# 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.

## Key takeaways

- Commercial contracts over $10,000: 3.5% contractor's tax on the whole contract price, with component materials bought exempt under an MPC.
- Residential: no contractor's tax. Plumbing, HVAC, electrical, landscaping and similar trades owe 7% on gross income; painters, drywall, masonry and carpenters pay 7% on purchases instead.
- In-state contractors bond or prepay the tax on contracts over $75,000; out-of-state primes do so over $10,000.
- MSBOC licenses commercial work over $50,000, residential remodeling and roofing over $10,000, and residential electrical, plumbing and HVAC subs at any amount.
- Individual income tax is 0% on the first $10,000 and 4% above that for 2026. Workers' comp applies at five employees.

## 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.

**How Mississippi taxes residential work and small contracts, by trade**

| Trade group | Tax on gross income | Tax on materials |
| --- | --- | --- |
| Plumbing, heating, air conditioning, electrical, excavating, landscaping, sheet metal, insulating | 7% sales tax on gross income | No sales or use tax on component materials |
| Painting, drywall, masonry, carpentry, structural steel | None | 7% sales or use tax on purchases of materials and services |

_Source: Mississippi DOR, Guide for Construction Contractors, verified 2026-10-19. Applies to residential work and prime contracts of $10,000 or less._

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](https://www.brix.so/learn/use-tax-for-contractors). For how Mississippi's model compares with other states, see [sales tax on labor vs. materials](https://www.brix.so/learn/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.

**Mississippi contractor licenses by trade**

| Trade | Agency | License and trigger | Link |
| --- | --- | --- | --- |
| Commercial general and subs | MSBOC | Commercial license for work over $50,000, with the right classification | [MSBOC FAQ](https://www.msboc.us/general-info/frequently-asked-questions/) |
| New homes | MSBOC | Residential builder, new residential construction over $50,000 | [MSBOC FAQ](https://www.msboc.us/general-info/frequently-asked-questions/) |
| Remodeling | MSBOC | Residential remodeler, improvements over $10,000 | [MSBOC FAQ](https://www.msboc.us/general-info/frequently-asked-questions/) |
| Roofing | MSBOC | Residential roofer, roofing on a residence over $10,000 | [MSBOC FAQ](https://www.msboc.us/general-info/frequently-asked-questions/) |
| Electrical, plumbing, HVAC (residential) | MSBOC | State license on covered residential projects at any amount (HB 1163) | [HB 1163 fact sheet](https://www.msboc.us/wp-content/uploads/2023/01/HB-1163-FACT-SHEET57.pdf) |
| Electrical, plumbing, HVAC (commercial) | MSBOC | Commercial license with matching classification over $50,000 | [MSBOC FAQ](https://www.msboc.us/general-info/frequently-asked-questions/) |

_Sources: MSBOC FAQ and HB 1163 fact sheet, verified 2026-10-19._

**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](https://www.brix.so/learn/contractor-license).

## 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](https://www.brix.so/learn/quarterly-estimated-taxes-for-contractors) for federal and state income tax; try the [quarterly estimated tax calculator](https://www.brix.so/tools/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](https://www.brix.so/learn/workers-compensation).

## 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](https://www.brix.so/taxes/alabama), [Louisiana](https://www.brix.so/taxes/louisiana), [Tennessee](https://www.brix.so/taxes/tennessee) and [Arkansas](https://www.brix.so/taxes/arkansas) for how neighboring states handle labor, materials and licensing.

BRIX tracks licenses, bonds, insurance and permits and flags renewals, which helps when you hold an MSBOC license and local permits across several cities. Quotes and invoices show materials and labor separately so your bookkeeper can see each job's tax picture. BRIX doesn't calculate or file the contractor's tax; your CPA handles that.

- [Compliance and permit tracking](https://www.brix.so/#use-cases): Tracks licenses, safety documents and permits and flags renewals before they lapse.
- [Quotes and estimates](https://www.brix.so/features/quotes-estimates): Builds accurate quotes on site and follows up on every open estimate.
- [Invoicing and payments](https://www.brix.so/features/invoicing-payments): Turns finished jobs into invoices and politely chases unpaid ones until the money is in your account.

## Frequently asked questions

### What is the Mississippi contractor's tax?

It's a 3.5% tax on the total contract price of non-residential construction when the contract exceeds $10,000. Residential construction, other than apartments and condominiums, is excluded. The prime contractor gets a Material Purchase Certificate so component materials can be bought without sales tax.

### Do residential contractors pay sales tax in Mississippi?

Yes, but how depends on the trade. Plumbing, heating, air conditioning, electrical, landscaping and similar trades owe 7% sales tax on gross income and no tax on component materials. Painters, drywall, masonry and carpentry contractors owe no tax on gross income but pay 7% on materials.

### Do Mississippi contractors need a bond for sales tax?

Contractors with a physical location in Mississippi must bond or prepay the taxes on contracts over $75,000. Out-of-state prime contractors must file a surety bond or prepay on contracts over $10,000.

### When do you need a contractor license in Mississippi?

MSBOC requires a commercial license for work over $50,000, a residential builder license for new homes over $50,000, and remodeler or roofer licenses for residential work over $10,000. Residential electrical, plumbing and HVAC subs on covered projects need a license at any amount.

### What is Mississippi's income tax rate for 2026?

For tax year 2026, Mississippi taxes individual income at 0% on the first $10,000 and 4% on taxable income above $10,000, according to the Department of Revenue. The rate was 4.4% for 2025.

### How many employees before workers' comp is required in Mississippi?

Five. Employers with five or more regular employees must carry workers' comp; under five it isn't mandatory. Many general contractors still require subs to carry coverage or will charge for it.

## Related

- [Do Contractors Charge Sales Tax on Labor or Materials?](https://www.brix.so/learn/sales-tax-on-labor-vs-materials)
- [What Is Use Tax for Contractors?](https://www.brix.so/learn/use-tax-for-contractors)
- [What Is a Contractor License?](https://www.brix.so/learn/contractor-license)
- [What Is Workers' Compensation Insurance?](https://www.brix.so/learn/workers-compensation)
- [Quarterly Estimated Taxes for Contractors: How They Work in 2026](https://www.brix.so/learn/quarterly-estimated-taxes-for-contractors)
- [Quarterly Estimated Tax Calculator for Self-Employed Contractors (2026)](https://www.brix.so/tools/quarterly-estimated-tax-calculator)
- [Alabama Contractor Taxes and Licensing: Materials Tax, Licenses and Workers' Comp](https://www.brix.so/taxes/alabama)
- [Louisiana Contractor Taxes and Licensing: Sales Tax, LSLBC Licenses and Income Tax](https://www.brix.so/taxes/louisiana)
- [Tennessee Contractor Taxes and Licensing: Sales Tax, Business Tax and Licenses](https://www.brix.so/taxes/tennessee)
- [Arkansas Contractor Taxes and Licensing: Taxable Labor, Materials and Licenses](https://www.brix.so/taxes/arkansas)

## Sources

- [Mississippi DOR — Guide for Construction Contractors](https://www.dor.ms.gov/business/sales-use-tax/guide-construction-contractors) (checked 2026-10-19)
- [Mississippi DOR — Sales Tax Rates](https://www.dor.ms.gov/business/sales-use-tax/sales-tax-rates) (checked 2026-10-19)
- [Mississippi DOR — Individual Income Tax Rates](https://www.dor.ms.gov/individual/tax-rates) (checked 2026-10-19)
- [Mississippi DOR — Form 83-100 Instructions (corporate income and franchise tax, Rev. 01/26)](https://www.dor.ms.gov/sites/default/files/tax-forms/business/2025%20CIT%20INSTRUCTIONS%2083-100%20-%20Final%20%2001.14.2026.pdf) (checked 2026-10-19)
- [Mississippi State Board of Contractors — FAQ](https://www.msboc.us/general-info/frequently-asked-questions/) (checked 2026-10-19)
- [Mississippi State Board of Contractors — HB 1163 fact sheet](https://www.msboc.us/wp-content/uploads/2023/01/HB-1163-FACT-SHEET57.pdf) (checked 2026-10-19)
- [Mississippi Workers' Compensation Commission — Workers' Compensation Facts](https://www.mwcc.ms.gov/pdf/WCFacts2013.pdf) (checked 2026-10-19)

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Written by BRIX Editorial Team. Last updated 2026-10-19. General information, not tax, legal or financial advice.
Canonical: https://www.brix.so/taxes/mississippi