Our Most Frequently Asked Questions:
- Can a cover charge qualify as a ticket tax?
- Is there any restriction on the geographical size of the district?
- Is there a threshold amount that has to be invested to qualify for the entertainment district credit?
- Can a project developed in phases qualify?
- Can the tax credits be sold or syndicated?
Answers to our most Frequently Asked Questions:ntly Asked Questions:ntly Asked Questions:
1. Can a cover charge qualify as a ticket tax?
Answer:
Addressing the cover charge qualifying as a ticket tax, Section 5 of the
Mississippi Entertainment District Act (MEDA) states that the qualifying
business “shall charge a Ticket Tax on any Entertainment Services provided by
the Qualifying Business in the amount of Two Dollars ($2.00) per ticket, pass or
admission, as applicable…” A cover charge can include the $2.00 Ticket Tax. For
example: The $2.00 Ticket Tax would be backed out of a $5.00 cover charge and
the remaining $3.00 is the cover charge. The $2.00 Entertainment District Ticket
Tax would then be remitted to the Department of Revenue. Sales tax would also be
due on the $3.00 cover charge and may be backed out of the $3.00 charge, as if
the tax is included in the $3.00 charge. In the example, $2.80 would constitute
the net cover charge and the remaining .20 cents the 7% sales tax, which would
be remitted to the Department of Revenue.
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2. Is there any restriction on the geographical size of the district?
Answer:
Section 3 of the MEDA addresses the issue of a restriction on the geographical
size when it states, “Any local governing body of a municipality, by majority
vote of said governing body, may establish an Entertainment District within its
boundaries and shall also designate the geographic area or areas in which the
District(s) shall be established…. Department of Revenue shall be required to
approve each establishment and designation of the District within such
municipality in accordance to the rules and regulations adopted by the
Department of Revenue.”
The MEDA does not expressly restrict the geographical size of the district.
However, once approved by the municipality, the Tax Commission must approve each
establishment according to the rules and regulations adopted by the Department
of Revenue. According to the Department of Revenue’s document titled
Entertainment District Incentive (EDI), there is not a geographical size
restriction or requirement, but a map or survey in sufficient detail to identify
the boundaries must accompany the application to the Department of Revenue.
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3. Is there a threshold amount that has to be invested to qualify for the entertainment district credit?
Answer:
There is not an expressed threshold amount in the MEDA or in the EDI as
prescribed by the MS Department of Revenue.
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4. Can a project developed in phases qualify?
Answer:
Again, there is not any express language in the MEDA or EDI that pertains to the
process or phases of construction of an entertainment district. However, the
applicant for a depreciation incentive must identify the time frame for
completion in the application to the Department of Revenue. A particular project
must lie within the boundaries of the district to qualify.
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5. Can the tax credits be sold or syndicated?
Answer:
Finally, in terms of the tax credits being syndicated, the answer is no. While
the MEDA does not address the issue explicitly, because the incentive is
actually accelerated depreciation, instead of a credit, the depreciation would
only be taken by the owner/developer of the project.
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