PROPOSED RULEMAKING
DEPARTMENT OF REVENUE
[61 PA. CODE CHS. 55 AND 60]
Sales and Use Tax; Lawn Care Services
[29 Pa.B. 3736] The Department of Revenue (Department), under authority contained in section 270 of the Tax Reform Code of 1971 (TRC) (72 P. S. § 7270), proposes to add § 55.6 (relating to lawn care services) and delete § 60.2 (relating to lawn care services) to read as set forth in Annex A.
Purpose
Currently, the Department's interpretation of section 201(k)(17), (o)(15) and (jj) act of August 4, 1991 (P. L. 97, No. 22) (72 P. S. §§ 7201(k)(17), (o)(15) and (jj)) relating to lawn care services is set forth as a pronouncement and codified in § 60.2. The Department has concluded that the issues relating to lawn care services have evolved to a point where a regulation can be proposed. With the adoption of the proposal in § 55.6, the Department will be deleting the pronouncement in § 60.2.
In 1996, the Department prepared a similar proposal. The Department received numerous comments on this prior proposal concerning the definition of ''lawn'' and the application of the tax to trimming shrubbery. In addition, there were indications that the authorizing statute might be amended by the Legislature. Consequently, the Department decided in 1997 to withdraw the final-form regulation to provide further time to study the revision of the regulation. In this present proposal, the Department has addressed the issues raised in the prior proposed rulemaking process.
Explanation of Regulatory Requirements
Section 55.6(a) defines the terms ''lawn'' and ''lawn care service'' for use in § 55.6. Subsection (b) provides that the sale at retail or use of lawn care services performed in this Commonwealth is subject to tax. Lawn care services became taxable October 1, 1991.
Subsection (c) provides examples of taxable lawn care services. Subsection (d) provides examples of services that are not taxable lawn care services. Subsection (e) provides that tax shall be imposed on the total charge for lawn care services. The failure to state charges for lawn care services separately from other nontaxable charges on the invoice requires the charging of tax on the total invoice amount.
Subsection (f) sets forth exclusions. Paragraph (1) provides an exemption if the lawn care services are purchased by qualified institutions of purely public charity, charitable organizations, volunteer fire companies, religious organizations and nonprofit educational institutions, except if used in an unrelated trade or business. The services are also excluded if purchased by the Federal government or its instrumentalities; or the Commonwealth or its instrumentalities or subdivisions, including public school districts. Paragraph (2) provides that the vendor of lawn care services may claim the resale exemption upon its purchase of tangible personal property that is transferred to the purchaser or a third party in the performance of the lawn care services. This subsection also provides examples of property that may be purchased exempt for resale when transferred to the purchaser in the performance of lawn care services and examples of property that is taxable when used in the performance of lawn care services.
Affected Parties
Providers of lawn care services will be affected by the proposed rulemaking.
Fiscal Impact
The Department has determined that the change in policy from the Department's statement of policy (§ 60.2) relating to the exclusion of shrubbery trimming from tax when not performed in conjunction with a taxable lawn care service and the exclusion of leaf raking from the definition of a lawn care service as set forth in this proposed rulemaking will result in an estimated revenue loss of approximately $1.1 million for Fiscal Year 1998-99.
Paperwork
The proposed rulemaking will require no additional paperwork for the public or the Commonwealth.
Effectiveness/Sunset Date
The proposed rulemaking will become effective upon final publication in the Pennsylvania Bulletin. The proposed rulemaking is scheduled for review within 5 years of final publication. No sunset date has been assigned.
Contact Person
Interested persons are invited to submit in writing comments, suggestions or objections regarding the proposed rulemaking to Anita M. Doucette, Office of Chief Counsel, Department of Revenue, Dept. 281061, Harrisburg, PA 17128-1061, within 30 days after the date of the publication of this notice in the Pennsylvania Bulletin.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on June 30, 1999, the Department submitted a copy of this proposed rulemaking to the Independent Regulatory Review Commission (IRRC) and the Chairpersons of the House Committee on Finance and the Senate Committee on Finance. In addition to submitting the proposed rulemaking, the Department has provided IRRC and the Committees with a copy of a detailed Regulatory Analysis Form prepared by the Department in compliance with Executive Order 1996-1, ''Regulatory Review and Promulgation.'' A copy of this material is available to the public upon request.
If IRRC has objections to any portion of the proposed rulemaking, it will notify the Department within 10 days of the close of the Committees' review period. The notification shall specify the regulatory review criteria which have not been met by that portion. The Regulatory Review Act specifies detailed procedures for review of objections raised, prior to final publication of the amendments, by the Department, the General Assembly and the Governor.
ROBERT A. JUDGE, Sr.,
SecretaryFiscal Note: 15-407. (1) General Fund; (2) Implementing Year 1998-99 is $1.1 million; (3) 1st Succeeding Year 1999-00 is $1.1 million; 2nd Succeeding Year 2000-01 is $1.1 million; 3rd Succeeding Year 2001-02 is $1.1 million; 4th Succeeding Year 2002-03 is $1.1 million; 5th Succeeding Year 2003-04 is $1.1 million; (4) 1997-98 $1.1 million; 1996-97 $1.1 million; 1995-96 $1.1 million; (8) recommends adoption.
Annex A
TITLE 61. REVENUE
PART I. DEPARTMENT OF REVENUE
Subchapter B. GENERAL FUND REVENUES
ARTICLE II. SALES AND USE TAX
CHAPTER 55. SERVICES § 55.6. Lawn care services.
(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise:
Lawn--An area maintained with grass adjacent to a building. The term does not include athletic fields, cemeteries, golf courses, fields, parks and public utility or highway right-of-ways.
Lawn care service--Providing services for lawn upkeep including fertilizing, mowing or performing other lawn treatment services.
(b) Scope. The sale at retail or use of lawn care services performed in this Commonwealth is subject to tax. Lawn care services became taxable October 1, 1991.
(c) Examples of taxable services. The following are examples of taxable lawn care services:
(1) Fertilizing lawns.
(2) Mowing, trimming, cutting or edging lawns.
(3) Dethatching lawns.
(4) Applying herbicides, insecticides or fungicides to lawns.
(5) Raking grass on lawns.
(6) Applying treatments for weed, pest, insect or disease control to lawns.
(7) Watering lawns.
(8) Applying lime to lawns.
(9) Aerating lawns.
(10) Providing lawn evaluation, consultation or soil testing services on lawns, if purchased in conjunction with other lawn care services, regardless of whether the costs of the lawn evaluation, consultation or soil testing services are separately stated on the invoice.
(11) Overseeding, sodding or grass plugging of lawns.
(12) Trimming or pruning shrubbery when performed in conjunction with other lawn care services.
(d) Examples of nontaxable services. The following are examples of services which are not taxable lawn care services:
(1) Seeding, sodding or grass plugging to establish a new lawn.
(2) Trimming, pruning or fertilizing trees.
(3) Planting or removing shrubbery or trees.
(4) Providing lawn evaluation, consultation or soil testing services, if not purchased in conjunction with other lawn care services.
(5) Designing lawns or landscapes.
(6) Applying herbicides or fungicides to shrubbery, trees, flowers or vegetables.
(7) Maintaining shrubbery, flower or vegetable beds, such as by mulching, tilling, weeding or fertilizing.
(e) Purchase price. Tax shall be imposed on the total charge for lawn care services. The failure to separately state charges for lawn care services from other nontaxable charges on the invoice requires the charging of tax on the total invoice amount.
(f) Exclusions.
(1) Lawn care services are exempt if purchased by qualified institutions of purely public charity, charitable organizations, volunteer fire companies, religious organizations and nonprofit educational institutions, except if used in an unrelated trade or business; the Federal government or its instrumentalities; or the Commonwealth, its instrumentalities or subdivisions, including public school districts. The manufacturing, mining, processing, public utility, farming, dairying, agriculture, horticulture or floriculture exclusions do not apply.
(2) The vendor of lawn care services may claim the resale exemption upon its purchase of tangible personal property that is transferred to the purchaser or a third party in the performance of the lawn care services. The vendor may also purchase lawn care services from another provider and subsequently resell the services to its customer. The vendor may not claim the resale exemption upon its purchase of administrative supplies or the purchase of other taxable services that it may use in the performance of its lawn care services.
(i) The following are examples of property that may be purchased exempt for resale when transferred to the purchaser in the performance of lawn care services:
(A) Herbicides, insecticides, fungicides or other chemicals that are applied to lawns.
(B) Grass seed, sod, grass plugs, straw, fertilizers or lime applied to lawns.
(ii) The following are examples of property that are taxable when used in the performance of lawn care services:
(A) Mowers; edgers; or pruning, dethatching, aerating or mulching equipment, including motor oil and gasoline used in these equipment.
(B) Rakes, shovels or hoes.
(C) Spray applicators.
(D) Testing kits.
(E) Lawn sweepers.
(F) Other tangible personal property and services used in connection with the performance of lawn care services such as invoices, sales receipts, contracts, estimate sheets, confirmations and other similar items.
CHAPTER 60. SALES AND USE TAX PRONOUNCEMENTS--STATEMENTS OF POLICY (Editor's Note: As part of this regulatory package, the Department is proposing to delete the text of the statement of policy that appears in § 60.2, 61 Pa. Code pages 60-7--60-9, serial pages (200067)--(200069).)
§ 60.2. (Reserved).
[Pa.B. Doc. No. 99-1125. Filed for public inspection July 16, 1999, 9:00 a.m.]
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