Title 61--REVENUE DEPARTMENT OF REVENUE [61 PA. CODE CHS. 55 AND 60] Sales and Use Tax; Lawn Care Services [30 Pa.B. 3935] The Department of Revenue (Department), under the authority contained in section 270 of the Tax Reform Code of 1971 (TRC) (72 P. S. § 7270), by this order adopts § 55.6 (relating to lawn care services) and deletes § 60.2 (relating to lawn care services).
Purpose of Regulation
This rukemaking provides the Department's interpretation of section 201(k)(17), (o)(15) and (jj) of the TRC (72 P. S. §§ 7201(k)(17), (o)(15) and (jj)) relating to lawn care services.
Explanation of Regulatory Requirements
Section 55.6(a) defines the terms ''lawn,'' ''lawn care service,'' ''shrubbery'' and ''tree'' for use in that section. Subsection (b) provides that the sale at retail or use of lawn care services performed in this Commonwealth is subject to tax.
Subsection (c) provides examples of taxable lawn care services. Subsection (d) provides examples of services that 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 state charges for lawn care services separately from other nontaxable charges on the same invoice requires the charging of tax on the total invoice amount.
Subsection (f) sets forth exemptions. Paragraph (1) provides that lawn care services are not subject to tax if purchased by qualified institutions of purely public charity, 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 purchase of lawn care services is subject to tax if purchased by persons engaged in the business of manufacturing, mining, processing, public utility, farming, dairying, agriculture, horticulture or floriculture, as those terms are defined in section 201(k)(8) and (o)(4)(B) of the TRC.
Subsection (f)(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 for resale when transferred to the purchaser in the performance of lawn care services and examples of property that is taxable when used in the performance of lawn care services.
With the adoption of § 55.6, the Department is deleting the pronouncement set forth in § 60.2.
Affected Parties
Providers of lawn care services will be affected by this rulemaking.
Comment and Response Summary
Notice of proposed rulemaking was published at 29 Pa.B. 3736 (July 17, 1999). This proposal is being adopted with changes to read as set forth in Annex A.
The Department received one comment during the public comment period. No comments were received from the House Finance Committee or the Senate Finance Committee. The Department received comments from the Independent Regulatory Review Commission (IRRC).
The amendments to the proposed rulemaking in response to the comments from the public and IRRC are as follows:
(1) In its comments, IRRC indicated that the definition of ''lawn care service'' was not consistent with the statutory definition and suggested that the Department replace its definition with a reference to the statutory definition. The Department amended the definition to mirror the statutory definition; however, the wording of the statute was added because in the Department's opinion, the statutory citation would not provide sufficient guidance to the taxpayers utilizing the regulation.
(2) Both the public commentator and IRRC indicated that it would be helpful if the Department could provide definitions for ''shrubbery'' and ''tree'' for use in the regulation. The Department agrees that the definitions are needed and added them to subsection (a). The Department's source for the definitions is The Manual of Woody Landscape Plants by Michael A. Dirr.
(3) Subsection (b) states that lawn care services became taxable October 1, 1991. IRRC questioned the necessity of this sentence and suggested that it be deleted from the section. The Department agrees with IRRC's suggestion and deleted the sentence from subsection (b).
(4) Subsection (c) provides a list of examples of taxable lawn care services. Paragraph (11) relates to the overseeding, sodding or grass plugging of lawns. For clarity, IRRC suggested the Department add the word ''existing'' to clearly distinguish these services from the services described in subsection (d)(1). The Department agrees with IRRC's comment and amended the paragraph accordingly.
(5) IRRC raised two concerns with regard to subsection (f). The first concern relates to the title of the subsection, ''exclusions,'' when the section discusses both exclusions and exemptions. IRRC suggested that the Department create a separate subsection to address exemptions to distinguish them from exclusions. The Department agrees that the use of the two terms could be confusing and amended the title of the subsection as well as the text to alleviate the confusion.
IRRC's second concern relates to the last sentence in subsection (f)(1). The proposed language provided ''[T]he manufacturing, mining, processing, public utility, farming, dairying, agriculture, horticulture or floriculture exclusions do not apply.'' IRRC was not clear on which ''exclusions'' were being referenced and how comprehensive they were, and suggested the Department reference the pertinent statutory provisions and state that the exclusions do not apply to the tax on lawn care services. To address IRRC's concerns and to clarify the meaning of the sentence, the Department reworded the sentence and added a reference to the applicable statutory provisions.
Revisions initiated during the Department's internal review of the regulation are as follows:
(1) Section 55.6(d) relating to nontaxable lawn care services is amended by adding an additional example in paragraph (8) relating to separately stated charges for leaf raking. In the Department's proposal, leaf raking was not enumerated in the list of taxable services to reflect the change in policy in this area. However, the mere omission from the listing of taxable services without a corresponding affirmation in the listing of nontaxable services could cause confusion; therefore, the Department added the paragraph to clarify the Department's change in policy in this area.
(2) Minor grammatical and stylistic changes were made throughout § 55.6 to improve clarity and readability.
(3) For clarity, the Department amended § 55.6(d)(1) to provide that seeding, sodding and grass plugging done in conjunction with building construction will be presumed to be a new lawn and therefore a nontaxable lawn care service.
Question raised regarding the proposal is as follows:
Both the public and IRRC questioned the application of the Department's proposed definition for ''lawn.'' Specifically, the commentators questioned how to distinguish a lawn from a field. The proposed definition defines lawn to be an area maintained with grass adjacent to a building. The Department chose this language because lawns are normally associated with buildings and fields are not. Thus, the distinguishing characteristic is that the area be associated with a building.
Fiscal Impact
The Department determined that the change in policy from the Department's statement of policy (§ 60.2) relating to the exclusion of shrubbery trimming from tax when not performed in conjunction with a taxable lawn care service and the exclusion of leaf raking from the definition of a ''lawn care service'' as set forth in this rulemaking will result in an estimated revenue loss of approximately $1.2 million for Fiscal Year 1999-00.
Paperwork
This rulemaking will require no additional paperwork for the public or the Commonwealth.
Effectiveness/Sunset Date
This rulemaking will become effective upon final publication in the Pennsylvania Bulletin. This rulemaking is scheduled for review within 5 years of final publication. No sunset date has been assigned.
Contact Person
The contact person for an explanation of this rulemaking is Anita M. Doucette, Office of Chief Counsel, PA Department of Revenue, Dept. 281061, Harrisburg, PA 17128-1061.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on June 30, 1999, the Department submitted a copy of the notice of proposed rulemaking, published at 29 Pa.B. 3736, to IRRC and the Chairpersons of the House Committee on Finance and the Senate Committee on Finance for review and comment.
In compliance with section 5(c) of the Regulatory Review Act (71 P. S. § 745.5(c)), the Department also provided IRRC and the Committees with copies of the comments received, as well as other documentation. In preparing this final-form rulemaking, the Department has considered the comments received from IRRC, the Committees and the public.
This final-form rulemaking was deemed approved by the Committees on June 14, 2000, and was approved by IRRC on June 22, 2000, in accordance with section 5.1(e) of the Regulatory Review Act (71 P. S. § 745.5a(e)).
Findings
The Department finds that:
(1) Public notice of intention to amend the regulations has been duly given under sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1201 and 1202) and the regulations thereunder, 1 Pa. Code §§ 7.1 and 7.2.
(2) The amendments are necessary and appropriate for the administration and enforcement of the authorizing statute.
Order
The Department, acting under the authorizing statute, orders that:
(a) The regulations of the Department, 61 Pa. Code Chapters 55 and 60, are amended by adding § 55.6 and deleting § 60.2 to read as set forth in Annex A.
(b) The Secretary of the Department shall submit this order and Annex A to the Office of General Counsel and the Office of Attorney General for approval as to form and legality as required by law.
(c) The Secretary of the Department shall certify this order and Annex A and deposit them with the Legislative Reference Bureau as required by law.
(d) This order shall take effect upon publication in the Pennsylvania Bulletin.
ROBERT A. JUDGE, Sr.,
Secretary(Editor's Note: For the text of the order of the Independent Regulatory Review Commission, relating to this document, see 30 Pa.B. 3534 (July 8, 2000).)
Fiscal Note: 15-407. (1) General Fund; (2) Implementing Year 1999-00 is $1.2 million; (3) 1st Succeeding Year 2000-01 is $1.2 million; 2nd Succeeding Year 2001-02 is $1.2 million; 3rd Succeeding Year 2002-03 is $1.2 million; 4th Succeeding Year 2003-04 is $1.2 million; 5th Succeeding Year 2004-05 is $1.2 million; (4) 1998-99 Not applicable; 1997-98 Not applicable; 1996-97 Not applicable; (8) recommends adoption. The proposed regulation estimated a $1.1 million revenue loss due to the proposed changes. The increase in the estimated revenue loss for the final regulation represents a recalculation for fiscal year 1999-00 rather than a substantive change from the proposed regulation.
Annex A TITLE 61. REVENUE PART I. DEPARTMENT OF REVENUE Subchapter 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:
Lawn--An area maintained with grass adjacent to a building. The term does not include athletic fields, cemeteries, golf courses, fields, parks and public utility or highway right-of-ways.
Lawn care service--Providing services for lawn upkeep including fertilizing, lawn mowing, shrubbery trimming or other lawn treatment services.
Shrubbery--A woody plant that produces branches or shoots from or near the base.
Tree--A woody plant with a main stem and usually having a distinct head.
(b) Scope. The sale at retail or use of lawn care services performed in this Commonwealth is subject to tax.
(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 grass on lawns.
(6) Applying treatments for weed, pest, insect or disease control to lawns.
(7) Watering lawns.
(8) Applying lime to lawns.
(9) Aerating lawns.
(10) 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.
(11) Overseeding, sodding or grass plugging of existing lawns.
(12) Trimming or pruning shrubbery when performed in conjunction with other lawn care services.
(d) Examples of nontaxable services. The following are examples of services which are not taxable lawn care services:
(1) Seeding, sodding or grass plugging to establish a new lawn. Seeding, sodding or grass plugging in conjunction with building construction will be presumed to be a new lawn.
(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.
(7) Maintaining shrubbery, flower or vegetable beds, such as by mulching, tilling, weeding or fertilizing.
(8) Separately stated charges for leaf raking.
(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 same invoice requires the charging of tax on the total invoice amount.
(f) Exemptions.
(1) Lawn care services are not subject to tax if purchased by qualified institutions of purely public charity, 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 purchase of lawn care services is subject to tax if purchased by persons engaged in the business of manufacturing, mining, processing, public utility, farming, dairying, agriculture, horticulture or floriculture, as those terms are defined in section 201(k)(8) and (o)(4)(B) of the TRC (72 P. S. §§ 7201(k)(8) and (o)(4)(B)).
(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 a purchaser. 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 but not transfer in the performance of its lawn care services.
(i) The following are examples of property that may be purchased exempt for resale when transferred to the purchaser in the performance of lawn care services:
(A) Herbicides, insecticides, fungicides or other chemicals that are applied to lawns.
(B) Grass seed, sod, grass plugs, straw, fertilizers or lime applied to lawns.
(ii) The following are examples of taxable property when used in the performance of lawn care services:
(A) Mowers; edgers; or pruning, dethatching, aerating or mulching equipment, including motor oil and gasoline used in the equipment.
(B) Rakes, shovels or hoes.
(C) Spray applicators.
(D) Testing kits.
(E) Lawn sweepers.
(F) Other tangible personal property and services used in connection with the performance of lawn care services such as invoices, sales receipts, contracts, estimate sheets, confirmations and other similar items.
CHAPTER 60. SALES AND USE TAX PRONOUNCEMENTS--STATEMENTS OF POLICY § 60.2. (Reserved).
[Pa.B. Doc. No. 00-1319. Filed for public inspection August 4, 2000, 9:00 a.m.]
