There are a number of economic development related
exemptions from the retail sales tax rate of 7% set forth under Miss. Code Ann.
§ 27-65-17. The two most often utilized
are based upon the geographic location of a particular economic development
project and/or whether certain conduit bond proceeds are utilized to finance a
qualified economic development project.
There is a full exemption from the retail rate of 7%
for the purchase of component materials used in building construction,
additions or improvements, sales of manufacturing or processing machinery that
becomes permanently attached to the ground or to a permanent foundation, and,
which, by its nature, is not intended to be housed within a building structure,
no later than 3 months after the initial start-up date, to permanent business
enterprises engaged in manufacturing or processing in Tier Three counties (as
such is defined in Miss. Code Ann. § 57-73-21).
See Miss. Code Ann. § 27-65-101(q).
Tier Three counties in Mississippi are the comparatively less developed
counties.
In Tier Two and Tier One counties (as such is defined
in Miss. Code Ann. § 57-73-21), the exemption provided above is equal half of
the tax imposed under § 27-65-17, the retail rate.
Generally, planned construction or an addition to an
existing structure is required before the exemption is granted by the Mississippi Department of Revenue. Normally, the taxpayer
writes a letter to the
Mississippi Department of Revenue explaining the circumstances and
justification of the exemption. The
taxpayer should provide the
Mississippi Department of Revenue with as much detail as possible in order
to facilitate the approval process.
It should be noted that if component building materials
and equipment and machinery (that otherwise qualifies for the exemption) are
purchased through the construction contractor within the construction contract
and not directly by the business receiving the exemption through a Direct Pay
Permit (“DPP”), then the exemption is lost.
The exempt items must be sold directly to, billed or invoiced directly
to and paid for directly by the business receiving the exemption.
Before construction begins, the taxpayer must be
certified for the exemption by the Commission.
In order to be certified for the exemption, the taxpayer must submit the
following:
·
For companies requiring Mississippi Development
Authority (“MDA”) approval, a copy of the approval letter from MDA;
·
A completed Application for Certification of
Economic Incentives, Form 70-801;
·
A detailed letter with a description of the type
of business and the type of construction or expansion;
·
A completed Registration Application for a use
tax account (only if one has not already been assigned); and,
·
A completed Application for a Direct Pay Permit,
Form 72-415.
After all of the required information has been submitted to the
Commission, the business will receive a letter acknowledging the county
designation, the amount of the exemption and the time period for the
exemption. The construction or expansion
must begin 1 year from the approval of certification.
The DPP number should be furnished to all vendors so that the
retail sales or use tax will not be charged on any purchases. The correct tax, if any is due, would then be
remitted directly to the
Mississippi Department of Revenue. For
qualified purchases during the construction or expansion period, the correct
tax would be either totally exempt or 50% exempt.
Sales and Use Tax Exemption for Purchased Made with
Bond Proceeds
There is also an exemption from the retail sales tax
for purchases of certain property with the proceeds of bonds issued by conduit
issuers in the State of Mississippi.
Purchases of certain property with the proceeds of bonds issued under
Miss. Code Ann. §§ 57-10-1 (et seq.), the Mississippi Business Financing Act,
Miss. Code Ann. §§ 57-61-1 (et seq.), the Mississippi Business Investment Act
and Miss. Code Ann. §§ 57-71-1 (et seq.), the Mississippi Small Enterprise
Development Finance Act are exempt from the retail sales tax in Mississippi.
MDA and the Mississippi Business Finance Corporation
(the “MBFC”) determine whether a business qualifies for financing under these
programs and the
Mississippi Department of Revenue determines how the exemption is applied to a
particular project. The exemption covers
all purchases of component building materials and other items of tangible
personal property and services paid for with the bond proceeds. The purchases must be made directly by the
entity that has been induced by the MBFC.
To be certified as eligible for this exemption, the
taxpayer must submit the following to the
Mississippi Department of Revenue:
·
A copy of the certificate of public convenience
and necessity issued by MDA;
·
A completed Application for Certification for
Economic Incentives, Form 70-801;
·
A completed Registration Application for a use
tax account (only if one has not already been assigned); and,
·
A completed Application for a Direct Pay Permit,
Form 72-415.
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