Is mowing, grading, dirt work, and other land-clearing or site-preparation work taxable in Texas, and does it matter whether the work is for new construction or an existing property?
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This page answers the general question as of 1996. Ezel answers yours, under current Texas tax law, with citations.
Subject
Clearing Land/Site Preparation — For Construction Purposes
Plain-English summary
A self-employed contractor whose work included mowing, grading, and dirt work asked the Comptroller's office nine specific questions about which of these activities are taxable. The Comptroller answered each one, and the answers turn on two distinctions that run through the whole letter: (1) agricultural work versus landscaping/lawn maintenance, and (2) work that is part of new construction (not taxable) versus work that repeats landscaping-type activities on an existing property (taxable).
Mowing. Mowing pastures for hay baling or other agricultural purposes is not taxable. But mowing vacant lots or acreage to control weeds or pests (often to satisfy a local ordinance) is taxable lawn maintenance.
Site preparation for new construction. Clearing and excavating (removing trees, grass, underbrush) and "rough grade" (shaping the ground around the foundation for drainage) are part of new construction and are not taxable. "Final grade" -- spreading or leveling dirt to prepare a yard for landscaping, including creating swells for drainage -- is a taxable service.
The 1995 residential exemption. Effective October 1, 1995, contractors building new residential structures can buy landscaping and other taxable real property services tax-free by giving the service provider an exemption certificate. The same services performed during new construction of an office building or other nonresidential structure remain taxable.
Existing properties. Leveling or grading the yard of an existing home or business is taxable if it repeats final-grade or other landscaping work. It is not taxable if it's rough grade for adding new space to the building, or landscaping for a contractor doing residential new construction -- but a homeowner (as opposed to the contractor) can never buy these services tax-free.
Drainage cutting. Not taxable when it's part of rough grade for new construction or part of installing an underground sprinkler system, water line, or gas line. Taxable when it's part of final grade or landscaping (such as cutting swells for drainage).
Gravel/road material leveling. Leveling gravel or road material in new residential driveways/parking areas (homes, apartments, nursing homes) is residential new construction or residential repair/remodeling; leveling for a new business driveway or parking lot is new construction -- in both cases the charge for new construction itself is not taxable. But leveling gravel or road material in existing driveways or parking areas of businesses is taxable nonresidential repair or remodeling.
Grass seed and ground preparation. Spreading grass seed is taxable lawn/yard maintenance or landscaping, unless it's sowing a hay field (not taxable). Disking or harrowing soil is taxable when done to prepare for landscaping, but not taxable when it's an agricultural operation.
Churches and schools. The taxability of all of the above services is the same whether the customer is a church, school, or other exempt organization -- but a qualifying exempt organization may give the service provider an exemption certificate for the taxable services.
The letter closes by noting the opinion is based on the facts presented and may change if the facts are different.
What this means for you
Land-clearing, grading, and lawn-service contractors
Track whether your work is agricultural, part of new construction (site prep, clearing/excavating, rough grade), or a landscaping/final-grade/maintenance activity -- the tax answer differs for each. If you bill a lump sum for new construction labor plus taxable services, and you separately state a charge for incorporated materials on the new-construction portion, you must collect tax on that separately stated materials charge.
Residential home builders and their subcontractors
Since October 1, 1995, if you're a contractor building a new residential structure, you can purchase landscaping and other taxable real property services tax-free by giving the service provider an exemption certificate or other documentation stating the services are for new construction of a residential structure. This exemption does not extend to office buildings or other nonresidential new construction, and it does not extend to the homeowner -- only the contractor can buy tax-free.
Homeowners, business owners, and property managers doing yard work on existing property
Repeat landscaping activities on your existing yard (final grade, grading, drainage cutting for landscaping, gravel leveling in existing drives/lots) are taxable, whether the property is residential or a business. Homeowners cannot use the residential-contractor exemption certificate -- that exemption applies only to the contractor performing new residential construction.
Common questions
Q: Is mowing a pasture for hay taxable?
A: No. Mowing pastures for hay baling or other agricultural purposes is not taxable.
Q: Is mowing a vacant lot in a subdivision taxable?
A: Yes. Mowing vacant lots or acreage for weed or pest control is taxable lawn maintenance, even though it's often done to satisfy a local ordinance.
Q: Is clearing and grading a new construction site taxable?
A: Site preparation, clearing/excavating, and rough grade performed as part of new construction are not taxable. Final grade -- spreading or leveling dirt for landscaping -- is taxable.
Q: Can a residential builder buy grading and landscaping services tax-free?
A: Yes, effective October 1, 1995, a contractor building a new residential structure may purchase landscaping and other taxable real property services tax-free by providing an exemption certificate. This does not apply to nonresidential (e.g., office building) new construction, and a homeowner cannot buy these services tax-free.
Q: Is leveling or grading the yard of an existing home taxable?
A: Yes, if it repeats final-grade or other landscaping activities. It is not taxable if it's rough grade for adding new space to the home, or if it's landscaping performed for a contractor doing residential new construction.
Q: Is cutting drainage into a site taxable?
A: No, if it's part of rough grade for new construction or part of installing an underground sprinkler system, water line, or gas line. Yes, if it's part of final grade or landscaping, including cutting swells for drainage.
Q: Is leveling gravel in a driveway or parking area taxable?
A: Leveling gravel or road material as part of new construction of a residential driveway/parking area, or a new business driveway/parking lot, is new construction and the charge for new construction is not taxable. Leveling gravel or road material in an existing driveway or parking area of a business is taxable nonresidential repair or remodeling.
Q: Is spreading grass seed taxable?
A: Yes, as lawn or yard maintenance or landscaping, unless the grass seed is being sown as a hay field, which is not taxable.
Q: Does it matter if the customer is a church or school?
A: No -- the taxability of the services is the same. However, a qualifying tax-exempt organization may issue an exemption certificate to the service provider for the taxable services.
Source
- STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
- Opinion: https://star.comptroller.texas.gov/view/9609900L
Original ruling text
September 27, 1996
Dear **:
I am responding to your sales tax questions. You stated you are self-employed
and the work includes mowing, grading and dirt work, etc. I have restated your
questions before each response.
The responses address the taxability of the labor, i.e. the lump-sum new
construction charge to the customer and the lump-sum charge for taxable
services to the customer. If you bill separately for incorporated materials and
labor on the services that are new construction, you must collect tax from the
customer for the separately stated charge for incorporated materials.
- Is there tax on field and pasture mowing/acreage mowing?
- Is there tax on mowing vacant lots in a subdivision?
Mowing pastures for hay baling and mowing for other such agricultural purposes
is not taxable.
Mowing vacant lots and acreage of various sizes for the purpose of weed control
or control of other pests (rodents, etc.) is taxable lawn maintenance. Normally
this is done to satisfy local ordinances.
- Is there tax on spreading or leveling dirt on construction sites of new
homes, office buildings on new construction?
The response to this question has been altered by legislation in the 1995
session. In my explanation I will point out the changes for residential
construction.
Activities performed to prepare the construction site for the building such as
site preparation; clearing and excavating that is the removal of trees, grass,
underbrush, etc.; and rough grade that involves work around the perimeter of
the foundation creating a slope downward away from the foundation for drainage
purposes are tasks included in new construction and are not, nor were not,
taxable services. Final grade involves preparation of the yard for landscaping
by spreading or leveling the dirt on the site. Final grade may include creation
of swells within the soil to improve drainage. Final grade is a taxable
service.
Effective October 1, 1995, contractors building new structures to be used as
residences may purchase landscaping and other taxable real property services
tax-free. The contractor should give exemption certificates or other acceptable
documentation to the service provider stipulating the real property services
are purchased by the contractor during the new construction of a residential
structure. These same services performed during the new construction of an
office building or other nonresidential structure will remain taxable.
- Is there tax on leveling or grading yards of existing residences or
businesses?
Yes, when the leveling or grading the yards of existing residences or
businesses is a repeat of the activities of final grade or of other landscaping
activities. No, when the leveling or grading is part of rough grade for the
addition of new space to the home or building and when the leveling or grading
is part of landscaping performed for a contractor performing residential new
construction. The homeowner cannot purchase these services tax-free.
- Is there tax on cutting drainage into residential or construction sites?
No, when the work is part of the rough grade for the new construction site or
when part of the installation of an underground sprinkler system, new water
line, gas line, etc. Yes, when the cutting is an integral part of the final
grade or landscaping including cutting that creates swells for drainage. Again,
the contractor performing residential new construction may purchase these
landscaping services tax-free; the homeowner may not.
- Is there tax on leveling gravel or road material in drives or parking areas
of homes or businesses?
Leveling gravel or road material in residential driveways or parking lots for
apartments, nursing homes, and other such residential property is either
residential new construction or residential repair or remodeling. Leveling
gravel or road material as part of the new construction of a driveway or
parking lot for a business is new construction. The charge to the customer for
new construction is not taxable.
Leveling gravel or road material in existing drives or parking areas of
businesses is taxable as nonresidential repair or remodeling.
- Is there tax on spreading grass seed on residential or commercial?
Yes, this is lawn or yard maintenance or landscaping. However, if the spreading
of grass seed is the sowing of a hay field the service is not taxable.
- Is there tax on ground preparation, disking, or harrowing soil for
preparation of grass seeding?
Yes, when in preparation for landscaping; no, when an agricultural operation.
- Is there tax on any of the above if this work is for a church or school?
The taxability of the services remain the same when performed for a church,
school, or other organization that has qualified for exemption from sales tax.
However, the qualifying exempt organization may issue an exemption certificate
to the service provider for the taxable services.
This opinion is based upon the facts presented. If there are additional or
different facts, this opinion may change.
Sincerely,
Tax Policy Division
NOTE: Previous Accession Number 9609L1441G12
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