Tax Type
Retail Sales and Use Tax
Description
Landscape contractor
Topic
Taxability of Persons and Transactions
Date Issued
04-21-1987
April 21, 1987
Re: Ruling Request/ Sales and Use Tax
Dear ********************
This will reply to your letter of February 27, 1987 seeking information on the correct application of the sales and use tax to transactions engaged in by ************** (taxpayer). This will also reply to your letter of January 19, 1987 seeking acceptance of a protective claim for refund in connection with an audit performed in the above referenced case.
FACTS
In connection with its primary activity as a landscape contractor for real estate developers. the taxpayer provides landscape design, site preparation and grading services, as well as the actual installation of plants, trees, shrubs, mulch seed, sod and similar items. In addition, the taxpayer provides periodic grounds maintenance services in connection with completed real estate developments.
According to the taxpayer, it does not generally make sales of plants or landscape items to the general public and does not own a nursery or maintain an inventory of such items. Rather, the taxpayer purchases all of its plants, trees, shrubs, fertilizer, etc., from unrelated third parties subject to the tax and therefore, does not add the tax to the total charge billed to real estate developers for its landscaping services.
The taxpayer requests a ruling whether it qualifies as a using and consuming contractor for Virginia sales and use tax purposes in connection with its purchases of items for use in its provision of landscape design and site preparation services for real estate developers as well as in connection with its grounds maintenance contracts.
RULING
§ 630-10-40.B of the Virginia Retail Sales and Use Tax Regulations provides that, "[w]hen a nurseryman, florist or other person makes retail sales of shrubbery and similar items, and as part of the transaction agrees to transplant them on the land of the purchaser for a lump sum, the tax applies to the total charge. The tax does not apply to the charge for transplanting if the charge is separately stated on the invoice."
However, § 630-10-40.C of the regulations provides that. "any landscaper [or] nurseryman... who goes beyond the sale and planting of shrubbery, sod, etc., and contracts to grade. seed. and fertilize lawns or to provide periodic fertilizing or weed killing treatment is deemed to be a consumer of all tangible personal property used in performing such service and must pay the tax on such property at the time of purchase." (Emphasis added)
In addition, neither Virginia Code § 58.1-610 nor regulation § 630-10-27 define a "contractor" to include businesses such as the taxpayer which provide landscaping, transplanting. fertilizing, watering and weed killing services in connection with real estate construction projects.
Therefore, whenever the taxpayer supplies and installs plants, trees, shrubbery, sod, etc. for customers, it must collect and report the tax based on the sales price of such items to customers and should not pay the tax on purchases of such items from suppliers. Rather, the taxpayer should purchase such items exempt of the tax pursuant to valid resale certificates of exemption. However, any items used and consumed by the taxpayer in connection with its installation of such plants and shrubbery such as fertilizer, seed, mulch or chemicals should be purchased from suppliers subject to the tax and the taxpayer should not charge the tax on such items when billing its customers.
Furthermore, provided the taxpayer continues to separately state its charges for installation labor in connection with its installation of trees, plants, shrubs, etc., such charges will not be subject to the tax.
However, in accordance with subsection C of § 630-10-40 of the regulations, the taxpayer is deemed to be the provider of a nontaxable service when it contracts with customers for the provision of periodic grounds maintenance services. Therefore, the taxpayer should pay the tax on all purchases of items for use in such periodic grounds maintenance contracts including such items as fertilizer, mulch, seed and chemicals, and should incorporate its costs for such items into the total charge for the provision of grounds maintenance services to customers.
With regard to the taxpayer's January 19, 1987 letter seeking acceptance of a protective claim for refund under Virginia Code §58.1-1824, it is our understanding that as of the date of this letter, the assessment has just recently been issued by the department and has not vet been paid by the taxpayer in this case. Therefore, no basis exists at the present time for the acceptance of the taxpayer's request for such a protective claim. However, if after reviewing the contents of this letter and receipt of the department's assessment the taxpayer continues to believe that there is basis for correction of the assessment, it may file an application for correction of the assessment under Virginia Code § 58.1-1821, setting forth the factual and legal grounds upon which it contests the assessment.
I hope all of the foregoing has responded to your questions but let me know if you have any further questions.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner