Do Lawn Care Companies Charge Sales Tax?
Navigate the varied landscape of sales tax for lawn care services. Get clarity on how local rules impact your charges.
Sales tax is a consumption tax imposed by a government on the sale of certain goods and services. It is calculated as a percentage of the retail price and collected by the seller at the point of purchase. The collected tax funds various public services, such as schools and roads.
Understanding Sales Tax on Services
Sales tax traditionally applies to the sale of tangible personal property, which are items that can be touched and moved. As the economy has shifted, many states have begun to impose sales tax on services. Services are generally exempt from sales tax unless specifically designated as taxable by law. Some services are exempt, such as professional services, while others are taxed, particularly if they involve the transfer or installation of goods. For example, if a service primarily involves installing equipment, the entire transaction might be taxable.
Lawn Care and State Sales Tax Rules
There is no universal rule regarding sales tax on lawn care services; taxability depends entirely on specific state and local laws. Some states explicitly tax “lawn care,” “landscaping,” or “maintenance” services. For example, Indiana taxes lawn care services, while in Arkansas, lawn care for non-residential property and landscaping services for both residential and non-residential property are subject to sales tax.
Some jurisdictions only tax these services if they involve the sale of tangible goods like plants or mulch. In such cases, if materials are separately stated on an invoice, the materials portion might be taxable, while labor for the service may not be. Other states distinguish between basic lawn mowing, which might be non-taxable, and more extensive landscaping or tree removal, which could be taxable. For instance, Minnesota generally taxes lawn and garden maintenance but exempts it when it is part of an initial landscaping project for a new site. Ohio taxes landscaping and lawn care services once a business reaches $5,000 in gross sales from these services in a calendar year.
States also vary on what activities they include as part of taxable lawn care services. Some states include pest control, fertilization, or snow removal. In Texas, taxable landscaping and lawn care services include planting, mowing, trimming, edging, and maintaining plants and grass, but professional landscape design services are not taxable. Review the detailed guidance provided by each state’s tax authority to determine the precise scope of taxable lawn care activities.
Navigating Sales Tax for Lawn Care
Consumers should review invoices from their lawn care providers to see if sales tax has been applied. If uncertain, ask the lawn care company for clarification. Consumers can also consult their state’s Department of Revenue or tax authority website, as these resources often provide specific guidance on taxable services and applicable rates. Many state tax websites offer sales tax rate locators where one can search by address to find the combined state and local sales tax rate for a specific location.
Lawn care businesses must understand their sales tax obligations in each state where they operate. Businesses that sell taxable goods or services need to register for a sales tax permit, also known as a seller’s permit. This permit authorizes them to legally collect and remit sales tax to the state and local tax authorities. The application process involves providing business information, identification like an Employer Identification Number (EIN), and a description of services.
Businesses should consult their state’s official tax guidance or a qualified tax professional to ensure compliance. Failure to properly collect and remit sales tax can result in penalties, interest charges, and potential audits. Maintaining accurate records of sales, collected taxes, and exemptions is also an aspect of sales tax compliance.