MISSISSIPPI LEGISLATURE

2005 Regular Session

To: Ways and Means

By: Representative Scott, Blackmon, Johnson, Evans, Flaggs, Fleming, Green, Harrison, Holloway, Middleton, Myers, Perkins, Thomas

House Bill 1717

AN ACT TO CREATE A STUDY COMMITTEE TO STUDY THE TAX SYSTEM OF THIS STATE AND TO MAKE RECOMMENDATIONS THEREON TO THE LEGISLATURE; TO REQUIRE THE BUDGET OF STATE AGENCIES BE REDUCED BY 5% IN FISCAL YEAR 2006; TO AMEND SECTION 27-7-5, MISSISSIPPI CODE OF 1972, TO REVISE THE TAX BRACKETS UNDER THE INCOME TAX LAW; TO AMEND SECTIONS 27-7-901 AND 27-7-903, MISSISSIPPI CODE OF 1972, TO INCREASE THE TAX LEVIED UPON AMOUNTS THAT ARE PAID OR CREDITED BY GAMING ESTABLISHMENTS TO THEIR PATRONS; TO AMEND SECTIONS 27-13-5 AND 27-13-7, MISSISSIPPI CODE OF 1972, TO INCREASE THE FRANCHISE TAX LEVY; TO AMEND SECTIONS 27-15-103 AND 27-15-109, MISSISSIPPI CODE OF 1972, TO INCREASE THE INSURANCE PREMIUM TAX; TO AMEND SECTION 27-19-43, MISSISSIPPI CODE OF 1972, TO INCREASE THE REGISTRATION FEE ON MOTOR VEHICLES; TO AMEND SECTION 27-65-17, MISSISSIPPI CODE OF 1972, TO INCREASE THE SALES TAX ON RETAIL SALES OF PRIVATE CARRIERS OF PASSENGERS AND LIGHT CARRIERS OF PROPERTY; TO AMEND SECTION 27-65-19, MISSISSIPPI CODE OF 1972, TO INCREASE THE SALES TAX ON SALES OF ELECTRICITY AND OTHER FUELS TO MANUFACTURERS, CUSTOM PROCESSORS OR PUBLIC SERVICE COMPANIES FOR INDUSTRIAL PURPOSES; TO AMEND SECTION 27-65-21, MISSISSIPPI CODE OF 1972, TO INCREASE THE CONTRACTOR'S TAX; TO AMEND SECTION 27-65-33, MISSISSIPPI CODE OF 1972, TO REMOVE THE DISCOUNT GIVEN FOR TIMELY FILING AND PAYING SALES TAXES; TO AMEND SECTION 27-65-75, MISSISSIPPI CODE OF 1972, TO INCREASE THE AMOUNT OF THE SALES TAX DIVERSION TO CITIES AND TO PROVIDE THAT THE ADDITIONAL SALES TAX ON MOTOR VEHICLES SHALL NOT BE DEPOSITED INTO THE MOTOR VEHICLE AD VALOREM TAX REDUCTION FUND; TO AMEND SECTION 27-65-111, MISSISSIPPI CODE OF 1972, TO REMOVE THE SALES TAX EXEMPTION ON SALES OF MOTOR FUEL AND TO EXEMPT RETAIL SALES OF CERTAIN GROCERIES FROM SALES TAXATION; TO AMEND SECTION 27-67-5, MISSISSIPPI CODE OF 1972, TO INCREASE THE USE TAX; TO AMEND SECTION 27-67-31, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT THE ADDITIONAL USE TAX ON MOTOR VEHICLES SHALL NOT BE DEPOSITED INTO THE MOTOR VEHICLE AD VALOREM TAX REDUCTION FUND; TO AMEND SECTION 27-69-13, MISSISSIPPI CODE OF 1972, TO INCREASE THE EXCISE TAX LEVIED ON CIGARETTES; TO ELIMINATE THE DISCOUNT OR COMPENSATION PROVIDED TO DEALERS AS CONSIDERATION FOR THEIR SERVICES IN AFFIXING TOBACCO TAX STAMPS REQUIRED UNDER THE STATE TOBACCO TAX LAW; TO AMEND SECTION 27-69-31, MISSISSIPPI CODE OF 1972, TO ELIMINATE THE DISCOUNT OR COMPENSATION PROVIDED TO DEALERS AS COMPENSATION FOR THEIR SERVICES IN AFFIXING TOBACCO TAX STAMPS REQUIRED UNDER THE STATE TOBACCO TAX LAW; TO AMEND SECTION 27-69-75, MISSISSIPPI CODE OF 1972, IN CONFORMITY TO THE PRECEDING PROVISIONS; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. The Legislature finds that tax revenues are not sufficient to fund essential functions of state government and without additional revenues to fund these functions, the health, safety, welfare and future of the citizens of the State of Mississippi will be compromised. It is the intent of the Legislature that the additional General Fund revenue that is generated as a result of the passage of this act shall be utilized to:

(a) Maintain the current eligibility standards under the Medicaid program;

(b) Fund the Medicaid Poverty Level Aged and Disabled Group;

(d) Fund the Children's Health Insurance Program administered by the Department of Medicaid;

(e) Fund the Mississippi Adequate Education Program and teacher salaries as provided by law;

(f) Fund State Institutions of Higher Learning and Community and Junior Colleges;

(g) Fund the State and School Employees' Health Insurance Plan;

(h) Fund a six percent (6%) increase in state employee compensation;

(i) Fund mental health crisis centers; and

(j) Fund additional patrolmen for the Highway Safety Patrol.

SECTION 2. (1) There is created a study committee on the tax system of Mississippi. The committee shall make a report of its findings and recommendations to the Legislature during the 2006 Regular Legislative Session, including any recommended legislation.

(2) The committee shall be composed of the following members:

(a) The President Pro Tempore of the Mississippi Senate;

(b) The Speaker Pro Tempore of the Mississippi House of Representatives;

(d) The Chairman of the House Appropriations Committee;

(e) The Chairman of the Senate Finance Committee;

(f) The Chairman of the House Ways and Means Committee;

(g) The State Treasurer, or his designee;

(h) The Executive Director of the Department of Finance and Administration;

(i) The State Auditor, or his designee;

(j) One (1) member designated by the State Tax Commission;

(k) One (1) member designated by the State Board of Public Accountancy;

(l) One (1) member designated by the President of The Mississippi Bar from the Taxation Section of The Mississippi Bar;

(m) One (1) member designated by the Mississippi Supervisors Association;

(n) One (1) member designated by the Mississippi Municipal Association; and

(o) Three (3) representatives of the general public, one (1) designated by the Governor, one (1) by the Lieutenant Governor and one (1) by the Speaker of the House of Representatives.

Appointments shall be made within thirty (30) days after the effective date of this act, and, within fifteen (15) days thereafter on a day to be designated jointly by the Lieutenant Governor and the Speaker of the House, the committee shall meet and organize by selecting from its membership a chairman and a vice chairman. The vice chairman shall also serve as secretary and shall be responsible for keeping all records of the committee. A majority of the members of the committee shall constitute a quorum. In the selection of its officers and the adoption of rules, resolutions and reports, an affirmative vote of a majority of the committee shall be required. All members shall be notified in writing of all meetings, such notices to be mailed at least five (5) days before the date on which a meeting is to be held.

(3) The committee shall study and make recommendations with respect to the imposition of state taxes and the granting of tax exemptions in all areas of taxation including, but not limited to, sales taxes, income taxes, privilege taxes, fuel taxes, diversions of taxes and the relationship between state and local taxes.

(4) Members of the committee who are not legislators, state officials or state employees shall be compensated at the per diem rate authorized by Section 25-3-69, and shall be reimbursed in accordance with Section 25-3-41 for mileage and actual expenses incurred in the performance of their duties. Legislative members of the committee shall be paid from the contingent expense funds of their respective houses in the same manner as provided for committee meetings when the Legislature is not in session; however, no per diem or expense for attending meetings of the committee will be paid while the Legislature is in session. No committee member may incur per diem, travel or other expenses unless previously authorized by vote, at a meeting of the committee, which action shall be recorded in the official minutes of the meeting. Nonlegislative members shall be paid from any funds made available to the committee for that purpose.

(5) The committee shall utilize clerical and legal staff already employed by the Legislature and any other staff assistance made available to it. To effectuate the purpose of this resolution, any department, division, board, bureau, commission or agency of the state or of any political subdivision thereof shall, at the request of the chairman of the committee, provide to the committee such facilities, assistance and data as will enable the committee properly to carry out its task.

(6) Upon presentation of its report to the 2006 Regular Legislative Session, the committee shall be dissolved.

SECTION 3. In fiscal year 2006, the budget of each state agency, as defined in Section 27-103-103, shall be reduced by five percent (5%) from the level it was funded in fiscal year 2005.

SECTION 4. Section 27-7-5, Mississippi Code of 1972, is amended as follows:

27-7-5. (1) There is * * * assessed and levied, to be collected and paid as hereinafter provided, for the calendar year 1983 and fiscal years ending during the calendar year 1983 and all taxable years thereafter, upon the entire net income of every resident individual, corporation, association, trust or estate, in excess of the credits provided, a tax at the following rates:

On the first Five Thousand Dollars ($5,000.00) of taxable income, or any part thereof, at the rate of four percent (4%);

On the next Five Thousand Dollars ($5,000.00) of taxable income, or any part thereof, at the rate of five percent (5%); and

On all taxable income in excess of Ten Thousand Dollars ($10,000.00), at the rate of six percent (6%).

(2) An S corporation, as defined in Section 27-8-3(1)(g), shall not be subject to the income tax imposed under this section.

(3) A like tax is * * * imposed to be assessed, collected and paid annually, except as hereinafter provided, at the rate specified in this section and as hereinafter provided, upon and with respect to the entire net income, from all property owned or sold, and from every business, trade or occupation carried on in this state by individuals, corporations, partnerships, trusts or estates, not residents of the State of Mississippi.

(4) In the case of taxpayers having a fiscal year beginning in the calendar year 1982 and ending after the first day of January 1983, the tax due for that taxable year shall be determined by:

(a) Computing for the full fiscal year the amount of tax that would be due under the rates in effect for the calendar year 1982; and

(b) Computing for the full fiscal year the amount of tax that would be due under the rates in effect for the calendar year 1983; and

(c) Applying to the tax computed under paragraph (a) the ratio that the number of months falling within the earlier calendar year bears to the total number of months in the fiscal year; and

(d) Applying to the tax computed under paragraph (b) the ratio that the number of months falling within the later calendar year bears to the total number of months within the fiscal year; and

(e) Adding to the tax determined under paragraph (c) the tax determined under paragraph (d) the sum of which shall be the amount of tax due for the fiscal year.

SECTION 5. Section 27-7-901, Mississippi Code of 1972, is amended as follows:

27-7-901. (1) There is * * * levied, assessed and shall be collected a tax of five percent (5%) upon amounts that are paid or credited by gaming establishments licensed under the provisions of the Mississippi Gaming Control Act to their patrons. The tax shall be collected by licensed gaming establishments and remitted to the State Tax Commission in the manner provided for by regulations promulgated by the Chairman of the State Tax Commission.

(2) As used in this section, "amounts that are paid or credited" means amounts or credits that are subject to the withholding or reporting requirements of the Internal Revenue Code.

(3) No credit shall be allowed under the Income Tax Law of 1952 for the tax collected by licensed gaming establishments under this section.

SECTION 6. Section 27-7-903, Mississippi Code of 1972, is amended as follows:

27-7-903. (1) There is * * * levied and assessed upon patrons of gaming establishments located in this state that are not licensed under the provisions of the Mississippi Gaming Control Act, a tax of five percent (5%) of the amounts that are paid or credited to those patrons by the gaming establishment, which tax is the same in kind and rate as has heretofore been imposed under Section 27-7-901 upon the patrons of gaming establishments that are licensed under the Mississippi Gaming Control Act. The legal incidence and duty to pay those taxes shall fall upon the patron. The assessment of the tax is subject to any exemptions as may exist under federal or state law. The State Tax Commission may enter into tax collection agreements regarding this tax.

(2) As used in this section, "amounts that are paid or credited" means amounts or credits that are subject to the withholding or reporting requirements of the Internal Revenue Code.

(3) No credit shall be allowed under the Income Tax Law of 1952 for the tax collected by gaming establishments under this section.

SECTION 7. Section 27-13-5, Mississippi Code of 1972, is amended as follows:

27-13-5. (1) Franchise tax levy. Except as otherwise provided in subsections (3), (4) and (5) of this section, there is * * * imposed, to be paid and collected as hereinafter provided, a franchise or excise tax upon every corporation, association or joint-stock company or partnership treated as a corporation under the income tax laws or regulations, organized or created for pecuniary gain, having privileges not possessed by individuals, and having authorized capital stock now existing in this state, or hereafter organized, created or established, under and by virtue of the laws of the State of Mississippi, equal to Five Dollars ($5.00) for each One Thousand Dollars ($1,000.00), or fraction thereof, of the value of the capital used, invested or employed in the exercise of any power, privilege or right enjoyed by the organization within this state, except as hereinafter provided. In no case shall the franchise tax due for the accounting period be less than Twenty-five Dollars ($25.00). It is the purpose of this section to require the payment to the State of Mississippi of this tax for the right granted by the laws of this state to exist as that organization, and to enjoy, under the protection of the laws of this state, the powers, rights, privileges and immunities derived from the state by the form of that existence.

(2) Annual report of domestic corporations. Each domestic corporation shall file, within the time prescribed by Section 79-3-251, an annual report as required by the provisions of Section 79-3-249.

(3) A corporation that has negotiated a fee-in-lieu as defined in Section 57-75-5 shall not be subject to the tax levied by this section on that project; * * * however, * * * the fee-in-lieu payment shall be otherwise treated in the same manner as the payment of franchise taxes.

(4) An approved business enterprise as defined in the Growth and Prosperity Act shall not be subject to the tax levied by this section on the value of capital used, invested or employed by the approved business enterprise in a growth and prosperity county or supervisors district as provided in the Growth and Prosperity Act.

(5) A business enterprise operating a project as defined in Section 57-64-33, in a county that is a member of a regional economic development alliance created under the Regional Economic Development Act shall not be subject to the tax levied by this section on the value of capital used, invested or employed by the business enterprise in such a county as provided in Section 57-64-33.

SECTION 8. Section 27-13-7, Mississippi Code of 1972, is amended as follows:

27-13-7. (1) Franchise tax levy. Except as otherwise provided in subsections (3), (4) and (5) of this section, there is * * * imposed, levied and assessed upon every corporation, association or joint-stock company, or partnership treated as a corporation under the Income Tax Laws or regulations as hereinbefore defined, organized and existing under and by virtue of the laws of some other state, territory or country, or organized and existing without any specific statutory authority, now or hereafter doing business or exercising any power, privilege or right within this state, as hereinbefore defined, a franchise or excise tax equal to Five Dollars ($5.00) of each One Thousand Dollars ($1,000.00), or fraction thereof, of the value of capital used, invested or employed within this state, except as hereinafter provided. In no case shall the franchise tax due for the accounting period be less than Twenty-five Dollars ($25.00). It is the purpose of this section to require the payment of a tax by all organizations not organized under the laws of this state, measured by the amount of capital or its equivalent, for which the organization receives the benefit and protection of the government and laws of the state.

(2) Annual report of foreign corporations. Each foreign corporation authorized to transact business in this state shall file, within the time prescribed by Section 79-3-251, an annual report as required by the provisions of Section 79-3-249.

SECTION 9. Section 27-15-103, Mississippi Code of 1972, is amended as follows:

27-15-103. (1) Except as otherwise provided in Section 83-61-11, in addition to the license tax now or hereafter provided by law, which tax shall be paid when the company enters or is admitted to do business in this state, there is * * * levied and imposed upon all foreign insurance companies and associations, including life insurance companies and associations, health, accident and industrial insurance companies and associations, fire and casualty insurance companies and associations, and all other foreign insurance companies and associations of every kind and description, an additional annual license or privilege tax of four percent (4%) of the gross amount of premium receipts received from, and on insurance policies and contracts written in, or covering risks located in this state, except for premiums received on policies issued to fund a deferred compensation plan qualified under Section 457 of the Federal Tax Code for federal tax exemption. In determining the amount of premiums, there shall be deducted therefrom premiums received for reinsurance from companies authorized to do business in this state, cash dividends paid under policy contracts in this state, and premiums returned to policyholders and cancellations on accounts of policies not taken, and, in the case of mutual insurance companies (including interinsurance and reciprocal exchanges, but not including mutual life, accident, health or industrial insurance companies) any refund made or credited to the policyholder other than for losses. The term "premium" as used in this section shall also include policy fees, membership fees, and all other fees collected by the companies. No credit or deduction from gross premium receipts shall be allowed for any commission, fee or compensation paid to any agent, solicitor or representative. * * * However, * * * any foreign insurance carrier selected to furnish service to the State of Mississippi under the State Employees Life and Health Insurance Plan shall not be required to pay the annual license or privilege tax on the premiums collected for coverage under the * * * plan.

* * *

(2) The taxes * * * levied and imposed in this section for the calendar year 1982 and all calendar years thereafter shall be reduced by the net amount of income tax paid to this state for the preceding calendar year, provided, in no event may the credit be taken more than once. The credit * * * authorized in this subsection shall, in no event, be greater than the premium tax due under this section; it being the purpose and intent of this paragraph that whichever of the annual insurance premium tax or the income tax is greater in amount shall be paid.

SECTION 10. Section 27-15-109, Mississippi Code of 1972, is amended as follows:

27-15-109. (1) Except as otherwise provided in Section 83-61-11, there is * * * levied and imposed upon each domestic company doing business in this state an annual tax of four percent (4%) of the gross amount of premiums collected by the domestic company on insurance policies and contracts written in, or covering risks located in this state, except for premiums received on policies issued to fund a retirement, thrift or deferred compensation plan qualified under Section 401, Section 403 or Section 457 of the Federal Tax Code for federal tax exemption. * * * However, * * * a domestic insurance company against which is levied additional premium tax under retaliatory laws of other states in which it does business, as a result of the tax increase provided by Sections 27-15-103 through 27-15-117, may deduct the total of the additional retaliatory tax from the state income tax due by it to the State of Mississippi. The insurance carriers selected to furnish service to the State of Mississippi, under the State Employees Life and Health Insurance Plan, shall not be required to pay the premium tax levied against insurance companies under this section on the premiums collected for coverage under the state employees plan.

(2) Except as expressly provided by subsection (1) of this section, all of the provisions of Sections 27-15-103 through 27-15-117 shall be applicable to the domestic insurance companies. However, the statement filed with the State Tax Commission by domestic insurance companies as provided in Section 27-15-107 shall include therein a sworn statement of all additional retaliatory premium taxes paid by them to other states as a result of the increase in premium taxes imposed by Sections 27-15-103 through 27-15-117, itemized by states to which paid.

* * *

SECTION 11. Section 27-19-43, Mississippi Code of 1972, is amended as follows:

27-19-43. (1) License tags, substitute tags and decals for individual fleets and for private carriers of passengers, school buses (excluding school buses owned by a school district in the state), church buses, taxicabs, ambulances, hearses, motorcycles and private carriers of property, and private commercial carriers of property of a gross weight of ten thousand (10,000) pounds and less, shall be sold and issued by the tax collectors of the several counties.

(2) Applications for license tags for motor vehicles in a corporate fleet registered under Section 27-19-66, and applications for all other license tags, substitute tags and decals shall be filed with the commission or the local tax collector of the respective counties and forwarded to the commission for issuance to the applicant. All tags and decals for vehicles owned by the state or any agency or instrumentality thereof, and vehicles owned by a fire protection district, school district or a county or municipality, and all vehicles owned by a road, drainage or levee district shall be issued by the commission.

(3) In addition to the privilege taxes levied in this section, there shall be collected the following registration or tag fee:

(a) For the issuance of both a license tag and two (2) decals, a fee of Five Dollars ($5.00).

(b) For the issuance of up to two (2) decals only, a fee of Three Dollars and Seventy-five Cents ($3.75).

No tag or decal shall be issued either by a tax collector or by the commission without the collection of the registration fee except substitute tags and decals and license tags for vehicles owned by the State of Mississippi.

Beginning July 1, 1987, and until the date specified in Section 65-39-35, there shall be levied a registration fee of Five Dollars ($5.00) in addition to the regular registration fee imposed in paragraphs (a) and (b) of this subsection. The additional registration fee shall be levied in the same manner as the regular registration fee.

(4) Beginning July 1, 2005, there shall be levied a registration fee of Ten Dollars ($10.00) in addition to the regular registration fee imposed in subsection (3) of this section. The additional registration fee shall be levied in the same manner as the regular registration fee.

SECTION 12. Section 27-65-17, Mississippi Code of 1972, is amended as follows:

27-65-17. (1) Upon every person engaging or continuing within this state in the business of selling any tangible personal property whatsoever, there is * * * levied, assessed and shall be collected a tax equal to seven percent (7%) of the gross proceeds of the retail sales of the business, except as otherwise provided in this section.

Retail sales of farm tractors shall be taxed at the rate of one percent (1%) when made to farmers for agricultural purposes. Retail sales of farm implements sold to farmers and used directly in the production of poultry, ratite, domesticated fish as defined in Section 69-7-501, livestock, livestock products, agricultural crops or ornamental plant crops or used for other agricultural purposes shall be taxed at the rate of three percent (3%) when used on the farm. The three percent (3%) rate shall alsoapply to all equipment used in logging, pulpwood operations or tree farming that is either (a) self-propelled or that is (b) mounted so that it is (i) permanently attached to other equipment that is self-propelled or (ii) permanently attached to other equipment drawn by a vehicle that is self-propelled.

Except as otherwise provided in subsection (3) of this section, retail sales of aircraft, automobiles, trucks, truck-tractors, semitrailers and mobile homes shall be taxed at the rate of three percent (3%).

Sales of manufacturing machinery or manufacturing machine parts when made to a manufacturer or custom processor for plant use only when the machinery and machine parts will be used exclusively and directly within this state in manufacturing a commodity for sale, rental or in processing for a fee shall be taxed at the rate of one and one-half percent (1-1/2%).

Sales of materials for use in track and track structures to a railroad whose rates are fixed by the Interstate Commerce Commission or the Mississippi Public Service Commission shall be taxed at the rate of three percent (3%).

Sales of tangible personal property to electric power associations for use in the ordinary and necessary operation of their generating or distribution systems shall be taxed at the rate of one percent (1%).

Wholesale sales of beer shall be taxed at the rate of seven percent (7%), and the retailer shall file a return and compute the retail tax on retail sales, but may take credit for the amount of the tax paid to the wholesaler on the return covering the subsequent sales of same property, provided adequate invoices and records are maintained to substantiate the credit.

Wholesale sales of food and drink for human consumption to full service vending machine operators to be sold through vending machines located apart from and not connected with other taxable businesses shall be taxed at the rate of eight percent (8%).

A manufacturer selling at retail in this state shall be required to make returns of the gross proceeds of those sales and pay the tax imposed in this section.

Any person exercising any privilege taxable under Section 27-65-15 and selling his natural resource products at wholesale or to exempt persons shall pay the tax levied by that section in lieu of the tax levied by this section.

(2) (a) From and after January 1, 1995, retail sales of private carriers of passengers and light carriers of property, as defined in Section 27-51-101, shall be taxed an additional two percent (2%).

(b) From and after July 1, 2005, retail sales of private carriers of passengers and light carriers of property, as defined in Section 27-51-101, shall be taxed an additional one percent (1%).

(3) In lieu of the tax levied in subsection (1) of this section, there is levied on retail sales of truck-tractors and semitrailers used in interstate commerce and registered under the International Registration Plan (IRP) or any similar reciprocity agreement or compact relating to the proportional registration of commercial vehicles entered into as provided for in Section 27-19-143, a tax at the rate of three percent (3%) of the portion of the sale that is attributable to the usage of the truck-tractor or semitrailer in Mississippi. The portion of the retail sale that is attributable to the usage of the truck-tractor or semitrailer in Mississippi is the retail sales price of the truck-tractor or semitrailer multiplied by the percentage of the total miles traveled by the vehicle that are traveled in Mississippi. The tax levied under this subsection (3) shall be collected by the State Tax Commission from the purchaser of the truck-tractor or semitrailer at the time of registration of the truck-tractor or semitrailer.

SECTION 13. Section 27-65-19, Mississippi Code of 1972, is amended as follows:

27-65-19. (1) (a) Except as otherwise provided in this subsection, upon every person selling to consumers, electricity, current, power, potable water, steam, coal, natural gas, liquefied petroleum gas or other fuel, there is * * * levied, assessed and shall be collected a tax equal to seven percent (7%) of the gross income of the business. However, gross income from sales to consumers of electricity, current, power, natural gas, liquefied petroleum gas or other fuel for residential heating, lighting or other residential noncommercial or nonagricultural use, and sales of potable water for residential, noncommercial or nonagricultural use shall be excluded from taxable gross income of the business. * * * Upon every such seller using electricity, current, power, potable water, steam, coal, natural gas, liquefied petroleum gas or other fuel for nonindustrial purposes, there is * * * levied, assessed and shall be collected a tax equal to seven percent (7%) of the cost or value of the product or service used.

* * *

(b) Upon every person operating a telegraph or telephone business for the transmission of messages or conversations between points within this state, there is * * * levied, assessed and shall be collected a tax equal to seven percent (7%) of the gross income of the business, with no deduction or allowance for any part of an intrastate rate charge because of routing across a state line. Charges by one (1) telecommunications provider to another telecommunications provider holding a permit issued under Section 27-65-27 for services that are resold by the other telecommunications provider, including, but not limited to, access charges, shall not be subject to the tax levied under this paragraph (b). However, any sale of a prepaid telephone calling card or prepaid authorization number, or both, shall be deemed to be the sale of tangible personal property subject only to those taxes imposed by law on the sale of tangible personal property. If the sale of a prepaid telephone calling card or prepaid authorization number does not take place at the vendor's place of business, it shall be conclusively determined to take place at the customer's shipping address. The reauthorization of a prepaid telephone calling card or a prepaid authorization number shall be conclusively determined to take place at the customer's billing address. Except for the provisions governing the sale of a prepaid telephone calling card or prepaid authorization number, this paragraph (b) shall not apply to persons providing mobile telecommunications services that are taxed under paragraph (d) of this section.

(c) Upon every person operating a telegraph or telecommunications business for the transmission of messages or conversations originating in this state or terminating in this state via interstate telecommunications, which are charged to the customer's service address in this state, regardless of where the amount is billed or paid, there is * * * levied, assessed and shall be collected a tax equal to seven percent (7%) of the gross income received by the business from those interstate telecommunications. However, a person, upon proof that he has paid a tax in another state on that event, shall be allowed a credit against the tax imposed in this paragraph (c) on interstate telecommunications charges to the extent that the amount of the tax is properly due and actually paid in the other state and to the extent that the rate of sales tax imposed by and paid to the other state does not exceed the rate of sales tax imposed by this paragraph (c). Charges by one (1) telecommunications provider to another telecommunications provider holding a permit issued under Section 27-65-27 for services that are resold by the other telecommunications provider, including, but not limited to, access charges, shall not be subject to the tax levied under this paragraph (c). This paragraph (c) shall not apply to persons providing mobile telecommunications services that are taxed pursuant to paragraph (d) of this subsection.

(d) (i) Upon every person providing mobile telecommunications services in this state, there is * * * levied, assessed and shall be collected:

1. A tax equal to seven percent (7%) of the gross income received on those services from all charges for transmission of messages or conversations between points within any single state as they shall be construed to be within this state; and

2. A tax equal to seven percent (7%) on the gross income received from all charges for services that originate in one (1) state and terminate in any other state.

Charges by one (1) telecommunications provider to another telecommunications provider holding a permit issued under Section 27-65-27 for services that are resold by the other telecommunications provider, including, but not limited to, access charges, shall not be subject to the tax levied under this paragraph (d).

(ii) Subject to the provisions of 4 USCS 116(c), the tax levied by this paragraph (d) shall apply only to those charges for mobile telecommunications services subject to tax that are deemed to be provided to a customer by a home service provider under 4 USCS 117(a), if the customer's place of primary use is located within this state.

(iii) A home service provider shall be responsible for obtaining and maintaining the customer's place of primary use. The home service provider shall be entitled to rely on the applicable residential or business street address supplied by the customer, if the home service provider's reliance is in good faith; and the home service provider shall be held harmless from liability for any additional taxes based on a different determination of the place of primary use for taxes that are customarily passed on to the customer as a separate itemized charge. A home service provider shall be allowed to treat the address used for purposes of the tax levied by this chapter for any customer under a service contract in effect on August 1, 2002, as that customer's place of primary use for the remaining term of the service contract or agreement, excluding any extension or renewal of the service contract or agreement. Month-to-month services provided after the expiration of a contract shall be treated as an extension or renewal of the contract or agreement.

If the commissioner determines that the address used by a home service provider as a customer's place of primary use does not meet the definition of the term "place of primary use" as defined in this paragraph, the commissioner shall give binding notice to the home service provider to change the place of primary use on a prospective basis from the date of notice of determination; however, the customer shall have the opportunity, before that notice of determination, to demonstrate that the address satisfies that definition.

The commission has the right to collect any taxes due directly from the home service provider's customer that has failed to provide an address that meets the definition of the term "place of primary use" that resulted in a failure of tax otherwise due being remitted.

(iv) For purposes of this paragraph (d):

1. "Place of primary use" means the street address representative of where the customer's use of mobile telecommunications services primarily occurs, which shall be either the residential street address of the customer or the primary business street address of the customer.

2. "Customer" means the person or entity that contracts with the home service provider for mobile telecommunications services. For determining the place of primary use, in those instances in which the end user of mobile telecommunications services is not the contracting party, the end user of the mobile telecommunications services shall be deemed the customer. The term "customer" shall not include a reseller of mobile telecommunications service, or a serving carrier under an arrangement to serve the customer outside the home service provider's licensed service area.

3. "Home service provider" means the facilities-based carrier or reseller with which the customer contracts for the provision of mobile telecommunications services.

(e) (i) For purposes of this paragraph (e), "bundled transaction" means a transaction that consists of distinct and identifiable properties or services that are sold for a single nonitemized price but that are treated differently for tax purposes.

(ii) In the case of a bundled transaction that includes telecommunications services taxed under this section in which the price of the bundled transaction is attributable to properties or services that are taxable and nontaxable, the portion of the price that is attributable to any nontaxable property or service shall be subject to the tax unless the provider can reasonably identify that portion from its books and records kept in the regular course of business.

(iii) In the case of a bundled transaction that includes telecommunications services subject to tax under this section in which the price is attributable to properties or services that are subject to the tax but the tax revenue from the different properties or services are dedicated to different funds or purposes, the provider shall allocate the price among the properties or services:

1. By reasonably identifying the portion of the price attributable to each of the properties and services from its books and records kept in the regular course of business; or

2. Based on a reasonable allocation methodology approved by the commission.

(iv) This paragraph (e) shall not create a right of action for a customer to require that the provider or the commission, for purposes of determining the amount of tax applicable to a bundled transaction, allocate the price to the different portions of the transaction in order to minimize the amount of tax charged to the customer. A customer shall not be entitled to rely on the fact that a portion of the price is attributable to properties or services not subject to tax unless the provider elects, after receiving a written request from the customer in the form required by the provider, to provide verifiable data based upon the provider's books and records that are kept in the regular course of business that reasonably identifies the portion of the price attributable to the properties or services not subject to the tax.

(2) Persons making sales to consumers of electricity, current, power, natural gas, liquefied petroleum gas or other fuel for residential heating, lighting or other residential noncommercial or nonagricultural use or sales of potable water for residential, noncommercial or nonagricultural use shall indicate on each statement rendered to customers that those charges are exempt from sales taxes.

(3) There is * * * levied, assessed and shall be paid on transportation charges on shipments moving between points within this state when paid directly by the consumer, a tax equal to the rate applicable to the sale of the property being transported. The tax shall be reported and paid directly to the State Tax Commission by the consumer.

SECTION 14. Section 27-65-21, Mississippi Code of 1972, is amended as follows:

27-65-21. (1) (a) (i) Upon every person engaging or continuing in this state in the business of contracting or performing a contract or engaging in any of the activities, or similar activities, listed below for a price, commission, fee or wage, there is * * * levied, assessed and shall be collected a tax equal to four and one-half percent (4-1/2%) of the total contract price or compensation received, including all charges related to the contract such as finance charges and late charges, from constructing, building, erecting, repairing, grading, excavating, drilling, exploring, testing or adding to any building, highway, street, sidewalk, bridge, culvert, sewer, irrigation or water system, drainage or dredging system, levee or levee system or any part thereof, railway, reservoir, dam, power plant, electrical system, air conditioning system, heating system, transmission line, pipeline, tower, dock, storage tank, wharf, excavation, grading, water well, any other improvement or structure or any part thereof when the compensation received exceeds Ten Thousand Dollars ($10,000.00). Those activities shall not include constructing, repairing or adding to property that retains its identity as personal property. The tax imposed in this section is levied upon the prime contractor and shall be paid by him.

(ii) Amounts included in the contract price or compensation received representing the sale of manufacturing or processing machinery for a manufacturer or custom processor shall be taxed at the rate of one and one-half percent (1-1/2%) in lieu of the three and one-half percent (3-1/2%).

(b) The following shall be excluded from the tax levied by this section:

(i) The contract price or compensation received for constructing, building, erecting, repairing or adding to any building, electrical system, air conditioning system, heating system or any other improvement or structure that is used for or primarily in connection with a residence or dwelling place for human beings. Those residences shall include homes, apartment buildings, condominiums, mobile homes, summer cottages, fishing and hunting camp buildings and similar buildings, but shall not include hotels, motels, hospitals, nursing or retirement homes, tourist cottages or other commercial establishments.

(ii) The portion of the total contract price attributable to design or engineering services if the total contract price for the project exceeds the sum of One Hundred Million Dollars ($100,000,000.00).

(iii) The contract price or compensation received to restore, repair or replace a utility distribution or transmission system that has been damaged due to ice storm, hurricane, flood, tornado, wind, earthquake or other natural disaster if the restoration, repair or replacement is performed by the entity providing the service at its cost.

(c) Sales of materials and services for use in the activities * * * excluded from taxes imposed by this section, except services used in activities excluded under paragraph (b)(iii) of this subsection, shall be subject to taxes imposed by other sections in this chapter.

(2) Upon every person engaging or continuing in this state in the business of contracting or performing a contract of redrilling, or working over, or of drilling an oil well or a gas well, regardless of whether the well is productive or nonproductive, for any valuable consideration, there is * * * levied, assessed and shall be collected a tax equal to three and one-half percent (3-1/2%) of the total contract price or compensation received when the compensation exceeds Ten Thousand Dollars ($10,000.00).

The words, terms and phrases as used in this subsection shall have the meaning ascribed to them as follows:

"Operator" -- One who holds all or a fraction of the working or operating rights in an oil or gas lease, and is obligated for the costs of production either as a fee owner or under a lease or any other form of contract creating working or operating rights.

"Bottom-hole contribution" -- Money or property given to an operator for his use in the drilling of a well on property in which the payor has no interest. The contribution is payable whether the well is productive or nonproductive.

"Dry-hole contribution" -- Money or property given to an operator for his use in the drilling of a well on property in which the payor has no interest. That contribution is payable only if the well is found to be nonproductive.

"Turnkey drilling contract" -- A contract for the drilling of a well that requires the driller to drill a well and, if commercial production is obtained, to equip the well to such stage that the lessee or operator may turn a valve and the oil will flow into a tank.

"Total contract price or compensation received" -- As related to oil and gas well contractors, shall include amounts received as compensation for all costs of performing a turnkey drilling contract; amounts received or to be received under assignment as dry-hole money or bottom-hole money; and shall mean and include anything of value received by the contractor as remuneration for services taxable hereunder. When the kind and amount of compensation received by the contractor is contingent upon production, the taxable amount shall be the total compensation receivable if the well is a dry hole. The taxable amount in the event of production when the contractor receives a production interest of an undetermined value in lieu of a fixed compensation shall be an amount equal to the compensation to the contractor if the well had been a dry hole.

(3) When the work to be performed under any contract is sublet by the prime contractor to different persons, or in separate contracts to the same persons, each such subcontractor performing any part of that work shall be liable for the amount of the tax that accrues on account of the work performed by the person when the tax previously imposed has not been paid upon the whole contract by the prime contractor.

When a person engaged in any business on which a tax is levied in Section 27-65-23 also qualifies as a contractor and contracts with the owner of any project to perform any services in excess of Ten Thousand Dollars ($10,000.00) herein taxed, the person shall pay the tax imposed by this section in lieu of the tax imposed by Section 27-65-23.

Any person entering into any contract over Seventy-five Thousand Dollars ($75,000.00) as defined in this section shall, before beginning the performance of that contract or contracts, either pay the contractors' tax in advance, together with any use taxes due under Section 27-67-5, or execute and file with the Chairman of the State Tax Commission a good and valid bond in a surety company authorized to do business in this state, or with sufficient sureties to be approved by the commissioner conditioned that all taxes that may accrue to the State of Mississippi under this chapter, or under Section 27-67-5 and Section 27-7-5, will be paid when due. Those bonds shall be either (a) "job bonds" that guarantee payment when due of the aforesaid taxes resulting from performance of a specified job or activity regardless of date of completion; or (b) "blanket bonds" that guarantee payment when due of the aforesaid taxes resulting from performance of all jobs or activities taxable under this section begun during the period specified therein, regardless of date of completion. The payments of the taxes due or the execution and filing of a surety bond shall be a condition precedent to the commencing work on any contract taxed hereunder. However, when any bond is filed in lieu of the prepayment of the tax under this section, that the tax shall be payable monthly on the amount received during the previous month, and any use taxes due shall be payable on or before the twentieth day of the month following the month in which the property is brought into Mississippi.

Any person failing either to execute any bond herein provided, or to pay the taxes in advance, before beginning the performance of any contract shall be denied the right to perform the contract until he complies with those requirements, and the commissioner is * * * authorized to proceed either under Section 27-65-59, or by injunction to prevent any activity in the performance of the contract until either a satisfactory bond is executed and filed, or all taxes are paid in advance, and a temporary injunction enjoining the execution of the contract shall be granted without notice by any judge or chancellor now authorized by law to grant injunctions.

Any person liable for a tax under this section may apply for and obtain a material purchase certificate from the commissioner that may entitle the holder to purchase materials and services that are to become a component part of the structure to be erected or repaired with no tax due. However, the contractor applying for the contractor's material purchase certificate shall furnish the State Tax Commission a list of all work sublet to others, indicating the amount of work to be performed, and the names and addresses of each subcontractor.

SECTION 15. Section 27-65-33, Mississippi Code of 1972, is amended as follows:

27-65-33. (1) Except as otherwise provided in this section, the taxes levied by this chapter shall be due and payable on or before the twentieth day of the month next succeeding the month in which the tax accrues, except as otherwise provided. Returns and payments placed in the mail must be postmarked by the due date in order to be considered timely filed, except when the due date falls on a weekend or holiday, returns and payments placed in the mail must be postmarked by the first working day following the due date in order to be considered timely filed. The taxpayer shall make a return showing the gross proceeds of sales or the gross income of the business, and any and all allowable deductions, or exempt sales, and compute the tax due for the period covered.

* * *

(2) A taxpayer required to collect sales taxes under this chapter and having an average monthly sales tax liability of at least Twenty Thousand Dollars ($20,000.00) for the preceding calendar year shall pay to the State Tax Commission on or before June 25, 2003, and on or before the twenty-fifth day of June of each succeeding year thereafter, an amount equal to at least seventy-five percent (75%) of the taxpayer's estimated sales tax liability for the month of June of the current calendar year, or an amount equal to at least seventy-five percent (75%) of the taxpayer's sales tax liability for the month of June of the preceding calendar year. Payments required to be made under this subsection must be received by the State Tax Commission no later than June 25 in order to be considered timely made. A taxpayer that fails to comply with the requirements of this subsection may be assessed a penalty in an amount equal to ten percent (10%) of the taxpayer's actual sales tax liability for the month of June for which the estimated payment was required to be made. Payments made by a taxpayer under this subsection shall not be considered to be collected for the purposes of any sales tax diversions required by law until the taxpayer files a return for the actual sales taxes collected during the month of June. This subsection shall not apply to any agency, department or instrumentality of the United States, any agency, department, institution, instrumentality or political subdivision of the State of Mississippi, or any agency, department, institution or instrumentality of any political subdivision of the State of Mississippi. Payments made under this subsection for the month of June 2003, shall be deposited by the State Tax Commission into the Budget Contingency Fund created under Section 27-103-301, and payments made under this subsection for the month of June of 2004, and each succeeding year thereafter, shall be deposited by the State Tax Commission into the State General Fund.

(3) All returns shall be sworn to by the taxpayer, if made by an individual, or by the president, vice president, secretary or treasurer of a corporation, or authorized agent, if made on behalf of a corporation. If made on behalf of a partnership, joint venture, association, trust, estate, or in any other group or combination acting as a unit, any individual delegated by the firm shall swear to the return on behalf of the taxpayer. The commissioner may prescribe methods by which the taxpayer may swear to his return.

(4) The commissioner may promulgate rules and regulations to require or permit filing periods of any duration, in lieu of monthly filing periods, for any taxpayer or group thereof.

(5) The commissioner may require the execution and filing by the taxpayer with the commissioner of a good and solvent bond with some surety company authorized to do business in Mississippi as surety thereon in an amount double the aggregate tax liability by the taxpayer for any previous three (3) months' period within the last calendar year or estimated three (3) months' tax liability. The bond is to be conditioned for the prompt payment of those taxes as may be due for each such return.

(6) The commissioner, for good cause, may grant such reasonable additional time within which to make any return required under the provisions of this chapter as he may deem proper, but the time for filing any return shall not be extended beyond the twentieth of the month next succeeding the regular due date of the return without the imposition of interest at the rate of one percent (1%) per month or fractional part of a month from the time the return was due until the tax is paid.

(7) For persistent, willful, or recurring failure to make any return and pay the tax shown thereby to be due by the time specified, there shall be added to the amount of tax shown to be due ten percent (10%) damages, or interest at the rate of one percent (1%) per month, or both.

(8) Any taxpayer may, upon making application therefor, obtain from the commissioner an extension of time for the payment of taxes due on credit sales until collections thereon have been made. When that extension is granted, the taxpayer shall thereafter include in each monthly or quarterly report all collections made during the preceding month or quarter, and shall pay the taxes due thereon at the time of filing the report. That permission may be revoked or denied at the discretion of the commissioner when, in his opinion, a total sales basis will best reflect the taxable income or expedite examination of the taxpayer's records.

(9) Any taxpayer reporting credit sales before collection thereof has been made may take credit on later returns or reports for bad debts actually charged off, if the amounts charged off have previously been included in taxable gross income or taxable gross proceeds of sales, as the case may be, and the tax paid thereon. However, any amounts subsequently collected on accounts that have been charged off as bad debts shall be included in later reports and the tax shall be paid thereon.

(10) In cases where an extension of time has been granted by the commissioner for payment of taxes due on credit sales and the taxpayer thereafter discontinues the business, the taxpayer shall be required to file with the commissioner within ten (10) days, or such further time as the commissioner may direct, from the date of the discontinuance of the business, a special report showing the amounts of any credit sales that have not been included in determining the measure of the tax previously paid and any other information with reference to credit sales as the commissioner may require. The commissioner shall thereupon investigate the facts with reference to credit sales and the condition of the accounts, and shall determine, from the best evidence available, the value of all open accounts, notes, or other evidence of debt arising from credit sales. The value of all notes, open accounts and other evidence of debt, as thus determined by the commissioner, shall be used in determining the amount of the tax for which the taxpayer shall be liable. When the amount of the tax has been ascertained, the taxpayer shall be required to pay the same within ten (10) days or such further time as the commissioner may allow, notwithstanding the fact that the note or accounts may still remain uncollected.

SECTION 16. Section 27-65-75, Mississippi Code of 1972, is amended as follows:

27-65-75. On or before the fifteenth day of each month, the revenue collected under the provisions of this chapter during the preceding month shall be paid and distributed as follows:

(1) On or before August 15, 1992, and each succeeding month thereafter through July 15, 1993, eighteen percent (18%) of the total sales tax revenue collected during the preceding month under the provisions of this chapter, except that collected under the provisions of Sections 27-65-15, 27-65-19(3) and 27-65-21, on business activities within a municipal corporation shall be allocated for distribution to the municipality and paid to the municipal corporation. On or before August 15, 1993, and each succeeding month thereafter, nineteen percent (19%) of the total sales tax revenue collected during the preceding month under the provisions of this chapter, except that collected under the provisions of Sections 27-65-15, 27-65-19(3) and 27-65-21, on business activities within a municipal corporation shall be allocated for distribution to the municipality and paid to the municipal corporation.

A municipal corporation, for the purpose of distributing the tax under this subsection, shall mean and include all incorporated cities, towns and villages.

Monies allocated for distribution and credited to a municipal corporation under this subsection may be pledged as security for any loan received by the municipal corporation for the purpose of capital improvements as authorized under Section 57-1-303, or loans as authorized under Section 57-44-7, or water systems improvements as authorized under Section 41-3-16.

In any county having a county seat that is not an incorporated municipality, the distribution provided under this subsection shall be made as though the county seat was an incorporated municipality; however, the distribution to the municipality shall be paid to the county treasury in which the municipality is located, and those funds shall be used for road, bridge and street construction or maintenance in the county.

(2) On or before September 15, 1987, and each succeeding month thereafter, from the revenue collected under this chapter during the preceding month One Million One Hundred Twenty-five Thousand Dollars ($1,125,000.00) shall be allocated for distribution to municipal corporations as defined under subsection (1) of this section in the proportion that the number of gallons of gasoline and diesel fuel sold by distributors to consumers and retailers in each such municipality during the preceding fiscal year bears to the total gallons of gasoline and diesel fuel sold by distributors to consumers and retailers in municipalities statewide during the preceding fiscal year. The State Tax Commission shall require all distributors of gasoline and diesel fuel to report to the commission monthly the total number of gallons of gasoline and diesel fuel sold by them to consumers and retailers in each municipality during the preceding month. The State Tax Commission shall have the authority to promulgate such rules and regulations as are necessary to determine the number of gallons of gasoline and diesel fuel sold by distributors to consumers and retailers in each municipality. In determining the percentage allocation of funds under this subsection for the fiscal year beginning July 1, 1987, and ending June 30, 1988, the State Tax Commission may consider gallons of gasoline and diesel fuel sold for a period of less than one (1) fiscal year. For the purposes of this subsection, the term "fiscal year" means the fiscal year beginning July 1 of a year.

(3) On or before September 15, 1987, and on or before the fifteenth day of each succeeding month, until the date specified in Section 65-39-35, the proceeds derived from contractors' taxes levied under Section 27-65-21 on contracts for the construction or reconstruction of highways designated under the highway program created under Section 65-3-97 shall, except as otherwise provided in Section 31-17-127, be deposited into the State Treasury to the credit of the State Highway Fund to be used to fund that highway program. The Mississippi Department of Transportation shall provide to the State Tax Commission such information as is necessary to determine the amount of proceeds to be distributed under this subsection.

(4) On or before August 15, 1994, and on or before the fifteenth day of each succeeding month through July 15, 1999, from the proceeds of gasoline, diesel fuel or kerosene taxes as provided in Section 27-5-101(a)(ii)1, Four Million Dollars ($4,000,000.00) shall be deposited in the State Treasury to the credit of a special fund designated as the "State Aid Road Fund," created by Section 65-9-17. On or before August 15, 1999, and on or before the fifteenth day of each succeeding month, from the total amount of the proceeds of gasoline, diesel fuel or kerosene taxes apportioned by Section 27-5-101(a)(ii)1, Four Million Dollars ($4,000,000.00) or an amount equal to twenty-three and one-fourth percent (23.25%) of those funds, whichever is the greater amount, shall be deposited in the State Treasury to the credit of the "State Aid Road Fund," created by Section 65-9-17. Those funds shall be pledged to pay the principal of and interest on state aid road bonds previously issued under Sections 19-9-51 through 19-9-77, in lieu of and in substitution for the funds previously allocated to counties under this section. Those funds may not be pledged for the payment of any state aid road bonds issued after April 1, 1981; however, this prohibition against the pledging of any such funds for the payment of bonds shall not apply to any bonds for which intent to issue those bonds has been published, for the first time, as provided by law before March 29, 1981. From the amount of taxes paid into the special fund under this subsection and subsection (9) of this section, there shall be first deducted and paid the amount necessary to pay the expenses of the Office of State Aid Road Construction, as authorized by the Legislature for all other general and special fund agencies. The remainder of the fund shall be allocated monthly to the several counties in accordance with the following formula:

(a) One-third (1/3) shall be allocated to all counties in equal shares;

(b) One-third (1/3) shall be allocated to counties based on the proportion that the total number of rural road miles in a county bears to the total number of rural road miles in all counties of the state; and

(c) One-third (1/3) shall be allocated to counties based on the proportion that the rural population of the county bears to the total rural population in all counties of the state, according to the latest federal decennial census.

For the purposes of this subsection, the term "gasoline, diesel fuel or kerosene taxes" means such taxes as defined in paragraph (f) of Section 27-5-101.

The amount of funds allocated to any county under this subsection for any fiscal year after fiscal year 1994 shall not be less than the amount allocated to the county for fiscal year 1994. Monies allocated to a county from the State Aid Road Fund for fiscal year 1995 or any fiscal year thereafter that exceed the amount of funds allocated to that county from the State Aid Road Fund for fiscal year 1994, first must be expended by the county for replacement or rehabilitation of bridges on the state aid road system that have a sufficiency rating of less than twenty-five (25), according to National Bridge Inspection standards before the monies may be approved for expenditure by the State Aid Road Engineer on other projects that qualify for the use of state aid road funds.

Any reference in the general laws of this state or the Mississippi Code of 1972 to Section 27-5-105 shall mean and be construed to refer and apply to subsection (4) of Section 27-65-75.

(5) One Million Six Hundred Sixty-six Thousand Six Hundred Sixty-six Dollars ($1,666,666.00) each month shall be paid into the special fund known as the "State Public School Building Fund" created and existing under the provisions of Sections 37-47-1 through 37-47-67. Those payments into that fund are to be made on the last day of each succeeding month hereafter.

(6) An amount each month beginning August 15, 1983, through November 15, 1986, as specified in Section 6 of Chapter 542, Laws of 1983, shall be paid into the special fund known as the Correctional Facilities Construction Fund created in Section 6 of Chapter 542, Laws of 1983.

(7) On or before August 15, 1992, and each succeeding month thereafter through July 15, 2000, two and two hundred sixty-six one-thousandths percent (2.266%) of the total sales tax revenue collected during the preceding month under the provisions of this chapter, except that collected under the provisions of Section 27-65-17(2) shall be deposited by the commission into the School Ad Valorem Tax Reduction Fund created under Section 37-61-35. On or before August 15, 2000, and each succeeding month thereafter, two and two hundred sixty-six one-thousandths percent (2.266%) of the total sales tax revenue collected during the preceding month under the provisions of this chapter, except that collected under the provisions of Section 27-65-17(2), shall be deposited into the School Ad Valorem Tax Reduction Fund created under Section 37-61-35 until such time that the total amount deposited into the fund during a fiscal year equals Forty-two Million Dollars ($42,000,000.00). Thereafter, the amounts diverted under this subsection (7) during the fiscal year in excess of Forty-two Million Dollars ($42,000,000.00) shall be deposited into the Education Enhancement Fund created under Section 37-61-33 for appropriation by the Legislature as other education needs and shall not be subject to the percentage appropriation requirements set forth in Section 37-61-33.

(8) On or before August 15, 1992, and each succeeding month thereafter, nine and seventy-three one-thousandths percent (9.073%) of the total sales tax revenue collected during the preceding month under the provisions of this chapter, except that collected under the provisions of Section 27-65-17(2), shall be deposited into the Education Enhancement Fund created under Section 37-61-33.

(9) On or before August 15, 1994, and each succeeding month thereafter, from the revenue collected under this chapter during the preceding month, Two Hundred Fifty Thousand Dollars ($250,000.00) shall be paid into the State Aid Road Fund.

(10) On or before August 15, 1994, and each succeeding month thereafter through August 15, 1995, from the revenue collected under this chapter during the preceding month, Two Million Dollars ($2,000,000.00) shall be deposited into the Motor Vehicle Ad Valorem Tax Reduction Fund established in Section 27-51-105.

(11) Notwithstanding any other provision of this section to the contrary, on or before February 15, 1995, and each succeeding month thereafter, the sales tax revenue collected during the preceding month under the provisions of Section 27-65-17(2)(a) and the corresponding levy in Section 27-65-23 on the rental or lease of private carriers of passengers and light carriers of property as defined in Section 27-51-101 shall be deposited, without diversion, into the Motor Vehicle Ad Valorem Tax Reduction Fund established in Section 27-51-105.

(12) Notwithstanding any other provision of this section to the contrary, on or before August 15, 1995, and each succeeding month thereafter, the sales tax revenue collected during the preceding month under the provisions of Section 27-65-17(1) on retail sales of private carriers of passengers and light carriers of property, as defined in Section 27-51-101 and the corresponding levy in Section 27-65-23 on the rental or lease of these vehicles, shall be deposited, after diversion, into the Motor Vehicle Ad Valorem Tax Reduction Fund established in Section 27-51-105.

(13) On or before July 15, 1994, and on or before the fifteenth day of each succeeding month thereafter, that portion of the avails of the tax imposed in Section 27-65-22 that is derived from activities held on the Mississippi state fairgrounds complex, shall be paid into a special fund that is created in the State Treasury and shall be expended upon legislative appropriation solely to defray the costs of repairs and renovation at the Trade Mart and Coliseum.

(14) On or before August 15, 1998, and each succeeding month thereafter through July 15, 2005, that portion of the avails of the tax imposed in Section 27-65-23 that is derived from sales by cotton compresses or cotton warehouses and that would otherwise be paid into the General Fund, shall be deposited in an amount not to exceed Two Million Dollars ($2,000,000.00) into the special fund created under Section 69-37-39.

(15) Notwithstanding any other provision of this section to the contrary, on or before September 15, 2000, and each succeeding month thereafter, the sales tax revenue collected during the preceding month under the provisions of Section 27-65-19(1)(f) and (g)(i)2, shall be deposited, without diversion, into the Telecommunications Ad Valorem Tax Reduction Fund established in Section 27-38-7.

(16) On or before August 15, 2000, and each succeeding month thereafter, the sales tax revenue collected during the preceding month under the provisions of this chapter on the gross proceeds of sales of a project as defined in Section 57-30-1 shall be deposited, after all diversions except the diversion provided for in subsection (1) of this section, into the Sales Tax Incentive Fund created in Section 57-30-3.

(17) Notwithstanding any other provision of this section to the contrary, on or before April 15, 2002, and each succeeding month thereafter, the sales tax revenue collected during the preceding month under Section 27-65-23 on sales of parking services of parking garages and lots at airports shall be deposited, without diversion, into the special fund created under Section 27-5-101(d).

(18) On or before August 15, 2005, and each succeeding month thereafter through July 15, 2006, from the sales tax revenue collected during the preceding month under the provisions of this chapter, Two Million Five Hundred Thousand Dollars ($2,500,000.00) shall be deposited into the Special Funds Transfer Fund created in Section 4 of Chapter 556, Laws of 2003.

(19) The remainder of the amounts collected under the provisions of this chapter shall be paid into the State Treasury to the credit of the General Fund.

(20) It shall be the duty of the municipal officials of any municipality that expands its limits, or of any community that incorporates as a municipality, to notify the commissioner of that action thirty (30) days before the effective date. Failure to so notify the commissioner shall cause the municipality to forfeit the revenue that it would have been entitled to receive during this period of time when the commissioner had no knowledge of the action. If any funds have been erroneously disbursed to any municipality or any overpayment of tax is recovered by the taxpayer, the commissioner may make correction and adjust the error or overpayment with the municipality by withholding the necessary funds from any later payment to be made to the municipality.

SECTION 17. Section 27-65-111, Mississippi Code of 1972, is amended as follows:

[Through June 30, 2006, this section shall read as follows:]

27-65-111. The exemptions from the provisions of this chapter that are not industrial, agricultural or governmental, or that do not relate to utilities or taxes, or that are not properly classified as one of the exemption classifications of this chapter, shall be confined to persons or property exempted by this section or by the Constitution of the United States or the State of Mississippi. No exemptions as now provided by any other section, except the classified exemption sections of this chapter set forth herein, shall be valid as against the tax herein levied. Any later exemption from the tax levied hereunder, except as indicated above, shall be provided by amendments to this section.

No exemption provided in this section shall apply to taxes levied by Section 27-65-15 or 27-65-21.

The tax levied by this chapter shall not apply to the following:

(a) Sales of tangible personal property and services to hospitals or infirmaries owned and operated by a corporation or association in which no part of the net earnings inures to the benefit of any private shareholder, group or individual, and which are subject to and governed by Sections 41-7-123 through 41-7-127.

Only sales of tangible personal property or services that are ordinary and necessary to the operation of those hospitals and infirmaries are exempted from tax.

(b) Sales of daily or weekly newspapers, and periodicals or publications of scientific, literary or educational organizations exempt from federal income taxation under Section 501(c)(3) of the Internal Revenue Code of 1954, as it exists as of March 31, 1975, and subscription sales of all magazines.

(d) Sales of tangible personal property for immediate export to a foreign country.

(e) Sales of tangible personal property to an orphanage, old men's or ladies' home, supported wholly or in part by a religious denomination, fraternal nonprofit organization or other nonprofit organization.

(f) Sales of tangible personal property, labor or services taxable under Sections 27-65-17, 27-65-19 and 27-65-23, to a YMCA, YWCA, a Boys' or Girls' Club owned and operated by a corporation or association in which no part of the net earnings inures to the benefit of any private shareholder, group or individual.

(g) Sales to elementary and secondary grade schools, junior and senior colleges owned and operated by a corporation or association in which no part of the net earnings inures to the benefit of any private shareholder, group or individual, and that are exempt from state income taxation, provided that this exemption does not apply to sales of property or services that are not to be used in the ordinary operation of the school, or that are to be resold to the students or the public.

(h) The gross proceeds of retail sales and the use or consumption in this state of drugs and medicines:

(i) Prescribed for the treatment of a human being by a person authorized to prescribe the medicines, and dispensed or prescription filled by a registered pharmacist in accordance with law; or

(ii) Furnished by a licensed physician, surgeon, dentist or podiatrist to his own patient for treatment of the patient; or

(iii) Furnished by a hospital for treatment of any person under the order of a licensed physician, surgeon, dentist or podiatrist; or

(iv) Sold to a licensed physician, surgeon, podiatrist, dentist or hospital for the treatment of a human being; or

(v) Sold to this state or any political subdivision or municipal corporation thereof, for use in the treatment of a human being or furnished for the treatment of a human being by a medical facility or clinic maintained by this state or any political subdivision or municipal corporation thereof.

"Medicines," as used in this paragraph (h), shall mean and include any substance or preparation intended for use by external or internal application to the human body in the diagnosis, cure, mitigation, treatment or prevention of disease and that is commonly recognized as a substance or preparation intended for that use; however, "medicines" do not include any auditory, prosthetic, ophthalmic or ocular device or appliance, any dentures or parts thereof or any artificial limbs or their replacement parts, articles that are in the nature of splints, bandages, pads, compresses, supports, dressings, instruments, apparatus, contrivances, appliances, devices or other mechanical, electronic, optical or physical equipment or article or the component parts and accessories thereof, or any alcoholic beverage or any other drug or medicine not commonly referred to as a prescription drug.

Notwithstanding the preceding sentence of this paragraph (h), "medicines" as used in this paragraph (h), shall mean and include sutures, whether or not permanently implanted, bone screws, bone pins, pacemakers and other articles permanently implanted in the human body to assist the functioning of any natural organ, artery, vein or limb and which remain or dissolve in the body.

"Hospital," as used in this paragraph (h), shall have the meaning ascribed to it in Section 41-9-3.

Insulin furnished by a registered pharmacist to a person for treatment of diabetes as directed by a physician shall be deemed to be dispensed on prescription within the meaning of this paragraph (h).

(i) Retail sales of automobiles, trucks and truck-tractors if exported from this state within forty-eight (48) hours and registered and first used in another state.

(j) Sales of tangible personal property or services to the Salvation Army and the Muscular Dystrophy Association, Inc.

(k) From July 1, 1985, through December 31, 1992, retail sales of "alcohol blended fuel" as that term is defined in Section 75-55-5. The gasoline-alcohol blend or the straight alcohol eligible for this exemption shall not contain alcohol distilled outside the State of Mississippi.

(l) Sales of tangible personal property or services to the Institute for Technology Development.

(m) The gross proceeds of retail sales of food and drink for human consumption made through vending machines serviced by full line vendors from and not connected with other taxable businesses.

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(n) Retail sales of food for human consumption purchased with food stamps issued by the United States Department of Agriculture, or other federal agency, from and after October 1, 1987, or from and after the expiration of any waiver granted under federal law, the effect of which waiver is to permit the collection by the state of tax on those retail sales of food for human consumption purchased with food stamps.

(o) Sales of cookies for human consumption by the Girl Scouts of America no part of the net earnings from which sales inures to the benefit of any private group or individual.

(p) Gifts or sales of tangible personal property or services to public or private nonprofit museums of art.

(q) Sales of tangible personal property or services to alumni associations of state-supported colleges or universities.

(r) Sales of tangible personal property or services to chapters of the National Association of Junior Auxiliaries, Inc.

(s) Sales of tangible personal property or services to domestic violence shelters that qualify for state funding under Sections 93-21-101 through 93-21-113.

(t) Sales of tangible personal property or services to the National Multiple Sclerosis Society, Mississippi Chapter.

(u) Retail sales of food for human consumption purchased with food instruments issued the Mississippi Band of Choctaw Indians under the Women, Infants and Children Program (WIC) funded by the United States Department of Agriculture.

(v) Sales of tangible personal property or services to a private company, as defined in Section 57-61-5, that is making those purchases with proceeds of bonds issued under Section 57-61-1 et seq., the Mississippi Business Investment Act.

(w) The gross collections from the operation of self-service, coin-operated car washing equipment and sales of the service of washing motor vehicles with portable high-pressure washing equipment on the premises of the customer.

(x) Sales of tangible personal property or services to the Mississippi Technology Alliance.

(y) Retail sales of food for human consumption not purchased with food stamps issued by the United States Department of Agriculture, or other federal agency, but which would be exempt under paragraph (n) of this section from the taxes imposed by this chapter if the food items were purchased with food stamps.

[From and after July 1, 2006, this section shall read as follows:]

No exemption provided in this section shall apply to taxes levied by Section 27-65-15 or 27-65-21.

The tax levied by this chapter shall not apply to the following:

Only sales of tangible personal property or services that are ordinary and necessary to the operation of those hospitals and infirmaries are exempted from tax.

(d) Sales of tangible personal property for immediate export to a foreign country.

(g) Sales to elementary and secondary grade schools, junior and senior colleges owned and operated by a corporation or association in which no part of the net earnings inures to the benefit of any private shareholder, group or individual, and which are exempt from state income taxation, provided that this exemption does not apply to sales of property or services that are not to be used in the ordinary operation of the school, or that are to be resold to the students or the public.