Questions Submitted for Hearing on Mississippi Software Sales Tax Regulation

In anticipation of the upcoming public hearing on Mississippi’s proposed amendments to its sales tax regulation on Computer Equipment, Software and Services, Jones Walker recently submitted a letter to the Mississippi Department of Revenue summarizing a wide range of questions and issues raised by the proposal.  These questions were compiled as a result of discussions among numerous Mississippi trade associations and businesses, and are intended to help foster the dialogue between the Department and taxpayers at the hearing on Wednesday, November 3.  Jones Walker will follow up with additional insight from the hearing following those discussions. Please contact Jones Walker SALT partner John Fletcher with any questions on the proposed amendments.

Louisiana Announces a New “Transfer Pricing Managed Audit Program”

The Louisiana Department of Revenue (the “Department”) released Revenue Information Bulletin No. 21-029 announcing the “Louisiana Transfer Pricing Managed Audit Program.”  Beginning November 1, 2021, eligible corporations may request to participate in the program in order to resolve intercompany transfer pricing issues with the Department. Newly registered taxpayers, existing taxpayers, and taxpayers currently under audit by the Department may participate in the program. Taxpayers may request to participate in the program until April 30, 2022, and all managed audits must be closed by June 30, 2022.

A taxpayer must meet the following qualifications in order to participate in the program:

  • Established history of voluntary tax compliance with the Department, if previously registered with the Department
  • Certification that the taxpayer has available time and resources to dedicate as a participant in the program
  • Available and suitable records concerning the intercompany transactions
  • Reasonable expectation of ability to pay an expected liability

Periods available for resolution include all open periods that have not prescribed, including those held open by a prescription waiver, as well as the 2021 tax year for both calendar and fiscal year filers, and up to four future tax periods.

If a taxpayer is approved and participates in the program, the taxpayer will be authorized to conduct a managed audit with respect to intercompany transactions. The taxpayer will be expected to provide all requested documentation to the Department within thirty days of signing a Managed Audit Agreement. Once the Department reviews the taxpayer’s information, the Department will issue a written determination as to whether the Department agrees with the taxpayer’s position. The taxpayer will then have thirty days to accept the determination or offer modifications or adjustments.

If the Department ultimately disagrees with the taxpayer, the Department may proceed with assessment and collection procedures.  However, no penalty will be assessed on any tax due relating to the managed audit findings. Any delinquency interest that accrued during the managed audit period will be abated, up to 180 days. The Department has defined the managed audit period from the date of the Department’s notice of acceptance into the program through the date of the Department’s notice of tax due.

Those taxpayers who already have transfer pricing matters under audit, or in the audit review, protest or litigation phase, are eligible to apply to participate in the program.

Please contact the Jones Walker SALT Team if you have questions about the potential benefits and consequences of participating in the new Louisiana Managed Audit Transfer Pricing Program.

UPDATE: Mississippi Attempts to Significantly Increase Sales and Use Taxes on Internet-Based Business Services Via Regulatory Amendment

UPDATE:  In response to widespread interest in these changes, the Mississippi Department of Revenue this afternoon scheduled a public hearing on the proposed amendments.  The hearing is set for Wednesday, November 3 at 1:30. Interested parties are encouraged to identify specific questions and issues to present to the Department at the hearing. Jones Walker is working with multiple parties and trade associations to assemble a list of these questions for submission to the Department in advance of the hearing to help facilitate that discussion. Anyone interested in adding to this list is welcome to contact us to discuss further.

Click here for more from our prior post on the proposed amendments.

Jones Walker SALT Team Members to Present at 28th Annual Paul J. Hartman State and Local Tax Forum – Register Now!

Jones Walker SALT Team members Jay AdamsBill Backstrom, and Alysse McLoughlin will present at the 28th Annual Paul J. Hartman State & Local Tax Forum October 27-29, 2021 in Nashville, TN.

The Professor Paul J. Hartman Memorial State and Local Tax (SALT) Forum, sponsored in conjunction with the Vanderbilt University Law School, provides industry, practitioners and state revenue employees the opportunity to participate in a quality forum exploring significant national developments and trends in state and local taxation. The Forum features speakers with the knowledge, expertise, and communication skills to impart current developments as well as the practical solutions and planning opportunities in structuring and reporting state and local tax transactions. This year’s Forum will be held in-person at the Loews Vanderbilt Hotel in Nashville, Tennessee. There will also be a virtual option available for all program sessions, likely via Zoom.

Please click here to register for the forum.

Mississippi Attempts to Significantly Increase Sales and Use Taxes on Internet-Based Business Services Via Regulatory Amendment

On September 24, the Mississippi Department of Revenue filed a proposed amendment to its sales tax regulation on Computer Equipment, Software and Services.  This amendment appears to reverse longstanding sales and use tax policy with respect to remote internet-based computer services, and could result in a significant non-legislative tax increase on Mississippi businesses.  The notice filed with the Secretary of State did not schedule a public hearing, and the amended regulation is set to go into effect in thirty days on October 24.  All taxpayers concerned about this potential shift in tax policy or the important issues identified below should immediately contact the Department and request a public hearing on the proposed changes.

The most prominent change within this amendment is to expand the regulatory definition of “computer software” to define items such as cloud computing, software as a service (SaaS), platform as a service (PaaS) and infrastructure as a service (IaaS).  The most significant and consequential change, however, may be the deletion of the existing use tax rule declaring as nontaxable any software located on an out-of-state server when accessed via the internet.  The practical effect of this deletion is that the Department will now consider as taxable many previously non-taxable internet based services provided or hosted entirely outside Mississippi when utilized by a Mississippi user.

The proposed regulation raises but fails to address numerous important questions related to the practical application of this new policy, and it will be very important that the Department hold a public hearing to explore these issues further.

Statutory background

Mississippi imposes its sales tax on “computer software sales and services.”  For sales tax purposes, computer software is not specifically defined and is not included within the definition of tangible personal property,[1] but is taxable by direct statutory reference as it is included in the list of miscellaneous businesses typically referred to as taxable services.[2]

In contrast, the use tax statutes specifically include “computer software programs” in the definition of tangible personal property, but computer software services are not referenced.[3]  The exclusion of computer services from that definition in the use tax code is consistent with Mississippi’s historic position that the use tax generally does not encompass services acquired from and performed by out-of-state providers.

The Department’s existing use tax regulation provides that “software maintained on a server located outside the state and accessible for use only via the Internet is not taxable.”[4]  Accordingly, under current law an in-state user accessing online software and database services via the internet is not equated with the importation of property into the state so as to trigger a use tax obligation.  The Department’s proposed amendment appears specifically designed to change that existing policy and render many of these cross-border web-based transactions taxable.

Proposed Changes

Mississippi’s regulation on computer programs and services is antiquated and reflects an outdated model where most software was purchased and delivered via some physical media and installed locally on a computer.  With the expansion of internet-based software delivery and cloud- or SaaS-type applications, it has become increasingly difficult to apply Mississippi’s “old” law to these new technologies and ways of doing business.  To that end, the amended regulation provides new definitions for numerous types of modern internet-based products and services.

101 Computer Software Sales and Services

  1. Definitions
  2. “Computer Software” means any computer data, program or routine, or any set of one or more programs or routines, which are used or intended to cause one or more computers, pieces of computer-related peripheral equipment, automatic processing equipment, or any combination thereof, to perform a task or set of tasks. Computer software may be contained in or on magnetic tapes, discs or other tangible or electronic media or downloaded online.
  3. “Cloud Computing” describes the delivery of computing resources, including software applications, development tools, storage, and servers over the Internet. The term includes the software as a service model (SaaS), platform as a service model (PaaS), infrastructure as a service model (IaaS), and similar service models.
  4. “Software as a Service” is software hosted and maintained by a third-party provider and delivered to customers over the internet as a service. The provider hosts and maintains the databases and code necessary for the application to run, and the application is run on the provider’s servers.
  5. “Platform as a Service” is a cloud computing model where a third-party provider delivers hardware and software tools to users over the internet. The provider hosts the hardware and software on its own infrastructure.
  6. “Infrastructure as a Service” is a cloud computing model that delivers fundamental computing, network, and storage resources to consumers on-demand, over the internet.

The regulation also adds new language providing that design and creation of a web page and other undefined “certain services” are taxable if they are “delivered through SaaS, PaaS, IaaS and other cloud computing models.”  This new provision recognizes that software is no longer acquired solely by purchasing it in some physical media and uploading or installing it on a local computer as reflected in the existing regulation, and that many physical components of a system may be located remotely rather than on site as historically would have been common.  The new language, however, evidences an intent to expand the sales tax base to tax computer-related services occurring beyond the state’s borders if they involve any of these modern platforms.

Equally important, the amendment removes an existing sentence in the use tax portion of the regulation providing that “software maintained on a server located outside the state and accessible for use only via the Internet is not taxable.”[5]  If implemented, this change appears to represent a fundamental shift in tax policy and presumably will empower the Department to assess sales and use tax on computer services performed or hosted entirely out-of-state if they are accessed from inside Mississippi via the Internet.

Important Unanswered Questions

The proposed amendments raise a host of unanswered questions and the risk of numerous unintended (or perhaps intended) consequences that should be addressed now rather than on an ad hoc basis in upcoming audits.

  • Are these changes retroactive? Because these policy changes do not appear to be tied to any legislative changes specifically concerning computer software, we do not have the benefit of statutory transition provisions that traditionally have clarified whether the changes apply only prospectively or retroactively to open periods.  Consistent with Department practices in other contexts, a concern exists that the Department may attempt to apply these changes to tax periods preceding the formal adoption of the amended regulation.
  • Who is responsible for the tax? The local user of these internet services will almost certainly be liable for any use taxes that arise under the new rules, on par with the traditional importation of taxable property into the state.  Under the state’s new marketplace seller legislation, however, it appears the provider may also qualify as a “remote seller” and be liable for collecting the tax.  The statutes, however, appear to provide no credit mechanism to prevent double taxation if the seller does not collect the tax and the Department audits both the seller and user as both parties could be held liable for the tax.  Based on prior audit experience, this statutory flaw (or perhaps feature) will almost certainly result in disputes over which party is ultimately responsible for the tax and whether the Department is entitled to collect simultaneously from both parties by hiding behind the confidentiality statutes.
  • What portion of a centralized software license or service is taxable in Mississippi? Multistate organizations often secure a single centralized license agreement for software utilized via the internet by employees both within and outside Mississippi.  Under the current regulation the remote use of that software via the internet should be nontaxable, but the amended regulation does not address how the Department will determine what portion of that centralized license fee will be taxable under this new policy.  Options might include a determination based on the simple number of in-state licensees or users, but this might produce a very different result than an approach based on actual use or if only certain portions of the core software are used by in-state employees.  Additional guidance on this topic will be critical for accurate compliance.
  • How will the “value” of unpaid intercompany technology services be determined? Other organizations may provide software or data services to affiliates from remote locations (e.g., a centralized database or a dedicated IT affiliate) and may not charge those affiliates for using those services.  Given that the new policy appears to view this remote access on par with the importation of tangible personal property into the state, those services presumably could be subject to use tax based on the “value” of that property at the time of “importation.”  The regulation does not address whether uncompensated intercompany web-based services are taxable or, if so, how that value might be determined.
  • Will intercompany charges be subject to “arm’s length” adjustments if the Department views them as inadequate? If a charge is made between affiliates for any intercompany software or data services, a question exists whether the Department intends to audit the adequacy of that charge and potentially adjust it to an “arm’s length” amount based on the reference to the “value” of imported property in the use tax statutes.  The regulation is silent on this key compliance issue.
  • How might the regulation impact the traditional charge-out of general administrative overhead expenses? The authors are aware of situations where the Department has attempted to levy use tax on internal intercompany charges for administrative overhead.  In a common situation, a multistate organization will allocate to local operating units certain administrative costs that were budgeted or incurred by internal cost centers located exclusively outside the state.  These costs often include, along with multiple unrelated costs, software and similar licenses that might have been taxable had they been acquired and used directly by an in-state cost center.  The proposed regulation presents a significant risk that these types of common intercompany cost allocations could be scrutinized heavily in future audits.
  • What are the “certain services” that the regulation could now consider taxable? The existing sales tax regulation already addressed web page design and creation, stating that those services could be taxable “regardless of the location of the hosting server,” but that language may have presumed the existence of someone in-state who was performing the actual services.  The new reference to additional “certain services” that could be taxable is very vague and raises the question whether the amended regulation will be asserted to treat as taxable otherwise nontaxable services simply due to the means of delivery via SaaS, PaaS, IaaS and other cloud computing models.
  • Will the traditional sales tax credit apply when use tax accrues? When a taxpayer imports previously-used property into the state, the use tax applies based on the value of the property at the time of importation but a partial credit generally is offered for any sales tax originally paid to another jurisdiction on that same property.  The regulation is silent as to whether and how that credit will apply in the net-based software context.
  • The presumed nontaxability of “exported” software appears vague and ambiguous. The amended regulation will provide that software will not be taxable in Mississippi if it is “transmitted by the Internet to a destination outside the State of Mississippi where the first use” by the purchaser occurs outside the state.  This appears to be an attempt to place these items on par with the sale and export of traditional tangible personal property, but the means of delivery of these different types of property varies significantly.  Initially, it should not be assumed that the Department will view an outbound “transmission” of software or online services the same as an inbound transmission by an in-state user.  Additionally, it is unclear what constitutes a “transmission” as this is the only context in the statute or regulation where this specific word is used and the Department has not provided a definition.  This provision will most likely be viewed as an exemption, so any ambiguities will be construed against the taxpayer.

The above examples are only a sampling of the myriad risks and uncertainties posed by this proposed regulation, and taxpayers are encouraged to request a formal public hearing to raise these and any additional concerns directly with the Department prior to the planned effective date of the changes.

[1] Miss. Code Ann. Section 27-65-3

[2] Miss. Code Ann. Section 27-65-23

[3] Miss. Code Ann. Section 27-67-3(i)

[4] Miss. Admin. Code 35.IV.5.06

[5] Miss. Admin. Code 35.IV.5.06(300)

Jones Walker’s Annual State & Local Tax Seminar Goes Virtual – October 6

Wednesday, October 6, 2021 | Zoom Webinar

Out of an abundance of caution and to better suit our attendees’ needs, we have decided to transition our October 6 SALT Seminar to a virtual format. We hope that you will be able to join us for our updated virtual program!

The Jones Walker LLP State and Local Tax Team is back with our annual program on October 6, 2021. This state and local tax workshop will discuss legislative and administrative updates in Louisiana and Mississippi. Then, we are back with your favorite group of key state tax administrators from Louisiana, Mississippi, Texas, and Alabama. This moderated panel will provide their perspective on recent tax developments. Finally, we will close out this annual program with recent hot SALT topics.


9:30 a.m. – 10:30 a.m. Legislative & Administrative Updates in LA and MS

10:30 a.m. – 10:40 a.m. Break

10:40 a.m. – 11:40 a.m. Roundtable with Your Favorite Tax Administrators featuring:

Kimberly Lewis, Secretary, Louisiana Department of Revenue

Karey Barton, Associate Deputy Comptroller for Tax, Texas Comptroller of Public Accounts

Mary Martin Mitchell, Acting Director, Tax Policy and Governmental Affairs Division, Alabama Department of Revenue

Chris Graham, Commissioner, Mississippi Department of Revenue

11:40 a.m. – 11:50 a.m. Break

11:50 a.m. – 12:50 p.m. Hot SALT Topics


When: Wednesday, October 6, 2021 | 9:30 a.m. – 12:50 p.m.

Where: Zoom Webinar

Fee: Complimentary

Questions or To Register: Contact Courtney Farley at

This program is intended for intermediate to advanced practitioners in state and local tax administration and those doing business in Louisiana and Mississippi. This course or a portion thereof has been approved by the Mandatory Continuing Legal Education Committee of the Louisiana State Bar Association for a maximum of 3 hours credit. An application for accreditation of this activity has been submitted to the MCLE Committee of the State Bar of Texas and is pending. The program has been recommended for 3.6 hours of Texas and Louisiana CPE.

Lafourche Parish, LA Local Sales Tax Collector Grants Local Sales Tax Filing Extensions to Certain Dealers/Taxpayers Impacted by Hurricane Ida

In a letter recently issued to Lafourche Parish, LA sales/use taxpayers, the Lafourche Parish local sales/use tax collector Amanda Granier explains that Lafourche Parish has now granted Lafourche Parish local sales/use tax filing extensions to certain dealers/taxpayers impacted by Hurricane Ida.

The Lafourche Parish sales/use tax office is now open again, but was previously closed due to Hurricane Ida.

The entire language of the collector’s letter, dated September 16, 2021, is found below:

“Due to the devastation caused by Hurricane Ida and the ongoing state of emergency, Lafourche Parish is granting extensions to certain dealers/taxpayers in impacted areas. Dealers/Taxpayers eligible for sales tax extensions include businesses who have had to close and are no longer able to operate or conduct business in the state and whose home or principal places of business where critical tax records are kept is one of the following parishes:

  • Ascension, Lafourche, St. Helena, Terrebonne, Assumption, Livingston, St. James, Washington, East Baton Rouge, Orleans, St. John the Baptist, West Baton Rouge, East Feliciana, Plaquemines, St. Martin, West Feliciana, Iberia, Pointe Coupee, St. Mary, Iberville, St. Bernard, St. Tammany, Jefferson, St. Charles, and Tangipahoa.

For businesses that remained operating for all or part of the recovery time in the State of Louisiana but you are having difficulty complying with the deadlines, you may also be eligible for an extension and/or interest and penalty relief.  A request for an extension or waiver must be made in writing or electronically to or by USPS to Sales Tax Office, Lafourche Parish School Board, P. O. Box 997, Thibodaux, LA 70302.  Any grant of waiver or extension is left to the sound discretion of the Collector based upon the individual circumstances of the dealer/taxpayer. Waivers and/or extensions do not apply for any tax that was due before August 26, 2021.”

(Emphasis added.).

Importantly, it should be noted that this letter from the Lafourche Parish collector does not apply to all parishes or all corresponding local sales/use taxes in Louisiana.  Taxpayers should consult each local tax collector directly to confirm any local sales/use tax filing or payment extension.

For state sales/use tax purposes, the Louisiana Department of Revenue has also now issued Revenue Information Bulletin (RIB) 21-027 , which grants an automatic state sales/use tax filing extension and corresponding penalty relief to taxpayers in certain Louisiana areas impacted by Hurricane Ida for August 2021 Louisiana state sales/use taxes that were due to be filed on or before September 20, 2021.  Our separate JW SALT blog post on the Department’s new RIB is found here.

The Jones Walker SALT Team will continue to provide additional updates regarding Hurricane Ida relief as they are issued.

Louisiana Department of Revenue Grants Automatic Sales Tax Return Filing Extension and Penalty Relief For Certain Eligible Businesses Impacted by Hurricane Ida

The Louisiana Department of Revenue has now issued Revenue Information Bulletin (RIB) 21-027 granting an automatic state sales/use tax filing extension and corresponding penalty relief to taxpayers in certain Louisiana areas impacted by Hurricane Ida for August 2021 Louisiana state sales/use taxes that were due to be filed on or before September 20, 2021.

The Department’s new RIB was issued late Friday, September 17, 2021.

For eligible taxpayers located in the parishes listed below, the deadline for filing August 2021 sales taxes is extended from September 20, 2021 to November 1, 2021.

To qualify for penalty relief, the taxpayer must file the August 2021 sales tax return and remit the sales tax and any deficiency interest by November 30, 2021. If a taxpayer is unable to remit the sales tax and any deficiency interest by this date, penalty relief will be granted if the taxpayer submits and enters into an Installment Payment Plan Request for sales taxes due by November 30, 2021.

Importantly, however, the tax payment due date remains September 20, 2021.  The Department’s new RIB does not include interest relief.

Also, importantly, this RIB does not apply to local sales/use taxes in Louisiana.  Taxpayers should consult each local tax collector directly to confirm any local sales/use tax filing or payment extension.

The Department’s new RIB specifically explains which taxpayers are eligible for automatic filing extensions and related penalty relief.  Eligible taxpayers include businesses whose principal places of business, critical tax records, or paid tax preparers are located in one of the following parishes:

  • Ascension
  • Assumption
  • East Baton Rouge
  • East Feliciana
  • Iberia
  • Iberville
  • Jefferson
  • Lafourche
  • Livingston
  • Orleans
  • Plaquemines
  • Pointe Coupee
  • St. Bernard
  • St. Charles
  • St. Helena
  • St. James
  • St. John the Baptist
  • St. Martin
  • St. Mary
  • St. Tammany
  • Tangipahoa
  • Ter
  • rebonne
  • Washington
  • West Baton Rouge
  • West Feliciana

These are the same parishes included in the Department’s prior RIB 21-024 regarding other automatic extensions already previously provided by the Department.  Our prior blog post on that separate RIB is found here.

Automatic extensions are based on the taxpayer’s location address on file with the Department.  If, however, a taxpayer’s location address is not within one of the parishes listed in the RIB, the taxpayer may still be eligible for interest and penalty relief even though an automatic extension did not apply.

The Jones Walker SALT Team will continue to provide additional updates regarding Hurricane Ida relief as they are issued.

Louisiana Department of Revenue Issues New Revenue Information Bulletin (RIB 21-025) Addressing Many Frequently Asked Questions Relating to Hurricane Ida Disaster Recovery

The Louisiana Department of Revenue has now issued Revenue Information Bulletin (RIB) 21-025, which addresses many frequently asked questions (FAQs) and provides informational guidance and resources to assist taxpayers located in designated parishes in their recovery efforts following the devastation to many Louisiana individuals and businesses following Hurricane Ida.

The Department’s new 10-page FAQs in RIB 21-025 address the following Hurricane Ida disaster recovery-related topics:

  • Federal and State Assistance
  • Tax Deadline Extensions
  • Natural Disaster Sales Tax Refunds
  • Donations to Recovery Efforts
  • Damages to Residence and Property

The Jones Walker SALT Team will continue to provide additional updates regarding Hurricane Ida relief as they are issued.

Louisiana Secretary of State Announces Rescheduling of Upcoming Tax Reform Vote to November 13

Louisiana Secretary of State Kyle Ardoin has now announced the rescheduling of the upcoming tax reform constitutional amendment votes and other Fall elections, which were to be held October 9.  The Fall elections and related tax reform votes are now scheduled to be held November 13.

This change was recommended by the Secretary of State Ardoin and agreed to by Governor John Bel Edwards in light of the devastation brought on by Hurricane Ida.

Our prior Jones Walker SALT blog post on the recent Louisiana tax reform legislation that is now up for a vote of the people on November 13 can be found here.