(1) Every employer residing in Montana and every nonresident employer transacting business in Montana is required to withhold Montana state income tax from wages paid to an employee for services rendered within Montana and for services rendered outside Montana by an employee who is a resident of Montana.

(2) Wages paid to nonresidents or nonresident aliens rendering services within Montana are subject to withholding in all cases unless the compensation is specifically exempted under Montana law.

(3) Compensation which may be excludable from adjusted gross income under a United States tax treaty remains subject to Montana withholding as the determination whether a nonresident alien qualifies for tax treaty exclusion cannot be made until the individual's Montana income tax return is filed.

(4) Temporary employment or employment of short duration within Montana of residents or nonresidents does not relieve the employer of the obligation to withhold on such wages.

(5) The Amtrak Reauthorization and Improvement Act of 1990 exempts from state income tax and withholding the compensation of certain railroad, trucking, and air and water carrier employees unless they are Montana residents. The exemption from withholding applies only to nonresident interstate carrier employees.

(6) Wages paid to an enrolled member of a Native American tribe are subject to withholding except as provided in this rule.

(a) Wages are exempt from withholding when:

(i) the employee is an enrolled tribal member of the governing tribe of the reservation on which the enrolled tribal member works and resides;

(ii) the wages earned by the employee derived from reservation sources; and

(iii) the employee submits a statement to the employer attesting that the employee resides on his or her reservation, together with a certificate of enrollment.

(b) When wages are derived from both reservation sources and nonreservation sources, only wages derived from reservation sources are exempt from withholding, provided the employee meets all the criteria in (6) (a) .

(c) When an employee does not reside on his or her reservation for an entire pay period, only wages earned while the employee was residing on the reservation are exempt from taxation, provided the employee meets all the criteria in (6) (a) .

(7) Wages paid to a resident of North Dakota for personal services rendered within Montana are not subject to withholding provided the employee has filed a certification of North Dakota residency (Form NR-2) in accordance with ARM 42.17.134.