DEPARTMENT OF REVENUE [61 PA. CODE CHS. 55 AND 60] Sales and Use Tax; Lawn Care Services [26 Pa.B. 893] The Department of Revenue (Department), under authority contained in section 270 of the Tax Reform Code of 1971 (TRC) (72 P. S. § 7270), proposes to amend § 55.6 (relating to lawn care services) and delete § 60.2 (relating to lawn care services) as set forth in Annex A. Section 270(a) of the TRC specifically provides that the Department is authorized and empowered to prescribe, adopt, promulgate and enforce, rules and regulations not inconsistent with Article II of the TRC (72 P. S. §§ 7201--7281.2) relating to tax for education, relating to any matter or thing pertaining to the administration and enforcement of the provisions of Article II and the collection of taxes, penalties and interest imposed by Article II.
Currently, the Department's interpretation of Act 1991-22 (72 P. S. §§ 7201(k)(17), (o)(15) and (jj)) relating to lawn care services has been set forth as a pronouncement and codified at § 60.2. The Department has concluded that the issues relating to this service have evolved to the point where the Department can set forth its interpretation as a regulation. Therefore, in addition to proposing to add § 55.6, the Department is also proposing to delete the pronouncement relating to lawn care services which appears at § 60.2.
Section 55.6(a) sets forth definitions for administrative supplies, lawn and lawn care service. Subsection (b) provides that the sale at retail or use of lawn care services performed in this Commonwealth is subject to tax. Lawn care services became taxable October 1, 1991.
Subsection (c) provides examples of taxable lawn care services. Subsection (d) provides examples of services which are not taxable lawn care services. Subsection (e) provides that tax shall be imposed on the total charge for lawn care services. The failure to separately state charges for lawn care services from other nontaxable charges on the invoice requires the charging of tax on the total invoice amount.
Subsection (f) sets forth exclusions. Paragraph (1) provides an exemption if the lawn care services are purchased by qualified charitable organizations, volunteer fire companies, religious organizations and nonprofit educational institutions, except if used in an unrelated trade or business. The services are also excluded if purchased by the Federal government or its instrumentalities; or the Commonwealth or its instrumentalities; or subdivisions including public school districts. Paragraph (2) provides that the vendor of lawn care services may claim the resale exemption upon its purchase of tangible personal property that is transferred to the purchaser or a third party in the performance of the lawn care services. This subsection also provides examples of property that may be purchased exempt for resale when used in performing lawn care services and examples of property that are taxable when used in performing lawn care services.
Fiscal Impact
The Department has determined that the proposed amendments will have no significant fiscal impact on the Commonwealth.
Paperwork
The proposed amendments will not generate significant additional paperwork for the public or the Commonwealth.
Effectiveness/Sunset Date
The amendments will become effective upon final publication in the Pennsylvania Bulletin. The amendments will be monitored annually. No sunset date has been assigned.
Contact Person
Interested persons are invited to submit in writing comments, suggestions or objections regarding the proposed amendments to Anita M. Doucette, Office of Chief Counsel, Department of Revenue, Dept. 281061, Harrisburg, PA 17128-1061, within 30 days after the date of the publication of this notice in the Pennsylvania Bulletin.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), the Department submitted a copy of these proposed amendments on February 20, 1996, to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the House Committee on Finance and the Senate Committee on Finance. In addition to submitting the proposed amendments, the Department has provided IRRC and the Committees with a copy of a detailed Regulatory Analysis Form prepared by the agency in compliance with Executive Order 1982-2, ''Improving Government Regulations.'' A copy of this material is available to the public upon request.
If IRRC has any objections to any portion of the proposed amendments, it will notify the Department within 30 days after the close of the public comment period. The notification shall specify the regulatory review criteria which have not been met by that portion. The Regulatory Review Act specifies detailed procedures for review of objections raised, prior to final publication of the amendments, by the Department, the General Assembly and the Governor.
ROBERT A. JUDGE, Sr.,
Secretary
Fiscal Note: 15-352. No fiscal impact; (8) recommends adoption.Annex A TITLE 61. REVENUE PART I. DEPARTMENT OF REVENUE Subpart B. GENERAL FUND REVENUES ARTICLE II. SALES AND USE TAX CHAPTER 55. SERVICES § 55.6. Lawn care services.
(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise:
Administrative supplies--
(i) Tangible personal property which is consumed in one of the following manners:
(A) Used but not transferred by a vendor in the performance of this service.
(B) Transferred by a vendor to another party in connection with the performance of the vendor's services when the property is not a critical element of the service.
(ii) Examples of administrative supplies include sales invoices, receipts, contracts, estimate sheets, confirmations or other similar items.
Lawn--Any area covered with grass, including residential and nonresidential lawns, parks, golf courses, athletic fields and cemeteries.
Lawn care service--Providing services for lawn upkeep including fertilizing, mowing, trimming shrubbery or performing other lawn treatment services.
(b) Scope. The sale at retail or use of lawn care services performed in this Commonwealth is subject to tax. Lawn care services became taxable October 1, 1991.
(c) Examples of taxable services. The following are examples of taxable lawn care services:
(1) Fertilizing lawns.
(2) Mowing, trimming, cutting or edging lawns.
(3) Dethatching lawns.
(4) Applying herbicides, insecticides or fungicides to lawns.
(5) Raking leaves or grass on lawns.
(6) Applying treatments for weed, pest, insect or disease control to lawns.
(7) Watering lawns.
(8) Applying lime to lawns.
(9) Reseeding, resodding or replacing lawns.
(10) Aerating lawns.
(11) Providing lawn evaluation, consultation or soil testing services on lawns, if purchased in conjunction with other lawn care services, regardless of whether the costs of the lawn evaluation, consultation or soil testing services are separately stated on the invoice.
(12) Overseeding lawns.
(13) Renovating lawns.
(14) Trimming or pruning shrubbery.
(d) Examples of nontaxable services. The following are examples of services which are not taxable lawn care services:
(1) Seeding, sodding or grass plugging new lawns.
(2) Trimming, pruning or fertilizing trees.
(3) Planting or removing shrubbery or trees.
(4) Providing lawn evaluation, consultation or soil testing services, if not purchased in conjunction with other lawn care services.
(5) Designing lawns or landscapes.
(6) Applying herbicides or fungicides to shrubbery, trees, flowers or vegetables. The application of insecticides or other similar chemicals to shrubbery, trees, flowers or vegetables is a taxable pest control service.
(7) Maintaining shrubbery, flower or vegetable beds, such as by mulching, tilling, weeding or fertilizing.
(e) Purchase price. Tax shall be imposed on the total charge for lawn care services. The failure to separately state charges for lawn care services from other nontaxable charges on the invoice requires the charging of tax on the total invoice amount.
(f) Exclusions.
(1) Lawn care services are exempt if purchased by qualified charitable organizations, volunteer fire companies, religious organizations and nonprofit educational institutions, except if used in an unrelated trade or business; the Federal government or its instrumentalities; or the Commonwealth, its instrumentalities or subdivisions, including public school districts. The manufacturing, mining, processing, public utility, farming, dairying, agriculture, horticulture or floriculture exclusion does not apply.
(2) The vendor of lawn care services may claim the resale exemption upon its purchase of tangible personal property that is transferred to the purchaser or a third party in the performance of the lawn care services. The vendor may also purchase lawn care services from another provider and subsequently resell the services to its customer. The vendor may not claim the resale exemption upon its purchase of administrative supplies or the purchase of other taxable services that it may use in the performance of its lawn care services.
(i) The following are examples of property that may be purchased exempt for resale when used in performing lawn care services:
(A) Grass seed, plugs, sod, straw or mulching material, when purchased for use in an existing lawn.
(B) Herbicides, insecticides, fungicides or other chemicals that are applied to lawns.
(C) Fertilizers or lime applied to lawns.
(ii) The following are examples of property that are taxable when used in performing lawn care services:
(A) Grass seed, plugs, sod, straw and mulching material purchased for use in creating a new lawn.
(B) Mowers; edgers; or pruning, dethatching, aerating or mulching equipment.
(C) Rakes, shovels or hoes.
(D) Spray applicators.
(E) Testing kits.
(F) Lawn sweepers.
(G) Shrubbery or trees.
(H) Administrative supplies.
CHAPTER 60. SALES AND USE TAX PRONOUNCEMENTS--STATEMENTS OF POLICY § 60.2. (Reserved).
(Editor's Note: As part of this proposal, the Department is proposing to delete the text of a statement of policy § 60.2 (relating to lawn care services) which appears at 61 Pa. Code pages 60-7--60-9, serial pages (200677)--(200679).)
[Pa.B. Doc. No. 96-290. Filed for public inspection March 1, 1996, 9:00 a.m.]
