Mississippi is cutting taxes steadily. The personal income tax is a flat 4% on income above $10,000 in 2026 and is scheduled to fall to 3% by 2030. The corporate income tax tops out at 5%, and the corporate franchise tax is being phased out by 2028. The main drawback is the 7% state sales tax, one of the highest in the country.
This guide covers Mississippi's business taxes for 2026, with worked examples and comparisons with its neighbors.
Mississippi business taxes at a glance
For most small businesses, Mississippi's income taxes are low. Pass-through owners pay nothing on the first $10,000 of taxable income and 4% on the rest. C corporations pay 5% on most of their profit and a shrinking franchise tax on capital. Customers pay a 7% sales tax, among the highest state rates in the country, though local add-ons are rare. LLCs pay $50 to form and nothing for annual reports, making Mississippi one of the cheapest states to maintain a company. Economic development incentives are generous for manufacturers and large employers.
Corporate income tax
| Taxable income | Rate |
|---|---|
| $0 to $5,000 | 0% |
| $5,000 to $10,000 | 4% |
| Over $10,000 | 5% |
- Apportionment: Single sales factor for most businesses, with industry-specific formulas for manufacturers and retailers.
- Combined reporting: Mississippi allows, and in some cases requires, combined filing.
- Credits: Jobs tax credits, manufacturing investment credits, research credits and incentives for businesses in less developed counties.
- Returns: Form 83-105 is due on the 15th day of the fourth month after year-end.
Franchise tax phase-out
| Tax year | Rate per $1,000 of capital above $100,000 |
|---|---|
| 2025 | $0.75 |
| 2026 | $0.50 |
| 2027 | $0.25 |
| 2028 onward | Repealed |
The franchise tax applies to corporations and LLCs taxed as corporations. It is based on capital, surplus and retained earnings employed in Mississippi, or, if greater, the assessed value of Mississippi property. A corporation with $2 million of capital in Mississippi pays about $950 in 2026, $475 in 2027 and nothing from 2028.
Personal income tax and pass-through owners
| Tax year | Rate on income above $10,000 |
|---|---|
| 2025 | 4.4% |
| 2026 | 4% |
| 2027 | 3.75% |
| 2028 | 3.5% |
| 2029 | 3.25% |
| 2030 | 3% |
The 2025 Build Up Mississippi Act set this schedule and allows further cuts after 2030 if revenue targets are met, with a long-term goal of eliminating the income tax.
- LLC owners, partners and sole proprietors pay these rates on profit.
- S corporation shareholders pay on their share.
- PTE election: Available for partnerships and S corporations.
Sales and use tax
| Item | Rate |
|---|---|
| General retail sales | 7% |
| Groceries (from July 2025) | 5% |
| Manufacturing machinery | 1.5% |
| Farm equipment | 1.5% |
| Local taxes (some cities, tourism) | Up to 3% |
- Local add-ons: Only a few cities, such as Jackson, Tupelo and tourism areas, levy extra sales tax, so the average combined rate is about 7.06%.
- Services: Mississippi taxes many services, including repairs, installation and some professional services.
- Remote sellers with more than $250,000 of Mississippi sales must collect, one of the highest thresholds in the country.
Payroll and property taxes
- Unemployment insurance: Employers pay on the first $14,000 of each employee's wages. New employers start at a reduced rate for the first years.
- Property tax: Commercial property is assessed at 15% of true value and taxed at local millage rates. Business inventory and equipment are taxed, though many counties offer fee-in-lieu agreements and ten-year exemptions for new manufacturing investment.
Forming a business in Mississippi: fees and ongoing costs
| Item | LLC | Corporation |
|---|---|---|
| Formation filing fee | $50 | $50 |
| Annual report | $0 (due April 15) | $25 (due April 15) |
| Franchise tax | None for LLCs taxed as partnerships | $0.50 per $1,000 above $100,000 in 2026 |
| Registered agent | Required | Required |
Worked example: $500,000 of profit
| Step | Amount |
|---|---|
| Taxable income | $500,000 |
| Mississippi tax (0% on $5,000, 4% on $5,000, 5% on $490,000) | $24,700 |
| Federal tax at 21% on $475,300 | $99,813 |
| Total income tax | $124,513 (24.9%) |
For a single LLC owner with $150,000 of Mississippi taxable income, state tax is about $5,600. At $75,000 it is about $2,600. Under the scheduled cuts, the $150,000 owner would pay about $4,200 in 2030.
How Mississippi compares with its neighbors
Mississippi's income taxes are now competitive with Arkansas and Louisiana and below Alabama's. Tennessee has no tax on wages but taxes LLCs at the entity level, so Mississippi can be cheaper for pass-through businesses. Mississippi's 7% state sales tax matches Tennessee's, though Tennessee's local add-ons make its combined rate higher.
Choosing an entity in Mississippi
- LLC: $50 to form, no annual report fee and a 4% rate for owners in 2026.
- S corporation: Same personal rate, with federal payroll tax savings, plus a $25 annual report.
- C corporation: 5% state tax plus 21% federally, plus a shrinking franchise tax until 2028.
Who pays the most in Mississippi
Mississippi's 7% sales tax falls most heavily on consumers and retailers, while service businesses pay sales tax on more services than in many states. Capital-intensive corporations pay franchise tax until 2028 and property tax on equipment and inventory. Pass-through owners and small LLCs, by contrast, pay some of the lowest income taxes and fees in the South, and the scheduled cuts will lower their bills each year through 2030.
Tax planning tips for Mississippi businesses
Negotiate incentives before you invest. Mississippi offers substantial property tax exemptions, fee-in-lieu agreements and job credits, but most must be approved before construction begins or employees are hired.
Use the reduced machinery rate. Manufacturers pay 1.5% sales tax on qualifying machinery instead of 7%. Make sure vendors apply the right rate.
Review taxable services. If you provide repairs, installations or other services, check whether you must collect sales tax. Many service businesses are surprised by Mississippi's broad service base.
Recent changes for 2025 and 2026
- Personal income tax cut to 4% for 2026, with cuts to 3% by 2030.
- Grocery sales tax reduced from 7% to 5% from July 2025.
- Franchise tax continues to phase out, with repeal from 2028.
- Gas tax increases phased in to fund roads.
Is Mississippi a good state for business?
Advantages
- Low and falling personal income tax
- Franchise tax repeal by 2028
- Very low formation and annual fees
- Low labor and land costs
- Generous manufacturing incentives
Drawbacks
- 7% state sales tax, one of the highest
- Sales tax on many services
- Smaller, less educated labor pool than larger states
- Property tax on business inventory and equipment
Compliance checklist
- File a Certificate of Formation or Articles of Incorporation with the Secretary of State.
- Register with the Department of Revenue through Taxpayer Access Point (TAP) for sales tax, withholding and income tax.
- Register with the Mississippi Department of Employment Security if you hire.
- File the annual report by April 15.
- File Form 83-105 (corporations) or Form 84-105 (pass-throughs) each year.
Compare Mississippi with its neighbors below or estimate your taxes in the United States calculator. See LLC taxes for more.