Montana Tipping Laws & Regulations (2026)

Montana's Unique Revenue-Based Tip Credit Model

Montana is the only state with a revenue-based threshold that determines tip credit eligibility:

• Businesses with gross annual revenue OVER $110,000: Must pay all employees the full $10.30 minimum wage (NO tip credit allowed)
• Businesses with gross annual revenue UNDER $110,000: Can pay tipped employees $4.00/hour if tips make up the difference to $10.30
• This is a critical distinction that many employers overlook when calculating compliance costs
• Gratuity Solutions automatically classifies your business and applies the correct wage rules
• If your revenue crosses the threshold mid-year, you must immediately update wage calculations

Determining Your Revenue Threshold Status

To determine whether your business qualifies for the tip credit:

• Calculate gross annual revenue from all sources (not net profit)
• Review the prior calendar year's revenue to determine current year compliance rules
• If you're a new business, estimate annual revenue; once you cross $110K, immediately switch to full minimum wage
• Keep documentation of revenue calculations for audit purposes
• Update payroll systems promptly if you cross the threshold

Tip Credit Rules for Small Businesses (Under $110K Revenue)

If your Montana business has less than $110,000 annual gross revenue, you can use a tip credit:

• The tipped minimum wage is $4.00 per hour
• Tips must make up the difference to reach the $10.30 full minimum wage
• If tips fall short in any pay period, the employer must make up the difference
• The employee must be customarily tipped (servers, bartenders, bussers)
• The employee must be informed of the tip credit policy in writing before employment begins

No Tip Credit for Large Businesses (Over $110K Revenue)

If your Montana business has $110,000 or more in annual gross revenue:

• NO tip credit is allowed for any employee
• All employees must be paid at least $10.30 per hour
• Tips are gratuities on top of the full minimum wage, not a substitute
• This applies to all positions, including servers and bartenders
• This significantly affects cost modeling and pricing strategies for larger establishments

Tip Pooling Regulations

Montana allows pooled tip arrangements with clear restrictions:

• Tips may only be pooled among employees who are customarily tipped (servers, bartenders, bussers, food runners)
• Non-tipped employees (kitchen staff, dishwashers) cannot participate in tip pools
• Managers and supervisors cannot take a share of tips unless they regularly perform tipped work
• The tip pool must be reasonable and transparent
• Employees must be informed of the tip pool arrangement in advance

Overtime Rules for Tipped Employees

When calculating overtime for tipped employees in Montana:

• For businesses UNDER $110K: Overtime is calculated on the full $10.30 minimum wage, not the $4.00 tipped wage
• For businesses OVER $110K: Overtime is calculated on the full $10.30 minimum wage (already paid)
• Tipped employees are entitled to 1.5x the full minimum wage for hours over 40 per week
• This is a significant compliance point employers often overlook
• Gratuity Solutions automatically recalculates for overtime compliance based on your business size

Record-Keeping Requirements

Montana employers must maintain:

• Annual revenue calculations to prove tip credit eligibility
• Daily tip records for each employee (if eligible for tip credit)
• Documentation of the tip credit policy provided to employees
• Proof of any tip make-up payments when tips fall short
• Records of tip pooling or sharing arrangements and distributions
• These records must be kept for at least 3 years

Planning for Revenue Growth

As your Montana business grows, prepare for potential changes:

• If you're approaching $110K revenue, plan for the transition to full minimum wage
• Update payroll systems before crossing the threshold
• Adjust pricing and staffing models if tip credit becomes unavailable
• Communicate changes to staff well in advance
• Gratuity Solutions can model both scenarios to help with financial planning