Pay BillThe manufacturing industry is facing a bevy of new challenges that have made it more difficult to maintain profitability while driving growth. Issues arising from workforce development, supply chain resilience, technology adaption and cost management have become prominent. The urgency to adopt Industry 4.0 automation is also top of mind. This has created a complex landscape for manufacturers to navigate. While focused on these issues, less time is available to focus on other matters such as tax planning. The good news for Mississippi manufacturers is that there are available state tax incentives which can help reduce overall tax liabilities. To help clients, prospects, and others, BMSS Advisors & CPAs has provided a summary of the key details below.
- Mississippi Flexible Tax Incentive (MFLEX) – This universal tax credit provides an incentive to manufacturers expanding operations to Mississippi. It is awarded based on the investment, job creation, and average wages for new positions created. It can be used to offset, income, franchise, sales and use, and payroll taxes. To qualify, a business must create a minimum of 10 new, full-time jobs with compensation equal to a minimum of 75% of the average state/county wages or invest a minimum of $2,500,000. Funding is not limited, so all companies that meet eligibility requirements can be approved by the Mississippi Development Authority.
- Manufacturing Investment Tax Credit – This incentive is available to manufacturers that have operated within the state for two or more years. To be eligible, a company must invest $1M or more in buildings or equipment used in the production process. The credit is determined by taking 5% of the eligible investment and is allowed only in the year the investment is made. The maximum credit amount is $1M and it can be used to offset 50% of state tax liabilities. The credit can be carried forward for up to five years.
- Jobs Tax Credit – This credit is available to manufacturers that increase employment by a minimum amount. The amount of the credit is based on the number of new jobs created and the county where the positions are based. Those in less developed counties are eligible for a higher credit against payroll taxes, while those in more developed counties are eligible for a lower amount. The credit per created job ranges from 2.5% to 10% of payroll. It is based on the number of new, full-time jobs created, as part-time positions are not included in the calculation.
- Skills Training Income Tax Credit – This credit is available to manufacturing companies that provide training to Mississippi-based employees. To qualify for the credit, training must be offered or approved by a community college in the district where the business is located as well as the Mississippi Department of Revenue. The training does not have to be held at a community college but must enhance the job skills the employee is performing. Eligible expenses include instructors’ cost, materials, and any equipment used for training purposes. The amount of the credit is equal to 50% of training expenses for the year and cannot offset more than 50% of state income tax. The credit amount is limited to $2,500 per employee per year and can be carried forward for up to 5 years.
- Inventory Ad Valorem Tax Credit – This income tax credit is available to manufacturers and is equal to the Ad Valorem taxes paid on commodities, raw materials, works-in-process, products, goods, wares, or merchandise held for resale. It also includes ad valorem taxes paid on rental equipment. It is important to note that these taxes must be tracked according to location in order to claim the credit. The incentive cannot exceed the lesser of $5,000 per location or the total Mississippi state income tax due allocated to the location where the inventory is held. Unused credit amounts can be carried forward for five consecutive years.
- Raw Materials Sales Tax Exemption – The state offers a sales tax exemption on the purchase of certain materials used in the manufacturing process. This includes the sale of containers, raw materials, catalysts, processing chemicals, welding gases, machinery, tools, repair parts, or fuel supplies (used directly in the manufacturing process). To claim the exemption, the sale must be made directly to a qualified business and payment must be received.
Contact Us
The state of Mississippi offers a variety of tax incentives for manufacturing companies. In fact, there are additional saving opportunities designed for general businesses which industry companies may be able to claim. If you have questions about the information outlined above or need assistance with a manufacturing tax or accounting issue, BMSS Advisors & CPAs can help. For additional information call (833) CPA-BMSS or click here to contact us. We look forward to speaking with you soon.