Tax Type
Retail Sales and Use Tax
Description
Services; Repair and installation; Horticultural service contracts
Topic
Taxability of Persons and Transactions
Date Issued
03-29-1996
March 29, 1996
Re: Request for Ruling: Retail Sales and Use Tax
Dear**************
This is in response to your letter of February 26, 1996 regarding the application of the sales and use tax to interior landscaping services offered by********(the "Taxpayer").
FACTS
The Taxpayer is an interior landscaping firm which sells plants and which offers, for an additional charge, guaranteed horticultural services which include plant maintenance. Under this maintenance service, guaranteed plants which die due to some fault of the Taxpayer will be replaced at no cost to the client.
In prior contacts with the department, the Taxpayer was advised to charge and collect the tax on the sale of its plant maintenance services. The Taxpayer requests a ruling regarding the impact of Code of Virginia § 58.1-609.5(9) as addressed in Virginia Tax Bulletin 95-8.
RULING
The department has previously determined that the sale of horticultural service contracts which provide for the replacement of plants represents the sale of tangible personal property. As such, the tax applies to the sale of these contracts. See the enclosed Public Document 88-91 (5/10/88).
Nevertheless, as recently enacted, Code of Virginia § 58.1-609.5(9) provides that:
-
- Beginning January 1, 1996, maintenance contracts, the terms of which provide for both repair or replacement parts and repair labor, shall be subject to tax upon one-half of the total charge for such contracts only. Persons providing maintenance pursuant to such a contract may purchase repair or replacement parts under a resale certificate of exemption.
Therefore, the Taxpayer's charge for maintenance services which call for the replacement of plants remains taxable. As noted above, however, the tax now applies to only one-half of the charge for such maintenance contracts. Further, replacement plants which the Taxpayer provides to clients under the terms of the maintenance contract may be purchased by the Taxpayer from its vendors exempt of the tax under the resale exemption.
Please note that the provisions of § 58.1-609.5(9) apply only to parts and labor maintenance contracts. Accordingly, the tax continues to apply to the total charge for the sale of plants and other items sold to clients.
Please contact ***** in my Office of Tax Policy at ***** if you need additional information regarding this letter.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10961I
Rulings of the Tax Commissioner