Taxes and Credits

Corporate Income Tax

All corporations engaged in business activities in Mississippi are taxed on the net taxable income derived from those activities as follows:

First	$5,000	3%
Next	$5,000	4%
Over	$10,000	5%

In the case of multi-state manufacturing corporations, net business income from manufacturing operations which cannot be directly assigned to the Mississippi operation is apportioned to the State on the basis of a three-factor formula:

1. Ratio of property (book value) in Mississippi versus total property
2. Ratio of payroll in Mississippi compared to total payroll
3. Ratio of sales attributable to Mississippi compared to total sales

Additional non-business income is added to the apportioned income.

Mississippi allows a net operating loss to be carried over for the five years following the taxable year of such a loss. The State, however, does not allow deductions of federal income taxes. There is no county or municipal income tax in Mississippi.

Example (Multi-State Operation)

Assume that a company selling at wholesale has two manufacturing plants, one in Mississippi and one in another state, and that the Mississippi plant accounts for 45% of the property, 40% of the payroll, and 35% of the sales. Assume further that the net business income of the corporation is $500,000. The corporate income subject to Mississippi tax and the amount of tax payable can be calculated as follows:

Ratio of property in Mississippi to total property	.45
Ratio of payroll in Mississippi to total payroll	.40
Ratio of sales in Mississippi to total sales	.35
Sum of the three factors	1.20
Apportionment ratio (1.20/3 = .40)
Business income apportioned to Mississippi ($500,000 x .40) Net taxable income	$200,000
Total Mississippi tax:
3% of first $5,000	$150
4% of next $5,000	200
5% of balance ($190,000)	9,500
Income tax payable to Mississippi	$9,850

EXEMPTIONS

Jobs Tax Credit*

Eligible employers in Mississippi who create a designated number of full-time jobs are eligible for a five-year jobs tax credit, the amount of which will vary depending upon the location of the facility.

The State’s 82 counties have been divided into three categories: Tier III, Tier II, and Tier I. Each category has individual Parameters for both the number of new jobs that must be created and the amount of the tax credit available to eligible employers.

Eligible businesses include manufacturers, processors, distributors, wholesalers, warehousers, research and development facilities, certain telecommunications and data or information processing companies, computer software development enterprises or any technology-intensive facility or enterprise, air transportation and maintenance facilities, final destination or resort hotels having a minimum of 150 rooms, and movie industry studios.

County Classification	# of New Jobs to be Created	Dollar Credit Per New Job
Tier III	10 or more	$2,000 annually
Tier II	15 or more	$1,000 annually
Tier I	20 or more	$ 500 annually

Growth and Prosperity Program (GAP)

The Growth and Prosperity Program is designed for designating certain counties as GAP counties and making incentives available to private companies that locate or expand in those economically challenged areas of the state. County eligibility is based on unemployment rates and poverty level. If a company locates in a GAP county, it will be exempt for a period of 10 years or until December 31, 2015, whichever occurs first, from:

1. All local ad valorem taxes levied by the county, except school taxes and that portion of the ad valorem tax utilized to pay for fire and police protection;
2. All state sales and use taxes imposed related to the purchase of component building materials and equipment; and
3. All state income and franchise taxes.

If the business is in a municipality in the county and the municipality consents, the business will be exempt from all local ad valorem taxes levied by the municipality, except school taxes.

Mississippi Advantage Jobs Incentive Program

The Mississippi Advantage Jobs Incentive Program (Advantage Jobs), administered by the Mississippi Development Authority (MDA) and the Mississippi State Tax Commission (Tax Commission), is designed to provide incentives to eligible companies that promise significant development of the economy of the State of Mississippi (State) through the creation of quality jobs.

In order to qualify for this incentive, the company must provide an annual salary (excluding benefits which are not subject to income tax) to its employees of at least 125% of the most recent State average annual wage or the most recent average annual wage of the county in which the business is located, whichever is less. Also, the company must provide or plan to provide to any new employees a basic health benefit plan. Such plan must be in effect within 180 days of receiving any incentives.

Eligible businesses will receive quarterly incentive payments. The incentives are funded through a diversion of the withholding taxes paid by the qualifying business. The Mississippi Development Authority determines, based on the estimated net direct state benefits of the jobs created, the actual amount of payments. The benefit rates may not exceed 4% of the business’ gross payroll.

National or Regional Headquarters Job Credit*

Out-of state businesses that transfer national or regional headquarters to Mississippi or existing in-state companies which establish national or regional headquarters in the State are eligible for a five-year $500 tax credit for each new full-time position created. A minimum of 35 full-time jobs must be created.

Companies can receive $1,000 for each new full-time job if the company pays 125% of the average annual state wage rate. If the company pays 200% of the average wage of the state, it may receive a $2,000 credit.

Research and Development Jobs Credit*

A five-year, $1000 tax credit is offered for each full-time job created which requires research and development skills.

Job Training Tax Credit*

A 50% income tax credit is offered to a manufacturer which participates in an employer-sponsored retraining program through a community/junior college in the district within which the employer is located.

Child/Dependent Care Income Tax Credit*

An income tax credit of 50% of qualified expenses is offered to any employer providing child/dependent care for employees during working hours. The facility must have an average daily enrollment for the taxable year of no less than six children who are twelve years of age or less; or must serve five or fewer children and/or elderly adults in a family child care/elder care home approved by the Department of Health for participation in the United States Department of Agriculture child and adult nutrition program; and be licensed according to the regulations governing licensure of child care facilities in Mississippi. The Mississippi Department of Health and the State Tax Commission will certify employers as eligible for the tax credit.

*These credits can be used in any combination, but the total combination cannot exceed 50% of the taxpayer’s income tax liability for that year. Any excess credit may be carried forward for five successive years.

Corporate Franchise Tax

Mississippi’s franchise tax applies to most corporations doing business in the State. The rate is $2.50 per $1,000 of the value of capital used, invested, or employed in the State. The tax base consists of capital stock issued and outstanding, surplus and undivided profits, and true reserves. However, the tax base cannot be less than the corporation’s assessed value of real and tangible personal property in Mississippi.

For multi-state corporations, capital is apportioned to Mississippi on a formula/ratio basis. The ratio is calculated by dividing the sum of the book value of real and tangible personal property owned in the State plus the gross receipts received from business activity in the State by the sum of the book value of real and tangible total corporate personal property plus total corporate gross receipts received. The ratio is then applied to the total capital stock, surplus and undivided profits, and true reserves to calculate the amount of capital apportioned to Mississippi. This amount is then multiplied by the franchise tax rate to obtain the amount of franchise tax owed.

The Mississippi Major Economic Impact Authority is authorized to negotiate a fee-in-lieu of franchise tax in an amount not less than $25,000 with the owners of a company if Major Economic Impact Act funds are utilized.

Example (Multi-State Operation)

Assume a company owns $2,400,000 (book value) of real and tangible personal property, $1,080,000 of which is located in Mississippi. The total capital stock, surplus and undivided profits, and true reserves of the company are $2,000,000. The corporation’s franchise tax is calculated below:

Book value of Mississippi property	$1,080,000
Mississippi gross receipts	1,900,000
(Formula numerator)	$2,980,000
Book value of total corporate property	$2,400,000
Total corporate gross receipts	4,800,000
(Formula denominator)	$7,200,000
Franchise tax apportionment ratio
($2,980,000/$7,200,000)	.414
Capital apportioned to Mississippi
($2,000,000 x .414)	$828,000
Mississippi franchise tax
($828,000/$1000) x $2.50	$2,070

Sales and Use Tax

Sales and use taxes are applied to all businesses having legal existence within the State. Although sales taxes vary, based upon the types of transactions, the following list details some of the more specific sales taxes relative to manufacturers.

Sales to a Manufacturer:

Raw materials (except sand and gravel, 5¢ /ton)	0%
Catalysts, chemicals, or gases used directly in processing (except natural gas, 1.5%)	0%
Packaging and containers for sale with finished goods	0%
Pollution control equipment (if qualified)	0%
Machinery and parts used directly in manufacturing and port operations (purchase or rental)*	1.5%
Industrial electricity, natural gas, and fuels	1.5%
Industrial water	7%
Telephone and telegraph	7%
All other equipment, furniture, fixtures, materials, supplies, and rentals not used directly in manufacturing	7%
Contract construction for projects over $10,000 (except residential)	3.5%

Sales by a Manufacturer:

To final consumer or user	7%
To another manufacturer for use as manufacturing machinery	1.5%
To another manufacturer as a raw material for further processing	0%
To a wholesaler or retailer for resale	0%
To exempt customers (e.g., government agencies, educational institutions, etc.)	0%

A use tax applies to personal property purchased in another state but utilized in Mississippi. The use tax is computed by applying the Mississippi sales tax rate applicable to that type of property less credit allowed for sales or use taxes paid in the state of purchase. Used property is generally taxed on the basis of its book value figured on straight-line depreciation.

EXEMPTIONS

In Tier III Counties**
A full sales and use tax exemption is available to qualified businesses (manufacturing and processing) on purchases of component building materials used in the construction or expansion of a building. A full sales and use tax exemption is also available on qualified purchases of new machinery and equipment.

In Tier II and Tier I Counties**
A sales and use tax exemption equal to one-half of the total tax liability is available to qualified businesses (manufacturing and processing) on purchases of component building materials to be used in the construction or expansion of a building. A sales and use tax exemption equal to one-half of the total tax liability is also available on qualified purchases of new machinery and equipment.

Bond Finance Program*

A full sales and use tax exemption is available to qualified businesses which finance component building materials and machinery and equipment with bond proceeds.

>National or Regional Headquarters

A full sales and use tax exemption is available to qualified businesses of an industrial nature transferring national or regional headquarters to Mississippi or in-state existing businesses establishing national or regional headquarters and creating a minimum of 35 jobs. The exemption is available to qualified businesses on purchases of component materials used in the construction or expansion of buildings. A full sales and use tax exemption is also available on qualified purchases of new machinery and equipment.

*These credits can be used in any combination, but the total combination cannot exceed 50% of the taxpayer’s income tax liability for that year. Any excess credit may be carried forward for five successive years. 

**These exemptions do not apply to the 3.5% contractor’s tax.

Property Tax

Counties and municipalities levy a property tax on real and tangible personal property. Most property is assessed at 15% of true value. Motor vehicles and utilities (excluding railroads) are assessed at 30% and owner-occupied residential properties at 10% of true value. Property is appraised and assessed by local assessors. Depreciation is allowed in determining true value. Tax rates are set by the political subdivision based on local budget requirements. Mississippi does not have a state property tax.

EXEMPTIONS

Counties and municipalities may grant an exemption on all property taxes, except school taxes, for a period of up to ten years. Eligible enterprises include warehouse and/or distribution centers, manufacturers, processors, refineries, research facilities, certain telecommunications and data processing companies, regional and national headquarters, movie industry studios, and air transportation and maintenance facilities.

County and municipal authorities may levy a fee-in-lieu of taxes on projects totaling over $100 million. The minimum fee cannot be less than one-third of the property tax levy which would be imposed. Eligible enterprises include warehouse and/or distribution centers, manufacturers, processors, refineries, research facilities, regional and national headquarters, air transportation and maintenance facilities, and regional shopping malls.

By taking advantage of Mississippi’s Free Port Warehouse law, manufacturers can be exempt from paying property taxes on property stored in a licensed Free Port Warehouse in the ratio that the value of shipments outside the State bears to the value of total shipments. For example, if 98% of the value of finished goods were shipped to destinations outside the State, then 98% of the value of the goods on January 1 would be exempt from property taxes.

Example

Assume that a plant is located within a municipality where the total of all property taxes is 78.5 mills. The total tax due is shown below:

Taxable Property	True Value
Land	$10,000
Buildings	1,500,000
Machinery and Equipment	700,000
Raw Materials	200,000
Finished Goods	500,000
Total	$2,910,000
Assessed Value: 15% x $2,910,000	$436,500
Tax due before exemptions: 78.5 mills x $436,500	$34,365

OTHER TAXES

State Unemployment Compensation Tax

Mississippi levies an unemployment compensation tax on the first $7,000 of an employee’s annual wages. The maximum rate is 5.4%. The minimum rate varies from year to year depending upon the general experience rate of the State. The minimum tax rate is 0.4%. New employers in the State are assigned a tax rate of 2.7% until such time as they establish an individual experience rate.

Workers’ Compensation

Employers in Mississippi having five or more employees must purchase workers’ compensation coverage through insurance carriers, or qualify with the Mississippi Workers ’ Compensation Commission as a self-insurer.

Compensation is up to two-thirds of the claimant’s average weekly wages for up to 450 weeks. Amounts are indexed on an annual basis. Compensation does not include medical payments.

Personal Income Tax

Individual income is taxed at the same rate as corporate income: 3% of the first $5,000 of taxable income, 4% of the next $5,000, and 5% of the balance. Individuals are allowed personal exemptions.