LANDSCAPING AND LAWN CARE SERVICES

If you do landscaping, lawn, or plant care, you should be collecting sales and use taxes. Landscaping, lawn, and plant care services include any work you do to maintain or improve lawns, yards, and ornamental plants and trees.

Here are some examples that should help you decide which of your services are taxable.

Taxable Services:

• Planting, transplanting, relocating and removing indoor or outdoor plants
• Identifying, preventing, or curing plant diseases
• Pruning, bracing, spraying, fertilizing, and watering plants
• Planting, mowing, trimming, and edging grass or other ground covering
• Planting and maintaining flower gardens
• Trimming, spraying, and maintaining trees

Nontaxable Services

• Mowing pipeline or highway rights-of-way
• Trimming trees away from power lines
• Harvesting, cultivating, mowing, and fertilizing farm or forest land
• Mowing cemeteries

You should separate state charges for nontaxable services from charges for taxable services. Otherwise, your total charge will be presumed taxable if the taxable portion is greater than 5 percent. You or your customer may overcome the presumption through documentary evidence that establishes the percentage related to nontaxable services. Your invoices or contracts should clearly identify the services you perform.

Lawn Care and Landscaping by the Self-Employed

Lawn care and landscaping are nontaxable when done by a self-employed individual who:

• does the actual lawn care or landscaping services;
• has no employees, partners, or other persons providing the services;
• has gross receipts from the services of $5,000 or less during the most recent four calendar quarters.

If your income from landscaping and lawn care exceeds $5,000 during the most recent four calendar quarters, you must begin collecting tax on these services on the first day of the quarter after the threshold is exceeded. When your gross income from these services falls to $5,000 or below for the most recent four calendar quarters, the exemption resumes on the first day of the next quarter.

Landscaping and Construction

Landscaping services do not include the construction or repair of decks, retaining walls, fences, or pools, or the installation of underground sprinkler systems. These activities are either new construction or repair/remodeling of real property. Be sure to separate landscaping charges from charges for new construction or for repair/remodeling because different rules apply.

Nonresidential real property repair or remodeling is a taxable service. The service provider must collect sales tax on the total charge to the customer for materials, labor, and other expenses. The service provider may issue a resale certificate to the supplier when purchasing materials are transferred to the customer. Refer to Rule 3.35 regarding Real Property Repair, Remodeling, and Restoration; Real Property Maintenance.

No tax is due on labor to repair or remodel residential real property or to build new structures (residential or nonresidential). The type of contract determines how tax is paid on the materials incorporated into the realty. If the construction contract is a lump sum (one charge, including labor and materials), the contractor pays tax when purchasing the materials and does not collect tax from the customer. If the contract is separated (separate charges for labor and materials), the contractor collects sales tax from the customer on the charges for materials but not for labor. A separated contractor may purchase the building materials tax-free by issuing a resale certificate. Refer to Rule 3.291 on Contractors.

Landscaping of New Residential Structures

Landscaping and lawn care are not taxable when purchased by a contractor or home builder as part of the improvement of real property with a new residence. This exclusion applies to the construction of model homes and speculative homes that will be sold for residential use, but not to an improvement being used as an office. For example, tax is due on the landscaping of a sales office, even if it’s located in a residential development. If you landscape a new residential structure for a contractor, you are responsible for billing and collecting tax until the contractor provides certification stating that the service is part of an improvement of real property with a new residential structure. If it is later determined that the work does not qualify as nontaxable, the person who issued the certification will be held liable for the tax.

The landscaping materials used for new residential structures are taxable. In a lump sum contract (one amount for materials and labor), the landscaper pays tax when purchasing the materials and does not collect tax from the customer. If the contract is separated (separate charges for materials and labor), the landscaper collects tax from the contractor or home builder on the charge for materials and can give a resale certificate when purchasing materials.

Of course, these examples don’t cover every situation. If you have a question give us a call.