Tax Structure in Mississippi

The taxes in Mississippi are administered by the Mississippi Department of Revenue (the “MDOR”).  Generally, Mississippi follows federal rules and regulations in determining the tax consequences of most transactions.  The following discussion summarizes the general business taxes applicable to entities doing business in Mississippi.

Corporate Income Tax

As a general rule, the income of every individual, business corporation, association, trust or estate is taxed in the State of Mississippi.  The State of Mississippi also taxes source income of nonresident taxpayers.  Therefore, in the case of nonresident taxpayers, income derived from employment, trade, business or other activities performed or carried on with in the State is attributable to and subject to income taxation in Mississippi.

The income tax rates in Mississippi for domestic and foreign corporations are progressive: 3% on the first $5,000 of taxable income, 4% on the next $5,000 of taxable income and 5% on all taxable income in excess of $10,000.  Mississippi does not, in general, impose an entity level tax on Subchapter S-corporations, limited liability companies or partnerships treated as pass-through entities under federal tax law.  However, shareholders, members and partners may be subject to personal income tax in Mississippi.

The MDOR Regulations prescribe how a multi-state corporation’s income from business activity that is taxable within and without Mississippi is subject to allocation and apportionment.  Business income in Mississippi means income arising from transactions and activities in the regular course of the taxpayer’s trade or business and includes income from real, tangible and intangible property if the acquisition, management and disposition of the property constitute integral parts of the taxpayer’s regular trade or business operations.  Taxable in another state means that the taxpayer is, in a state other than Mississippi, subject to a net income tax or a franchise tax measured by net income or the other state has jurisdiction to subject the taxpayer to a net income tax regardless of whether that state exercises that jurisdiction.

If these two factors are present, then a multi-state corporation is subject to allocation and apportionment in Mississippi.  Generally, the rules in Mississippi only apportion and tax that portion of the business income attributable to the State Mississippi.  The MDOR Regulations provide further guidance on how income is allocated and apportioned depending on the nature of the business activity that is subject to taxation in Mississippi.

Corporate Franchise Tax

The State of Mississippi levies a corporate franchise tax all domestic and foreign corporations, associations, joint-stock companies and partnerships treated as corporations authorized to do business, doing business, or exercising any power, privilege, or right, in Mississippi.  The amount of franchise tax due and payable in Mississippi is based upon the capital employed by the taxpayer and is equal to $2.50 for every $1,000 of the value of capital of the organization.

For purposes of the franchise tax in Mississippi, capital includes combined issued and outstanding capital stock, paid-in capital, surplus and retained earnings, deferred taxes, deferred gains, deferred income, contingent liabilities and all true reserves.  Capital generally does not include bad debt or depreciation reserves or any debts, notes or mortgages.

The value of the capital employed in Mississippi by a multi-state corporation doing business both inside and outside of the state is determined by using a specified allocation and apportionment formula.

Ad Valorem Property Tax

In Mississippi, counties and municipalities levy an ad valorem property tax on real and personal property.  The Mississippi Constitution provides 5 classes of taxable property and establishes the assessment rate for each class.  Class I property is single family owner-occupied real property and it is assessed at 10% of true value.  Class II property is all real property that is not Class I or Class IV and it is assessed at 15% of true value.  Class III property is personal property not included in Class IV or Class V and it is assessed at 15% of true value.  Class IV property is all property owned by a public utility corporation and it is assessed at 30% of true value.  Finally, Class V property includes motor vehicles and these are assessed at 30% of true value.

True value is defined to mean market value, cash value, actual cash value, proper value and value for appraisal purposes.  Once the true value of the property is determined, the property is then classified based upon the classes set forth above.  This calculation provides the assessed value of the property.  The tax assessor in the county or municipality multiplies the assessed value by the millage rate and computes the ad valorem property tax due for a particular piece of property.

Sales and Use Tax

As a general rule, Mississippi imposes a sales tax of 7% upon the retail sale of tangible personal property within Mississippi.  Conversely, Mississippi imposes a use tax of 7% on the use, storage or consumption of tangible personal property within Mississippi.  There is also a sales tax imposed of 7% on certain business services.

Gaming Tax

The State of Mississippi imposes a graduated gaming tax upon gaming licensees at the following rates: 4% on the first $50,000 of monthly gross revenue, 6% on the next $84,000 and 8% on all monthly gross revenue in excess of $134,000.  In addition, through local and private legislation, most of the counties and municipalities where gaming operations are conducted impose fees that are a certain percentage of monthly gross revenue.  For most counties and municipalities, the fee is equal to 3.2% of monthly gross revenue.