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Your business will need to meet its federal, state, and local tax obligations to stay in good legal standing. Your business structure and location will influence which taxes your business has to pay.

Content

  • Choose your tax year
  • Determine your state tax obligations
  • Determine your federal tax obligations

Choose your tax year

Your business is legally required to pay taxes and keep accounting records on a consistent yearly schedule called a tax year.

Most businesses choose their tax year to be the same as the calendar year. You select your tax year the first time you file for taxes, but can change it later with permission from the IRS.

  • Calendar tax year if you don’t have special accounting needs for your business.

  • Fiscal tax year if you want your 12-month accounting cycle to end in a month that isn’t December.

  • Short tax year if your business wasn’t in existence for an entire tax year, or you changed your accounting period.

If your business doesn’t have much reporting or bookkeeping, you might be required to use a calendar tax year. Check with the IRS for detailed rules about tax years.

Determine your state tax obligations

Your business might need to pay state and local taxes. Tax laws vary by location and business structure, so you’ll need to check with state and local governments to know your business’ tax obligations.

The two most common types of state and local tax requirements for small business are income taxes and employment taxes.

Your state income tax obligations are determined by your business structure. For example, corporations are taxed separately from the owners, while sole proprietors report their personal and business income taxes using the same form.

If your business has employees, you’ll be responsible for paying state employment taxes. These vary by state, but often include workers’ compensation insurance, unemployment insurance taxes, and temporary disability insurance. You might also be responsible for withholding employee income tax. Check with your state tax authority to find out how much you need to withhold and when you need to send it to the state.

Welcome to The Mississippi Department of Revenue

The Department of Revenue is the primary agency for collecting tax revenues that support state and local governments in Mississippi. This website provides information about the various taxes administered, access to online filing, and forms.

The Department of Revenue is responsible for titling and registration of motor vehicles, monitoring ad valorem assessments throughout the state to ensure consistent appraisal and valuation of properties among the municipalities and counties of the state, enforcement of Mississippi’s Prohibition and Local Option Law and operating as the wholesale distributor of alcoholic beverages.

Business Incentive Tax Credits

Information concerning tax incentive credits available for businesses that are located in Mississippi or considering relocating in Mississippi are provided below.

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Forms

50-124 | Application for SMART Business Incentive

70-801 | Application for Certification of Economic Incentives

72-415 | Application – Direct Pay Permit – Sales and Use Tax

Incentives that may or may not be available to you. Check them out.

Please investigate on your own.  A state informational booklet is available.  We are not responsible for any tax resources this course has supplied.  Each individual situation is different.  Please see an attorney or accountant for specific advice for you.

This information is not tax advice.

Mississippi Tax Incentives, Exemptions and Credits

Mississippi is committed to encouraging businesses to establish or expand businesses and increase the employment of individuals in the State. To help businesses, Mississippi has authorized several tax incentives, including tax exemptions, rebates and credits. These incentives will give an economic benefit to those businesses which are eligible. Some incentives have a greater financial benefit when locating in a lesser developed county. Other incentives give greater benefits when employing the more technical positions or the more highly compensated positions in Mississippi.

 

Most of the incentives require advanced approval either by the Mississippi Development Authority (referred to from this point forward as MDA), the Mississippi Business Finance Corporation (referred to from this point forward as MBFC) or by the Mississippi Department of Revenue (referred to from this point forward as MDOR) or by local governing authorities (referred to from this point forward as County or City) or a combination. In this book, the incentives, exemptions and credits are grouped by the tax type.

 

Compliance with the equal pay provisions of the federal Equal Pay Act of 1963, the Americans with Disabilities Act of 1990 and the fair pay provisions of the Civil Rights Act of 1964 is required for any entity applying for a job based incentive authorized by Mississippi Code.

 

Each incentive, whether exemption, rebate or credit, will have a description, the types of businesses eligible for the incentive, and what is required to claim the incentive. Also included are the code sections that authorize the specific incentive. All references to the code sections will be attributed to the Mississippi Code Annotated, as amended (referred to from this point forward as Miss. Code Ann.). You can locate the code sections at the following web site http://www.lexisnexis.com/hottopics/mscode/.

 

IMPORTANT!!! Detailed records must be maintained on any information used to calculate any incentive benefit. These records may be requested to be presented to a representative of the MDOR upon audit or to be attached to a specific application or tax return. If adequate records are not available to verify exemptions, rebates, credits or other incentive benefits, the incentive may be revoked. Also, if any material omission or misstatement of fact or fraudulent representation is revealed after an economic incentive has been approved, the incentive may be revoked. Any financial benefit as a result of either of the two situations mentioned above may be required to be paid back to the state.

 

References will be made to various state agencies throughout this book. The agency and the abbreviated reference, along with their associated web site, are listed below. These abbreviated references will be consistent while you read the different incentive opportunities available to businesses in Mississippi.

 

Mississippi Development Authority

(MDA)

www.mississippi.org

Mississippi Business Finance Corporation

(MBFC)

www.msbusinessfinance.com

Mississippi Department of Revenue

(MDOR)

www.dor.ms.gov

Mississippi Secretary of State

(MSOS)

www.sos.ms.gov

Mississippi Department of Employment Security

(MDES)

www.mdes.ms.gov

Mississippi Department of Archives and History

(MDAH)

www.mdah.ms.gov

JOBS TAX CREDIT FOR ECONOMICALLY DISTRESSED COMMUNITIES (Credit Code 05)

There is a jobs tax credit for businesses operating in an “economically distressed community” as certified by the MDOR in lieu of the basic Jobs Tax Credit previously defined. This credit is available to the same types of businesses which are eligible for the basic Jobs Tax Credit. These businesses must create at least 10 new full-time jobs and be located in an area within a city where thirty percent (30%) of the residents are below the national poverty level and where the unemployment rate is one and one half (1½) times the national average. The MDOR must certify both the area and the business before the Economically Distressed Community Jobs Tax Credit can be taken. The definition of “economically distressed community” is found in Miss. Code Ann. Section 27-7-22.27.

 

For the MDOR to certify an economically distressed community, the city officials must provide to the MDOR the following:

  1. a map detailing the area to be certified;
  2. copy of the documentation from the US Census Bureau proving that thirty percent (30%) of the residents are below poverty level;
  3. the census tract grouping unemployment rate for the area and the national unemployment rate for the same area for the same time period; and
  4. the population of the

After receiving this information, the MDOR will verify the information and, if all requirements are met, will certify the area as an economically distressed community.

 

For the Economically Distressed Community Jobs Tax Credit, all other requirements, instructions or limitations (as previously defined for the basic Jobs Tax Credit) apply, except for the following:

  • The amount of credit is equal to ten percent (10%) of the payroll of each new full-time
  • The credit can offset fifty percent (50%) of the income tax liability attributable to the income generated by the operations in this
  • The business may choose when to begin taking advantage of the credit, but it must be within five (5) years of the beginning of commercial
  • The business must attach a map showing the location of the business inside the economically distressed area to the Application for Certification for Economic Incentives.

JOBS TAX CREDIT FOR BROWNFIELDS (Credit Code 05)

There is a jobs tax credit for businesses which remediate contaminated property or brownfields. This credit is available to any commercial or industrial property owner who incurs costs in the remediation of contaminated property in accordance with the Mississippi Brownfields Voluntary Cleanup and Redevelopment Act. There is no minimum number of new full- time jobs that must be created.

For the Brownfields Jobs Tax Credit, all other requirements, instructions or limitations (as previously defined for the basic Jobs Tax Credit) apply, except for the following:

  • There is no minimum number of new full-time jobs that must be created, regardless of where the property is
  • This Brownfields Jobs Tax Credit cannot be taken in conjunction with the National or Regional Headquarters Credit or the Research and Development Skills

The owner of the brownfields property must attach a copy of the certification from the Commission on Environmental Quality of the completion of the remediation and the amount of cost incurred in the project to the Application for Certification for Economic Incentives.

A.1.                Income Tax Exemption for Growth and Prosperity (GAP) Areas

The Growth and Prosperity (GAP) Areas Tax Exemption was created to encourage businesses to locate facilities and hire individuals in areas that have thirty percent (30%) or more of the population at or below the federal poverty level according to the most recent official data compiled by the United States Census Bureau or have an unemployment rate that is two hundred percent (200%) of the state’s average unemployment rate. A county or supervisor’s district applies to MDA to be designated as a GAP Area. After the application has been approved, the GAP Area is issued a certificate of public convenience and necessity. At this time, an eligible business that constructs a new facility or expands an existing facility located in one of these GAP Areas can apply to MDA to be exempted from state and local taxes for a period of ten (10) years or until December 31, 2029, whichever occurs first. A business that relocates from a county in Mississippi to a GAP Area is not eligible for the exemption.

State taxes are defined as 1) sales and use tax on component materials, equipment and machinery for the initial construction of a business or an additional expansion of an existing business; 2) income tax on income generated by the business in the GAP Area; 3) franchise tax on the value of the capital used, invested or employed by the business in that GAP Area and 4) sales and use tax imposed on the lease of machinery and equipment acquired in the initial construction of a business or an additional expansion of an existing business. Local taxes mean any county or municipal ad valorem taxes except for the school, fire and police portions of the tax. However, if the business enterprise is located in an area that has been declared by the Governor to be a disaster area and as a direct result of the disaster the business cannot utilize its exemption, the MDA may extend the exemption from state taxes for no more than two (2) years or until December 31, 2029, whichever occurs first. Any property or equipment purchased utilizing a sales tax exemption that is damaged or destroyed as a result of the disaster may be replaced exempt from tax.

The business must be in compliance with all state and local tax laws and related ordinances and resolutions to be eligible for the exemption. Such exemption is not transferable and cannot be applied, used or assigned to any other entity. The approved business must also enter into an agreement with MDA which sets out performance requirements of the business that must be met and provisions to recapture any or all of the taxes exempted if the requirements are not met. The business must make available, at the Commissioner’s request, all books, records, or other information, necessary to verify the correctness of any exemptions claimed. For more information on the GAP areas, contact:

Mississippi Development Authority

Financial Resources Division – GAP Program

Post Office Box 849 Jackson, MS 39205

financial@mississippi.org

601-359-3552

The exemption granted to a business is based on the Mississippi net income and/or loss attributable to its new or expanded operation within a GAP Area. A business may have, in addition to the business operation in the GAP Area, other business operations which are located outside of the GAP Area. These operations do not qualify as a MDA approved business operation and, therefore, are not allowed the exemption. Because of this, the income attributable to the GAP Area must be identified separately from its total Mississippi income. Any losses assigned to the GAP Area business operation from the use of a formula or direct accounting shall not be carried backward or forward in computing Mississippi taxable income during the exemption period. A business cannot qualify for certain income tax credits from its operation within a GAP Area when the credit is determined by an expense incurred, such as the Ad Valorem Tax Credit, the RED Tax Credit, the Child/Dependent Care Tax Credit and the Export Charges Tax Credit.

Generally, an apportionment formula would be used to determine the amount of Mississippi net income and/or loss attributable to a GAP Area. In very limited circumstances, direct accounting would be used in making the determination. When a business or individual is a partner or shareholder in a flow-through entity and has income and/or loss being reported to them generated in a GAP Area, then such GAP Area income and/or loss will not be used in any calculation of income tax due by such partner or shareholder of the flow-through entity. The exemption is not transferable and cannot be applied, used or assigned to any other person or business or tax account, other than the one approved by MDA.

 

E.1.             Ad Valorem Exemption for Growth and Prosperity (GAP) Areas

The Ad Valorem Tax Exemption for GAP Area businesses was created to encourage businesses to locate facilities and hire individuals in areas that have a certain percentage of the population below the federal poverty level or have an unemployment rate that is 200% of the state’s average unemployment rate. A county or supervisor’s district must apply to MDA to be designated as a GAP Area. After the application has been approved, the GAP Area is issued a certificate of public convenience and necessity. An eligible business that constructs a new facility or expands an existing facility located in a GAP Area can apply to MDA to be exempted from local taxes for a period of ten (10) years or until December 31, 2029, whichever occurs first.

Local taxes mean any county or municipal ad valorem taxes except for the school, fire and police portions of the tax.

The business must be in compliance with all state and local tax laws and related ordinances and resolutions to be eligible for the exemption. Such exemption is not transferable and cannot be applied, used or assigned to any other entity. A business that relocates from a county in Mississippi to a GAP Area is not eligible for the exemption.

For more information on the GAP areas, contact: Mississippi Development Authority

Financial Resources Division GAP Program

Post Office Box 849 Jackson, MS 39205

Determine your federal tax obligations

Your business structure determines what federal taxes you must pay and how you pay them. Some of the taxes require payment throughout the year, so it’s important to know your tax obligations before the end of your tax year.

There are five general types of business taxes.

  • Income tax
  • Self-employment tax
  • Estimated tax
  • Employer tax
  • Excise tax

Each category of business tax might have special rules, qualifications, or IRS forms you need to file. Check with the IRS to see which business taxes apply to you.

If your business has employees, you might be required to withhold taxes from their paychecks. Federal employment taxes include income, Social Security and Medicare, unemployment, and self-employment taxes. Check with the IRS to see which taxes you need to withhold.

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