Sleeveless in Seattle - Wacky Tax Wednesday

Recent record-breaking high temperatures and sunny skies are intoxicating the people of the Pacific Northwest. We’re peeling off our customary layers, firing up the grills, and turning lovely shades of boiled-lobster red. I suspect that no one appreciates the fine weather more than the accountants and bookkeepers who have been buried in tax returns for months.

To stave off nightmares of income tax returns, I've turned my attention to sales tax. Will I pay sales tax on the accounting/bookkeeping services I use to file my returns? Do my neighbors pay sales tax on their yard care services?

Silly me. I should have known that sales tax compounds nightmares.

Scary: sometimes taxable

The taxability of landscaping and lawn care services is less straightforward than one might think. In fact, they're more likely to be “sometimes taxable” than strictly taxable or exempt. Taxation can hinge on the amount of business done in a year, or whether a lawn is new or being maintained, or even the location of a plant itself. And I thought Stephen King stories were scary.

An un-exhaustive list of sometimes taxable landscaping and lawn care services:

• Minnesota: most lawn and gardening services are taxable unless they’re part of an initial landscaping project, when they’re exempt. For example:
  • Moving trees, shrubs, etc. from one location to another is exempt;
  • Bracing, pruning, spraying, surgery, and trimming trees is taxable.
• Ohio: landscaping and lawn care services are exempt if providers sell less than $5,000 worth of these services, but taxable if providers do $5,000 or more in business.
• Texas: taxability depends on who is performing the service and the location of the plant. For example:
  • Lawn care and landscaping services are taxable unless performed by a self-employed individual who performs the services him or herself, has no employees or partners, and has annual gross receipts from the services of $5,000 or less;
  • Trimming, spraying and maintaining trees is a taxable service unless you’re trimming trees away from power lines, when the charge is exempt.

It should be noted that landscaping services are almost always taxable in some states, such as Arkansas and Washington. They are also exempt in several states, including Alabama.

The balm: professional services

By contrast, considering the taxability of professional services is a balm. The services provided by our beloved (and recently beleaguered) accountants and tax preparers are the least taxed type of service around; only a handful of states apply tax to all but a few exempt professional services: Hawaii, New Mexico, and South Dakota.

Could this be because attorneys and lobbyists also fall under professional services? Perhaps. But for this week, at least, let’s say our tax preparers have earned an exemption. They've suffered enough.

From time to time, lawmakers in one state or another propose broadening sales tax in general and applying it to professional services in particular. The District of Columbia and North Carolina have successfully extended sales tax to certain services (professional services remain exempt), and the topic is currently under discussion in Vermont.

Interested in knowing more? Read this whitepaper: Services Taxability by State.