What Can Be Purchased Tax Free
As discussed above, things and services that are integral to the service can be purchased tax free. This would be most aggregates and plants, and there are further other items available.
Additionally, say you have a subcontractor arborist who is only handling the trees as part of the overall job. In that scenario, you could issue a resale certificate and not pay tax on their services.
What Can't Be Purchased Tax Free
Generally for landscapers, the confusion is on what the Comptroller calls 'equipment.'
With equipment where the items aren't being transferred as part of the job, tax is due by the landscaper when purchasing them.
For example, for a lawnmower tax would be due when the landscaper purchases it. Leafblowers, shears, really if it's used by the landscaper to do the job, it's going to be taxable.
Many vendors, especially national and regional brands like Home Depot, Lowes or Tractor Supply, have sophisticated systems where they have intelligently coded their accounting system so a landscaper with a resale certificate will be charged tax on equipment while not charging it on plants or dirt. Smaller companies don't tend to have these sophisticated systems, so you may want to be a bit wary when purchasing supplies or equipment from a small vendor, especially an out of state one, as they may fail to charge in error, which will be an issue come audit time.
Remember Landscaping are Hardscaping Taxed Differently.
For example, a landscaper can generally issue a resale certificate dirt used in a landscaping job, however for example, gravel purchased for backfilling a french drain where the contract is lump sum, a resale certificate is not valid.
Importantly, a vendor won't know the difference, and may sell items tax free in error. This is a pretty common problem for landscapers in audits. My general advice for landscapers that also do hardscaping is to be consistent as possible between the two categories or use different suppliers or accounts when making purchases. Any accounting process that requires someone to manually review each entry is going to be more expensive and have more issues than one set up to the issue altogether.
Landscaping and agricultural work are not the same thing.
The general rule is if it's for the creation of agricultural products, the taxation is different and needs to be evaluated differently. It's a bit complicated, but work for farmers and ranchers may have legitimate basis for tax free purchases not discussed in this article. If any concern on this issue, check with an expert.
How to Purchase Items Tax Free
To purchase the relevant items tax free, you need to do these three things.
1. Register with the Comptroller for a Sales Tax Permit.
2. Fill out a Resale Certificate
3. Provide a fully filled out certificate when purchasing the items that can be tax free.
Overall, it a pretty simple process and an easy way to save money. If you have any questions, feel free to reach out.
Additional Reading
https://comptroller.texas.gov/taxes/publications/94-112.php Is the landscaping publication, very laymen friendly but does not go into much detail.
https://star.comptroller.texas.gov/view/200102063L This Private Letter does a pretty good job going over different scenarios for sales and purchases where tax would or not be due if you would like to read on this issue further.
