Pollution Control Exemption

In general, the State of Mississippi imposes a sales or use tax at a rate of 7% on the sale of tangible personal property in Mississippi or the use, storage or consumption of tangible personal property in Mississippi.  See Miss. Code Ann. §§ 27-65-17 and 27-67-5.

Sales of manufacturing machinery or manufacturing machine parts when made to a manufacturer or custom processor for plant use only when the machinery or machine parts will be used exclusively and directly within the State of Mississippi in manufacturing a commodity for sale, rental or in processing for a fee shall be taxed at the rate of 1.5%.  See Miss. Code Ann. § 27-65-17(1)(e).  The preferential manufacturer’s rate applies to use tax as well.  See Miss. Code Ann. § 27-65-5(a).

Manufacturing begins at the point where the raw materials are transferred to the actual processing operating from storage or stock pile at the plant, and ends when the manufactured product leaves the assembly line for storage or shipment, and includes the processing of the by-product or waste materials to avoid air and water pollution.  See Miss. Admin. Code § 35.IV.7.03(208).

Pursuant to Miss. Code Ann. § 27-65-101(1)(w), sales of pollution control equipment to manufacturers or custom processors for industrial use are exempt from sales and use tax.  For purposes of this exemption, pollution control equipment means equipment, devices, machinery or systems used or acquired to prevent, control, monitor or reduce air, water or groundwater pollution, or solid or hazardous waste as required by federal or state law or regulation.  Although the main use of the equipment must be pollution control, the incidental use for other purposes would not result in the exemption being disallowed.  See Miss. Admin. Code § 35.IV.7.03(302).

The taxpayer will be required to substantiate that any equipment purchased for purposes of pollution control does qualify for the exemption.  The taxpayer must provide certification from a professional engineer that the purchases do meet the requirements of the exemption with regard to the prevention, control, monitoring, or reduction of air, water or groundwater pollution or solid or hazardous waste.  The certification must provide a list of the purchases and a description of the use of such purchases.  See Miss. Admin. Code § 35.IV.7.03(303).