Installation of Trees, Shrubs, Plants, and Sod Taxable in Virginia

BackgroundThe taxpayer is a landscape contractor performing a full range of services such as grading, mulching, fertilizing, transplanting, mowing, and clearing. For each job the landscaper purchases materials, and pays the sales tax to the vendor. He maintains no inventory. Also the taxpayer does not hold himself out to the public as a retailer, and does not have a retailer’s business license.

Taxpayer's PositionUpon audit, the Department assessed sales tax on the sale and installation of trees, shrubs, plants, and sod. The taxpayer maintains that he operates as a contractor of real property, and therefore is the consumer of the landscaping material. As a result he is not required to charge sales tax on his landscaping sales and installations.

AnalysisTitle 23 of the Virginia Administrative Code (VAC) 10-210-610 sets out the application of sales and use tax for nurserymen and landscape contractors. Sub part (B) of the regulation requires tax to be charged when for a lump sum price shrubbery and similar items are transplanted on a purchaser’s land. If the installation is separately stated, no tax would apply to this service. Sub part (C) of the same regulation states that if the service goes beyond the sale and planting of shrubbery etc., and entails grading, seeding and fertilizing lawns, and weed killing the service provider is considered the consumer of the material and is required to pay tax at the time of purchase.

RulingIf the service entails the sale and planting of shrubs, trees and plants for one lump sum price the entire charge is subject to tax. If the services go beyond the latter sales and planting, as stated in the regulation, the service provider is considered the consumer. The audit assessment was sustained.

This ruling may be viewed at: http://policylibrary.tax.state.va.us/OTP/Policy.nsf