Taxation and Regulatory Compliance

Mississippi Franchise Tax Rate and Phase-Out Schedule

Navigate the repeal of Mississippi's franchise tax. This overview explains business liability during the phase-out and clarifies final compliance requirements.

A franchise tax is a levy imposed on businesses for the privilege of operating within a state. Unlike an income tax based on profit, a franchise tax is calculated based on a company’s net worth or capital. The most important feature of Mississippi’s franchise tax is its repeal. Under a 2016 law, the tax is being eliminated over a ten-year period and will be fully repealed for tax years after 2027.

Determining Franchise Tax Liability

The Mississippi franchise tax applies to most corporations, including C and S corporations, that are organized, domiciled, or qualified to do business in the state. This liability exists even if a corporation is inactive, and the requirement to file continues until the corporation is officially dissolved or withdrawn through the Mississippi Secretary of State’s office. Certain entities are exempt from the franchise tax, including non-profit organizations organized for religious, charitable, scientific, or educational purposes. Businesses structured as sole proprietorships or general partnerships are not subject to the corporate franchise tax.

Calculating the Mississippi Franchise Tax

The calculation of Mississippi’s franchise tax begins with determining the tax base. This base is the greater of two values: the value of capital used, invested, or employed in the state, or the assessed value of the company’s real and tangible personal property in Mississippi. “Capital employed” includes the book value of capital stock, paid-in surplus, retained earnings, and other true reserves.

A primary feature of the calculation is an exemption for the first $100,000 of capital. For corporations operating in multiple states, Mississippi requires an apportionment of capital using a formula that considers the ratio of in-state property and gross receipts to the company’s total. There is also a minimum tax of $25 that applies.

The Franchise Tax Phase-Out Schedule

The repeal of the Mississippi franchise tax was initiated by the “Taxpayer Pay Raise Act of 2016.” This legislation established a ten-year schedule to eliminate the tax, beginning in the 2018 tax year. The phase-out is structured to reduce the tax rate each year until it is fully repealed.

The rate reduction schedule decreases the tax levy by $0.25 per $1,000 of capital each year. For the 2025 tax year, the rate is $0.75 per $1,000. It will decrease to $0.50 in 2026 and $0.25 in 2027. For tax year 2028 and all subsequent years, the franchise tax will be fully repealed.

Filing and Payment Procedures

The franchise tax is filed as part of the Mississippi Corporate Income and Franchise Tax Return. This combined return integrates the calculations for both taxes into a single submission, which simplifies the reporting process.

The filing deadline for S corporations is the 15th day of the third month after the end of the fiscal year, which is March 15 for calendar-year filers. For C corporations, the deadline is the 15th day of the fourth month, or April 15 for those on a calendar year.

If a business files for a federal extension, Mississippi automatically grants a corresponding extension to file the state return. Payments can be submitted electronically or mailed with the tax return. Penalties and interest apply for late payments, even if a filing extension has been granted.

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