May 7, 2021

Volume XI, Number 127

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House extends contractors tax to residential construction; Senate requires all contractors to register with DOR to obtain local building permit

The Mississippi House of Representatives passed HB 1142 to extent the state’s 3.5% contractor’s tax to residential construction and to require builders to obtain a material purchase certificate (“MPC”) in order to pull a local building permit. Under current law, the contractor’s tax only applies to commercial construction, and the ordinary 7% sales tax applies to certain aspects of residential construction. Confusion and disagreement over that residential tax scheme has led to extensive controversy and litigation especially in the context of roofers, remodelers and others performing home repairs and renovations rather than original construction.

The House bill would also remove certain land costs from the contractor’s tax base, and that would apply both for commercial and residential projects. If enacted, this bill would become effective July 1, 2021.

The Senate passed SB 2874 that would require all residential or commercial contractors to register with the Department of Revenue in order to pull a local building permit, but that bill did not extend the contractor’s tax to residential construction and repairs as with the House bill. The Senate bill would be effective immediately upon passage.

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© 2021 Jones Walker LLPNational Law Review, Volume XI, Number 43
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About this Author

John Fletcher Tax Lawyer Jones Walker Law Firm
Partner

John Fletcher is a partner in the firm's Tax & Estates Practice Group and practices from the Jackson, Mississippi office. With more than twenty years' experience in the legal, corporate, and accounting arenas, his practice focuses primarily on state tax matters, encompassing Mississippi, Louisiana and multi-state income, franchise, sales, use and local ad valorem taxes.

He is a contributor for Cooking with SALT, a legal blog committed to providing timely insights on recent legal and practical developments concerning clients...

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