Did Texas's intercorporate-services exemption cover landscaping and hardscaping performed for affiliates, and how were separated and lump-sum hardscaping contracts taxed?

Plain-English summary

For the affiliated entities described, labor to plant trees, shrubs, or grass and to apply soil or soil additives was nontaxable under the intercorporate-services exemption. The position applied to commercial and residential property.

The exemption did not apply when the company acted as a contractor on hardscaping improvements such as new sprinkler systems, ponds, pools, decks, walks, walls, or fences.

For a separated hardscaping bill, the company charged sales tax on the materials portion. For a lump-sum bill, the customer owed no sales tax on the contract charge, but the contractor accrued use tax on the cost of materials used.

Common questions

Was planting labor for the described affiliate taxable? No.

Did the exemption cover hardscaping contractors? No.

How was a separated hardscaping bill treated? Tax applied to the materials portion.

How was a lump-sum hardscaping bill treated? No customer tax was due, but the contractor owed use tax on material cost.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9005L1020A11

Original ruling text

May 15, 1990

Dear *****:

I have been forwarded your letter concerning landscaping services and
intercorporate exemptions.

Please refer to Adina Whittemore's letter of April 26, 1989 (977G09) to you
for our interpretation of the intercorporate services exemption as it applies
to landscaping. This position applies to commercial and residential property.

The labor to plant trees, shrubs or grass and to apply soil or soil additives,
for example, is not taxable when the customer is an affiliated entity such as
you have described.

When work performed involves "hardscaping" such as the construction of new
sprinkler systems, ponds, pools, decks, walks, walls or fences, you will be
treated as a contractor making improvements to realty. The intercorporate
services exemption does not apply to contractors.

If you bill your customer separated amounts for materials and labor on
hardscaping jobs, you should charge sales tax on the materials portion. If
your billing is a lump-sum amount, no tax is due from your customer; however,
you should accrue use tax on the cost of the materials used on the job.

This opinion is based on the facts presented. If there areadditional facts, or
if the circumstances change, the opinion may change.

Please write or call if you have any questions. You can call toll-free at
800-531-5441. Our regular number is 512-463-3830 and our FAX number is
512-475-0900.

Sincerely,

Larry Koenig
Taxability Section
Legal Services Division