “And then when the legislature wanted to adopt a statewide sales tax, those cities were the number one opponents to a statewide sales tax because it would mess up their revenue stream.
Under the proposed legislation, if a general statewide sales tax was implemented, communities with the local option sales tax could keep that tax, but it would be capped at two percent and would continue to be allocated to local government.
Several outfitters also testified against HB 489, saying they worried the bill places an unfair burden on their industry.
Clayton Murphy is a reporter with the UM Legislative News Service, a partnership of the University of Montana School of Journalism, the Montana Broadcasters Association, the Montana Newspaper Association and the Greater Montana Foundation. Murphy can be reached at clayton.murphy@umconnect.umt.edu.
