Mississippi Contractor Taxes and Licensing: Contractor's Tax, Sales Tax and Licenses

Mississippi charges a 3.5% contractor's tax on the full price of non-residential construction contracts over $10,000, and materials for those jobs can be bought tax-free with a Material Purchase Certificate. Residential work skips the contractor's tax. Instead, some trades, like plumbing, HVAC and electrical, owe 7% sales tax on gross income, while others pay 7% on materials.

Why Mississippi's contractor tax is different

Most states make you choose between "consumer of materials" and "retailer of materials." Mississippi adds a third model: a separate contractor's tax of 3.5% on the gross price of commercial construction. And on residential work, the tax depends on your trade. A plumber and a carpenter on the same house remodel can owe tax in completely different ways. If you work both sides, residential and commercial, you need to know which bucket each job is in before you bid.

Here's what the Mississippi Department of Revenue (DOR) and the State Board of Contractors said as of 2026-10-19. This isn't tax advice. Mississippi's rules are detailed and the forms matter, so have a CPA who works with Mississippi contractors look at your setup.

Is contractor labor taxed in Mississippi?

On commercial jobs over $10,000, yes, in effect: DOR's construction guide says the law "levies a 3.5% contractor's tax on all non-residential construction activities" when the contract "exceeds $10,000.00." The tax is on the total contract price, labor included. On residential work, "residential construction (not including apartments or condominiums) is excluded from the 3.5% contractor's tax," but retail sales tax still applies, depending on the trade.

Repair businesses are on DOR's 7% list too: its rates page includes air conditioning repairs and refrigeration equipment repairs among businesses taxed at "7% of the gross income of the business, unless otherwise provided."

How do the Material Purchase Certificate and bonds work?

On a commercial job over $10,000, the 3.5% contractor's tax replaces sales tax on materials that become part of the structure. "Prior to beginning work, the prime contractor(s) is required to apply for a MPC for the contract," DOR says. The prime and its subs then buy component materials without tax. Tools, equipment and forms you keep "are subject to the regular retail rate of sales or use tax."

• "Contractors with a physical location in Mississippi are required to bond or prepay the taxes due on all contracts over $75,000."
• Out-of-state primes must "either file a surety bond or prepay the sales and use tax on contracts exceeding $10,000.00."
• Out-of-state equipment brought into Mississippi for a job can trigger use tax, with credit for tax paid to another state.
• Contractor vehicles owe use tax at 5% (10,000 lbs or less) or 3% (over 10,000 lbs), per the same guide.

For the general logic of use tax, see use tax for contractors. For how Mississippi's model compares with other states, see sales tax on labor vs. materials.

What is Mississippi's sales tax rate?

The general rate is 7% of gross proceeds, "unless otherwise provided." The contractor's tax rate is 3.5%. Some cities add local tourism or economic development taxes; DOR keeps those on a separate page, so check with the department for the city where your job is.

Which contractor licenses does Mississippi require?

The Mississippi State Board of Contractors (MSBOC) handles both commercial and residential licensing. Since July 1, 2022 (HB 1163), residential electrical, plumbing, HVAC and mechanical subcontractors need a state license on covered residential projects "regardless of the amount" of their own work. A covered project is residential construction over $50,000 or residential improvement over $10,000.

Local licensing: HB 1163 "requires all cities and counties to issue permits for construction work." Many cities also license trades locally; check with the building department. More on licensing in our contractor license guide.

What income and franchise taxes apply in Mississippi?

DOR's rate table shows individual income is taxed at 0% on the first $10,000 of taxable income and, for tax year 2026, 4% on the excess (it was 4.4% for 2025). Corporations pay 0% on the first $5,000, 4% on the next $5,000 and 5% above $10,000, and must make estimated payments if their liability is over $200.

The corporate franchise tax is phasing out: $0.50 per $1,000 of capital over $100,000 for tax year 2026, $0.25 for 2027, and "repealed effective January 1, 2028." Sole proprietors and pass-through owners should plan quarterly estimated taxes for federal and state income tax; try the quarterly estimated tax calculator for the federal side and check Mississippi's individual estimate rules with the department.

When is workers' comp required in Mississippi?

The Mississippi Workers' Compensation Commission says "all employers with five (5) employees regularly employed are required to provide workers' compensation insurance coverage," and coverage is not mandatory under five. We found no separate construction threshold. General contractors often require subs to carry it regardless, and officer exemptions should be confirmed with the Commission. See workers' compensation for contractors.

Local taxes to watch in Mississippi

• City tourism and economic development taxes in some cities, on top of the 7% state rate.
• Permits from every city and county under HB 1163.
• Privilege or business licenses from some municipalities. Check locally.

Neighboring state guides

See Alabama, Louisiana, Tennessee and Arkansas for how neighboring states handle labor, materials and licensing.