Current through Register Vol. 24-06, March 15, 2024
(1)
Introduction. This section
provides tax reporting instructions for persons who provide landscape and
horticultural services. This section does not apply to silvicultural activities
or to horticultural services provided to farmers. Silviculture means the
commercial production of timber and includes activities such as growing seed
into seedlings, planting, fertilizer and pesticide application, pruning and
thinning as provided to timber growers. Silvicultural activities are generally
subject to the extracting B&O tax classification or the service and other
business activities B&O tax classification. (See WAC
458-20-135 and
458-20-224.)
(2)
Retail landscape and horticultural
services. Landscape and horticultural services which are retail sales
include:
(a) Grading, filling, leveling,
planting, seeding, sodding, removing, cutting, trimming, pruning, mulching,
aerating, applying chemicals, watering, and fertilizing to establish, promote,
or control the growth of trees, shrubs, flowers, grass, ground cover and other
flora for ornamentation or other nonagricultural purposes.
(b) The sale or rental of landscaping
materials and the construction of sprinkling systems, walks, pools, fences,
trellises, rockeries, and retaining walls.
(c) Cultivating fruits, flowers, and
vegetables for consumers other than farmers.
(d) All tree trimming other than for farmers
or persons engaged in silviculture. This includes all trimming for size, shape,
aesthetics, removal of diseased branches, and removal of limbs because they are
too close to structures. It does not include tree trimming performed for public
and private electric utilities or at the direction of electric utilities to
keep power lines, distribution lines, or equipment free of tree branches or
brush.
(3)
Nonretail landscape and horticultural services. Landscape and
horticultural services which are not retail sales include:
(a) Landscape design services performed by a
landscape architect separate from a contract for landscape
maintenance.
(b) Planting trees for
farmers.
(c) Thinning or planting
of trees for persons who are involved in the commercial production of timber.
These are silvicultural activities and silvicultural activities are not
considered to be horticultural or landscape maintenance activities. (See WAC
458-20-135 and
458-20-209.)
(d) Landscape services performed for
municipal corporations or political subdivisions of the state on real property
owned by those entities if the real property is used or held for public road
purposes. (See WAC
458-20-171.)
(e) Horticultural services, including
spraying and fertilizing, performed for farmers for agricultural purposes. See
WAC 458-20-209 for examples of
horticultural services performed for farmers.
(f) Pruning, trimming, repairing, removing,
and clearing of trees and brush near electric transmission or distribution
lines or equipment, if performed by or at the direction of an electric utility.
The removing and clearing of trees includes the stump removal by grinding,
digging, or any other means, if performed by or at the direction of an electric
utility. These are retail activities when not performed by or at the direction
of an electric utility.
(4)
Business and occupation tax.
The business and occupation (B&O) tax applies as follows.
(a)
Retailing. The gross income
from landscape and horticultural services which are retail sales and which are
performed for consumers is taxable under the retailing
classification.
(b)
Wholesaling. The gross income from services which are retail sales
and which are performed for other contractors for resale is taxable under the
wholesaling classification.
(c)
Service. The gross income from horticultural services provided to
farmers is taxable under the service and other activities classification. This
tax classification also applies to income received from pruning, tree trimming,
removing and clearing of trees and brush near electric lines, if performed by
or at the direction of an electric utility. Income from services performed by
landscape architects is also subject to the service and other activities
classification.
RCW
82.04.290.
(d)
Public road construction.
Persons who perform landscape services for municipal corporations or political
subdivisions of the state on real property owned by those entities are taxable
under the public road construction B&O tax classification, but only if the
real property is used or held for public road purposes.
(e)
Government contracting. This
classification applies to persons engaged in the business of constructing,
repairing, decorating, or improving new or existing buildings or other
structures for the United States, or a city or county housing authority created
under chapter 35.82
RCW. This classification would include the construction or maintenance of items
such as walls, fences, walks, pools and other structures. This classification
does not include the planting of lawns or trees or the cutting of grass or tree
trimming performed for these customers. These activities are subject to the
retailing classification.
(5)
Retail sales and use tax.
Landscape gardeners and horticulturists, except horticulturists performing
services for farmers, must generally collect and report the retail sales tax
upon the full contract price when performing landscaping or horticultural
services for consumers. For purposes of collecting the local option retail
sales tax, the sale takes place where the service is performed. See WAC
458-20-145. The retail sales tax
does not apply to charges to the United States for landscape services,
including landscape maintenance services, and sellers may take a deduction from
the retail sales tax classification in reporting those sales which are taxable
under the retailing B&O tax classification.
(a) Persons performing a landscaping or
horticultural service for a contractor for resale must provide a resale
certificate for sales made before January 1, 2010, or a reseller permit for
sales made on or after January 1, 2010, to document the wholesale nature of any
sale as provided by WAC
458-20-102A (Resale certificates)
and WAC 458-20-102 (Reseller permits).
Even though resale certificates are no longer used after December 31, 2009,
they must be kept on file by a seller for five years from the date of last use
or December 31, 2014.
(b) Landscape
gardeners and horticulturists must pay the retail sales tax to their vendors
when purchasing tools, equipment, and supplies which are not resold, either
directly or as a component part of the finished work. They must pay deferred
sales or use tax directly to the department upon the value of any such property
that was purchased or acquired without payment of Washington retail sales
tax.
(c) Plants, shrubs, trees,
sod, seed, chemicals, fertilizer, peat moss, sprinkler systems, rocks, building
materials and any other tangible personal property which becomes a part of the
finished work may be purchased for resale, except items used in providing
horticultural services for farmers and items used in performing public road
construction, government contracting, or services for timber growers.
(d) Retail sales tax or use tax is due with
respect to items purchased by horticulturists for use in performing services
for farmers. (See also WAC
458-20-209.)
(e) Retail sales tax or use tax is due with
respect to items purchased for use in performing services for timber growers or
which are taxable as either public road construction or government contracting.
This includes items such as sod, seed, trees, building materials, fertilizers,
spray materials, etc.
(f) The
retail sales tax does not apply to the charge made by persons performing tree
trimming near electric transmission or distribution lines, but only if the work
is performed at the direction of an electric utility. Persons performing these
services must pay retail sales or use tax on all materials, supplies, tools,
and equipment used in performing the service.
(6)
Examples. The following
examples identify a number of facts and then state a conclusion. These examples
should be used only as a general guide. The tax results of other situations
must be determined after a review of all facts and circumstances.
(a) John Doe, a landscaper, was hired by a
city to maintain the landscaping around the buildings at the city's municipal
golf courses. He must collect and report the retail sales tax and pay retailing
B&O tax on the full contract amount.
(b) John Doe purchased several plants, some
fertilizer, and insect spray to use in landscaping the golf course. He also
purchased some solvent and mineral oil to clean and maintain some of his
landscaping tools. His purchases of the plants, fertilizer and insect spray are
purchases for resale. He must pay retail sales tax to his vendors on his
purchases of the solvent and mineral oil.
(c) Landscaping company provides complete
landscaping services including landscape design by a licensed landscape
architect, installation, and maintenance. Landscaping charged Jane Smith two
hundred dollars for a landscaping plan for her new home. She planned to
purchase the plants and do the landscaping work herself. Landscaping must
report B&O tax on the charge for the design service at the service and
other activities classification rate.
(d) Landscaping company entered into a
contract to landscape the yard for a client's new home. The company must
collect and report retail sales tax and pay retailing B&O on the full
contract amount, even though part of Landscaping's services included drawing a
landscaping plan.
(e) Landscaping
company entered into a two-phase contract with a county. Phase one required the
company to plant trees and shrubs and put in a sprinkling system as part of a
public road project. The sprinkler system is located in the public road right
of way. The contract provided Landscaping would receive five hundred thousand
dollars for phase one of the project. Phase two provided that Landscaping would
maintain the trees and shrubs for a period of five years. The contract provided
for payments of four thousand dollars per month plus costs for fertilizer and
spray for maintaining the planted strips.
(i)
Phase one is part of public road construction and Landscaping is taxable under
the public road construction classification upon the five hundred thousand
dollars received for phase one. The company must pay sales tax when purchasing
the trees and shrubs and materials for the sprinkling system for use in phase
one of the project. See WAC
458-20-171 for the tax liability
for public road construction.
(ii)
Phase two for the maintenance of the completed project is also public road
construction. This is not a retail sale because the work is performed for a
municipal corporation or political subdivision of the state on land owned by
that entity and which is being used for public road purposes. See
RCW
82.04.190.
Landscaping will owe B&O tax under the public road
construction classification and must pay retail sales or use tax on any items
used in performing this work, including purchases of fertilizers, chemicals and
other materials.
(f) John Doe operates a tree trimming
business and has a contract with a public utility district (PUD) to trim trees
along the PUD's power lines. Some of these trees are on private property with
the PUD obtaining the permission of the owners to trim the trees. Some trees
are also located on land for which the PUD has an easement, including along
public road right of ways. This tree trimming is not a retail sale, but taxable
under the service and other activities classification. This includes trimming
performed along the road right of way. The property on the road right of way is
not owned by the PUD for whom the work is being performed. The easement is not
for use as a public road and as such the tree trimming is not public road
construction.
(g) John Doe provides
a tree trimming service to his residential customers. The tree trimming is
performed at the direction of the residential customer to remove diseased
limbs, limbs too close to the house, limbs which are a safety hazard because of
their proximity to power lines, and limbs which are objectionable to the
desired shape of the tree. All of this tree trimming is a retail activity,
regardless of the specific reason for cutting the limbs.
Statutory Authority:
RCW
82.32.300,
82.01.060(2),
chapters
82.04,
82.08,
82.12 and
82.32 RCW. 10-06-070, §
458-20-226, filed 2/25/10, effective 3/28/10. Statutory Authority:
RCW
82.32.300. 99-09-013, § 458-20-226,
filed 4/13/99, effective 5/14/99. Statutory Authority:
RCW
82.32.300 and to implement
RCW
82.04.050. 96-05-080, § 458-20-226,
filed 2/21/96, effective 3/23/96. Statutory Authority:
RCW
82.32.300 and
82.04.050(3)(e).
94-23-053, § 458-20-226, filed 11/10/94, effective 12/11/94. Statutory
Authority:
RCW
82.32.300. 83-08-026 (Order ET 83-1), §
458-20-226, filed 3/30/83; Order ET 70-3, § 458-20-226 (Rule 226), filed
5/29/70, effective 7/1/70.