Nothing in life is certain except death and taxes. And if you fail to understand Mississippi’s unique contractor’s tax framework before a project begins, it is almost certain to create problems down the road.
A. What is contractor’s tax?
The term “contractor’s tax” is the common vernacular used to refer to Mississippi’s special sales tax applicable to construction projects. Mississippi sales tax law imposes a 3.5% contractor’s tax on all non-residential construction activities when the total contract price or compensation exceeds $10,000. The tax is levied on the entire contract price even though most construction contracts will consist of both goods and services. Moreover, the Mississippi Department of Revenue’s (MDOR) position is that all non-residential construction contracts are subject to contractor’s tax, including contracts with state and federal governmental entities, as well as exempt and non-profit entities, such as hospitals and churches.
