35 Miss. Admin. Code Pt. IV, Subpt. 10, Ch. 01 — Construction Contractors

100 Definitions.
101 The terms "contractor" and "prime contractor" mean a person entering into an agreement,
either verbal or written, with the owner of a project to perform such work as is described
in the following paragraphs. A person may not contract with himself.
102 A "subcontractor" is a person entering into an agreement with a prime contractor or other
subcontractor to perform work required under the prime contract.
103 A person entering into an agreement , or "management contract", on a fee basis is not
considered a prime contractor when such person acts as a liaison between the owner of
the project and the various contractors who are hired and paid directly by the owner.
104 (Reserved)
200 Qualification and Payment of Tax.
201 A contractor, other than an oil or a gas well driller, taxable under Miss. Code Ann.
Section 27 -65-21 shall apply to the Commissioner for a Material Purchase Certificate
(MPC) identifying the specific contract before work is begun. Contracts for residential
construction are not taxable under Miss. Code Ann. Section 27 -65-21 and do not qualify
for an MPC.
202 The contractor's tax, together with any use tax due, must be paid before work is begun on
any contract exceeding $75,000 , unless a bond is filed with the Department of Revenue.
Bond forms are made available on request.
203 On taxable contracts between $10,000 and $75,000, or when a bond is required to be
filed, the tax must be paid on a monthly basis as compensation is received regardless of a
contractor's sales tax filing status. Any use tax due on equipment shall be paid on or
before the 20th day of the month following the month in which the property is brought
into Mississippi.
204 Persons or firms without a permanent place of business within Mississippi are required to
qualify and pay the 3½% contractor's tax and any use tax due on the total contract amount
before work is begun, unless a bond is filed as provided by Miss. Code Ann. Section 27 -
65-27 in an amount sufficient to cover these taxes.
205 The tax is levied upon the prime contractor. Subcontractors who perform work on a
qualified prime contract owe no tax on the subcontract price or gross income unless the
prime contractor fails to pay the tax due. A subcontractor may want to request a copy of
the MPC from the prime contractor. Should the prime contractor fail to qualify the
contract and pay the amount of tax due , the subcontractor is liable for the contractor's tax
on that portion of the work sublet to him.
206 The 2% taxpayer discount is not allowed on sales tax imposed and levied by Miss. Code
Ann. Section 27-65-21 (contractor's tax).
207 Failure to comply with the requirements to obtain an MPC before work begins, prepay
contractor's and use taxes or obtain a bond shall result in the contractor being prohibited
from performing the contract until such requirements are met.
208 A ten percent (10%) penalty is due on all deficiencies. Deficiencies include failure to
post a bond or prepay the tax in full on all contracts requiring the posting of a bond or
prepayment of tax before work has begun. This penalty is based on the total amount of
tax due on the total contract price. A ten percent (10%) penalty is also due on the tax
applicable to monthly compensation not reported timely on subsequent returns.
209 There will not be a 10% penalty on the same deficiency more than once. Any portion of
tax related to compensation that was penalized as a failure to post a bond or prepay the
tax in full on contracts before the work was begun will not also be subject to a 10%
penalty on the late remittance of monthly returns. Any portion of tax related to the late
remittance of monthly returns that was penalized will not also be subject to a 10%
penalty for failure to post a bond or prepay the tax of a contract.
210 In the instance a contractor or subcontractor incorrectly uses an MPC number to purchase
non-component materials or services, and it is determined by the Commissioner that there
is intentional disregard of the law or done with intent to defraud, there will be a fifty
percent (50%) penalty assessed. This penalty will be used when the contractor or
subcontractor misuses an MPC number or when an audit of taxpayer records reveals an
attempt to disguise or hide the misuse of an MPC number . This penalty will not be
assessed if the taxpayer can prove reasonable cause for failure to comply.
211 (Reserved)
300 Activities Taxed and Application of Rates.
301 A tax of 3½% is levied on the total contract amount or compensation received from all
contracts, except contracts for residential construction, that exceed $10,000 when the
work to be performed is constructing, building, erecting, repairing, grading, excavating,
drilling, exploring, testing or adding to any of the following:

# 1.

Air conditioning system

# 2.

Bridge

# 3.

Building

# 4.

Culvert

# 5.

Dam

# 6.

Dock

# 7.

Drainage or dredging system

# 8.

Electrical system

# 9.

Heating system

# 10.

Highway

# 11.

Irrigation or water system

# 12.

Levee or levee system

# 13.

Oil or gas well

# 14.

Pipeline

# 15.

Power plant

# 16.

Railway

# 17.

Reservoir

# 18.

Sewer

# 19.

Sidewalk

# 20.

Storage tank

# 21.

Street

# 22.

Tower

# 23.

Transmission line

# 24.

Water well

# 25.

Wharf

# 26.

Wiring for communication or information systems

# 27.

Any other improvement or structure or any part thereof (fences, etc.)
302 The tax is levied on contracts with the United States Government, the State of Mississippi
and its political subdivision s and any other exempt agency , without any deduction for
amounts paid to subcontractors, architects, engineers, landscapers or for any other costs
or expenses (including the 3½% contractor's tax) incurred by the contractor. Liquidated
damages that are withheld by the owner are not to be included in taxable contract
receipts.
303 The portion of the total contract price attributable to design or engineering services is
excluded from the contractor's tax if the total contract price for the project exceeds
$100,000,000; or if the engineering services are performed by a professional engineer, as
defined in the Miss. Code Ann. Section 73-13-3, who is the general or prime contractor.
304 A person taxable under Miss. Code Ann. Section 27 -65-23 who performs any of the
activities listed in section 301 as a prime contractor for compensation in excess of
$10,000 shall qualify and pay tax as a contractor in lieu of the tax levied by Miss. Code
Ann. Section 27-65-23. Activities so taxed under Miss Code Ann. Section 27-65-23 are:
1. Air conditioning installation or repairs;
2. Electrical work, wiring, and all repairs or installations of electrical equipment;
3. Elevator or escalator installation or repairs;
4. Grading, excavating, ditching, dredging or landscaping;
5. Insulating services or repairs;
6. Plumbing or pipe fitting;
7. Tin and sheet metal work;
8. Welding, etc.
305 Persons performing any services taxed under Miss. Code Ann. Section 27 -65-23 for
contracts of $10,000 or less owe the regular retail rate of sales tax on gross income.
Persons performing contracts of $10,000 or less that do not include services taxed under
Miss. Code Ann. Section 27 -65-23 owe no tax on gross income but are required to pay
the regular retail rate of sales or use tax on all taxable purchases.
306 Continuous contracts on project s embracing activities taxable under Miss. Code Ann.
Section 27-65-21, which are to be carried on for a definite period of time and a definite
amount, will be qualified and taxed at 3½%. Otherwise, the determination of whether a
contract is subject to tax under Miss. Code Ann. Section 27 -65-21 will be made from
purchase orders, work orders or invoices. Purchase orders, work orders or invoices that
are a continuation of prior purchase orders, work orders or invoices will be considered
part of one project. Generally, work on a project takes place in the same, adjacent or
adjoining area. Transmission lines (gas, water, sewage, power, telephone, etc.) are
considered a project. Amounts included in the contract for non-taxable activities (grass
cutting, tree trimming, etc.) may be excluded from the taxable amount of the contract.
307 Individual contracts for the construction of several buildings, streets, etc., or parts
thereof, may together be qualifiable as a prime contract despite the fact that the
compensation for each separate part of the project is less than $10,000. In order to
determine whether such contracts are qualifiable, consideration must be given to the
types of activities involved.
308 Contracts for the performance of work upon personal property, such as shipbuilding or
ship repairing, or activities that consist of demolishing or razing old property or clearing
land, are not subject to the provisions of Miss. Code Ann. Section 27 -65-21. However,
where land clearing or building razing activities are incidental to the primary purpose of
the contract, such as highway or building construction, the total contract is taxable. No
separation of incidental activity will be allowed even though it may be subcontracted.
309 Contractor's tax does not apply to the contract price or compensation received to restore,
repair, or replace a utility distribution or transmission system (electric, gas, water,
sewage, telephone, etc.) damaged by an ice storm, hurricane, flood, tornado, wind,
earthquake or other natural disaster if the entity performing the restoration, repair or
replacement is reimbursed for its cost only.
310 The portion of the contract price or compensation received from the sale and installation
of manufacturing or processing machinery that loses its identity as tangible personal
property to a manufacturer or a customer processor is to be taxed at the special sales tax
rate of 1 ½%.
311 (Reserved)
400 Floating Structures.
401 A 3½% tax is levied on the gross proceeds or gross receipts from the sale of any tangible
personal property that becomes a component part of any floating structure, or on the
performance of any construction activity upon any floating structure (not limited to
casinos). These floating structures are located within the waters of the State of
Mississippi and are normally moored and not normally engaged in the business of
transporting people or property. This tax does not apply to tangible personal property
that does not become a component part of the structure. If one contractor is doing both
land-based and floating structure construction, this tax may be paid by the contractor ;
otherwise, the owner of floating structure is responsible for the tax. The owner of a
floating structure subject to the 3½% tax will be issued a Casino Construction Project
Certificate. The owner will provide th e CCPC number to the prime contractors and sub -
contractors performing work on the structure . This will allow the component materials
and parts used in the construction activities to be purchased exempt from sales tax.
402 The owner of a floating structure will also be issued a direct pay number. With the use of
the CCPC number and this direct pay number, tax is accrued on the owner's use tax
return and not paid to vendors.
403 The contractor will be allowed to qualify those contracts involving both land -based and
water-based structures that cannot be easily separated, as long as the land -based portion
of the contract is in excess of $10,000.
404 (Reserved)
500 Material Purchase Certificates and Component Materials.
501 A Material Purchase Certificate is a certificate issued by the Department upon application
by a construction contractor with a qualifying contract. Each MPC is assigned an
identifying number which relates to a specific contract. Application to the Commissioner
for an MPC number is required before work is begun to cover all qualifying commercial,
non-residential construction. The MPC number allows the contractor and his
subcontractors to make tax -free purchases of materials and services that become a
component part of the structure covered by the qualified contract. The MPC number is
not applicable to other contracts and expires upon completion of the contract.
502 The contractor and his subcontractors shall provide their vendors with the MPC number
when purchasing component materials. The vendors shall list the MPC number on each
sales invoice as a prerequisite to claiming the exemption. Contractors and subcontractors
incorrectly using an MPC number to purchase non -component materials or services will
be held liable for the applicable sales tax due on their purchases. See Mississippi
Department of Revenue vs Hotel and Restaurant Supply 192 So.3d 942. Vendors who
incorrectly accept an MPC number to exempt the sale of consumables or services such as
rental of construction and related equipment will be liable for the applicable sales tax
due.
503 Component materials are all materials that become an integral part of the structure being
erected. Certain taxable services provided under Miss. Code Ann. Section 27 -65-23 are
also considered to be component to the structure. Component materials may include
built-in furniture, fixtures, appliances and similar personal property. For personal
property to become real property, it must be permanently attached to real property. To be
considered permanently attached, the property must lose its identity as personal property
and one or more of the following criteria must be met:
1. The property or equipment must be attached to building walls, floors, and/or
ceilings in such way as to require design or structural alterations to the real property
to which it is being attached; or
2. The property cannot be removed intact or its removal would result in the alteration
or destruction of the structure or property; or
3. The property must become an independent structure, itself (real property).
504 Non-component material is property that retains its identity as tangible personal property.
Free-standing furniture, fixtures, appliances and similar personal property are non-
component materials. Non-component property may be excluded from the measure of the
contractor's tax.
505 Items that are considered to be non -component materials include, but are not limited to,
the following:
1. Awnings
2. Building signage (channel letters, etch)
3. Cellular telephone tower addition (antennas, radio equipment, platforms, etc.)
4. Conveyor system, non-integrated
5. Digital billboard screens
6. Fuel dispensers
7. Generators
8. Gutters
9. Irrigation systems, above the ground
10. Motors
11. Movable bleachers or stadium seating
12. Playground equipment
13. Removable/replaceable pumps
14. Solar panels
15. Walk-in cooler/freezer
16. Water treatment clarifiers, descales and water conditioning/filtration equipment,
etc.
506 The purchase price or sales price of non-component materials is taxed as a withdrawal of
stock at the regular seven percent (7%) retail rate and any applicable special tax levy
when these items are purchased exempt with an MPC. The sales tax on purchases of
non-component materials should be reported on the contractor's or subcontractor's Sales
Tax return. Any special tax levy should be reported by the contractor or subcontractor on
their sales tax return at the applicable rate.
507 Free-standing personal property sold under a contract with the United States Government,
the State of Mississippi and its political subdivisions or any other exempt agency that has
been qualified can be purchased tax free. The contractor must apply to the Department
for a letter granting the authority to purchase free -standing personal property exempt
from tax.
508 When records and invoices are not kept to substantiate the exemption , sales made to the
contractor or subcontractor will be considered retail sales, taxable at the regular retail
rate. Contractors with contracts taxable under Miss. Code Ann. Section 27 -65-21 who
have paid retail sales tax on purchases of materials and services in the state that become a
component part of a structure being erected or repaired may take a credit against their
sales tax liabilities for the sales tax paid on these purchase after obtaining the MPC for
the related project.
509 A valid MPC number or direct pay permit is required to make an exempt purchase of
concrete or asphalt for use in any commercial construction job that is required to be
qualified under Miss. Code Ann. Section 27 -65-21. All purchases of asphalt or concrete
for commercial construction jobs less than $10,000 are taxable at the regular retail rate of
tax at the time of purchase, unless the purchaser is an exempt entity or provides the seller
with a direct pay permit. An exempt entity is one that is exempt from sales tax as
provided in Miss. Code Ann. Sections 27 -65-101 through 27-65-111. Direct pay permits
are issued to taxpayers under the provisions of Miss. Code Ann. Section 27-65-93.
510 A person with a valid sales tax number who is purchasing concrete to use in the
performance of a taxable service is considered the consumer of the concrete and must pay
tax to the vendor at the time of purchase. Contractors who mix concrete or asphalt for
use in the performance of a job owe sales tax on the value of the concrete or asphalt. Any
person purchasing concrete or asphalt from a n out-of-state vendor for delivery and use in
this state will be liable for remitting use tax on the purchase price of the concrete or
asphalt. Any person who mixes concrete or asphalt out of state for delivery and use in
this state will be liable for remitting use tax on the value of the concrete or asphalt. The
term "vendor", as used in this section, means the person who is manufacturing or
producing the concrete or asphalt from raw materials either at a fixed plant site location, a
portable plant or through ready -mix trucks. Materials used to form concrete are not
considered component materials and may not be covered by the use of an MPC number.
511 (Reserved)
600 Bond Requirement.
601 A bond must be filed on taxable contracts exceeding $75,000 that are performed in this
State, unless the tax is prepaid. Persons or firms without a permanent place of business
within Mississippi must file a bond on any taxable contract in excess of $10,000, unless
the tax is prepaid.
602 Such bonds shall be either (a) job bonds which guarantee the payment of taxes resulting
from the performance of a specified job or activity regardless of date of completion; or
(b) blanket bonds which guarantee the payment of taxes resulting from the performance
of all jobs or activities taxable under Miss. Code Ann. Section 27 -65-21 that are begun
during a specified period, regardless of the date of completion. The bond must be
sufficient to cover the liability for sales, use, income, withholding and motor fuel taxes
and must be approved by the Commissioner.
603 In lieu of a job or blanket bond, a tax rider, with a copy of a performance and/or payment
bond, may be accepted. In order for the tax rider to be accepted, a copy of the
performance and/or payment bond for which the tax rider is executed must be on file with
the Department.
604 It is in the discretion of the Department to require that a job bond be filed when making
application to the Commissioner for an MPC for continuous and/or maintenance projects.
This request must be updated annually along with the submission of proof of continued
bonding coverage.
605 Where a contractor prepaid the sales tax, but a use, income, withholding or motor fuel tax
bond is still required, the contractor will be notified of the bond requirement after an
application for a Material Purchase Certificate has been received.
606 When a contractor defaults ion the execution of his contract and the bonding company
acting as surety for the performance of the contract assumes completion of the contract,
the bonding company becomes liable for the payment of the sales, use, income,
withholding and motor fuel tax accruing as a result of its activities. The contractor's
MPC number becomes void at the time of default. The surety company shall make
application to the Commissioner for an MPC covering the remaining/unfinished portion
of the contract. The application must include proper bonding and/or prepayment of tax.
607 (Reserved)
700 Owner Construction.
701 A person constructing buildings on property he owns is not a contractor and is liable for
the retail sales or use tax on all materials or services purchased even though the person
may enter into a contract to sell the building and lot (real property) before construction is
completed.
702 (Reserved)
800 Residential Construction.
801 The contract price or compensation received for constructing, building, erecting,
repairing, or adding to any building, electrical system, heating system or any other
improvement or structure that is used for or primarily in connection with a residence or
dwelling place for human beings is excluded from the 3½% contractor's tax provided by
Miss. Code Ann. Section 27-65-21.
802 Sales of materials and services for use in residential construction activities are taxed at
the regular retail rate of tax provided by Miss. Code Ann. Sections 27 -65-17, 27-65-23
and 27 -67-5. Such residences shall include homes, mobile homes, summer cottages,
fishing and hunting camp buildings and similar buildings, but shall not include hotels,
motels, hospitals, apartments, condominiums, nursing or retirement homes, tourist
cottages, military barracks, school dormitories, sorority and fraternity houses, churches or
other commercial establishments. An "apartment" is a collection of four or more
dwellings on continuous land with kitchen facilities and common ownership that are
rented to tenants rather than transient guests. Groups of single family homes do not
constitute apartments. A "nursing home ", as the term is used in this section, is any
complex that provides any type of assisted living. The caregivers can be either medical
or non-medical personnel.
803 It is in the discretion of the Department to separate out residential housing from a
construction contract for nonresidential construction.
804 All purchases of concrete and asphalt for residential use are taxable at the regular retail
rate of sales tax at the time such materials are purchased from the vendor, unless the
purchaser is an exempt entity or provides the seller with a direct pay permit. An exempt
entity is one that is exempt from sales tax as provided in Miss. Code Ann. Sections 27 -
65-101 through 27 -65-111. Direct pay permits are issued to taxpayers under the
provisions of Miss. Code Ann. Section 27 -65-93. A direct pay permit relieves the seller
of the responsibility for collecting tax and requires the holder to remit any taxes due on
the purchase directly to the state.
805 A person with a valid sales tax number who is purchasing concrete to use in the
performance of a taxable service is considered the consumer of the concrete and must pay
tax to the vendor at the time of purchase. Contractors who mix concrete or asphalt for
use in the performance of a job owe sales tax on the value of the concrete or asphalt. Any
person purchasing concrete or asphalt from an out-of-state vendor for delivery and use in
this state will be liable for remitting use tax on the purchase price of the concrete or
asphalt. Any person who mixes concrete or asphalt out of state for delivery and use in
this state will be liable for remitting use tax on the value of the concrete or asphalt. The
term "vendor", as used in this section, means a person who is mixing concrete or asphalt
from raw materials either at a fixed plant site location, a portable plant or through ready -
mix trucks.
806 (Reserved)
900 Equipment and Supplies.
901 Purchases by contractors and subcontractors of work equipment, tools, building forms,
repair parts for work equipment and similar items of tangible personal property that do
not become component part s of the structure being erected are taxed at the regular retail
rate of sales or use tax and any applicable special tax . When property of this type has
been previously used in another state and is imported into this State for use, the use tax is
due on the fair market value of the property at the time of importation. At no time shall
the value be less than 20% of original cost. Credit for sales or use tax paid to another
state in which the property was acquired or used may be taken in computing the amount
of use tax due this State. The credit must be computed by applying the rate of sales or
use tax paid to another state to the value of the property at the time it enters Mississippi.
902 Owners or other persons receiving benefit from the use of tangible property in this State
are liable for use tax on such property.
903 The rental or lease of equipment and other tangible personal property is taxed at the same
rates as a sale of the same property.
904 (Reserved)
1000 Persons or Firms Domiciled Outside the State
1001 Persons or firms domiciled outside Mississippi who perform contracts in Mississippi are
construed to be doing business within the State and are subject to the various provisions
of the Sales and Use Tax Laws, the Income and Withholding Tax Laws, the Franchise
Tax Laws and the Motor Fuel Tax Laws in the same manner as are resident taxpayers.
1002 (Reserved)
35.IV.10.01 revised effective April 1, 2018.