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Mississippi is one of a handful of states that still assesses a full inventory tax

Business community: Ax inventory tax

A priority legislative issue shared by many business associations and trade groups is the modification — if not outright elimination – of the state’s inventory tax.

The inventory tax is paid by businesses at the end of every calendar year, with the money going to local governments.

Lt. Gov. Phil Bryant, before the session started, included in his agenda turning the inventory tax into a tax credit.

Mississippi is one of a handful of states, and just about the only one in the Southeast, that still assesses a full inventory tax. Alabama has none. Tennessee has no inventory tax on finished goods. Louisiana offers a full tax credit.

The National Federation of Independent Business (NFIB) has joined the Mississippi Manufacturers Association in advocating for the end of the inventory tax.

The NFIB wants the Legislature to establish what amounts to an inventory tax rebate fund that would allow businesses to receive a full refund of their inventory taxes. Local governments would still get their money, NFIB/Mississippi state director Ron Aldridge said.

“(Inventory tax proceeds) touches so many things at the local government level,” he said. “We knew at this point in time there was no way to go at it directly and get rid of the whole system because we did not have a vehicle to replace those funds. And we did not want to do harm to local governments because all that would do is come back to bite us on the property taxes.”

Sen. and Speaker Pro Tem Billy Hewes, R-Gulfport, and Rep. Wanda Jennings, R-Southaven, have introduced bills that would provide for inventory tax rebates.

The current budget has already lost $200 million because of sagging revenue, and the upcoming budget year is likely to be even leaner. Asking for new money to be spent against that backdrop, Aldridge said, is difficult.

“Our hopes are that we could at least set up the rebate program and then within the next year or two begin to appropriate monies into it,” he said.

The problem with a tax credit plan like Bryant’s, Aldridge said, is that it would not help small businesses much, if any.

Local governments in Mississippi annually take in approximately $142 million in inventory tax money. The state gives back a total of $6.5 million in income tax credits.

“That tells you real quickly that a whole lot of (small businesses) don’t have enough income tax because some of them are at break-even, whereby the credit does them no good. We see the rebate program as doing the same good that repealing the tax would, because it would end up being no cost to (businesses).

“That would allow Mississippi compete with Alabama, Tennessee and Louisiana. It would position us pretty well because Georgia still has an inventory tax.

“In the South, with our location, it would place us in a much more competitive situation for lots of types of businesses. As we go through this downturn, it would put us at the right point to head back toward recovery.

We’re getting some positive response (from lawmakers),” Aldridge said. “We all know realistically that the money is probably not there, and for sure won’t be there unless a cigarette tax, and still might not be there, depending at what level the cigarette tax is passed.”

Contact MBJ staff writer Clay Chandler at clay.chandler@ msbusiness.com .

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