Mississippi LLC Taxes
All Mississippi LLCs are taxed as a pass-through entity by default, which means all of the business’ revenue is reported on the members’ individual tax returns. In addition to the federal 15.3% self-employment tax, Mississippi LLC members pay the Mississippi personal income tax rate, which starts at 4%. The other option is to apply for S-corp of C-corp tax status with the IRS. Other Mississippi taxes include the sales and use tax, local taxes, and industry taxes.
In this article, we'll cover:
How Are Mississippi LLCs Taxed?
Mississippi LLCs are taxed depending on the number of members (or owners) the business has. For example, a single-member LLC (SMLLC) is taxed as a sole proprietorship, and a multi-member LLC is taxed as a partnership. These are both default tax classifications, which means you don’t need to file a request for the IRS to tax you this way.
- Single-member LLC—Form 1040 (usually Schedule C, but some SMLLCsfile C-EZ, E, or F)
- Multi-member LLC—Form 1065
Both single-member and multi-member LLCs are taxed as pass through entities, meaning the owners would pay taxes on the company’s revenue on their individual tax return.
However, a Mississippi LLC can elect to be taxed as an S-corp or C-corp.
Mississippi LLCs taxed as S-corp
S-corp status is a tax election that the IRS offers LLCs and corporations to be taxed as pass-through entities. Since an LLC’s default tax status is pass-through, this doesn’t change how the LLC will be taxed. However, an LLC with S-corp status can distribute income to their members, which would not be taxed at the 15.3% self-employment tax rate.
- S-corp LLC—Form 1120-S
To apply for S-corp status, check that your business meets the IRS requirements for S-corps, consult your CPA, and consider if the complicated nature of S-corp tax election is a good idea for your business’ needs and goals.
LLCs taxed as C-corp
A Mississippi LLC can choose to taxed as a C-corp, the default tax status for corporations. Some LLCs choose this tax election because C-corps often have larger tax deductions that regular LLCs and are more appealing to investors or buyers. However, C-corps pay the 21% federal corporate income tax as well as Mississippi’s franchise tax ($2.25 per $1,000 above $100,000) and corporate income tax (starting at 5% for $10,000 or more in profit). Consider checking with your CPA before choosing C-corp tax election.
- C-corp LLC—Form 1120
Mississippi State Income Tax
Mississippi has a graduated state income tax rate, which means that you pay a different percentage on different amounts of taxable income. In Mississippi, the tax rates are:
- 0% on the first $3,000 of taxable income
- 3% on the next $2,000 of taxable income
- 4% on the next $5,000 of taxable income
- 5% on all taxable income over $10,000
However, if your LLC has C-corp tax election, it will also pay Mississippi’s franchise tax, which is $2.25 per $1,000 above $100,000 of the money you’ve spent doing business in Mississippi. While your first $100,000 aren’t included for the franchise tax, any property that the business owns that has value greater than the money spent is included as taxable assets. There is a $25 minimum on corporate franchise tax.
Sales and Use Tax
In Mississippi, the sales and use tax rate is usually 7% with some exceptions including farm instruments (1.5%), sales to electric power associations (1%), and the sale of automobiles (1-5%). The Department of Revenue’s website offers a full list of Mississippi sales and use tax rates.
Your local Mississippi jurisdiction might charge additional sales tax, such as Baldwyn’s 2% tourism tax on the proceeds of hotel/motel room rentals, restaurants, and prepared food at convenience stores. You should check with your local municipality to determine what your local sales and use tax will be.
Local Mississippi Taxes
Depending on which county or city your business is located in, your LLC might be subject to local Mississippi taxes. This differs from place to place, as well as from business to business. In addition to sales tax, some places include taxes on particular fields of business, such as hospitality or tourism, as well as the right to sell certain goods, like alcohol or tobacco.
Other Taxes in Mississippi
In addition to your sales and use tax, local taxes, and income tax, Mississippi levies additional taxes on businesses with employees and businesses in certain fields. Below, we go over Mississippi’s employer and industry-specific taxes.
Mississippi State Employer Taxes
If you are an employer, you will need to pay unemployment insurance taxes and workers’ compensation insurance:
- Unemployment Insurance (UI) Tax—Due to a variety of factors, your Mississippi LLC’s UI tax will range between 0.0% and 5.4%. Typically, the tax rate for a start up is 1% on the first year of liability, 1.10% on the second, and 1.20% on every year after that until the employer is eligible for a modified tax rate (usually ending at 5.4% at the high end).
- Workers’ Compensation—The estimated Mississippi workers’ compensation is $1.19 per $100 in covered payroll, though this can change for a variety of factors, including how many employees your company has, the industry you’re in, what the day-to-day operations are, and more. All Mississippi businesses with more than five employees are required to have workers’ compensation insurance unless the worker is exempt, such as domestic and farm labor.
Depending on your LLC’s industry, there might be additional taxes to pay. For example, Mississippi requires an additional tax on the construction of commercial real property. This is 3.5% of the contractor’s gross receipts from the construction, and there are no exemptions. Other industry specific taxes include:
- Alcohol Beverage Tax
- Beer Tax
- Tobacco Tax
- Gaming Tax
- Petroleum Tax
- Estate Tax
- Tourism Tax
- Oil and Gas Tax
Check with the Mississippi Department of Revenue, along with your local municipality, to make sure you’re in compliance with local and state Mississippi tax law.
Do foreign LLCs in Mississippi need to pay Mississippi taxes?
Yes. If you register your out-of-state LLC to do business in Mississippi, you will be considered a Mississippi foreign LLC. All LLCs—even foreign ones—are required to pay Mississippi taxes, including sales and use tax, state income tax, local municipality taxes, and industry taxes.