Landscaping services that are subject to sales tax include maintenance, service, and repair of real estate. The installation of tangible personal property that does not qualify as a capital improvement is also taxable. Examples of garden repair and maintenance services include mowing lawns, repairing fences, trimming hedges, and removing snow.
Companies that provide landscaping services are considered contractors under the law. Therefore, the landscaper is responsible for paying sales or use tax on materials that are installed on the real estate. A contractor who provides gardening services for an end-user must collect 6.625% sales tax on the gross sales receipt. However, at the contractor's choice, the actual cost of the materials used and on which the contractor paid taxes may be indicated separately on the invoice. The separate statement of the actual cost of materials would not be subject to tax collection. Whenever a contractor performs a taxable service, if the customer is billed a lump sum, the entire receipt is taxable. If the contractor separately states the actual cost of the materials of the taxable labor, the customer will only be charged tax on the part of the labor.
Excavation and rough grading services provided to new construction are not subject to tax. However, excavation and leveling services that are performed as an integral part of landscaping work are subject to tax. Excavation and grading services provided to landscapers for landscaping work are subject to sales tax unless the landscaper issues a genuine resale certificate to the excavating contractor.
Most states state that it is mandatory to have a sales tax permit or license for companies to participate in the sale of goods and services. There are also other exceptions when landscape designers enter into contracts for organizations that are exempt from sales tax under certain conditions. For instance, if XYZ is the property owner and ABC Landscaper has a contract with them for installation of planting materials such as trees and shrubs into existing construction, then XYZ is considered as the final consumer of landscaping services and must pay tax on the amount charged by ABC Landscaper.
When Bob's Landscaping purchases material from its supplier that will be resold to Bob's customer at his retail store, Bob's Landscaping must present a completed and signed Resale Certificate (ST) to his supplier at the time of purchase of the material. In each of these examples, Bob's Landscaping is considered a contractor and sales are exempt from sales tax to Bob's customer.
Repair and maintenance services are also subject to taxes under Sales and Use Tax Act. It imposes taxes on charges for maintenance, service, and repair of real property. Landscaping services provided to new construction, residential real estate, and industrial, commercial or revenue-generating properties are subject to sales and use tax.
Services are not taxable for customers and Bob's Landscaping is considered as consumer of all mulch, seeds, grass or any other material purchased to perform services for which he was contracted.