Tax Type
Retail Sales and Use Tax
Description
Florists, nurserymen and landscapers
Topic
Taxability of Persons and Transactions
Date Issued
01-15-1987
January 15, 1987
Re: Ruling Request/ Sales and Use Tax
Dear**********************
This will reply to your letter of August 22, 1986 seeking a ruling regarding the sales and use tax of landscaping.
FACTS
************* (taxpayer) is engaged in the landscape contracting business in Virginia, Maryland, and the District of Columbia. In this connection, taxpayer mainly provides periodic grounds maintenance services for customers including the provision of necessary seed, fertilizer, mulch, chemicals and other supplies. In the past, taxpayer has paid the tax on such items at the time of purchase from suppliers and incorporated its costs for such materials into its contracts with customers.
In addition, on an occasional basis taxpayer also supplies and installs plant material, including trees, shrubbery, sod, ground cover, or annuals for customers. In the past taxpayer has purchased such items from its suppliers exempt of the tax for resale, and then collected the tax from its customers at the time of sale and installation of such items. Taxpayer has also separately stated its charges for the installation of such items in billing its customers.
Taxpayer requests a ruling whether it is operating in accordance with §630-10-40 of the Virginia Retail Sales and Use Tax Regulations.
RULING
Section 630-10-40.B of the regulations provides that, "[w]hen a nurseryman... 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."
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)
Therefore, when supplying and installing plants, trees, shrubbery, sod, etc., taxpayer is operating correctly when it collects and reports the tax based on the sales price of such items to customers. Furthermore, taxpayer is correct in purchasing such items exempt of the tax from suppliers if such purchases are made pursuant to valid resale certificates of exemption. In addition, any other items which taxpayer knows at the time of purchase will be resold to customers in the process of installing or transplanting plants, trees, etc., may also be purchased exempt of the tax from suppliers pursuant to such certificates of exemption.
For example, taxpayer may purchase exempt of the tax any fertilizer, mulch or chemicals which it knows at the time of purchase will be resold to customers subject to the tax in connection with its sale of plants, trees, etc. However, any of such items purchased exempt of the tax which taxpayer withdraws from its inventory of items for resale and converts to its own use or consumption, will be subject to the tax at that time. Taxpayer would then be required to report the tax based on the cost price of such items on the consumer use tax portion of its monthly sales and use tax return.
Furthermore, provided 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 the above referenced regulation section, 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, taxpayer is operating correctly when it pays the tax on all purchases of items, such as fertilizer, mulch, seed and chemicals, used in connection with the provision of such services, and incorporates its costs for such materials into the total charge for its annual contracts with customers.
I hope all of the foregoing has responded to your questions but please let me know if you have any further questions.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner