Landscaping is a taxable service in Texas, so landscapers must charge sales tax on their services. So if you are do landscaping you should likely:
Get set up for a sales tax permit with the Texas Comptroller.
Charge tax on services, with some exceptions discussed non-exhaustively below.
Remit that tax to the Comptroller, generally on a monthly basis.
There a couple key distinctions on what exactly is landscaping, which I'll walk through below with the associated authoritative texts.
The initial taxable determination comes directly from the Texas sales tax statute, with this particular addition being updated in 1987.
Sec. 151.0101. "TAXABLE SERVICES" (a) "Taxable services" means:
(11) real property services;
Then real property services is further defined in the statute:
Sec. 151.0048. REAL PROPERTY SERVICE. (a) Except as provided by Subsection (b), "real property service" means:
(1) landscaping;
Pretty cut and dry, huh? That "except as Subsection (b)" language being:
(b) "Real property service" does not include a service listed under Subsection (a) if the service is purchased by a contractor as part of the improvement of real property with a new structure to be used as a residence or other improvement immediately adjacent to the new structure and used in the residential occupancy of the structure.
That's a pretty dense chunk of tax language. Conceptually, this means homebuilders may purchases what would otherwise be taxable real property services tax free, and we'll circle back to some more clear language on this later.
So with landscaping being taxable, let's turn our attention to how the administration has settled on it's interpretation of the statute to see exactly what are the bounds of "landscaping". This is written in Texas Administrative Tax Code Rule 3.356 Real Property Service.
This section goes over a number of the areas considered taxable, below I have the relevant code sections pulled out and comment on them in sequence.
a)(4) Landscaping--The activity of arranging and modifying areas of land, natural scenery and other areas, such as indoor or outdoor patios, for aesthetic effect, considering the use to which the land is to be put. The term includes adding, removing, or arranging natural forms, features, and plantings, including vegetation, and other features to fulfill aesthetic requirements. It includes the application of soil, soil additives, and amendments to prepare or maintain the planting area. Some examples are garden planting or maintenance, arborist services, ornamental bush or shrub planting, tree planting or removal, tree surgery, pruning or spraying, and lawn sodding. The term does not include the addition of sprinkler systems, retaining walls, ponds, pools, or fences, or other construction activities or services provided by landscape designers or landscape architects such as consultation, research, preparation of general or specific design or detail plans, studies, specifications, or supervision, or any other professional services or functions within the definition of the practice of engineering or architecture. Landscaping services performed by landscape designers or landscape architects are taxable.
Luckily the definition is pretty robust here. It also goes specifically into what is not included. Generally the term used by the Comptroller is "hardscaping." In practice this is one of the spots that I correct auditors on, so understanding this is very useful come audit time as they tend to assess tax incorrectly. Note what is being given examples are considered property improvements.
https://star.comptroller.texas.gov/view/200205063L This policy letter give a bit more detail on the distinctions, and I'm adding just to add that "cart paths"; is considered hardscaping as well, and I have seen paths and trails to reasonably be part of this space, though if a business charges a single charge for hardscaping and landscaping, the Comptroller will presume the entire charge is taxable. This can be rebutted, but tends to take significant documentation that is not always created at the start of these sorts of projects. Just having internal documentation showing a job estimation where of a 10,000 charge, 5k is for fencing and pathways, and 5k is for new plants, tree trimming. something that would have been considered 10,000 dollars taxable, would generally instead be considered only 5,000 dollars taxable.
This is a complex enough area so there are further hearings and policy letters here 60214: LANDSCAPING SERVICES-TAXABILITY OF SERVICES DETERMINED BY TYPE OF REALTY INVOLVED, TYPE OF SERVICE PROVIDED (LANDSCAPING VS. HARDSCAPING) AND MANNER OF CUSTOMER BILLING
The most useful of the document in this list's relevant context below:
https://star.comptroller.texas.gov/view/201005482L
Hardscaping services are not considered landscaping services for sales tax purposes, although landscaping companies may commonly provide hardscaping services. When your company performs hardscaping, you are improving realty and that service is treated differently than landscaping, both in terms of what items are taxable to your customers as well as what local taxes apply. Landscaping services includes services such as planting, transplanting, pruning, bracing, spraying, aerating, mulching, fertilizing, mowing, trimming, watering, installing fabric weed barrier, installing metal tree stakes, and tree planting. It does not include mowing right-of-ways of public entities if required by the public entity, trimming trees away from power lines, and mowing cemeteries.
Hardscaping is the building, remodeling or repair of a building, structure or other similar improvements to realty such as underground sprinkler systems, irrigation systems, fences, ponds, patios, decks, masonry construction, retaining walls, water collection and drainage systems, outdoor lighting systems, French drains and pools.
(a)(5) Lawn and yard maintenance--Mowing, trimming, fertilizing, watering and any other treatment or service which may be performed on private or commercial yards or lawns. It also includes maintenance of trees and plants whether inside or outside a building. The term does not include clearing land for buildings, power line rights-of-way, pipeline rights-of-way, or maintenance on land belonging to a governmental entity when the service is required by the governmental entity.
Pretty cut and dry, just noting that watering plants in indoor planters, say in an office complex, is taxable under this definition.
(8) Structural pest control services--Activities performed for the purpose of identifying, preventing, controlling, or eliminating, by use of chemical or mechanical means, infestation of any of the following:
(B) pests or diseases of trees, shrubs or other plantings in a park or adjacent to a residence, business establishment, industrial plant, institutional building, or street; and (...)
I noted this specifically because while it's noted as pest control services, controlling and removing diseased plant or diseased sections of plants is something commonly done by those in landscaping.
(e) Landscaping, lawn, and yard maintenance provided by persons under 18 years old or by persons 65 years old or older. Charges for the performance of landscaping, lawn, and yard maintenance services (subsection (a)(4) and (5) of this section) are exempt if performed by:
(1) a self-employed person under 18 years of age whose total receipts from providing landscaping, lawn, or yard maintenance are $1,000 or less during either the preceding calendar quarter or the same calendar quarter of the preceding year; or
(2) an individual 65 years of age or older whose total receipts from providing landscaping or yard maintenance are $5,000 or less for the four most recent quarters.
Obviously the intent is for certain groups of people doing a nominal amount of business to not have to go through the rigor of complying with the tax law. For most reading this it won't apply though.
(k) Local taxes. With the exception of garbage or other solid waste removal services, local sales and use taxes apply to services in the same way as they apply to tangible personal property. Generally, service providers must collect local sales taxes if their place of business is within a local taxing jurisdiction, even if the service is actually provided at a location outside that jurisdiction.
Local taxes occasionally is an issue for landscapers for 2 reasons:
Landscaping taxes are due primarily from the landscapers place of business, while hardscaping is primarily due from the job site.
If a landscaper is not at 8.25% location and does business in another jurisdiction, the customer may owe additional tax.
The former is easier to deal with than the latter. Having a business location remit tax based on an 8.25% location rate solves #2 practically. #1 is generally solved by having a lump sum transaction.
Exemptions
Like most services, resale certificates and exemption certificates can relieve a business from needing to charge tax.
You may generally accept a resale certificate from another landscaper (generally when acting as a sub contractor) so long as it's fully filled out.
You may generally accept an exemption certificate from exempt entities (churches being the most common entity here.)
Work for political subdivisions of Texas (cities, counties, ISDs, etc.) is not taxable by statute and does not require a certificate. It can be handy to get just in case, and generally they are more than happy to provide.
Additionally, homebuilders may purchase taxable services that go into a new home tax free. https://star.comptroller.texas.gov/documents-by-subject/45940 Goes into the specific details, however it's generally pretty cut and dry.
If you have any questions, please feel free to reach out, we're generally happy to point folks in the right direction.
