If your business specializes in Lawn Care Services, understanding sales and use tax is crucial for compliance and smooth operations. Lawn and plant care services encompass a wide range of activities aimed at maintaining and enhancing lawns, yards, and ornamental plants and trees. This guide breaks down the essentials of collecting sales tax on these services.
Understanding Tax Collection for Lawn Care Businesses
As a provider of lawn care services, you are generally required to collect state sales tax, in addition to any applicable local taxes (city, county, special purpose district, or transit taxes), on the total charges for your services. For a comprehensive understanding of local tax collection, refer to resources like Publication 94-105, Local Sales and Use Tax Collection – A Guide for Sellers.
Services Subject to Sales Tax
The following lawn care and landscaping services typically fall under taxable categories:
- Planting and Plant Management: This includes planting, transplanting, relocating, and even removing both indoor and outdoor plants.
- Plant Health and Maintenance: Services aimed at identifying, preventing, or treating plant diseases are taxable.
- Routine Plant Care: Regular maintenance practices such as pruning, bracing, spraying, fertilizing, and watering plants are considered taxable services.
- Lawn and Ground Cover Maintenance: This covers planting, mowing, trimming, and edging grass and other ground covers.
- Flower Garden Services: Planting and maintaining flower gardens are taxable services.
- Tree Maintenance: Trimming, spraying, and general maintenance of trees are also taxable.
Services Exempt from Sales Tax
Certain lawn care services are specifically designated as non-taxable. These exceptions include:
- Right-of-Way Maintenance: Mowing pipeline or highway rights-of-way is typically non-taxable.
- Utility Line Clearance: Trimming trees to keep them clear of power lines is generally exempt.
- Agricultural and Forestry Services: Harvesting, cultivating, mowing, and fertilizing activities on farm or forest land are not taxable.
- Cemetery Mowing: Mowing services performed in cemeteries are also considered non-taxable.
To ensure accurate billing, it’s essential to clearly separate charges for non-taxable services from those for taxable services on your invoices. If these charges are not separated, the entire service charge may be presumed taxable, particularly if the taxable portion exceeds 5% of the total. However, you or your customer can challenge this presumption with adequate documentation that clarifies the proportion of non-taxable services provided. Clear and detailed invoices and contracts are vital for proper tax handling.
The Role of Landscape Designers and Architects
It’s important to note that the professional services offered by landscape designers and architects are generally not subject to sales and use tax. These non-taxable services include consultations, research, the development of design plans, and other professional engineering or architectural services. Similar to other service categories, you should differentiate charges for these non-taxable professional services from any charges for taxable landscaping services. Failure to separate these charges may result in the total charge being presumed taxable if the taxable component is greater than 5%. Again, proper documentation can help overcome this presumption.
Special Considerations for Self-Employed Lawn Care Providers
For self-employed individuals in the lawn care and landscaping industry (excluding pest control services requiring specific licenses), there’s a specific exemption. Lawn care and landscaping services performed by a self-employed individual are non-taxable under these conditions:
- The individual personally performs the lawn care or landscaping services.
- They operate without employees, partners, or other individuals providing the services.
- Their gross receipts from these services are $5,000 or less during the most recent four calendar quarters.
If your income from lawn care and landscaping surpasses $5,000 within the most recent four calendar quarters, you must begin collecting tax on these services from the first day of the quarter following when you exceeded the threshold. Conversely, if your gross income from these services falls to $5,000 or below for the most recent four calendar quarters, the tax exemption resumes on the first day of the subsequent quarter.
Lawn Care Services and Construction Activities
It’s crucial to distinguish lawn care services from construction-related activities. Landscaping services do not encompass the construction or repair of structures like decks, retaining walls, fences, or pools, nor the installation of underground sprinkler systems. These activities are classified as either new construction or the repair or remodeling of real property and are subject to different tax rules. Always ensure that landscaping charges are billed separately from charges for new construction or repair and remodeling work to apply the correct tax regulations.
Nonresidential real property repair or remodeling is a taxable service. Service providers are obligated to collect sales tax on the total charge to the customer, covering materials, labor, and other expenses. However, a resale certificate can be used when purchasing materials that will be transferred to the customer. Refer to Rule 3.357, Nonresidential Real Property Repair, Remodeling, and Restoration; Real Property Maintenance, for detailed guidance.
Labor for residential real property repair or remodeling, or for building new structures (residential or nonresidential), is not taxable. The tax treatment of materials incorporated into the property depends on the type of contract. Under a lump-sum contract (a single charge for both labor and materials), the contractor pays tax on the materials when purchased and does not collect tax from the customer. In a separated contract (with distinct charges for labor and materials), the contractor collects sales tax from the customer on the materials but not on the labor. A separated contractor can purchase building materials tax-free by providing a resale certificate. Consult Rule 3.291, Contractors, for further details.
Landscaping for New Residential Buildings
Landscaping and lawn care services for new residential structures have specific tax considerations. These services are not taxable when purchased by a contractor or homebuilder as part of improving real property with a new residence. This exclusion applies to model homes and speculative homes intended for residential sale, but not to improvements for commercial use, such as a sales office within a residential development. Landscaping services for a sales office, even in a residential area, are taxable. If you are landscaping a new residential structure for a contractor, you are responsible for billing and collecting tax unless the contractor provides a certification confirming that the service is part of a new residential property improvement. Liability for the tax may shift to the certifier if the work is later deemed taxable.
Materials used for landscaping new residential structures are taxable. In a lump-sum contract, the landscaper pays tax on materials upon purchase and does not collect tax from the customer. In a separated contract, the landscaper collects tax from the contractor or homebuilder on material charges and can use a resale certificate when buying these materials.
Handling Materials, Supplies, and Equipment
When purchasing materials like fertilizer, plants, flowerbed edging, herbicides, and processed dirt, sand, and gravel for taxable landscaping or lawn care services, provide a resale certificate to your supplier. These materials are considered transferred to your customer as part of the taxable service. Remember the distinction between lump-sum and separated contracts when dealing with new residential structures.
However, you must pay sales tax on supplies and equipment used in your lawn care operations. There is no tax exemption for purchasing or renting items like wheelbarrows, lawn mowers, string trimmers, gloves, and other tools and supplies essential for your business.
Reselling Lawn Care Services
In situations where you subcontract a portion of your lawn care services to a third party, you can provide the third party with a resale certificate instead of paying sales tax to them. You then collect sales tax from your customer on the total charge, which includes the subcontractor’s fees.
By understanding and correctly applying these tax rules, lawn care service businesses can ensure compliance and maintain accurate financial practices. For more detailed information, refer to Publication 94-112 (03/2022) and other relevant resources from tax authorities.
