Mississippi Sales and Use Tax - Exempt Purchases by Governmental Entities and Medical Clinics

Posted on June 06, 2018

Governmental Entities and Employees

In May 2018, the Mississippi Department of Revenue released a fact sheet explaining how sales and use tax applies to purchases made by governmental entities and their employees. According to the fact sheet, sales of property, labor, services, or products are exempt from Mississippi sales tax when sold to the United States government, the State of Mississippi and its departments, institutions, counties, and municipalities or departments, or school districts of counties and municipalities.

To qualify for the exemption, goods or services must be sold directly to, billed directly to, and paid for directly by the exempt governmental entity. Records must be maintained for at least 36 months to verify that the governmental sales or use tax exemption is valid.

Sales made to government employees are exempt when the payment comes from the government by a government check, a centrally billed debit or credit card, or other form of payment coming directly from the exempt governmental entity. However, sales to governmental employees paying for the goods or services are subject to sales or use tax even though employees may be reimbursed by an exempt governmental entity. This is known as being “individually billed.” Businesses must verify that purchases are made with a centrally billed credit or debit card, meaning that the entity is billed directly for purchases made with the card. Two ways to verify that a card is centrally-billed are:

(1) The card is a GSA SmartPay 2 Card issued through the Governmental Services Administration, and the number sequence on the card verifies that the card is in fact centrally billed; or

(2) A letter signed by the administration of the exempt governmental entity that serves to verify that cards issued by or through institutions other than the Governmental Services Administration are centrally billed. The letter must identify the card by listing the last four digits of the card number and clearly state that the card is billed directly to the exempt governmental entity.

 There are four types of GSA SmartPay 2 Cards as follows:

Travel Cards - individually billed (taxable) and centrally billed (exempt)
Integrated Cards - individually billed (taxable) and centrally billed (exempt)
Purchase Cards - centrally billed (exempt)
Fleet Cards - centrally billed (exempt)

Mississippi Medical Clinics

As of March 2018, the Mississippi Department of Revenue released new information regarding how sales and use tax applies to medical clinics. Medical clinics are defined as consumers of products which are provided to patients, or products used in services rendered. Clinics are required to pay Mississippi sales or use tax at the regular retail rate of tax on such purchases of tangible personal property and taxable services. Clinics acquiring medical equipment, office equipment, supplies, and other taxable purchases from out-of-state vendors should verify that the vendor collects Mississippi sales or use tax. The state of Mississippi requires clinics to register for a use tax account and self-report Mississippi use tax at the regular retail rate (7%), if the out-of-state vendors do not collect Mississippi tax. Medical clinics that are owned and operated by the United States Government, the State of Mississippi, and its departments, institutions, counties or municipalities, are exempt from Mississippi sales and use tax as was stated in the section above. Medicines purchased for the treatment of patients are exempt from Mississippi sales and use tax. To qualify for the exemption, drugs and medicines must meet the following criteria:

Prescribed for the treatment of a human being by a person authorized to prescribe the medicine, and dispensed or prescription filled by a registered pharmacist in accordance with law; or
Furnished by a licensed physician, surgeon, dentist, or podiatrist to their patient for treatment of the patient; or
Furnished by a hospital for treatment of any person pursuant to the order of a licensed physician, surgeon, dentist or podiatrist; or
Sold to a licensed physician, surgeon, podiatrist, dentist or hospital for the treatment of a human being; or
Sold to the State of Mississippi or any of the state’s political subdivisions or municipalities for the treatment of a human being.

 As of July 1, 2016, certain sales of durable medical equipment and home medical supplies and their replacement parts are exempt from sales tax. This exemption applies only when the medical equipment or supplies were ordered in writing or prescribed by a licensed physician.

Taxpayer’s looking for more information regarding exemptions applicable to either government entities or medical clinics should refer to the fact sheets on the Mississippi Department of Revenue’s website. The fact sheet can be found at the following web address: www.dor.ms.gov

Tips for the Taxpayer

Mississippi taxpayers should review their sales to determine if the details of these fact sheets pertain to their businesses. Medical clinics could benefit from a decreased use tax remittance or sales tax collection burden and businesses who make sales to government entities or employees can achieve full compliance by ensuring they are following correct procedure when allowing exemptions. Stay updated with the latest legislation and future notices. If questions still exist, consult a tax professional or government official for clarity and expertise.

How Can We Help?

Allyn offers tax compliance and consulting services for companies doing business in Mississippi and throughout the United States. Allyn has significant tax experience assisting businesses with research of taxability, registering businesses with states, and performing opportunity reviews of their sales and use tax processes. As tax laws change, we use our experience to help your business improve compliance, minimize costs, reduce liabilities and increase profits.

We can help your business maintain compliance with federal and state tax responsibilities and put procedures in place to ensure future streamlining of processes and increased data accuracy for tax purposes.

Allyn’s tax team is experienced in all aspects of Federal, state, and local tax compliance and consulting for large US and global corporations. We use that expertise to your advantage.

Allyn files state and local sales and use, property, and license tax returns in every US taxing jurisdiction in addition to excise tax filings such as Federal Excise Tax, Heavy Highway Vehicle Use Tax, and International Fuel Tax Agreement returns. We can manage your tax compliance, create a solid tax process, and provide audit defense for your company.

Contact us and we can provide a customized cost-effective solution to meet your company’s needs. For further information on Allyn Tax services, please contact: tax@allynintl.com.

Contributer: Dustin Kato

About Allyn International

Allyn International is dedicated to providing high quality, customer centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance. Allyn clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North and South America, Europe and Asia. Allyn’s regional headquarters are strategically located in Fort Myers, Florida, U.S.A., Shanghai, P.R. China and Prague, Czech Republic. For more information, visit www.allynintl.com.

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