Landscaping Services Provided by Construction Company Subject to Tax in Arkansas

In a request for revision, the Arkansas commissioner of revenue affirmed an administrative law judge’s determination that a construction company was required to collect and remit sales tax on landscaping work that it performed. The taxpayer is a construction company that performs residential and nonresidential construction. One of the services the taxpayer provides is landscaping. Under audit, it was determined that the taxpayer was selling landscaping services but not collecting or remitting sales tax on sales of the services. Tax was assessed on the taxpayer for the landscaping services sold, and the taxpayer received a credit for tax paid on purchases of items that were purchased for resale. The taxpayer protested the assessment and requesting a hearing, arguing that landscaping on new construction is not subject to tax. In Arkansas, landscaping services are subject to sales tax. Landscaping is statutorily defined as “the installation, preservation, or enhancement of ground covering by planting trees, bushes and shrubbery, grass, flowers, and other types of decorative plants.” The taxpayer did not dispute that the services provided fall under that definition. The taxpayer’s contention that landscaping on new construction is exempt is simply not found in the law. The General Assembly defined “lawn care” to only apply to nonresidential property, but it did not define “landscaping” to only apply to a particular type of property such as new construction. Under the plain meaning of the applicable statute, the services provided by the taxpayer constitute taxable landscaping services. As a result, the assessment of tax on the services was upheld as proper. For taxpayers, this serves as a helpful reminder to be aware or the taxability of the different services that you provide in a state.

(Request for Revision, November 30, 2022, Arkansas DFA)

Posted on January 18, 2023