Governor Tate Reeves this week signed into law H.B. 549 to enact a new sales tax exemption for items manufactured in the state and exported for first use in another state, regardless of the party or means by which those goods are delivered.  While Mississippi already offered a broad 48-hour vehicle export exemption and also an interstate commerce exemption for goods shipped out of state by the manufacturer or common carrier, the state considered other transactions on par with ordinary taxable retail sales if the purchasers picked the items up at the manufacturer’s facility and took them home. 

This restrictive and somewhat arbitrary policy placed Mississippi manufacturers at a competitive disadvantage by discouraging out of state customers from traveling to the state for instruction, training or inspection of locally-manufactured products prior to taking possession.  To avoid the tax, the parties would have to arrange and pay for separate shipping even though the purchaser could more cost effectively take the product home themselves.  This new law, codified as Miss. Code Ann. § 27-65-101(yy), allows the customer to come into Mississippi to retrieve the product if that is more beneficial, and expressly provides that any in-state instruction, training or inspection of the product does not constitute a taxable first use of the product.

(yy) The gross proceeds from the sale of any item of tangible personal property by the manufacturer or custom processor thereof if such item is shipped, transported or exported from this state and first used in another state, whether such shipment, transportation or exportation is made by the seller, purchaser, or any third party acting on behalf of such party. For the purposes of this paragraph (yy), any instruction to, training of or inspection by the purchaser with respect to the item prior to shipment, transportation or exportation of the item shall not constitute a first use of such item within this state.

The Mississippi Manufacturers Association and several local manufacturing enterprises supported and encouraged this legislation, and the bill received unanimous approval in both chambers of the Legislature.  The bill is effective July 1, 2023.

Please reach out to John Fletcher or the Jones Walker LLP State & Local Tax (SALT) Team with any questions.