A measure seeking to require certain out-of-state sellers to collect and remit Mississippi sales and use tax was approved by the Mississippi House on February 1, 2017. If approved by the Senate and signed into law by Governor Phil Bryant (R), who supports a tax on remote sales, the measure would take effect July 1, 2017.

Yet even if the bill is killed, Mississippi may still be on track to tax remote sales. The Mississippi Department of Revenue has proposed an administrative rule similar to the bill currently under consideration in the Senate.

House Bill 480

House Bill 480 expands Mississippi’s definition of a “person doing business in this state” to include “any out-of-state seller who lacks a physical presence in this state but who is making retail sales of tangible personal property into this state and has a substantial economic presence in this state by such seller’s retail sales of tangible personal property sold into this state exceeding … $250,000 based on the immediately preceding calendar year sales.”

While many voices in Mississippi are calling for an internet sales tax, there remains opposition. Republican Rep. Joel Bomgar, who described HB 480 as a tax increase, voted against it. Fellow Republican Rep. Dana Criswell also opposed the measure on the grounds that “it is a tax.”

If HB 480 is approved, the state would receive 70 percent of revenue collected, which would be allocated for the repair, maintenance, and/or reconstruction of roads, streets, and bridges. The remaining revenue would be divided equally among counties and municipalities.

Proposed administrative rule

The Department of Revenue has proposed a new rule, under which out-of-state sellers that lack a physical presence in Mississippi but make retail sales of tangible personal property into the state may have a substantial economic presence and an obligation to collect and remit tax in Mississippi. Substantial economic presence is created if their sales into Mississippi exceed $250,000 per year (based on the previous calendar year’s sales).

The proposed rule also explains that nexus (the connection between a business and a state that requires the business to collect and remit tax on behalf of the state) is created when “the consumer market is purposefully and systematically exploited by computer assisted shopping in addition to other customary means of media driven and catalogue distribution of solicitation made by out-of-state sellers.”

Finally, the rule would penalize out-of-state sellers who do not “voluntary register to collect tax on their sales into Mississippi by July 1, 2017.” These sellers will be “assessed retroactively,” and “no statute of limitations will be used in determining the total tax liability for such taxpayers.”

Sales and use tax revenue lost to untaxed remote sales

A January 2017 study released by the University Research Center found that Mississippi lost between $105.6 million and $122.7 million in 2016 from untaxed remote sales.

There were $341.5 billion in total U.S. retail ecommerce sales in 2015, an increase of more than $310 billion over 2000. However, “retail ecommerce and other ecommerce sales in Mississippi are likely below the same proportion as the U.S. and likely have grown at a slower pace.” This is, in part, due to a lack of connectivity in Mississippi.

The study references a 2015 U.S. Census Bureau survey, which found that 80.8 percent of the total U.S. population live in households with a broadband internet subscription; in Mississippi, only 65.6 percent of the population does. In the country as a whole, 9.6 percent of survey respondents live in a household with no internet subscription, as compared to 18 percent of Mississippi respondents.

In addition, only 51.5 percent of Mississippians aged 19 and older possess a credit card or home equity line of credit, and credit cards are usually necessary when shopping online. Not surprisingly, the National Telecommunications and Information Administration (NTIA) found that “the percentage of Mississippi consumers shopping online was second-lowest among all states,” just below Oklahoma.

Nonetheless, the University Research Center concluded that “the value of ecommerce remote sales to Mississippi already exceeds the value of traditional, non-electronic remote sales. Therefore, these sales represent, potentially, a meaningful source of tax revenue for the state.”

Amazon to collect Mississippi tax

Even without new legislation or administrative rules, the state will soon see sales and use tax revenue increase. As of February 1, 2017, Amazon is voluntarily collecting and remitting tax on Mississippi transactions.

Whatever happens in Mississippi, tax automation software facilitates sales and use tax compliance for businesses of all sizes, in all states. Learn more.