Arkansas Rules Artificial Turf Installation to Not Be Taxable Landscaping

Overturning an audit determination made by the Department of Finance and Administration, the Arkansas Tax Appeals Commission determined that a company’s installation and repair of artificial turf for athletic fields did not qualify as a taxable landscaping service. The ruling relied on the plain text of the statute that defines landscaping as, “the installation, preservation, or enhancement of ground covering by planting trees, bushes and shrubbery, grass, flowers, and other types of decorative plants,” and noted that artificial turf was not included in the descriptions. The Appeals Commission also cited the language of rules defining taxable and nontaxable contractor services to real property, which include the installation of artificial surfaces like parking lots. Comparing the two in their decision, the Commission writes, “Both are permanent improvements to real estate; both are nonmechanical; both provide a functionality not previously present; and both typically involve substantial substrate, concrete edging, and a finished surface. No rule or statute exists that alters the taxability based on the fact that one is used for vehicles and the other for humans, or that one is constructed with gravel, concrete and/or asphalt, while the other consists of gravel, concrete, and fabric.” The Commission also denied the Department of Finance and Administration’s Motion for Reconsideration.

When deciding the taxability of a product or service not specifically named in any state law or guidance, often the decision comes down how similar services are treated. In this case, the Department of Finance and Administration and the Appeals Commission both compared the artificial turf service to different specified services, and came to different conclusions. For the taxpayer, paying close attention to how the rules for these products are written can be important when determining how they apply to their own situations. (Docket No. 23-TAC-00112, Arkansas Tax Appeals Commission, November 27, 2023, released December 2023)

Posted on February 26, 2024