Document Number
Tax Type
Retail Sales and Use Tax
Landscape contractor/ real property work/treated it as a retailer
Appropriateness of Audit Methodology
Collection of Tax
Computation of Tax
Date Issued

February 1, 2005

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

Dear **************:

This will reply to your letter in which you seek correction of a retail sales and use tax assessment issued to ***** (the "Taxpayer"), for the period March 1998 through July 2003.


The Taxpayer is a sod contractor. The Taxpayer contracts with real property contractors to furnish and install sod for real property construction jobs. The Department audited the Taxpayer and treated it as a retailer. As a result, the auditor assessed sales tax on the Taxpayer's charges to its customers for the sale and installation of sod. The Taxpayer asserts the assessment is erroneous, based on instructions received from a Department representative when the Taxpayer established business operations. The Taxpayer asserts it was instructed to operate as a landscape contractor in accordance with Title 23 of the Virginia Administrative Code (VAC) 10-210-610. The Taxpayer paid sales tax on purchases of sod for use in real property work at the time of purchase.


Retailer vs. Contractor

Title 23 of the Virginia Administrative Code (VAC) 10-210-610 sets out the application of sales and use tax to landscape contractors that furnish and install flowers, shrubbery, nursery stock, sod and similar items. Landscape contractors that provide these types of items under the terms of real property contracts are deemed to be making taxable retail sales rather than providing 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, plants and sod. These services typically include grading, seeding, mowing and fertilizing. The regulation clearly differentiates between the sale and installation by landscapers and contractors of plants, shrubs, trees and sod and the services of grading, seeding, and fertilizing performed by landscapers and contractors.

Public Document 85-207 (10/31/85) 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. The Department has issued other public documents that have consistently reflected this policy, e.g., P.D. 96-277 (10/15/96) and P.D. 96-181 (7/24/96). These documents support the audit findings that the provisions of Title 23 VAC 10-210-610 apply to the Taxpayer's business of selling and installing sod.

Advice Received from Department

Virginia Code § 58.1-1835 authorizes the Tax Commissioner to abate an assessment or a portion of an assessment that is attributable to erroneous advice furnished to taxpayers in writing by an employee of the Department acting in his official capacity. The Taxpayer has not provided evidence that it received and relied upon written advice from the Department that resulted in the assessment that is under appeal.

My concern with the verbal information your representative received is that it is often difficult to determine what specific questions were asked and what information regarding the Taxpayer's business activities was presented to the Department. In addition, the application of the tax to the Taxpayer's business activities is clearly set out in Title 23 VAC 10-210-610, the regulation that was given to the Taxpayer and cited in the Taxpayer's appeal letter.


Based on the above, the assessment is correct. The outstanding balance of ***** should be paid within 30 days from the date of this letter to avoid the accrual of additional interest. Payment should be sent to: Virginia Department of Taxation, Office of Policy and Administration, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203, Attention: *****.

The Code of Virginia section, public documents and regulation cited are available on-line in the Tax Policy Library section of the Department's web site, located at If you have any questions or wish to discuss the information in this letter, please contact ***** at *****.
                • Sincerely,

                • Kenneth W. Thorson
                  Tax Commissioner


Last Updated 08/25/2014 16:46