This section provides information on the following tax topics: property taxes, state taxes, corporate income tax, corporate franchise tax, state unemployment compensation tax, workers' compensation rate, personal income tax, jobs tax credit, property tax exemptions, and excise taxes.

Incentive topics include: state corporate income tax credit, labor taxes, a summary of tax rates in Mississippi, tax rates for Tennessee residents in Mississippi, tax rates for Mississippi residents in Tennessee, programs through the Mississippi Business Finance Corporation, programs through the Mississippi Department of Economic and Community Development, finance programs, and program descriptions.

Counties and municipalities levy a property tax on real and tangible personal property. Most property is assessed at 15 percent of true value. Motor vehicles and utilities (excluding railroads) are assessed at 30 percent and owner-occupied residential properties at 10 percent of true value. Depreciation is allowed in determining true value. Tax rates, set by each city and county, are based on local budget requirements.

Mississippi does not have a state property tax.

*The Town of Tunica has no tax millage. Property owners do not pay ad valorem tax on properties. Assessment Ratio: 15 percent of true value on real and personal property.

Exemptions

Exemptions may be available in some instances. These are determined on an individual basis by the appropriate governmental entity. Exemptions are not allowed on school taxes (28.65) mills.

For single-family owner-occupied homes, Mississippi has a Homestead Exemption (credit) available.

Mississippi businesses are subject to four basic state taxes: corporate income tax, franchise tax, sales and use tax and property tax. Tax credits or exemptions are available on all base state taxes except franchise tax. State tax highlights include:

• 7% retail sales tax
• No tax on raw materials, processing chemicals, or packaging
• 1.5% on industrial electrical power, natural gas and other fuels

Exemptions are available for materials used on projects financed by state bond program. 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 list below details some of the more specific sales taxes relative to manufacturers:

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.

Manufacturers pay a 1.5 percent sales tax on machinery and parts used directly in manufacturing and port operations, industrial electricity, natural gas and fuels.

Manufacturers pay a 3.5 percent contractor's fee for all costs (exceeding $10,000) included in a contractor's construction contract.

New or expanding manufacturers pay a 3.5 percent sales tax for purchases of building construction materials and new machinery or equipment not used directly in the manufacturing process and .75 percent sales tax on purchases of all machinery and equipment that is directly used in the manufacturing process.

If used in conjunction with Mississippi finance programs, some of these taxes may be abated.

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

In the case of multistate manufacturing operations, net business income from manufacturing 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 loss. The state, however, does not allow deductions of federal income taxes. There is no county or municipal income tax in Mississippi.

Mississippi's franchise tax applies to most corporations doing business in the state (value of capital used or attributed to state). The rate is $2.50 per $1,000 of the value of the 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 multistate 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 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.

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

Exemptions

Tax credits or exemptions are available on all base state taxes except for franchise tax. For details on tax credits or ad valorem and Free Port exemptions, please contact the Tunica County Chamber of Commerce or the State of Mississippi Tax Commission.

Eligible employers in Mississippi who create a designated number of full-time jobs are eligible for a five-year jobs tax credit. In Tunica County, if 20 or more new jobs are created, tax credit is $500 per job annually.

National or regional headquarters locating in Mississippi are eligible for a five-year, $500 tax credit for each full-time position created. A minimum of 35 jobs is required.

A 25 percent income tax credit is offered to a manufacturer which participates in an employer- sponsored retraining program through a community/junior college.

A sales and use tax exemption equal to one-half of the total tax liability is available to qualified businesses 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.

By state statute, Tunica County and the Town of Tunica may grant an exemption on real and personal property taxes, except school taxes. The granting of this exemption will be considered on an individual basis, and factors such as employment and capital investment are considered. The Tunica tax rate is the lowest in Mississippi without exemptions.

Eligible enterprises include warehouse and/or distribution centers, manufacturers, processors, refineries, research facilities, regional and national headquarters, movie industry studios and air transportation and maintenance facilities.

By taking advantage of Mississippi's Free Port Warehouse law, manufacturers and distributors can be exempt from property taxes on finished goods stored in a licensed Free Port Warehouse that are shipped outside of the state.

Example of Property Tax:

Jobs Tax Credit: Provides a five-year credit to the company's state income tax bill for each new job created by a new or expanded business, effective for years two through six after the creation of the job. Businesses which create at least 20 new jobs receive $500 per new job.

Research & Development Jobs Tax Credits: Provides an additional five-year tax credit of $500 per year for each net new research and development job created by new or expanding businesses, effective for years two through six after the creation of the job. There is no minimum number of research and development jobs required to be eligible for credit. To qualify for this credit, a business must first meet Mississippi Tax Commission regulations defining the eligible research and development jobs.

Headquarters Jobs Tax Credit: Provides an additional five-year tax credit of $500 per year for each net new job created by the transfer of a national or regional headquarters. This credit is effective for years two through six after the creation of the job.

Child Care Tax Credit: Provides a tax credit to new or existing businesses that provide or contract for child care for employees during the employee's work hours; credit is equal to 25 percent of qualified expenses of the child care. The child care facility must have an average daily enrollment of at least six children who are 12 years of age or less in order to qualify for this tax credit. Facilities must be certified by the state Department of Health.

• No sales tax on purchases of raw materials, processing chemicals or packaged materials.
• No sales tax on direct purchases of construction materials, machinery, and equipment for businesses that are financed through certain bonds.
• Partial (50 percent) sales tax exempt for purchases of construction materials, machinery and equipment.
• 1.5 percent sales tax on machinery and parts used directly in manufacturing and on industrial electricity, natural gas and fuels.
• Favorable individual and corporate income tax rates.
• State income tax credits for job years of $500 for each new job created by a new or expanding business.
• Five-year state income tax credits of $500 for each new research and development job created.
  
  

Residents of Tennessee employed in Mississippi are subject to the Mississippi state income tax imposed on income earned in Mississippi. For resident and non-resident employees, Mississippi allows a $12,000 exemption for married filing jointly and an additional $1,500 for each dependent. For non-resident employees, these amounts are prorated based upon the ratio of Mississippi source income. Additionally, there is a standard deduction of $4,600. Therefore, a husband and wife with two dependents will not pay Mississippi income tax on $19,600 or less of income earned in the state of Mississippi.

Tennessee residents employed in Mississippi who are unable to itemize their deductions will pay less in federal income tax. Therefore, actual "out of pocket" burden on the Tennessee resident will be the Mississippi tax minus the amount "saved" by paying less federal income tax.

Further, it should be noted that Tennessee residents, while not taxed on earned income, are subject to 6 percent personal tax on dividends from stock and interest from bonds and other obligations (after a $1,250 exemption).

Estimates of the out-of-pocket Mississippi state income tax burden on Tennessee residents are presented in the table below. The table examines salaries from $20,000 to $50,000. To estimate Mississippi income tax, the following assumptions are made:

1. The employee is married with two minor children (dependents).

2. The employee has no other source of income.

3. The employee's itemized deductions approximate the average of all U.S. taxpayers in his salary range based upon Preliminary Average Itemized Deductions for 1999 by AGI Ranges, IRS Publication No. 1136, Statistics of Income Bulletin - Spring 2001.

4. The employee's itemized deductions for both state and federal income tax would be the same, with the exception of state income tax, which is NOT deductible for state purposes.

*Medical deductions limited to 7.5 percent AGI; therefore as AGI increases, medical deductions decrease.

Effect of Mississippi State Income Tax on Mississippi Residents Employed in Tennessee or Other States

Mississippi residents are subject to Mississippi state income tax on income from all sources. Mississippi allows a credit for taxes paid to other states up to the maximum (5 percent) tax rate of the state of Mississippi.

*Medical deductions limited to 7.5 percent AGI; therefore as AGI increases, medical deductions decrease.

The Mississippi Business Finance Corporation (MBFC) administers a variety of finance programs designed to assist businesses in locating or expanding in the state.

• Industrial Development Revenue Board Program
• Small Enterprise Development Program
• Rural Economic Development Assistance Program
• Loan Guaranty Program
• Minority Surety Bond Guaranty Program
• Minority Business Enterprise Loan Program
  
  

• Mississippi Business Reinvestment Act
• Development Infrastructure Program
• Mississippi Major Economic Impact Authority
• Mississippi Access Road Program
• Community Development Block Grant
• Mississippi Small Business Assistance Program
• Agribusiness Enterprise Loan Program
  
  

The Industrial Development Revenue Bond Program reduces the interest costs of financing projects for companies through the issuance of both taxable and tax-exempt bonds. Additionally, ad valorem and sales tax exemptions are granted in conjunction with this type of public funding.

The bonds must be secured by an irrevocable, direct-pay letter of credit or other credit enhancement acceptable to the issuing authority.

The proceeds of a bond issue may be used for the acquisition and construction of real property, machinery and equipment, capitalized interest, reserve funds, and a limited amount of the cost of issuance in accordance with provisions of the Internal Revenue Code.

Although there is no restriction on the amount of taxable debt which may be incurred, there is a $10 million cap on tax-exempt financing. The maximum term of a bond issue will be equal to 120 percent of the average life of the financed assets or 30 years, whichever is less. The interest rate will be determined by the bond purchaser. The borrower will pay the cost of issuance and any other applicable fees.

Small Enterprise Development Program

The issuance of State General Obligation Bonds provides funds for manufacturing and processing companies to finance fixed assets, including land, buildings, new machinery, and new equipment at below-market interest rates for terms of up to 15 years.

Although a company may qualify for more than one loan under this program, the aggregate amount loaned to any company cannot exceed $2 million. Interest rates on these loans are equal to the net interest rate on the bonds issued by the state plus a serving fee. The borrower will pay the costs of issuance and any other applicable fees. A project must create a minimum of 10 jobs, and loans cannot exceed 90 percent of the market value of the financed assets. Companies participating in the program will be required to obtain a bank letter of credit guaranteeing the loan.

Rural Economic Development Assistance Program

Companies financing projects through the Small Enterprise Development of Industrial Revenue Bond Programs may be eligible to participate in the Rural Economic Development Assistance Program. The program allows eligible companies to receive credits on Mississippi corporate income taxes.

Mississippi corporate income tax credits will be granted at the end of a company's fiscal year and will be based on the Mississippi income liability at that time. The amount a company will be required to pay in Mississippi income tax will be reduced by the amount of debt service paid during the past year.

The total amount of tax credits may not exceed the annual debt service on the bond issue. The credits may be used to offset up to 80 percent of the company's state corporate income tax liability.

Minority Surety Loan Program

Program enables minority contractors not meeting the surety industry's standard underwriting criteria to obtain bid and performance bonds on contracts with state agencies and political subdivisions in Mississippi. With successful completion of contract guarantees under the program, coupled with management and technical assistance by the program administrator and others, minority contractors will grow in experience, management skills and financial stability sufficient to obtain surety bonding on their own. Maximum bond guaranty is 75 percent of contract bond amount or $112,500, whichever is less. A contractor may have more than one guaranteed bond as long as total guarantees do not exceed $112,500.

A contractor applicant must be certified with the Minority Business Enterprise Division of the Mississippi Development Authority (MDA), have its principal place of business at least one year prior to application, subcontract no more than 75 percent of a qualified contract and show reasonable evidence of inability to secure bonding under normal market conditions.

Minority Business Enterprise Loan Program

This program is designed for the purpose of providing funds to socially and economically disadvantaged minority- or women-owned small businesses. To be eligible for assistance, the ownership and day-to-day management of the business must be at least 60 percent minority or female. Loan proceeds may be used for all project costs associated with the establishment or expansion of a minority business, including the purchase of fixed assets or inventory or to provide working capital.

The minimum loan is $2,000, and the maximum loan is $250,000. MDA may fund up to 100 percent of a total project of $15,000 or less and up to 50 percent of a total project greater than $15,000. The borrower must inject or have at least 5 percent equity in the project. Repayment terms are determined by the amount of the loan and the collateral securing the debt, and may extend up to 15 years. Interest rates on the MDA portion of the loan are set at below-market rates for the term of the loan. Applications for this program must be submitted to one of the Qualified Entities approved for participation by MDA.

The Qualified Entities include the 10 Planning and Development Districts, Community Development Corporations and other similar entities. All applicants must be certified as a woman-/minority-owned business by the Minority Division of MDA prior to funding.

Mississippi Business Investment Act Program

Through the issuance of State General Obligation Bonds, low-interest loans are provided to counties or incorporated cities or towns to finance improvements which complement investments by private companies.

To be eligible for financing under this program, a private company must invest at least $3.00 for every $1.00 it receives in state assistance and must create and maintain new jobs as required by state statute and MDA. The project to be financed must be necessary for the operation of the company, and it must be determined that other financing options are unavailable.

The minimum loan amount for a project is generally limited to $500,000 for a term of 10 years or the estimated useful life of the project to be financed, whichever is greater. Rates of interest are set by MDA on a scale based on the number and quality of jobs created.

Loan proceeds may be used for acquisition, expansion, or improvement of land, buildings, and infrastructure.

Mississippi Major Economic Impact Authority

Unique in the nation, this program allows the state, through the issuance of general obligation bonds, to assist local communities in meeting the development requirements inherent in large capital projects, thereby generating an investment in the quality of life in such communities. Funds may be used to improve transportation, education, recreation and medical facilities within 65 miles of a project site. Certain other infrastructure needs are also eligible for financing.

Major Economic Impact Authority projects can be new projects or expansions of existing facilities which have a minimum initial investment of $300 million by the private sector or the U.S. government. Eligible projects include industrial or commercial projects, research and development, warehousing, distribution, transportation, processing, mining establishments, U.S. government projects, and tourism facilities.

Economic Development Highway Program

The Economic Development Highway Program assists political subdivisions with the construction or improvement of highway projects which encourage high economic benefit projects to locate in a specific area. A high economic benefit project is any new private investment of $50 million or more by a company in land, buildings, or depreciable fixed assets, or an investment of at least $20 million by a company which has statewide capital investments of at least $1 billion in the aggregate.

A private company engaged in agriculture, aquaculture, mariculture, processing, distribution, warehousing, manufacturing, research and development, or any air transportation and maintenance facility, regional shopping mall, large hotel, resort, movie industry studio, or the federal government with a project meeting the high economic benefit criteria is eligible for assistance. The highway must be necessary to ensure adequate and appropriate access to the proposed project.

Mississippi Access Road Program

Under this program MDECD and the Mississippi Department of Transportation assist local entities in the construction of links of highways or roads necessary to connect new and existing industrial sites to adequate road facilities.

Community Development Block Grant Program

The State Community Development Block Grant (CDBG) Program was established to aid in the development of viable communities which provide a suitable living environment, decent housing, and economic opportunities for their residents.

The CDBG Program makes grants and loans available to incorporated municipalities and county governments that show a genuine need for specific projects and can meet the program's state and federal eligibility requirements. Benefits to low- and moderate-income persons are the basic thrust of funding. All Mississippi cities and counties are eligible for CDBG funding, except the entitlement cities of Jackson, Biloxi, Gulfport, Hattiesburg, Moss Point and Pascagoula.

Communities may apply for CDBG funding through the category of Economic Development. The primary criterion for economic development funding is to provide jobs for persons of low/moderate income. The Economic Development category accepts applications for communities in three subcategories.

Economic Development Public Improvements - funds such as the provision of water, sewer and access roads within a community. The Economic Development Loan Program makes it possible for for-profit businesses to promote economic development by creating or retaining jobs primarily for low- and moderate-income families. Through the Public Facilities Component, grants are available to local units of government on a comprehensive basis for a variety of development activities, including, but not limited to, water and sewer improvements, streets, drainage, bridges, handicapped accessibility of public buildings, flood improvements and fire protection.

Mississippi Small Business Assistance Program

The Mississippi Small Business Assistance Program was established for the purpose of providing funds to qualified entities to establish revolving loan funds to assist in financing small businesses.

Qualified entities must be approved by MDA and are defined as Mississippi Planning and Development Districts (PDD's), Small Business Investment Corporations, Community Development Corporations and other similar entities.

A small business is defined as any for-profit commercial enterprise with fewer than 100 full-time employees, less than $2 million in net worth, or less than $350,000 in net annual profit, after taxes, during two of the last three years. A company meeting any of the above criteria is eligible to seek assistance under this program. No small business shall receive funding under this program in excess of $100,000 or more than 50 percent of the total project cost.

Maximum terms of the loans shall be 15 years for buildings, 10 years for equipment, five years for working capital and three years for inventory. Interest rates cannot be less than 5 percent per annum or more than 4 percent above the Federal Reserve discount rate plus servicing fee. Small businesses should contact a qualified entity in their area for application.

Agribusiness Enterprise Loan Program

Designed to encourage the extension of conventional financing by lending institutions, this loan provides interest-free loans to agribusinesses. An eligible agribusiness is any aquaculture-, horticulture-, or agriculture-related industrial, manufacturing, research and development or processing enterprise.

Maximum loan is 20 percent of the total project cost or $200,000, whichever is less. Proceeds may be used to finance buildings and equipment and for costs associated with the purchase of land (appraisals, title searches, etc.). However, proceeds cannot be used to purchase land. All loans must be guaranteed 100 percent by a direct lender.

Mississippi Airport Revitalization Revolving Loan Program

Funds from the issuance of state bonds provide loans to airport authorities for the construction and/or improvement of airport facilities.

Airport loan funds may be used for 100 percent project financing. The maximum loan amount for any one project is $750,000, with a maximum term of 10 years and an interest rate of 3 percent per annum.

Mississippi Port Revitalization Revolving Loan Program

The Mississippi Port Revitalization Revolving Loan Program is designed for making loans to state, county, or municipal port authorities for the improvement of port facilities.

Funding for loans is derived from the issuance of state bonds. The maximum amount which may be loaned to finance any one project is $750,000, with a term of up to 10 years and an interest rate of 3 percent per annum. Port loan funds may be used for 100 percent financing.

Advantage Mississippi Initiative

The Advantage Mississippi Initiative outlines a comprehensive package of incentive programs and funding opportunities to assist communities in recruiting new industry. The programs offered also ensure that companies are creating new jobs, building coalitions with community leaders and directly impacting economic growth in the state.

These programs include: Mississippi Land Water and Timber Board, and Small Municipalities and Limited Population Grant Program.

Local Industrial Development Revenue Bonds

Local political entities in Mississippi, including counties, supervisors' districts, incorporated cities and towns, have the authority to issue tax-exempt and taxable industrial development revenue bonds to finance new or expanding industrial enterprises.

Election approval is not required unless 20 percent or more of the entity's electors object to the bond issuance in writing. Ownership of a bond-financed facility is retained by the issuing political entity, which leases it to a company for a rental sufficient to pay the annual principal and interest on bonds. Industrial development revenue bonds can finance up to 100 percent of total project costs, including land buildings, fixtures, new equipment, new machinery and professional fees. Facilities financed by such bonds are allowed up to a 10-year property tax exemption, in addition to being exempt from most sales and use taxes on project-related purchases during construction.

Energy Investment Program

Through the Energy Investment Program, MDA provides financial assistance to individuals, partnerships or corporations making energy-conserving capital improvements or designing and developing energy conservation processes.

This program offers low-interest loans of up to $300,000 with maximum terms of seven years. Each loan may be secured by a lien on the measures installed, other business assets, personal guarantees of the owners or officers, performance bonds or a combination of these.

Capital Improvements Revolving Loan Program (CAP)

CAP is designed for making loans to counties or municipalities to finance capital improvements in Mississippi. Counties and municipalities are encouraged to use these loans in connection with state and federal programs. Funding for loans to applicants is derived from the issuance of state bonds. CAP was enacted by the state legislature.

Eligible Projects Include:

• Construction or repair of water and sewer facilities.
• Construction or repair of drainage systems for industrial development.
• Improvements in fire protection.
• Construction of new buildings for economic development.
• Renovation or repair of existing buildings for economic development purposes.
• Purchase of buildings for economic development purposes.
• Construction of any county- or municipality-owned health care facilities, excluding any county health departments.
• Construction, purchase, renovation or repair of any building to be utilized as an auditorium or convention center.

For additional assistance with your site selection process, please call the
Tunica County Chamber of Commerce at (662) 363-2865 or e-mail marketing@tunicachamber.com.