Mississippi charges sales tax on labor only when the work falls into a category the state has specifically named as taxable. Repair shops, skilled trades, and a defined list of personal and technical services owe 7% on their gross income, which includes both labor and any materials. Construction runs on a separate track with a 3.5% contractor’s tax on non-residential jobs over $10,000. Unlisted professional services — legal advice, accounting, consulting, design work — are generally not taxed at all.
Labor That Is Taxed at 7%
Mississippi Code Section 27-65-23 names the business activities that owe 7% sales tax on gross income. If your work appears on the list, the tax applies to your total charge, not just the parts or supplies you used.
Repair and trade services on the list include:1Mississippi Department of Revenue. Sales Tax Rates
- Air conditioning installation and repair
- Automotive repair and servicing for cars, motorcycles, boats, and other vehicles
- Electrical wiring, repair, and installation
- Plumbing and pipe fitting
- Foundries, machine shops, and general repair shops
- Jewelry and watch repair
- Radio and television installation, repair, and servicing
- Tire vulcanizing, repair, and recapping
- Tin and sheet metal shops
- Furniture repair and upholstering
Other listed services that owe the 7% tax include dry cleaning and laundering, pest control, car washing, and admissions to amusement venues and sporting events.1Mississippi Department of Revenue. Sales Tax Rates
Computer software services performed in Mississippi also fall under Section 27-65-23.2Justia Law. Mississippi Code 27-65-23 – Miscellaneous Businesses That covers technical design and programming of software, along with installing, configuring, debugging, modifying, testing, and troubleshooting hardware, networks, and software. Custom software work and IT repair labor both belong here.
For every category above, the entire charge is taxable. An auto mechanic owes 7% on the combined charge for parts and labor, not just the parts.
Labor That Is Not Taxed
Mississippi has no blanket tax on services. If your service is not on the statutory list and your work does not transfer tangible personal property to the customer, your labor is generally exempt. That is the position of most “pure” professional services: legal advice, accounting, management consulting, architectural design, and similar work where the customer is buying expertise rather than a physical product.
The test is narrow and mechanical. If the statute names your activity, you owe the tax. If it does not, and no goods change hands, you do not.
Construction and Contractor Labor
Construction sits outside the 7% service tax and follows its own rules under Section 27-65-21. The rules split on whether the project is residential and whether it clears $10,000.
Non-Residential Projects Over $10,000
When total compensation on a non-residential construction contract exceeds $10,000, the contractor owes 3.5% on the full contract price, covering both labor and materials.3Justia Law. Mississippi Code 27-65-21 – Contracting, Etc This contractor’s tax replaces the standard 7% retail rate on the project. Once it is paid, the Mississippi Department of Revenue (MDOR) issues a Material Purchase Certificate tied to that specific contract, letting the contractor buy component materials for the job without paying 7% on top.4Cornell Law School. 35 Mississippi Code R 4-10-01-508 – State Regulations
The certificate must be applied for before work starts, and each one is tied to a single contract; you cannot use one project’s certificate to buy materials for a different job.5Cornell Law School. 35 Mississippi Code R 4-10-01-501 – State Regulations If you paid 7% retail tax on materials before obtaining the certificate, you can credit those purchases against your contractor’s tax liability.4Cornell Law School. 35 Mississippi Code R 4-10-01-508 – State Regulations
Residential and Small Jobs
Residential construction is excluded from the 3.5% contractor’s tax entirely. The contractor is treated as the end user of the materials and pays 7% retail sales tax on those purchases. The labor portion of a residential project is not separately taxed.
Mississippi’s definition of “residential” is narrow. It covers homes, mobile homes, summer cottages, and hunting or fishing camp buildings. It does not cover apartment buildings, condominiums, hotels, motels, hospitals, nursing homes, retirement homes, or tourist cottages.3Justia Law. Mississippi Code 27-65-21 – Contracting, Etc Building an apartment complex is non-residential work for tax purposes, even though people will live there. If it clears $10,000, the 3.5% tax applies.
Non-residential jobs under the $10,000 threshold work the same way as residential ones: no contractor’s tax, but the contractor pays 7% retail sales tax on materials.
Sales Direct to Government
Labor and services sold directly to the federal government, the State of Mississippi and its departments, counties, municipalities, and school districts are exempt. The transaction has to be billed to and paid by the government entity itself.6Mississippi Department of Revenue. Exempt Entities
The exemption does not flow through to contractors performing government work. A contractor building a county courthouse still owes the contractor’s tax or retail sales tax on material purchases. And a sale to a government employee who gets reimbursed later is taxable.6Mississippi Department of Revenue. Exempt Entities
Invoicing Labor and Materials Together
How you write the invoice matters when part of the job is exempt. If your labor qualifies as a non-taxable service, you have to itemize the labor and material charges separately. Lump them on a single line, and the MDOR can tax the whole amount at 7%.7Mississippi Department of Revenue. Business Tax Frequently Asked Questions
If your labor is on the taxable list, separating it changes nothing. The full charge is taxable at 7% no matter how the invoice reads.7Mississippi Department of Revenue. Business Tax Frequently Asked Questions
Writing “Labor” on a line by itself is not enough. The MDOR expects a description of the work, the time spent, and the rate charged. The seller carries the burden of proof, and undocumented labor charges get taxed at 7% with interest and penalties on the shortfall.4Cornell Law School. 35 Mississippi Code R 4-10-01-508 – State Regulations The same logic applies to businesses that mix taxable and non-taxable work: keep separate records for each line, or the state can tax total receipts at 7%.7Mississippi Department of Revenue. Business Tax Frequently Asked Questions
What Late or Wrong Payments Cost
A deficient or delinquent return draws a 10% penalty on the total tax owed. Interest runs separately at 0.5% per month from the original due date until the balance clears.7Mississippi Department of Revenue. Business Tax Frequently Asked Questions The MDOR applies both to the same liability, so a $5,000 shortfall becomes $5,500 before monthly interest starts adding on. Continued non-filing can also lead to liens against your property.