It depends. There are two different possibilities:
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You are a Montana resident. If you are a Montana resident, Montana will tax all of your income regardless of where you earned it. However, Montana will give you a credit for the amount of tax you must pay to the other state for income earned there. (If the other state is ND, there is a reciprocal agreement between MT and ND, and you are only taxed in the state where you live. You would not have to file a ND return unless ND tax is mistakenly withheld).
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You are working in Montana as a nonresident. Montana will not tax income earned in the other state, but may factor in all of your income to determine MT tax. In this situation, MT pretends that all of your income is taxable in MT, and the prorates the amount of tax to the percentage of income you earn in MT. In this way, MT does not tax your other state's income, but all income is used to determine MT tax. (Also note, if the other state is ND, you do not need to file a MT return unless MT tax was mistakenly withheld. If this is the case, you would file a MT return with zero income to have all MT tax refunded to you, and use the refund to pay what you owe to ND on this income.).
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