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Understanding Mississippi Sales and Use Taxes

Filed under Sales Taxes. Fact checked on June 22, 2012.

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Understanding and complying with the sales tax requirements in the states in which you do business is absolutely essential. More states are taxing services, as well as retail sales, so no business owner can afford to be in the dark. In addition, you may find that you are liable for use taxes for products purchased out of state. This article answers some of the basic questions regarding sales tax in Mississippi.

In Mississippi the sales tax is levied on the privilege of engaging in business. The tax is measured by the gross proceeds of sales that are derived from the business or occupation. The tax is imposed on the gross proceeds of sales of tangible personal property and sales of many services.

Leases. In Mississippi, property is considered rented when the lessor grants its use and possession for a consideration. Rental or lease transactions are subject to sales tax in the same manner as sales transactions. Charges to lessees for such items as repairs, transportation, hotels, meals, and supplies are subject to sales tax.

Sales and use tax rate. The Mississippi sales and use tax rate is generally 7 percent. Mississippi does not have local city or county sales taxes except an additional .25% tax on regular retail sales made inside the city of Tupelo. However, there are numerous tourism and economic development taxes levied in many cities and counties typically imposed on hotels, motels, restaurants and bars. Please review the listing on the Tax Commission website to determine if your business is subject to any of these taxes.

The following are the tax rates for the main categories of taxable items in Mississippi:

  • Sale of tangible personal property.......7 percent/li>
  • Farm tractors and logging equipment...…1.5 percent
  • Farm implements……1.5 percent
  • Sales to electric power associations..…1 percent
  • Certain machinery, machine parts and equipment located on and used in the operation of certain publicly-owned port facilities...1.5 percent
  • Manufacturing machinery …..1.5 percent
  • Automobiles and light trucks (10,000 lbs. or less)…..5 percent
  • Trucks (greater than 10,000.00 lbs.), aircraft, semitrailers, mobile homes and modular homes……3 percent
  • Materials to railroads for use in track and track structure…….3 percent
  • Other tangible personal property including alcoholic beverages and beer…….7 percent

Tax-exempt items. Mississippi has many specific items that are exempt from sales tax. For example, certain prescription medications are exempt from Mississippi sales tax. You'll want to check and see if you are exempt from the sales tax.

Sellers Must Collect and Pay Over Sales Tax

In Mississippi, the seller must add the tax to the sales price and collect the tax from the purchaser at the time the sales price or gross income is collected. The tax is a debt from the purchaser to the seller until paid. The tax must be stated separately from the sales price on the sales invoice and shown separately on the seller's records.

Absorbing the tax is not permitted. In Mississippi it is against the law to refund or offer to refund all or any part of the amount collected, or to absorb the amount of sales tax required to be added to the sales price and collected from the purchaser. As a seller, it is also against the law for you to advertise directly or indirectly that you will absorb the sales tax that is required to be added to the sales price.

Obtaining tax permits in Mississippi

In Mississippi every person engaging in a business subject to the sales tax must secure a license. The license is valid indefinitely and is obtained from the State Tax Commission.

Purchasers Responsible for Tax Exemption Certificates

An exemption certificate may be issued by a purchaser of a nontaxable item. The exemption certificate may be based on the type of transaction (such as a resale exemption) or on the item itself.

Wholesale Purchases Generally Are Exempt from Tax

The sale of taxable services or tangible personal property to a retailer for resale in the regular course of business is considered to be a wholesale sale. If you're making wholesale purchases you are exempt from sales tax. Wholesale or exempt sales must be substantiated by an invoice that clearly indicates the following information:

  • the date;
  • the name and address of the vendor (seller);
  • the purchaser's name and address;
  • the items sold; and
  • the price.

Resale exemption certificates. Mississippi does not have a formal resale exemption certificate. If you're making purchases for resale the invoice must include the following information:

  • the date;
  • the name and address of the vendor (seller);
  • the purchaser's name and address;
  • the items sold; and
  • the price

The invoices must be filed in chronological order and retained for at least three years from the date of sale.

Blanket resale certificates. Sellers have no formal way of accepting a blanket certificate from you as a purchaser if you repeatedly purchase the same type of property or service for processing or resale. However, if the invoice has the information required above for resale exemption certificates, that will in effect act like a blanket certificate.

Physical Presence Triggers Tax Liability

Mississippi has a statute that specifically taxes out-of-state mail order and catalogue sellers. However, you will be responsible for paying this tax only if you have physical presence within Mississippi. To determine if you have physical presence, ask yourself the following:

  • Do I have retail facilities, a warehouse, or any office space in Mississippi? Maintaining retail or warehouse facilities will give you physical presence. Also, having an office for employees, even for business activities unrelated to mail order sales, will give you physical presence.
  • Do my employees or I enter Mississippi for purposes of taking and transmitting orders from Mississippi? If your employee or independent contractor goes into Mississippi to take or transmit orders, your business may have physical presence in Mississippi. However, contracting with a common carrier to deliver mail order goods does not constitute physical presence.
  • Do my delivery vehicles frequently enter Mississippi for purposes of delivering property? Frequent deliveries in Mississippi by your trucks will give you physical presence in Mississippi.

Overpayment of Taxes Can Be Refunded or Credited

You are normally allowed to take credit for an overpayment on a subsequent sales tax return or file for a refund. You may apply to the Mississippi Tax Commissioner for a revision of the tax liability. The application for refund or credit must be made within 36 months from the date of the assessment or the date the return was filed.

Mississippi Imposes Use Tax on Out-of-State Purchases

The use tax is imposed for the privilege of using, storing, or consuming within Mississippi any tangible personal property, possession, regardless of the manner in which possession of the property was acquired. However, property brought into Mississippi on which a sales or use tax has been paid in another state equal to or in excess of the Mississippi tax is not subject to tax in Mississippi.

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