Does a contractor building a new golf course owe Texas sales or use tax on site preparation work like clearing, grading, excavation, and earthmoving for tee boxes, greens, and bunkers?

Plain-English summary

A contractor building a new golf course asked the Comptroller whether sales or use tax applies to site preparation work — clearing, grading, excavation, and moving earth to level areas or shape mounds, tee boxes, greens, and bunkers.

The Comptroller's answer: building a new golf course counts as new construction, and labor for new construction is not taxable. So the contractor's own site-preparation labor is not subject to tax.

However, the letter flags an important wrinkle. Even on a new-construction job, the contractor may still owe tax on taxable services it buys from subcontractors. The letter uses landscaping as the example: if a lump-sum contractor hires a landscaping subcontractor, the contractor must pay tax on that landscaping service. A "separated" contractor (one who bills materials and labor separately, rather than one lump sum) can instead buy the landscaping service tax-free for resale, but then must include the landscaping charge in the taxable materials charge billed to the customer. Either way, the tax gets paid somewhere in the chain.

The letter also notes that landscaping-type work — planting flower beds, sowing grass, and similar work — is taxable even when performed on a golf course that already exists, not just on new construction.

What this means for you

Golf course developers and general contractors

If you're building a new golf course, your own site-preparation labor (clearing, grading, excavation, earthmoving) isn't taxed because it's new construction labor. But don't assume the whole job is tax-free — if you subcontract out landscaping (or similar taxable services), you'll owe tax on that piece one way or another, either as the lump-sum contractor paying tax to the subcontractor, or as a separated contractor including the landscaping charge in your taxable materials bill.

Landscaping and grounds-maintenance subcontractors

Landscaping services (planting flower beds, sowing grass, etc.) are taxable services in Texas regardless of whether the property is brand-new construction or an existing, already-built golf course. There's no exemption just because the work happens on a golf course.

Accountants and tax professionals

This letter is a useful, if brief, illustration of the Comptroller's general contractor rules applied to golf course construction: new construction labor is exempt, but taxable services purchased from subcontractors (like landscaping) remain taxable, and the tax treatment differs slightly depending on whether the general contractor bills lump-sum or separated. Note that the letter itself cites no specific statute or rule section — it applies the Comptroller's general new-construction/contractor framework to this taxpayer's facts.

Common questions

Q: Is site preparation for a new golf course taxable in Texas?
A: No. The Comptroller treated building a new golf course as new construction, and new construction labor — including clearing, grading, excavation, and earthmoving — is not taxed.

Q: If site prep isn't taxed, is anything on a golf course construction project taxable?
A: Yes — taxable services purchased from subcontractors, such as landscaping, remain taxable even on a new-construction job. The contractor either pays tax to the landscaping subcontractor directly (lump-sum contractor) or must include the landscaping charge in its taxable incorporated-materials charge (separated contractor).

Q: Is landscaping work on an existing golf course taxed differently than on a new one?
A: No — the letter specifically states that planting flower beds, sowing grass, and similar landscaping work is taxable "even as part [of] an existing golf course," so landscaping stays taxable whether the course is brand-new or already built.

Q: Does this ruling apply to my project?
A: This is a taxpayer-specific letter ruling based on the facts as presented to the Comptroller; only the original recipient can rely on it. It's a useful illustration of how the Comptroller applies new-construction and contractor rules, but you should confirm current treatment with a Texas tax professional or the Comptroller for your own facts.

Q: What's the difference between a "lump-sum" and a "separated" contractor mentioned in the letter?
A: A lump-sum contractor bills the customer one combined price for labor and materials and pays tax on its own taxable purchases (like a landscaping subcontractor's services). A separated contractor bills materials and labor as distinct line items and can buy taxable services like landscaping tax-free for resale, but must then include that cost in the materials charge it bills — and collects tax on that materials charge instead.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9210L1198D08

Original ruling text

August 19, 1992

Dear ***:

I am responding to your letter regarding the construction of a golf course. You
specifically questioned the application of sales or use tax to site preparation
such as clearing, grading, excavation, and movement of the earth to level some
areas, and to create mounds, tee boxes, greens, bunkers, ponds, etc.

Building a new golf course is new construction. Although new construction
labor is not taxed, the contractor may be purchasing taxable services from
suppliers (subcontractors). For example, if a lump-sum contractor is purchasing
landscaping services, the contractor must pay tax to the service provider.
Landscaping services are incorporated into the realty and may be purchased for
resale by a separated new construction contractor; when this occurs the charges
for landscaping must be included as part of the incorporated materials charge.
Planting flower beds, sowing grass, etc., even as part an existing golf course
are also taxed.

This opinion is based upon the facts presented. If there are additional or
different facts, the opinion may change.

You may write Tax Administration Division, Comptroller of Public Accounts.

Sincerely,

Tax Administration Division