Internet sales tax diversion comes in higher than expected

Published 7:00 am Friday, February 5, 2021

Local municipalities have seen more tax dollars than anticipated from Mississippi’s Internet sales tax, which will be used to fund infrastructure improvements.

The Mississippi Infrastructure Modernization Act of 2018 designated how Internet sales tax would be diverted to municipalities after the Supreme Court ruled states could tax Internet sales even if the retailer did not have a brick and mortar location in the state.

All of the funds have to be spent on repair, maintenance or reconstruction of roads, streets, bridges, water and sewer. The tax funds cannot be used for new construction.

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The funds are phased in over time. The state has a formula to determine how much municipalities receive, and in the first year, 2020, they got 25 percent of the amount. Municipalities will get 50 percent in 2021, 75 percent in 2022 and finally 100 percent in 2023 and subsequent years.

The state projected that Pearl River County would receive $220,000 the first year, the 2019-2020 fiscal year. The county actually received $124,000 more than anticipated, totaling $344,000 for year one.

County Administrator Adrain Lumpkin said it may be due to the increase in Internet sales during the pandemic.

The state projection outlined $440,000 in year two and $660,000 for year three. Year four and on was projected at $880,000 in tax diversions for the county. Lumpkin said he is hoping the year two funds will also be more than the $440,000 expected.

The city of Picayune was projected to receive $200,000 from the funds, and instead received $385,516. Picayune has not spent those funds yet. The money can be saved for a larger future project, according to guidance from the Mississippi Municipal League.

The City of Poplarville received $45,543 from Internet sales tax in the 2019 to 2020 fiscal year and has received $56,024 for the 2020-2021 fiscal year as of Jan. 27.

The funds are given to cities in two payments per year, once in January and once in July.

Lumpkin said the funds are the first new revenue for the Pearl River County Road Department since he started working for the county. Just the material costs for paving asphalt roads is $60,000 per mile, said Lumpkin.