Assuming you only collect sales tax on products? That assumption costs service businesses thousands in compliance penalties every year. Mississippi taxes dozens of services at its standard 7% rate. From HVAC repair to pest control to computer software services.
The confusion makes sense. Most states exempt professional services entirely. Mississippi does too, but draws the line differently than you’d expect. Plumbers collect tax. Accountants don’t. Electricians do. Lawyers don’t. Miss that distinction during your first Mississippi sale, and you’re already behind.
Remote sellers crossing Mississippi’s $250,000 economic nexus threshold face immediate collection obligations whether they’re selling products or taxable services. Hands Off Sales Tax (HOST) specializes in exactly this scenario: determining which services trigger tax, handling registration, and managing ongoing compliance so you focus on operations instead of state tax codes.
Which Services Actually Trigger Mississippi Sales Tax?
Mississippi taxes repair and maintenance services that most service providers assume are exempt. If you’re fixing something, installing something, or maintaining something tangible, you’re collecting 7% tax.
Home Services: Plumbing, electrical work, HVAC installation and repair, pest control, landscaping, welding, painting, and carpentry all trigger the 7% rate. Doesn’t matter whether you’re servicing a home or commercial property. Tax applies to both.
Vehicle Services: Auto repair, motorcycle servicing, boat work, and tire repair all fall under taxable services. Even elevator and escalator work counts.
Technology Services: Computer software services including installation, maintenance, and upgrades are taxable when bundled with software purchases. Web design services trigger tax. Here’s where it gets tricky: SaaS hosted outside Mississippi and accessed remotely is exempt, but downloaded software or software hosted on Mississippi servers is taxable under Senate Bill 2449.
Personal Services: Dry cleaning, car washes, parking services, cable TV, and admission to entertainment venues all require tax collection.
Often-Overlooked Taxable Services: Mississippi taxes specialized services many businesses miss: burglar and fire alarm installation and monitoring, storage and warehousing, laundry services, film processing and photo finishing, furniture repair and upholstering, telegraph and communication services, and cotton compress operations.
Hospitality Services and Local Taxes: Hotels, restaurants, and bars face the standard 7% rate plus additional tourism and economic development taxes imposed by many Mississippi counties and cities. Check local ordinances! These supplemental taxes vary by jurisdiction and stack on top of state rates.
Resource Extraction: Services connected to oil, gas, and mineral exploration face a reduced 4.5% rate. The only service category with special treatment.
Admission Services: Entertainment and amusement admissions are taxable at 7%, though admissions to publicly-owned enclosed coliseums and auditoriums carry a reduced 3% rate (excluding college athletic contests).
Construction Contractors: Non-residential construction over $10,000 pays a 3.5% contractor’s tax instead of the standard 7% rate. Residential construction stays at 7% regardless of contract size.
The Services Mississippi Doesn’t Tax
Professional services escape sales tax entirely. Legal services, accounting, medical care, architectural work, and most consulting services remain exempt, provided they stay purely advisory without crossing into tangible deliverables.
The moment your consulting includes taxable elements like installing software, providing physical manuals, or performing maintenance work, that portion becomes taxable even if the advice isn’t.
Educational services also stay exempt, along with residential construction projects under $10,000.
Economic Nexus: When Remote Service Providers Owe Tax
Mississippi’s economic nexus law, active since September 1, 2018, requires remote sellers exceeding $250,000 in gross sales over any 12-month period to register and collect. Service revenue counts the same as product sales.
Physical presence still triggers nexus instantly: employees in Mississippi, inventory stored in-state, equipment located there, or even making deliveries with company vehicles.
Many service providers discover nexus obligations months after crossing thresholds. Every sale made after crossing $250,000 should have included tax collection. The exposure compounds daily.
Common Mistakes That Trigger Audits
Assuming all services are exempt. Mississippi taxes specific trade services while exempting professional services. That distinction catches businesses off-guard during audits.
Mixing taxable and non-taxable services on invoices. When you bundle taxable HVAC installation with potentially exempt consulting without separating charges, Mississippi taxes the entire invoice.
Ignoring economic nexus. Service providers selling remotely into Mississippi often miss the $250,000 threshold entirely until a notice arrives.
Using wrong contractor rates. Applying 7% retail rates to non-residential projects over $10,000 overpays on every contract. Using the 3.5% contractor’s rate for residential work creates audit liability.
Misunderstanding SaaS rules. Cloud-hosted services accessed remotely stay exempt. Downloaded software gets taxed. The delivery method determines taxability, not the product itself.
How Service Businesses Navigate Mississippi Compliance
Registration happens through Mississippi’s Taxpayer Access Point (TAP) system. Free to register, but expensive to skip. All contractors performing taxable services need a Sales Tax Certificate before starting work.
Out-of-state service providers with nexus must register and collect. Mississippi is origin-based, meaning you apply the tax rate based on your business location, not the customer’s.
Combined state and local rates range from 7% to 8%. Jackson adds 1%, Tupelo adds 0.25%, everywhere else stays at the 7% state rate.
Returns are due monthly, quarterly, or annually depending on assigned filing frequency. Due date is the 20th of the month following the reporting period. Mississippi requires zero returns even when no taxable sales occurred. Skip filing and penalties arrive regardless.
What HOST Does for Service-Based Businesses
Service providers face distinct sales tax challenges. Product taxability is straightforward: you sell a widget, you collect tax. Services require determining which aspects of your work trigger tax, managing mixed transactions, and tracking obligations across multiple states with conflicting rules.
Hands Off Sales Tax handles the complexity:
Nexus Analysis determines where you’ve crossed Mississippi’s $250,000 threshold or established physical presence.
Service Taxability Review examines your specific services against Mississippi’s rules, identifying which revenue streams require collection and which qualify for exemptions.
Registration Management completes Mississippi sales tax registration through TAP, managing paperwork and ensuring proper setup for your service categories.
Ongoing Filing prepares and submits Mississippi returns on schedule monthly, quarterly, or annually including zero returns during slower periods.
Software Configuration reviews your automation tools to ensure services are taxed correctly and exemptions apply where appropriate.
Audit Defense organizes documentation, interprets statutes, and defends your position when Mississippi questions service taxability.
Voluntary Disclosure Agreements limit lookback periods and waive penalties when you’ve been operating without collecting tax.
Getting Mississippi Service Tax Right
Mississippi sales tax on services catches businesses precisely because it contradicts typical assumptions. Most states exempt services broadly. Mississippi taxes them specifically. That gap between expectation and reality creates exposure.
The 7% rate applies to trade services, the 3.5% contractor’s rate applies to non-residential construction over $10,000, and professional services stay exempt. Crossing $250,000 in Mississippi sales triggers immediate obligations for remote providers. Physical presence creates nexus instantly.
With 25+ years of specialized sales tax experience, Hands Off Sales Tax manages Mississippi compliance for service businesses determining taxability, handling registration, managing ongoing filings, and defending audits so you deliver services rather than decode tax codes.
Ready to ensure your service business collects Mississippi sales tax correctly? Contact HOST today to discuss your specific situation.
Frequently Asked Questions
Are professional services taxable in Mississippi?
No. Professional services including legal, accounting, medical, and most consulting remain exempt. Trade services like plumbing, electrical work, HVAC, and pest control are taxable at 7%.
Does Mississippi tax SaaS?
SaaS hosted outside Mississippi and accessed remotely is exempt. Software hosted on Mississippi servers and accessed by in-state customers is taxable at 7%. Downloaded software is always taxable.
What rate do contractors pay in Mississippi?
Non-residential construction exceeding $10,000 pays a 3.5% contractor’s tax. Residential construction pays 7% on materials and taxable services regardless of contract size.
Do remote service providers collect Mississippi sales tax?
Yes, if you provide taxable services to Mississippi customers and exceed $250,000 in gross sales over any 12-month period, you must register and collect due to economic nexus rules.
How do I register for Mississippi sales tax?
Register through Mississippi’s Taxpayer Access Point at tap.dor.ms.gov. Provide business structure information, FEIN, officer details, and anticipated sales volume. Registration is free but required before making taxable sales.
Are repair services taxable in Mississippi?
Most repair services are taxable at 7%, including vehicle repair, equipment maintenance, appliance servicing, and property repair work. Taxability depends on whether the service involves repairing tangible personal property or real property improvements.
