Tax Notes – Landscaping Services

Note: Updated by Publication ANJ-4, Landscapers & New Jersey Sales Tax.

Capital improvements performed by landscapers and similar businesses, as well as charges for certain defined landscaping services, have been subject to tax since October 1, 2006. The labor to install the following types of capital improvements to real property is subject to tax:

• Seeding
• Sodding
• Grass plugging of new lawns
• Planting trees, shrubs, hedges, plants, etc.
• Clearing and filling land associated with seeding, sodding, grass plugging of new lawns, or planting trees, shrubs, hedges, plants, etc. This also includes tree/stump removal. Any clearing and filling of land that is not associated with the installation of the above property is not subject to tax, for example, clearing land for a new development. Since the installation of structures remains exempt (see below), clearing and filling land performed in connection with the installation of structures remains exempt from tax.

See examples below. 

Other services which may be performed by a landscaper such as the installation of a new fence, low-voltage lighting, a pond, underground sprinkler system, hardscaping (i.e., installation of deck, paver patio, walkway, driveway, swimming pool deck, retaining walls, etc.), and similar structures, remain capital improvements to real property.  Thus, the installation labor is exempt from Sales Tax.

Examples

ABC Landscaper has a contract with a property owner for the installation of planting materials, such as trees and shrubs, on existing construction. ABC Landscaper hires a subcontractor to perform the taxable planting service. Since ABC is charging the property owner for a taxable service, ABC must collect tax from the property owner. The amount charged to ABC by the subcontractor is not a taxable receipt.

XYZ real estate developer is constructing a home to sell to the public. XYZ hires ABC Landscaper to perform taxable landscaping services. XYZ is the property owner and thus, the end-consumer of the landscaping services, and must pay tax on the amount charged by ABC Landscaper.

XYZ real estate developer is constructing a home to sell to the public. XYZ hires GC General Contractor. GC hires ABC Landscaper as a subcontractor to perform taxable landscaping services. XYZ is the property owner, and thus, the end-consumer of the landscaping services, and must pay tax on the amount charged by GC for the landscaping services. The amount charged to GC by ABC Landscaper is not a taxable receipt.

Repair and Maintenance Services
The Sales and Use Tax Act imposes tax on charges for maintaining, servicing, and repairing real property. N.J.S.A. 54:32B-3(b)(4). Repair and maintenance services performed by landscapers are subject to tax under this provision. The following are examples of taxable repair and maintenance services performed by landscapers:

• Lawn mowing
• Lawn reseeding
• Lawn fertilizing
• Tree maintenance (trimming, pruning, spraying, bracing, cabling, grafting, coppicing, suckering and feeding)
• Weed/Insect control
• Soil aerating, sterilizing and mulching

Material Purchases
Businesses that provide landscaping services are considered contractors under the law. Thus, the landscaper is responsible for paying Sales or Use Tax on the materials that are installed onto real property.

Collecting Tax From Customers
A contractor performing landscaping services for an end-user must collect 6.625% Sales Tax on the gross sales receipt. However, at the option of the contractor, the actual cost of materials used and upon which the contractor paid tax may be separately stated on the invoice. The separate statement of the actual cost of materials would not be subject to the collection of tax. Whenever a contractor performs a taxable service, if the customer is billed a lump sum amount, the entire receipt is taxable. If the contractor separately states the actual cost of materials from the taxable labor, the customer would only be charged tax on the labor portion.

For more information see publication ANJ-4, Landscapers & New Jersey Sales Tax 394K  .