The Mississippi sales tax exemption for manufacturing enables manufacturers and custom processors to take advantage of a lower tax rate on eligible machinery and equipment as well as a full sales tax exemption on items incorporated into the final manufactured product. The skilled sales tax consultants at Agile Consulting are excited to help Mississippi manufacturers understand and take advantage of these generous exemptions.
Mississippi sales tax exemption for manufacturers
The state of Mississippi defines manufacturing as “activities of an industrial or commercial nature wherein labor or skill is applied, by hand or machinery, to materials belonging to the manufacturer so that a new, different, or more useful article of tangible personal property or substance of trade or commerce or electric power is produced for sale or rental and includes the production or fabrication of special-made or custom-made articles for sale or rental” [Miss. Code Ann. §27-65-11(b)]. Manufacturing also includes recycling that does convert material into more useful product for sale.
Manufacturing does not include:
Filing Medical Prescriptions
Washing and Screening Minerals
Logging (Cutting, Hauling, Decking)
Recycling that does not convert material into more useful product for sale
Mississippi defines custom processing as “the performance of a manufacturing service done or made to order upon the property of the customer and shall include laundering, cleaning and pressing, but shall not include “repairs” or “maintenance” as these terms are defined herein; nor self-service commercial laundering, drying, cleaning and pressing equipment” [Miss. Code Ann. §27-65-11(e)].
Mississippi manufactures can make qualifying purchases at a sales tax rate of 1.5% as opposed to the standard sales tax rate of 7% [Miss. Code Ann. §27-65-17(e,f)].
THE MISSISSIPPI SALES TAX EXEMPTION FOR MANUFACTURING INCLUDES THE FOLLOWING TYPES OF PURCHASES:
The Mississippi Department of Revenue has provided taxpayers with examples of purchases that do and do not qualify for the Mississippi sales tax exemption for manufacturing.
EXAMPLES OF QUALIFYING PURCHASES FOR MANUFACTURER AT 1.5% SALES TAX RATE:
Motorized Units, Conveyor Systems, Pollution Control Equipment
Component parts of manufacturing machinery
Material Handling Equipment used in industrial process
Mississippi Manufacturing Machinery
EXAMPLES OF NON-QUALIFYING PURCHASES FOR MANUFACTURER 1.5% SALES TAX RATE:
Maintenance or Tools for Maintenance
Lab Research Machinery
The Mississippi sales tax exemption for manufacturing also includes some items that manufacturers can purchase completely tax exempt:
EXAMPLES OF QUALIFYING PURCHASES EXEMPT FROM SALES TAX
Component Materials (become apart of the finished product)
Raw materials, Packaging Supplies, Catalysts, Chemicals, Gases used directly in processing
Electricity, Gas, Steam, etc. (any fuel that is used in the industrial process)
Mississippi Manufacturing Saw Cutting
HOW TO CLAIM THE MISSISSIPPI SALES TAX EXEMPTION FOR MANUFACTURING
In order to take advantage of the Mississippi sales tax exemption for manufacturing, qualifying manufacturers must fill out, sign, and send to the state Mississippi Sales Tax Form 72-15-18 “Direct Pay Permit Application” which can be found at the Mississippi Department of Revenue website. Once the state approves the Direct Pay Permit, manufacturers can then purchase machinery and equipment from their vendors completely tax free. However, it is then the manufacturer’s responsibility to self-assess and remit the 1.5% tax on qualifying purchases on their use tax return to the state.
HOW TO RECOVER MISSISSIPPI SALES TAXES
Mississippi manufacturers are also entitled to refunds for purchases that were made at the incorrect tax rate back to 3 years (36 months) from when the tax was paid. In order to receive a refund for overcharged sales tax, Mississippi manufacturers will have to request a refund directly from their vendors because only the entity that remitted the sales tax to the state is able to recover the sales tax from the state. The vendor can then amend their sales tax returns and issue their customer a refund check. Please feel free to contact Agile’s sales tax consultants for help and experience with this process.
As with all sales and use tax research, the specifics of each case need to be considered when determining taxability.
Have a question? Contact Aaron Giles.