LANDSCAPING AND LAWN MAINTENANCE SERVICES

If you provide landscaping or lawn or plant maintenance services, you must be collecting sales and use tax. Landscaping and lawn and plant maintenance services include any work you perform to maintain and improve lawns, gardens, plants and ornamental trees. Don’t forget the Residential lawn maintenance.

Tax collection

You must collect state taxes, plus any local (city, county, special purpose district or transit) taxes on the total charge for these services.

directives

Below are some examples to help you decide which of your services are taxable. Obviously, these examples do not cover every situation. If you have any questions, give us a call.

Taxable Services

• Plant, transplant, relocate and remove indoor or outdoor plants
• Identify, prevent or cure diseases in plants
• Prune, reinforce, fumigate, fertilize and water plants
• Plant, mow, trim, and edging grass or other ground covers
• Plant and maintain flower gardens
• Trim, fumigate and maintain trees

Non-Taxable Services

• Mow grass from pipeline rights-of-way or highways
• Trimming trees to keep them away from power lines
• Harvest, cultivate, cut or fertilize agricultural land or forest
• mowing the lawn in cemeteries

You must separately indicate charges for nontaxable services and charges for taxable services. Otherwise, your entire collection will be presumed taxable if the taxable portion is more than 5 percent. You or your client can overcome the presumption with documented evidence that establishes the percentage related to non-taxable services. Your bills or contracts must clearly identify the services you perform.

Landscape Designers and Architects

Professional services of landscape designers and architects are not subject to sales and use tax. These services include consultation, research, preparation of design drawings, and other engineering or architectural services. You must separate your charge for nontaxable professional services from charges for any taxable landscape services, or the entire charge will be presumed to be taxable if the taxable portion is more than 5 percent. Again, you or your client can overcome the presumption with documented evidence.

Lawn Maintenance and Landscaping by a Self-Employed Person

Lawn maintenance and landscaping (other than pest control services that require a license) are not taxable when performed by a self-employed person who:

• performs lawn maintenance or landscaping services himself;
• have no employees, partners or other persons providing the services;
• You have gross receipts from services of $5,000 or less during the most recent four calendar quarters.

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

Building

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 considered new construction or real estate repair or remodeling. Be sure to separate landscaping charges from new construction or repair or remodeling charges because different rules apply.

Repair or remodeling of non-residential real estate is a taxable service. The provider of this service 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 transferred from the customer. Refer to Rule 3.357 regarding Repair, Remodeling, and Restoration of Real Property; Real Estate Maintenance.

Taxes are not due for repair or remodeling work on residential real estate or for the construction of new structures (residential or non-residential). The type of contract determines how the taxes on the materials incorporated in the real estate are paid. If the construction contract is for a lump sum (a charge that includes labor and materials), the contractor pays the taxes when he purchases the materials and does not collect taxes from the customer. If the contract is separate (separate charges for labor and materials), the contractor collects sales tax from the customer on the material charges but not on the labor. A contractor who separates the charges can purchase building materials duty-free by issuing a resale certificate.

Landscaping for New Residential Structures

Landscaping and lawn maintenance are not taxable when purchased by a contractor or homebuilder as part of real estate improvement with a new residence. This exclusion applies to the construction of a model home or speculative homes to be sold for residential use, but does not apply to improvements used as an office. For example, taxes are due for landscaping services at a sales office even though it is located in a residential development. If you landscape a new residential structure for a contractor, you are responsible for billing and collecting taxes until the contractor issues a certificate indicating that the service is part of real estate improvement to a new residential structure.

Landscaping materials used for new residential structures are taxable. In a lump sum contract (a single amount for materials and labor), the landscaper pays taxes when he purchases the materials and does not collect taxes from the customer. If the contract is separate (separate charges for labor and materials), the landscaper collects taxes from the contractor or homebuilder on material charges and may issue a resale certificate when materials are purchased.