AN ACT TO AMEND SECTION 27-31-1, MISSISSIPPI CODE OF 1972, TO EXEMPT FROM AD VALOREM TAXATION THE ENTIRE ASSESSED VALUE OF COMMODITIES, RAW MATERIALS, WORKS-IN-PROCESS, PRODUCTS, GOODS, WARES AND MERCHANDISE HELD FOR RESALE BY A MANUFACTURER, DISTRIBUTOR, WHOLESALE OR RETAIL MERCHANT; TO PROVIDE THAT SUCH ASSESSED VALUE MAY BE DETERMINED BY PHYSICAL COUNT OR BOOK VALUE, AT THE OPTION OF THE MANUFACTURER, DISTRIBUTOR, WHOLESALE OR RETAIL MERCHANT; TO EXEMPT FROM AD VALOREM TAXATION THE ENTIRE ASSESSED VALUE OF ELIGIBLE PERSONAL PROPERTY THAT IS OWNED BY A BUSINESS ENTERPRISE AND USED BY THE BUSINESS ENTERPRISE SOLELY ON THE PREMISES OF THE BUSINESS ENTERPRISE IN THE OPERATION OF THE ENTERPRISE; TO SPECIFY THAT "ELIGIBLE PERSONAL PROPERTY" MEANS FURNITURE, FIXTURES OR EQUIPMENT CLASSIFIED AS PERSONAL PROPERTY FOR PURPOSES OF AD VALOREM TAXATION BUT DOES NOT INCLUDE MOTOR VEHICLES OR CLASS IV PROPERTY AS DEFINED IN SECTION 112 OF THE MISSISSIPPI CONSTITUTION OF 1890; TO CREATE A NEW CODE SECTION TO EXPRESS THE INTENT OF THE LEGISLATURE THAT ANY LOSS OF REVENUE INCURRED BY A COUNTY, MUNICIPALITY, OR SCHOOL DISTRICT RESULTING FROM THE ELIMINATION OF THE INVENTORY TAX BE REIMBURSED TO THE RESPECTIVE LOCAL GOVERNMENT ENTITY THROUGH LEGISLATIVE APPROPRIATION; TO REQUIRE THAT THE AMOUNT OF COUNTY, MUNICIPAL AND SCHOOL DISTRICT INVENTORY TAX THAT WOULD HAVE BEEN LEVIED BE CERTIFIED TO THE DEPARTMENT OF REVENUE, WHICH SHALL COMPILE THE DATA AND REPORT IT TO THE LEGISLATURE NO LATER THAN NOVEMBER 1 OF EACH YEAR; TO AUTHORIZE THE DEPARTMENT OF REVENUE TO PROMULGATE RULES AND REGULATIONS TO ADMINISTER THESE REPORTING PROVISIONS; TO BRING FORWARD SECTION 27-7-22.5, MISSISSIPPI CODE OF 1972, WHICH PROVIDES AN INCOME TAX CREDIT FOR AD VALOREM TAXES PAID ON COMMODITIES, RAW MATERIALS, WORKS-IN-PROCESS, PRODUCTS, GOODS, WARES AND MERCHANDISE HELD FOR RESALE BY ANY MANUFACTURER, DISTRIBUTOR, WHOLESALE OR RETAIL MERCHANT, FOR THE PURPOSE OF POSSIBLE AMENDMENT; TO BRING FORWARD SECTION 27-35-15, MISSISSIPPI CODE OF 1972, WHICH PROVIDES THE METHOD OF ASSESSING PERSONAL PROPERTY, FOR THE PURPOSE OF POSSIBLE AMENDMENT; AND FOR RELATED PURPOSES.
The proposed changes in SB3163 are designed to lessen the tax burden on businesses involved in manufacturing, distribution, and retail by eliminating the inventory tax. The bill specifies that the exemption's impact on local revenues will be addressed through legislative appropriations to compensate local governments, school districts, and municipalities for any loss in revenue they may incur due to the elimination of the inventory tax. This ensures that local governmental entities are not detrimentally affected by the changes, as tax assessors will still calculate the inventory tax even though it will not be levied.
Senate Bill 3163 aims to amend Section 27-31-1 of the Mississippi Code of 1972, specifically by exempting the entire assessed value of certain properties from ad valorem taxation. This encompasses commodities, raw materials, works-in-process, products, goods, wares, and merchandise held for resale by manufacturers, distributors, wholesale, or retail merchants. Moreover, personal property owned by business enterprises that is exclusively used on the business premises will also be exempt, which includes furniture, fixtures, and equipment classified as personal property under state tax laws. Notably, motor vehicles and specific Class IV properties as defined in the Mississippi Constitution remain excluded from this exemption.
Despite the bill's potential benefits in stimulating business operations and economic growth, it has raised concerns regarding its financial implications for local governments. Critics worry that while the bill promises reimbursement for lost revenue, the effectiveness of such compensation hinges on legislative appropriations, which can be inconsistent or insufficient. Additionally, the delineation between personal property that qualifies for the exemption and that which does not may lead to further disputes and complications in tax assessments, particularly in the context of ongoing discussions about the proper role and funding of schools and municipalities within Mississippi.