State Taxation

Income Tax

 

  • Assessments and Statue of Limitations

The Fourteenth Amendment prohibits a state from depriv[ing] any person of life, liberty, or property without due process of law.  U.S. Const. amend. XIV, § 1.  Similarly, the Mississippi Constitution provides that “[n]o person shall be deprived of life, liberty, or property except by due process of law.”  M.S. Const. art. 3, § 14.  Before the Mississippi Department of Revenue can commence collection activities, there must be a valid assessment of tax.  The timeframe for examining returns is generally limited to three (3) years from the due date or filing of the return, whichever is later.  Miss. Code Ann. § 27-7-49(1).  Where a false or fraudulent return is filed with intent to evade tax, the three-year rule does not apply.  Miss. Code Ann. § 27-7-49(4).  In addition, the three-year rule does not apply where the Internal Revenue Service (hereinafter, “IRS”) has increased or decreased the taxpayer’s reported taxable income; after the IRS disposes of the tax liability in question, no additional assessment or refund shall be made after three years have elapsed.  Miss. Code Ann. § 27-7-49(3).

 

If examination of a return results in an increased tax liability, the assessment of additional tax is made via mail or personal delivery of said assessment.  The assessment constitutes notice and demand for payment.  For a sixty (60) day period from the date of the notice, the taxpayer may appeal to the board of review.  If the taxpayer does not appeal or make payment within this timeframe, collection activities shall commence.  Miss. Code Ann. § 27-7-51.

 

If a taxpayer does not make a return required by law, the taxpayer’s liability shall be determined based on the available information, and an assessment of the determined tax is made via mail or personal delivery of said assessment.  The assessment constitutes notice and demand for payment.  For a sixty (60) day period from the date of the notice, the taxpayer may appeal to the board of review.  If the taxpayer does not appeal or make payment within this timeframe, collection activities shall commence.  Miss. Code Ann. § 27-7-53.

 

  • Appeals Process

Mississippi statutory framework outlines the procedures for review of the actions of the Mississippi Department of Revenue  (hereinafter, "MDOR").  This includes, but is not limited to, administrative review of tax assessments.  Miss. Code Ann. § 27-77-5.  An aggrieved taxpayer is allotted sixty (60) days to appeal specified actions, including tax assessments, of the MDOR to the board of review, which consists of employees of the MDOR.  §§ 27-77-3, -5(1).  Where the board of review affirms a tax assessment, the taxpayer is afforded sixty (60) days to appeal to the Board of Tax Appeals.  Miss. Code Ann. §§ 27-4-1(1), 27-77-5(4). 

 

Additionally, Mississippi statutory framework provides for judicial review of orders of the Board of Tax Appeals.  An aggrieved taxpayer is allotted sixty (60) days to appeal an order affirming a tax assessment.  To do so, the taxpayer must file a petition “accompanied by a surety bond approved by the clerk of the court in a sum half the amount in controversy, conditioned to pay the judgment of the court.”  Miss. Code Ann. § 27-77-7(1), (3).  In lieu of posting a bond, an aggrieved taxpayer “may, prior to the filing of the petition, pay the agency, under protest, the amount ordered by the Board of Tax Appeals to be paid and seek a refund of such taxes, plus interest thereon, in the appeal.”  Miss. Code Ann. § 27-77-7(3).

 

  • Methods of Collection

Mississippi statutory framework authorizes tax liens as a means of securing the MDOR’s collection of delinquent income taxes, penalties, and interest where the taxpayer fails or refuses to pay amounts due after receiving notice and demands in compliance with Miss. Code Ann. §§ 27-7-49, 27-7-51, and 27-7-53 without filing a timely appeal to the board of review.  Miss. Code Ann. § 27-7-55.  Section 27-7-55 requires affirmative action in that a notice of tax lien must be filed with the circuit clerk of the county in which the taxpayer resides or owns property; the notice of tax lien is enrolled on the judgment roll.  Generally, this judgment remains “a lien upon all property and rights to property belonging to the taxpayer, both real and personal, including choses in action” until satisfied, but the judgment shall not form the basis for a lien upon the taxpayer’s property for more than seven years from the date the notice of tax lien is filed unless the Department of Revenue brings an action on the lien or refiles the notice of tax lien prior to expiration of the seven-year period.

 

Section § 27-7-55 provides: 

 

The judgment shall serve as authority for the issuance of writs of execution, writs of attachment,

writs of garnishment or other remedial writs.  The commissioner may issue warrants for collection

of income taxes from such judgments in lieu of the issuance of any remedial writ by the circuit
clerk.

 

Miss. Code Ann. § 27-7-55.  A multitude of Mississippi statutes provide more guidance regarding attachment, garnishment, and execution.  Miss. Code Ann. § § 11-33-1 to -107, 11-35-1 to -61, 13-3-111 to -189.  The Mississippi Code provides, “[W]arrants . . .  shall be used to levy on salaries, compensation or other monies due the delinquent taxpayer.”  After the warrant is served “on the person or entity responsible or liable for the payment of monies to the delinquent taxpayer,” the person or entity served shall forward monies “in complete or partial satisfaction of the tax liability.”  Unless expressly provided otherwise, garnishment laws govern the amount payable under the warrant and the payor’s obligation to continue payment.  Miss. Code Ann. § 27-3-33(4).  The Mississippi Administrative Code provides guidance regarding the extent of withholding required and remission of monies levied pursuant to § 27-3-33(4).  Pursuant to the aforementioned regulations promulgated by the Mississippi Department of Revenue, the Distress Warrant does not bind monies owed to the defaulting taxpayer(s) for the first thirty (30) days following service of said warrant.  Thereafter, the default rule generally is that “the employer shall withhold twenty-five percent (25%) of the defaulting taxpayer(s)’ disposable earnings per pay period until the Distress Warrant For The Levy of Monies Owed To Taxpayer(s) is satisfied.”  Where the amount or percentage of wages levied under a Distress Warrant deviates from the general rule, said warrant “shall clearly set out the amount or percentage of disposable earnings to be levied and withheld under said Distress Warrant.”  Code Miss. R. tit. 35, § 103.

 

Sales Tax

 

  • Assessments and Statute of Limitations

Miss. Code Ann. § 27-65-13 authorizes the levy, assessment, and collection of sales tax.  The seller’s responsibility to collect sales tax, file returns, and remit payments are delineated in Miss. Code Ann. §§ 27-65-31 and 27-65-33.  If a return is not filed by the due date, Miss. Code Ann. § 27-65-35 authorizes assessment of taxes and damages based on available information.  The taxpayer must be notified of the assessment in written correspondence that demands payment within sixty (60) days from the notice date.  Said notice must be delivered via mail or personal delivery to the taxpayer or someone at the taxpayer’s place of business or residence, who is of suitable age and discretion.  If the taxpayer files a return and remits tax shown to be due within sixty (60) days from the assessment date, it shall be accepted in lieu of the assessment.                               


A variety of factors including, but not limited to, failure to maintain adequate sales records or preserve invoices as well as the results of audit of the taxpayer’s records or filed returns may disclose that taxes are due and unpaid.  In such instances, available information is used to make assessments of taxes, damages, and interest.  The taxpayer must receive notice of the assessment delivered via mail or personal delivery to the taxpayer or someone at the taxpayer’s place of business or residence, who is of suitable age and discretion.  If the taxpayer does not make payment within sixty (60) days of the notice date or petition for a hearing, further action is authorized.  Miss. Code Ann. § 27-65-37.          

 

Where a sales tax return has been filed as required, assessment of taxes generally must occur within thirty-six (36) months of the filing date.  If taxpayer is notified of commencement of an examination to verify a filed return within the thirty-six month period, expiration of the thirty-six-month period does not bar the determination of correct liability that is made "within one (1) year after the expiration of the thirty-six-month examination period."  Determination, assessment, and collection of such taxes are not subject to limitation where: (1) a fraudulent return intended to evade tax was filed; or (2) a return was not filed.  Miss. Code Ann. § 27-65-42.

 

When sales taxes attributable to operation of a corporation or limited liability company with a maximum of thirty-five (35) owners become due and unpaid, Miss. Code Ann. § 27-65-55(2) imposes derivative liability on persons exercising responsibility for fiscal management and owning at least ten percent (10%) of a corporation’s stock or a ten percent (10%) interest in a limited liability company.  Derivative liability is only imposed to the extent that such persons exercised responsibility for fiscal management when such taxes accrued.  After the business entity’s liability becomes final, the thirty-six-month period for assessment under Miss. Code Ann. § 27-65-42 begins to run for derivative liability.  Pursuant to Miss. Code Ann. § 27-77-5, assessment of derivative liability may be appealed solely on the basis of management requirements and ownership interest.   

 

  • Appeals Process

Mississippi statutory framework outlines the procedures for review of the actions of the MDOR.  This includes, but is not limited to, administrative review of tax assessments.  Miss. Code Ann. § 27-77-5.  An aggrieved taxpayer is allotted sixty (60) days to appeal specified actions, including tax assessments, of the MDOR to the board of review, which consists of employees of the MDOR.  §§ 27-77-3, -5(1).  Where the board of review affirms a tax assessment, the taxpayer is afforded sixty (60) days to appeal to the Board of Tax Appeals.  Miss. Code Ann. §§ 27-4-1(1), 27-77-5(4). 

 

Additionally, Mississippi statutory framework provides for judicial review of orders of the Board of Tax Appeals.  An aggrieved taxpayer is allotted sixty (60) days to appeal an order affirming a tax assessment.  To do so, the taxpayer must file a petition “accompanied by a surety bond approved by the clerk of the court in a sum half the amount in controversy, conditioned to pay the judgment of the court.”  Miss. Code Ann. § 27-77-7(1), (3).  In lieu of posting a bond, an aggrieved taxpayer “may, prior to the filing of the petition, pay the agency, under protest, the amount ordered by the Board of Tax Appeals to be paid and seek a refund of such taxes, plus interest thereon, in the appeal.”  Miss. Code Ann. § 27-77-7(3).

 

  • Methods of Collection

Mississippi statutory framework authorizes tax liens as a means of securing the MDOR’s collection of delinquent sales taxes, damages, and interest where the person liable for said amounts fails or refuses to pay amounts due after receiving notice and demands in compliance with §§ 27-65-35 and 27-65-37 without filing a timely appeal to the board of review.  Miss. Code Ann. § 27-65-57.  Section 27-65-57 requires affirmative action in that a notice of tax lien must be filed with the circuit clerk of the county in which the taxpayer resides or owns property; the notice of tax lien is enrolled on the judgment roll.  In general, the judgment remains “a lien upon all property and rights to property belonging to the taxpayer, both real and personal, including choses in action” until satisfied, but it judgment shall not form the basis for a lien upon the taxpayer’s property for more than seven years from the date the notice of tax lien is filed unless the Department of Revenue brings an action on the lien or refiles the notice of tax lien prior to expiration of the seven-year period.  Miss. Code Ann. § 27-65-57.


Section § 27-65-57 provides:

            The commissioner may issue warrants for collection of sales taxes from such judgments, in lieu of the issuance of  any

            remedial writ by the circuit clerk, as provided in Sections 27-65-59 and 27-65-61 hereof.
 

Miss. Code Ann.  § 27-65-57.  The Mississippi Code provides, “[W]arrants . . .  shall be used to levy on salaries, compensation or other monies due the delinquent taxpayer.”  After the warrant is served “on the person or entity responsible or liable for the payment of monies to the delinquent taxpayer,” the person or entity served shall forward monies “in complete or partial satisfaction of the tax liability.”  Unless expressly provided otherwise, garnishment laws govern the amount payable under the warrant and the payor’s obligation to continue payment.  Miss. Code Ann. § 27-3-33(4).  The Mississippi Administrative Code provides guidance regarding the extent of withholding required and remission of monies levied pursuant to § 27-3-33(4).  Pursuant to the aforementioned regulations promulgated by the Mississippi Department of Revenue, the Distress Warrant does not bind monies owed to the defaulting taxpayer(s) for the first thirty (30) days following service of said warrant.  Thereafter, the default rule generally is that “the employer shall withhold twenty-five percent (25%) of the defaulting taxpayer(s)’ disposable earnings per pay period until the Distress Warrant For The Levy of Monies Owed To Taxpayer(s) is satisfied.”  Where the amount or percentage of wages levied under a Distress Warrant deviates from the general rule, said warrant “shall clearly set out the amount or percentage of disposable earnings to be levied and withheld under said Distress Warrant.”  Code Miss. R. tit. 35, § 103.

 

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