The Mississippi Department of Revenue (DOR) has amended several sales and use tax regulations to remove provisions imposing use tax on third-party freight charges. The amendments, effective August 3, 2026, follow the Mississippi Supreme Court’s decision in Mississippi Department of Revenue v. Tennessee Gas Pipeline Company, LLC.
In its May 1, 2025, decision, the Mississippi Supreme Court ruled that freight charges paid to independent third-party carriers were not subject to use tax when purchased separate from the tangible personal property being transported. Tennessee Gas Pipeline Company had paid use tax on equipment purchased for use in Mississippi but excluded transportation charges paid to independent carriers. DOR assessed additional tax on those charges. However, the court ruled in favor of the taxpayer, determining that the purchase of tangible personal property and the separately purchased transportation services constituted two separate transactions. The court also noted that freight charges associated with delivery by the seller would likely remain part of the taxable purchase price.
Following the decision, the DOR amended the following provision of the Mississippi Administrative Code Rule 2.03(101): Mileage, Delivery Chargers, and Rebilled Expenses. The amendments remove provisions imposing use tax on qualifying third-party freight charges, aligning the regulations with the court’s interpretation of the Mississippi law.
Businesses should be aware that separately purchased third-party freight charges are not subject to use tax under the amended regulations. If purchasing tangible personal property for use in Mississippi, businesses should review their freight arrangements and use tax accrual procedures to ensure separately purchased third-party transportation charges are treated appropriately.
(Mississippi Administrative Code, Title 35, Part IV, Rule 2.03(101), Mississippi Department of Revenue. Effective August 3, 2026)