Document Number
04-100
Tax Type
Retail Sales and Use Tax
Description
Regulation for florists and nurserymen, real property contractor
Topic
Property Subject to Tax
Taxability of Persons and Transactions
Taxable Income
Date Issued
09-08-2004


September 8, 2004



Re: § 58.1-1821 Application: Retail Sales and Use Tax

Dear *********:

This will reply to your letter in which you seek the correction of the retail sales and use tax assessment issued to your client, ***** (the "Taxpayer") for the period January 2000 through March 2003. I apologize for the delay in the Department's response.

FACTS


The Taxpayer is a landscape contractor, performing a full range of landscaping services such as grading, mulching, fertilizing, transplanting, mowing, and clearing. The Taxpayer does not maintain an inventory of landscape materials. The Taxpayer purchases landscape materials as they are needed for each job and pays sales tax to vendors at the time of purchase. The Taxpayer states that it does not hold itself out as a retail business to the public, does not advertise as a retailer and does not have a retailer's business license.

The Taxpayer was audited by the Department and assessed sales tax on the sale and installation of trees, shrubs, plants and sod. The Taxpayer maintains that it operates as a using and consuming real property contractor and pays sales tax on all its purchases. The Taxpayer believes that it has operated properly based on its understanding of the Department's regulation for florists and nurserymen. For this reason, the Taxpayer suggests that the assessment of sales tax on the sale and installation of trees, shrubs and similar items is erroneous. The Taxpayer suggests that, as a real property contractor, it is not required to charge and collect sales tax on the sale and installation of the plants, trees and shrubs provided under its contracts.

DETERMINATION


Retailer vs. Contractor

Title 23 of the Virginia Administrative Code (VAC) 10-210-610 sets out the application of sales and use tax to nurserymen and landscape contractors. The regulation specifically provides that the furnishing and transplanting of trees, shrubs, and plants is a taxable retail sale, and not the provision of services with respect to real estate. Title 23 VAC 10-210-610(B) states:
    • When a nurseryman, florist or other person makes retail sales of shrubbery and similar items, and as a part of the transaction agrees to transplant them on the land of the purchaser for a lump sum, the tax applies to the total charge. The tax does not apply to the charge for transplanting if the charge is separately stated on the invoice. [Emphasis added.]
    • Title 23 of the Virginia Administrative Code (VAC) 10-210-610(C) then states:
    • Any landscaper, nurseryman, or contractor who goes beyond the sale and planting of shrubbery, sod, etc. and contracts to grade, seed and fertilize lawns or to provide periodic fertilizing or weed killing treatments is deemed to be a consumer of all tangible personal property used in performing such service and must pay the tax on such property at the time of purchase. [Emphasis added.]

Under this regulation, a business is deemed to be a contractor only with respect to the services it renders beyond the sale and installation of shrubs, trees and plants. These services include those performed by the Taxpayer such as grading, seeding, mowing and fertilizing. The regulation states that these specific services, when rendered by landscapers, nurserymen and contractors, are not retail sales and must be treated differently from the sale and installation of plants, shrubs, and trees. Subsection (C) refers to "such service" to differentiate between the services of grading, seeding, and fertilizing and the retail sale and planting of plants, trees and shrubs.

Public Document (P.D.) 87-130 (4/21/97) is on point with the facts of the Taxpayer's case. This ruling explains that landscape contractors are considered retailers with respect to the sale and installation of plants, trees, shrubs and sod. This is true although a landscape contractor may not operate as a retail business. The Department has issued other public documents that have consistently reflected this policy, such as P.D. 97-82 (2/19/97) and P.D. 94-222 (7/18/94). These documents support the audit findings that the (B) and (C) provisions of Title 23 VAC 10-210-610 apply to the Taxpayer's landscaping business. The audit assessment is correct in this regard.

Markup of Plant Materials

The Taxpayer states that the Department applied an arbitrary markup to the cost of the plant materials sold by the Taxpayer at retail. The audit report indicates that the items treated as retail sales were listed at the amounts invoiced to customers by the Taxpayer. Credits were allowed in the audit for sales taxes paid by the Taxpayer on the items purchased for resale. The Taxpayer has not provided evidence that an arbitrary markup was applied to the landscape materials taxed in the audit.

Conclusion

Based on the above, the assessment is correct as issued. The outstanding balance of ***** remains due and payable and must be paid within 30 days from the date of this letter to avoid the accrual of additional interest. The Taxpayer's payment should be sent to: Virginia Department of Taxation, 3600 West Broad Street, Suite 160, Richmond, Virginia 23230, Attention: *****. If you have any questions concerning payment of the assessment, you may contact ***** at *****.

The public documents and regulations cited are available on-line in the Tax Policy Library section of the Department's web site, located at www.tax.state.va.us. If you have any questions about this determination, please contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *********

Sincerely,

                • Kenneth W. Thorson
Tax Commissioner


AR/49202S

Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46