Mississippi Broadband Technology Act

The Mississippi Broadband Technology Act (the “Act”) is codified as Miss. Code Ann. § 57-87-1 et seq. and provides certain state and local tax incentives for telecommunications enterprises in Mississippi.  See Miss. Code Ann. § 57-87-5(1)(a) and § 57-73-21.

For purposes of the Act, telecommunications enterprises means entities engaged in the creation, display, management, storage, processing, transmission or distribution for compensation of images, text, voice, video or data by wire or by wireless means, or entities engaged in the construction, design, development, manufacture, maintenance or distribution for compensation of devices, products, software or structures used in the above activities. Companies organized to do business as commercial broadcast radio stations, television station or news organizations primarily serving in-state markets shall not be included within the definition of term telecommunications enterprises.  See Miss. Code Ann. § 57-73-21(13)(b).

Pursuant to the Act, equipment used in the deployment of broadband technologies means any equipment capable of being used for or in connection with the transmission of information at a rate, prior to taking into account the effects of any signal degradation, that is not less than three hundred eighty-four (384) kilobits per second in at least one direction, including, but not limited to, asynchronous transfer mode switches, digital subscriber line access multiplexers, routers, servers, multiplexers, fiber optics and related equipment.  See Miss. Code Ann. § 57-87-5.

Income Tax and Franchise Tax

Telecommunications enterprises may take an annual credit against their aggregate income and franchise tax liabilities for a portion of the cost of equipment used in the deployment of broadband technologies in each year before July 1, 2020. The amount of the credit is dependent upon where the equipment is placed. In the more economically depressed areas of the state that are designated as Tier Two and Tier Three, the credit is equal to 10% and 15% of the equipment cost, respectively. In the less depressed areas designated as Tier One, the credit is equal to 5% of the equipment cost.

The annual credits begin with the first tax year in which the qualifying equipment is placed in service and continue for the next nine consecutive years. The annual credit is limited to 50% of the eligible taxpayer's income and franchise tax liabilities for the tax year. Any unused credit may be carried forward for 10 consecutive years from the close of the tax year in which the credits were earned. The maximum aggregate credit cannot exceed the original investment in the qualifying equipment.

To be eligible for the credit, the item(s) must be sold directly to, billed directly to and paid for directly by the business receiving the credit.  Before the credit can be claimed, the company must complete the Application for Certification for Economic Incentives, Form 70-801 and attach a letter explaining the reason the business is eligible to claim the credit and the types of purchases that qualify for the tax credit. These should then be forwarded to the Mississippi Department of Revenue.

When filing the state income/franchise tax return claiming the credit, attach: a schedule showing the cost and description of the equipment being deployed and the county or counties in which the equipment was deployed that gave rise to the credit for the current period; and a schedule showing a year by year calculation, including the current year, of all credits taken and any credits carry forward.

Effective April 13, 2010, the governor is authorized to issue to a telecommunication enterprise that has contracted with the state to provide broadband telecommunications service to institutions of higher learning a payment credit voucher in lieu of cash payment pursuant to the terms of the contract for services. The credit payment voucher entitles the telecommunication enterprise to a credit against its aggregate income and corporation franchise tax liabilities. Any excess credit may be used against the aggregate tax liabilities of any related member, and if the related member is unable to use the full amount of the credit voucher, any remaining amount will be refunded to the service provider. The total amount of tax credits authorized in any fiscal year must not exceed $2 million in the aggregate. This provision is repealed from and after July 1, 2018.  See Miss. Code Ann. § 27-111-1.

Sales and Use Tax

Sales of equipment used in the deployment of broadband technologies by telecommunications enterprises after June 30, 2003 and before July 1, 2013 are exempt from sales tax. In the case of qualifying equipment installed in Tier Two and Tier Three counties, the exemption is 100%. However, in Tier One counties, only 50% is exempt from tax.  See Miss. Code Ann.  §27-65-101(3).

To be eligible for the credit, the item(s) must be sold directly to, billed directly to and paid for directly by the business receiving the credit.  Before the credit can be claimed, the company must complete the Application for Certification for Economic Incentives, Form 70-801 and attach a letter explaining the reason the business is eligible to claim the credit and the types of purchases that qualify for the tax credit. These should then be forwarded to the Mississippi Department of Revenue.

Contractor's tax is imposed directly on the contractor for the gross proceeds of commercial construction activities regardless of who is the owner of the project. If component materials, or machinery and equipment (purchases covered under the exemption) are purchased through a construction contractor within the construction contract amount and not directly by the business receiving the exemption, then the exemption is lost on any items included in the contract. Again, in order to receive the exemption the business receiving the exemption must purchase the items direct.