86-214 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Plant care maintenance agreements

Topic

Taxability of Persons and Transactions

Date Issued

11-03-1986

November 3, 1986

Re: Ruling Request / Sales and Use Tax

Dear ******************

This is in response to your letters of March 7, 1986 and April 18, 1986 requesting a ruling regarding the liability of one of your clients for the Virginia Retail Sales and Use Tax.

FACTS

This client's business provides plant care service. He goes to his customers once a week and waters, prunes and provides any necessary maintenance to the plants. He also sells potted plants to his customers as needed. You request a ruling on the taxability of the monthly charge for the plant service.

RULING

Virginia Code §58.1-608.2 excludes from the tax:

- Professional, insurance, or other personal service transactions which involve sales as inconsequential elements for which no separate charges are made, nor services rendered by repairmen for which a separate charge is made.

The taxability of the transaction depends upon the terms and conditions of the contract or agreement that your client has with his customer. In the event that the contract or agreement provides that your client will only service the customer's plants and does not provide for the replacement of any of the plants, then the transaction is exempt from the tax under the exclusion granted by Virginia Code §58.1-608.2. Since your client is the user or consumer of the tangible personal property necessary in meeting the terms of the contracts, items used in the fulfillment of these contracts are taxable to your client at the time of purchase. Such tax should not be charged back to a customer, but rather should be taken into consideration when determining the fee to be charged for the service.

To the extent that your client enters into contracts with his customers to lease or sell plants to them, which he will then maintain for a monthly fee, or he enters into a maintenance contract that provides for the servicing of the customer's plants, as well as the replacement of the plants as necessary, such transactions are taxable. The lease or sale of plants to a customer for his own use, without a maintenance contract, would constitute a retail sale. Your client must register as a dealer and collect and remit the tax monthly on any such transactions. All items used in maintaining these plants prior to their sale are taxable to your client at the time of purchase.

If your client has been improperly charging Virginia Retail Sales and Use Tax on the charge for service only agreements, he should contact the Department of Taxation, Technical Services Section, in order to obtain a refund. Any such refund must then be passed on to his customers. If you have any additional questions, please do not hesitate to contact the department.

Sincerely,

W. H. Forst
Tax Commissioner

Rulings of the Tax Commissioner