Tax Type
Retail Sales and Use Tax
Description
Florists and nurseries; Plant maintenance contracts
Topic
Taxability of Persons and Transactions
Date Issued
04-30-1996
April 30, 1996
Re: § 58.1-1821 Application: Sales & Use Tax
Dear**************
This will reply to your letter in which you seek correction of sales and use taxes assessed to ****** (the "Taxpayer") for the period June 1989 through December 1992.
FACTS
The Taxpayer provides all phases of lawn and landscape maintenance to the owners of apartment complexes, nursing homes, and other multi-tenant properties. As part of its complete lawn and shrubbery maintenance, the Taxpayer plants and maintains seasonal flowers.
The Taxpayer was assessed tax on lawn maintenance contracts which provide that during changes in the seasons, the Taxpayer will replace flowers to correspond to the colors of nature. The Taxpayer protests the assessment, maintaining it is a real estate contractor and the user/consumer of tangible personal property in the performance of completing its maintenance contracts.
DETERMINATION
Real Property Contractor: Your letter refers to a previous ruling, (P.D. 86-214, 11/03/96), which stated that the taxpayer was the user and consumer of tangible personal property necessary in meeting the terms of its contracts, and was to pay tax on all purchases when providing plant care services. You state that as a landscape contractor, you are also the user and consumer of the seasonal flowers planted in your customers' properties and that the auditor's assessment is improperly applied.
The department has traditionally held that nurserymen, florists, landscape contractors, and other persons who sell and transplant trees, plants, shrubbery, and other landscaping materials to be retailers. Virginia Regulation (VR) 630-10-40(B), copy enclosed, provides that:
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- "when a nurseryman, florist or other person makes retail sales of shrubbery and similar items, and as 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."
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- This regulation goes on to provide in subsection (C) that:
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- "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).
A landscape contractor is considered to be a user and consumer of tangible personal property when the contract or agreement provides that the contractor will only service the customer's plants and does not provide for the replacement of any of the plants. If the taxpayer enters into a maintenance contract that provides for the servicing of the customer's plants, as well as the replacement of plants as necessary, such transactions would be taxable. See P.D. 86-214.
Maintenance Contracts: The application of the tax to maintenance contracts is governed by VR 630-10-62.1. As set out in the regulation:
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- "Maintenance contracts, the terms of which provide both repair or replacement parts and repair labor, represent a sale of tangible personal property. The total charge for such contracts is subject to the tax...."
In light of the wording in P.D. 86-214, as provided above, I also refer to P.D. 88-31 (03/02/88)(copy enclosed), which specifically addresses the taxable status of plant maintenance contracts.
Consequently, I find that the auditor properly applied the tax in this case. In accordance with the department's longstanding policy regarding the application of the tax to plant maintenance contracts, the assessment is correct.
Please note that effective January 1, 1996, the sales and use tax applies to one-half of the total charge for maintenance contracts when such contracts provide for both repair or replacement parts and repair labor. (see enclosed Tax Bulletin 95-8 (9/27/95).
Please have your client remit a check for the balance of the assessment totaling ****, to the address listed on the department's assessment, or to ***** of the department's Office of Tax Policy, at P. O. Box 1880, Richmond, Virginia 23218-1880.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/9651Q
Rulings of the Tax Commissioner