Tax the tourists? That cash grab may be not so lucrative
Darrell Ehrlick
(Daily Montanan) Frustrated by rising property taxes, complicated tax schemes and housing costs that seem out-of-control, leaders at the state, county and local level have been getting an earful from local residents, and some have raised the question: Is it (again) time to consider a statewide sales tax?
Just the mere mention of the concept is politically fraught in the Treasure State.
Bob Story, of the Montana Taxpayers Association, told a crowd in Billings on Tuesday that since 1971, the state had attempted some form of sales tax on at least five occasions, only having success once — for a limited local-option resort sales tax that exists in places like Big Sky, Whitefish and Red Lodge.
For a long list of politicians, the concept has been likened to political suicide as the state’s residents have stubbornly refused efforts to implement a sales tax, stretching back to a last serious attempt in 1994 when the concept was defeated by state voters by a 3-to-1 margin.
In addition to being just one of four states that doesn’t have a sales tax, Montana may be the only one that has no sales tax but still has a constitutional amendment governing a sales tax. Article VIII, Section 16, passed in 1994, and it caps a sales tax at 4% — even though the state has never had one, a sort of end-run to control the Legislature should it ever decide to pass such a measure.
A semi-annual Bureau of Business and Economic Research “road show” is traveling statewide and is tackling the controversial subject.
“Certainly, being a no-sales-tax state is part of our cultural identity,” said Jeffrey Michael, the director of the BBER, of the University of Montana.
Tax the tourists
If Montana has any popular support for a sales tax, it might be as a means to tax tourism, one of the largest sectors of Montana’s economy. Local leaders have repeatedly pointed out that tourism takes a toll on infrastructure, which is hard to recoup because when out-of-state tourists travel the state, they don’t pay taxes on purchases or food.
The state’s Legislative Fiscal Division estimates that 88% of a state sales tax would fall on the shoulders of state residents. That estimate may be smaller than what some leaders expect because Montana already has a lodging tax, which captures revenue from motels and hotels.
While the average length of stay for an out-of-state tourist is more than five days, Michael said that many of the tourists coming to Montana are not shopping. Rather, their time is often spent in national and state parks and recreation.
The state estimates a 4% sales tax would generate about $1.3 billion in revenue, while Montana’s current property taxes generate $2.4 billion.
Proportionally, more tax is collected from out-of-state residents through property taxes than a sales tax capped at 4%, Michael said.
“That’s because out-of-state residents generally have higher dollar property values,” he said.
While state-to-state comparisons show visitors to Montana spend about the same or less money in the state compared to other locations, one of the noticeable differences is in gasoline. Because many of the tourists want to travel around the state, sometimes with large recreational vehicles, they tend to spend about twice as much on gasoline. Michael said an option to raising revenue could be increasing the gasoline tax, now at around 33 cents per gallon, which ranks 18th in the nation, according to the Tax Foundation. Michael said Montana could even consider a seasonal gas tax increase, too.
“Visitors put a lot of pressure on roads and infrastructure,” Michael said.
Tourism trends
Melissa Weddell, the director of the UM Institute For Tourism and Recreation Research, located in Missoula, helped describe the economic activity of tourism on the state.
Overall, tourism in Montana during 2025 decreased by 4%, dropping to 13.3 million visitors.
In 2024, non-resident spending in the state topped $5 billion. The average amount being spent by tourists is going up, and Weddell said it’s incredibly positive 75% of those who visited are “repeat visitors.”
Vacation and recreation top the list of reasons to visit Montana, and 89% feel a sense of being welcomed. Weddell said that Montana’s tourism metrics are a very positive factor for the state.
“They want authentic and genuine experiences,” she said.
She said adding flights to various airports, especially those east of the Mississippi River, have made it easier for folks to visit from farther away. Montana also ranks No. 3 nationally in terms of gross-domestic product of tourism at 4.6% of the Treasure State’s income coming from tourism.
Even though the Yellowstone or Glacier national parks act like a magnet for many visitors, Weddell said that often those same visitors spend more time or come back because they discover other recreational opportunities. For example, mountain biking and target shooting have become two of the largest activities that draw residents.
While Weddell described Montana as doing “all the right things,” she pointed out that to the east, North Dakota, has more tourists and visitors. Even though the Peace Garden State has the Teddy Roosevelt National Park, she pointed out that a massive investment in marketing North Dakota helps draw a higher-than-expected turnout.
And Weddell said with the economic uncertainty nationwide, the tourism industry is facing a “softening.”
“And that’s going around across the state,” she said.
Those rising costs are dragging down the optimism of some travel-related businesses, of which, 67% reported an increased concern about the costs of fuel, goods or services.