The Supreme Court of Mississippi recently held that separate freight fees are not included in Mississippi use tax base. The taxpayer, Tennessee Gas Pipeline Company, paid use tax on certain tangible personal property that it used in Mississippi. It later paid freight charges to a third-party company to ship these goods to Mississippi and did not include the freight charges in its tax base for calculation of the use tax. Upon audit, the Mississippi Department of Revenue assessed use tax on the freight charges. The Supreme Court of Mississippi agreed with the taxpayer that the company’s purchase of the tangible goods from the seller constituted one closed transaction, while its later purchase of third-party shipping services to move those goods from one location to another constituted a second closed transaction. The Court therefore found that the freight charges were not subject to use tax. The Court noted, however, that had the seller participated in both the sale of the goods and the shipping of the goods, the freight charges would likely be part of the use tax calculation.
