What Was the Mississippi Franchise Tax?

The Mississippi franchise tax was a levy imposed on corporations for the privilege of existing and conducting business within the state. This tax was calculated not on a company’s income, but on the value of its capital or property located and employed within Mississippi. Landmark legislation initiated a multi-year phase-out of the tax, significantly reducing its impact over time and scheduling its complete elimination. While the tax burden has been substantially lowered, the tax is not yet fully repealed, with the final phase of its elimination scheduled for the coming years.

Entities Subject to the Franchise Tax

The franchise tax was specifically aimed at corporations and other entities that received the legal benefits of a corporate structure. This included standard C-corporations and S-corporations that were either originally incorporated or domesticated in Mississippi, or foreign corporations that had qualified to do business in the state. The tax also applied to associations, joint-stock companies, and certain partnerships that are treated as corporations for income tax purposes.

Conversely, the tax did not apply to all business structures. Sole proprietorships and general partnerships were generally not subject to the franchise tax because they are not considered separate legal entities from their owners in the same way corporations are. The obligation to file and pay was tied to the corporate privilege itself. Therefore, even a corporation that was inactive but still legally registered with the Mississippi Secretary of State was historically required to file a franchise tax return.

Calculating the Franchise Tax Liability

The tax base was determined by identifying the greater of two specific values. The first was the value of the corporation’s capital—which included its capital stock, surplus, and undivided profits—that was employed within Mississippi. The second was the assessed value of the company’s real estate and tangible personal property located in the state for the preceding year. This dual-base system ensured that a company’s tax liability reflected both its financial structure and its physical assets within the state.

Once this tax base was established, a specific tax rate was applied. The first $100,000 of the capital base is exempt. The tax rate is applied only to the value in excess of this exemption. As part of the legislative phase-out, the rate has been systematically reduced. For the 2025 tax year, the rate is $0.75 per $1,000 of the determined capital base over the exemption amount. Regardless of the calculation, a corporation could not pay less than a $25 minimum tax for the filing period.

Historical Filing and Payment Requirements

The administrative process for the franchise tax was integrated with the state’s corporate income tax system. Businesses did not file a separate, standalone franchise tax form. Instead, the calculation and payment were handled as part of a combined return, specifically Form 83-105, the Mississippi Corporation Income and Franchise Tax Return.

The deadline for filing this combined return and paying the associated liability was determined by the corporation’s fiscal year-end. For traditional calendar-year C-corporations, the due date was the 15th day of the fourth month following the close of the tax year, which is April 15th. The state generally followed federal guidelines for filing extensions. If a company filed for an extension, it was required to submit Form 83-180 and pay the estimated tax due by the original deadline to avoid interest and penalties on any underpayment. The extension only provided more time to file the return, not more time to pay the tax owed.

The Repeal of the Mississippi Franchise Tax

In 2016, legislation was passed to methodically eliminate the franchise tax over a ten-year period. This was not an immediate repeal but a gradual phase-out that began with the 2018 tax year. Beginning in 2019, the tax rate applied to the remaining capital base was also progressively reduced each year, lessening the financial impact on businesses incrementally.

This structured phase-out is scheduled to continue with further rate reductions until the tax is completely eliminated. According to the Mississippi Code, the franchise tax law is set to be fully repealed effective January 1, 2028. For tax years beginning on or after that date, corporations will no longer be required to calculate or pay the franchise tax. Businesses must continue to file and pay according to the reduced rate schedule for the remaining years of the phase-out. The final franchise tax filing will be for the 2027 tax year.