On September 24, the Mississippi Department of Revenue (Department) filed a proposed amendment to its sales tax regulation on Computer Equipment, Software, and Services. This amendment appears to reverse long-standing sales and use tax policy with respect to remote internet-based computer services, and could result in a significant nonlegislative tax increase on Mississippi businesses. The notice filed with the secretary of state did not schedule a public hearing, and the amended regulation is set to go into effect in 30 days, on October 24. All taxpayers concerned about this potential shift in tax policy or the important issues identified below should immediately contact the Department and request a public hearing on the proposed changes.

The most prominent change within this amendment is to expand the regulatory definition of "computer software" to define items such as cloud computing, software as a service (SaaS), platform as a service (PaaS), and infrastructure as a service (IaaS). The most significant and consequential change, however, may be the deletion of the existing use tax rule declaring as nontaxable any software located on an out-of-state server when accessed via the internet. The practical effect of this deletion is that the Department will now consider as taxable many previously nontaxable internet-based services provided or hosted entirely outside Mississippi when utilized by a Mississippi user. Continue reading >