Mississippi Computer, Software, and SaaS Tax Guide

Prepared by Sales Tax Helper

Table of Contents

1. Introduction
2. Nexus Considerations
3. General Rules and Compliance Considerations
4. Specific Exemptions
5. Sourcing Rules
6. Audit Considerations
7. Voluntary Disclosure Agreements (VDAs)
8. Conclusion
9. References & Resources

1. Introduction

For software companies, SaaS providers, and technology firms conducting business in
Mississippi, the state's sales and use tax rules present unique challenges. Unlike some states thattreat digital products and cloud-based services uniformly, Mississippi taxes software
comprehensively, including both prewritten (canned) and custom software, regardless of delivery method. Mississippi's tax treatment of software and technology-related services depends on multiple factors, including whether software is delivered in tangible or electronic form, whether it is used inside or outside the state, and how services are structured and classified.

Purpose of This Guide

This guide is designed to help businesses navigate Mississippi's sales and use tax rules related to software and technology services. It focuses on:

• Nexus Considerations: Understanding when businesses must register and collect
  Mississippi sales tax due to physical or economic presence.
• Taxability of Software & Services: Clarifying the tax treatment of prewritten vs. custom
  software, cloud computing services, and related technology offerings.
• Sourcing Rules: Determining how and where transactions are taxed based on customer
  location and method of software delivery.
• Audit Considerations: Identifying common tax audit triggers and best practices for
  compliance.
• Voluntary Disclosure Agreements (VDAs): Explaining the process for businesses to
  rectify past noncompliance while mitigating penalties and limiting back-tax liability.

Why This Matters for Technology Companies

Mississippi's sales tax laws impact software companies, SaaS providers, and technology firms in multiple ways:

• Broad Tax Base: Mississippi takes a comprehensive approach to taxing software, with
  both canned and custom software subject to tax at the regular retail rate, regardless of
  delivery method.
• Recent Legislative Changes: Effective July 1, 2023, Mississippi updated its taxation of
  software, including provisions for remotely accessed software hosted outside the state,
  creating new compliance considerations.
• Cloud Computing Complexity: Recent changes to Mississippi's tax code have clarified
  that certain cloud-based services are not taxable, specifically excluding "platform as a
  service" and "infrastructure as a service" from the definition of computer software.

Compliance Risks: Failure to correctly assess and collect sales tax can result in
significant penalties, interest, and extended audit exposure.

This guide will walk through Mississippi's specific sales tax rules governing software, SaaS, and
technology-related services while referencing applicable statutes, administrative rules, and
Mississippi Department of Revenue guidance. Throughout the guide, official Mississippi
Department of Revenue sources will be linked for further reference.

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