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Court decision could allow Legislature to provide more revenue for municipalities

UPWARD: Sales and use tax revenues in Mississippi have been on the increase since 2011. Graph by Steve Wilson

Mississippi legislators could have several methods to help cities financially after a U.S. Supreme Court decision opened the door for states to levy internet sales taxes.

Mississippi levies two taxes on sales: a conventional sales tax and a consumer use tax. Taxpayers are supposed to pay a 7 percent use tax individually on all purchases from out-of-state firms, which also is the same rate as the state’s sales tax.

Before the recent decision in South Dakota v. Wayfair, states were unable to levy sales tax on internet sales because of a 1992 decision that mandated that a company had to have a physical presence in a state (such as a warehouse, store or office) before a state could tax its sales.

Now states have the green light to force online retailers to collect sales tax, which could lead to some unintended consequences such as revenue departments hitting online retailers outside their boundaries with audits.

The key difference between the use tax and the sales tax in Mississippi is that municipalities receive 18.5 percent of the revenue from the sales tax, while the majority of proceeds from the use tax go to the state’s general fund.

Counties don't receive any sales or use tax revenues. Sales tax revenues have increased 11.5 percent since 2005, according to data from the Mississippi Department of Revenue.

Despite that uptick, the future is e-commerce. According to data from the U.S. Census Bureau, more shoppers are shopping online than ever before. E-commerce sales increased 3.9 percent in the first quarter of this year from the fourth quarter of last year, an increase of 16.4 percent from the same time last year.

There were several bills in this year's session that could've addressed this issue, but none of them made it to Gov. Phil Bryant's desk for a signature. Here are the two most important proposals that could be revived in a possible special session.

Increase the sales tax disbursement

There were several bills that would've increased the sales tax disbursement to cities from the present rate of 18.5 percent to 20 percent. In 2017, the Mississippi Department of Revenue disbursed $434,620,950 to municipalities, down 0.57 from 2016, when the DOR sent $437,129,439 back to municipalities.

Such a plan would require only a tweak to the state's present law.

Here is a database of all the state's municipalities and how much they stand to gain under such a plan:

If the 20 percent standard was in effect in 2017, cities and towns would've received $469,860,486, or about $35 million more annually.

The biggest cities in the state would gain the most under such a plan. Those include:

  • Jackson — $2,342,927

  • Hattiesburg — $1,767,541

  • Gulfport— $1,680,739

  • Tupelo — $1,672,999

  • Meridian— $1,134,091

  • Southaven — $1,171,077

  • Ridgeland — $1,076,645

  • Biloxi — $1,015,32

  • Flowood — $934,040

USe tax to cities

State Rep. Mark Baker (R-Brandon) wrote a bill, House Bill 722, that would've sent 15 percent of use tax revenues to municipalities for road and bridge improvements. The bill passed the House, but died in the Senate Finance Committee.

Last year, use tax revenues totaled $310,441,806. If Baker's plan would've become law, $46,566,270 would be available annually to cities for infrastructure improvements. The DOR would've divided up the money to municipalities on the basis of a proportion of their sales tax disbursements from the previous fiscal year.

If estimates of an additional $50 million in use tax revenue are realized, the amount that would go for infrastructure improvements would increase to $54 million per year.

Cities would be limited, under Baker's plan, to spending that money on road and bridge improvements.

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