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IPLLA News Online for March 2011- IN Sales Tax Revisited

07 Mar 2011 8:00 AM | IPLLA Admin (Administrator)

   




View the Indiana Sales Tax Information Bulletin #21  Here


IPLLA News Online
March 2011


Revisiting the Indiana Sales Tax Law
Bob Andrews IPLLA Executive Director

As we prepare for another and hopefully successful season, I want to revisit an issue which comes up every year--that is the collection of Indiana Sales Tax on the sale of lawn and/or tree care treatments.  The Indiana Department of Revenue has consistently enforced the law--that sales tax is to apply to the gross income received from each lawn care application.  The same holds true for tree and shrub applications.

Let me be clear on this as, after many years of enforcement, there still seems to be considerable question about when you are required to collect sales tax and when you are not.  In the case of lawn care and tree care applications, you definitely are required to do so and on the entire amount of the sale.

Such applications are considered to be unitary transactions; meaning that they are the sale or purchase of a tangible good or service under a single agreement for which a total combined charge is calculated.  Virtually every lawn care company I know sells services “by the application” and charges a single price for both product and labor to apply it.  Under Indiana law, this means that you must collect 7% of the total price charged for Indiana Sales Tax.

At the same time, most lawn care operators do not pay sales tax when they purchase chemicals or fertilizers.  When those products are then sold as a part of the entire treatment, sales tax is to be charged to the customer.

Sales tax does not need to be charged when the service consists of labor only--such as mowing or core aeration. 

Each season I hear of more than one of our members who make the mistake of not including sales tax on the total amount for their application sales.  After an audit by the Department of Revenue reveals this, they face paying the tax, which they failed to collect, as well as any penalties involved.

Don’t get caught off guard here.  Refer any questions you may have to your accountant who can then research Information Bulletin #21 dated May 2002 by the Indiana Department of Revenue.


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