Landscaping Services encompass a wide range of activities, from basic lawn maintenance to complex landscape design and installation. For businesses providing these services, understanding the associated tax obligations is crucial for compliance and financial health. This guide breaks down the tax responsibilities for landscaping services, offering clarity for both service providers and clients.
Landscaping Services for Homeowners and Businesses
When you provide landscaping services to homeowners or businesses, it’s important to understand your Business & Occupation (B&O) tax responsibilities. This income is generally reported under the retailing classification. Furthermore, you are required to collect retail sales tax from your customers, based on the sales tax rate applicable to the job location. This collected sales tax must then be remitted with your tax return.
For materials that are directly resold to your customer without any intervening use, such as mulch, fertilizer, potted plants, sod, and paving stones, you can utilize a reseller permit to purchase these items without paying sales tax. The act of installing these materials for a customer is not considered a taxable use by the landscaper.
Landscaping Services for Cities and Towns
Tax obligations differ when providing landscaping services to cities or towns, depending on the location of the service.
Within the Public Road Right-of-Way
Income earned from landscaping services performed within the public road right-of-way is reported under the public road construction classification of the B&O tax. In this instance, you are not required to collect retail sales tax on your services. However, it’s important to note that you are responsible for paying sales or use tax on any materials purchased and installed for these projects. Examples of such materials include soil, seed, rocks, and gravel.
In Public Areas such as Parks
For landscaping services conducted in public areas like parks, the income is reported under the retailing B&O classification. You are also obligated to collect and remit retail sales tax for these services. Similar to services for homeowners and businesses, you can use a reseller permit to purchase materials like soil, seed, rocks, and gravel without paying sales tax upfront.
Horticultural Services for Farmers
Horticultural services provided to farmers have specific tax considerations. A farmer is defined as someone engaged in the business of growing or producing agricultural products for sale on land they own or possess.
Income from services performed for farmers is reported under the service and other activities B&O classification. Sales tax is not collected on these services. However, when purchasing items intended for use on farms, such as fertilizers, spray materials, and baling wire, you are generally required to pay sales or use tax on these items.
Exception: If you bill the farmer separately for these materials, you are not obligated to pay sales tax or use tax upon purchase. In this case, you can utilize a reseller permit to acquire these materials. The income from these separately billed materials is generally classified under the retailing B&O tax. You will also need to charge your customer retail sales tax and remit it with your tax return.
Further Exception: Sales of feed, seed, seedlings, fertilizer, spray materials, and agents for enhanced pollination to farmers are subject to the wholesaling B&O tax classification, and sales tax is not collected on these sales.
Landscaping Services for Public or Private Utilities
Landscaping services for public or private utilities, which often include clearing limbs and brush from power lines and telephone lines, are reported under the service and other activities B&O classification. No sales tax is collected on these services.
Landscaping Services for General Contractors
If you are subcontracted by a general contractor who provides you with a reseller permit, the income from this work is reported under the wholesaling B&O classification. You are not required to collect retail sales tax from the general contractor. Similar to other scenarios, you can use a reseller permit to purchase items installed on the job or directly resold to the customer (without intervening use) without paying sales tax. Examples include mulch, fertilizer, potted plants, sod, and paving stones. Again, installing these items is not considered a taxable use by the landscaper.
Landscape Design Services
Landscape design services, when provided as the sole service, are reported under the service and other activities B&O classification. Sales tax is not collected on design services alone. However, if you offer both landscape design and installation services, the total income is reported under the retailing B&O tax, and you must collect and remit retail sales tax on the entire service package.
Services for Fannie Mae and Freddie Mac Properties
Charges for retail services like lawn mowing and trimming are subject to retailing B&O tax but are exempt from retail sales tax when performed on properties owned by Fannie Mae or Freddie Mac. If you are hired as a subcontractor for these properties, sales tax is not collected, and the income falls under the wholesaling B&O tax classification. For more detailed information on these specific activities, refer to WAC 458-20-226.
This guide provides a comprehensive overview of the tax implications for various landscaping services. Understanding these distinctions is vital for accurate tax reporting and ensuring compliance within the landscaping industry.
