EvergreenLawns.com understands what’s it’s like to be a lawn maintenance company just starting out in the green industry. Having gone from a single employee working out of a personal truck and pulling a trailer, to multiple crews and 6 figure sales in just 4 short years. When we started out we serviced only residential accounts but quickly learned that if you want to keep employees on the payroll year round we would need commercial accounts. By the end of year four we were 98% commercial with year round annual contracts.

Below are some tips and tricks we learned the hard way. Though not meant to be a lesson on how to run a lawn care business, it may offer some information that you might not have thought about prior to starting a small lawn care and landscaping company.

As this website is basically a hobby, please be patient as we add additional content to the website. If you come across a link that is not yet active, try again in a few days as we may have been able to get that page uploaded.

Please Note: The following information is relavent to lawn care and landscaping companies operating within the State of Texas only as license requirements, plant and grass types, equipment distributors, and fees differ from state to state. Being from Texas and operating a commercial lawn maintenance business within the State of Texas, this is the area of the country that we are the most familiar with. Although the lawn care tips and tricks provided on this website can be useful in other areas of the country as well.

If you do landscaping or lawn or plant care, you should be collecting sales and use taxes. Landscaping and lawn and plant care services include any work you do to maintain or improve lawns, yards and ornamental plants and trees.

Collecting Tax

You should collect state tax, plus any local tax (city, county, special purpose district or transit) on the total charge for these services.

Guidelines

Here are some examples that should help you decide which of your services are taxable. Of course, these examples don’t cover every situation. If you have a question, call us.

Taxable Services

• Planting, transplanting, relocating and removing indoor or outdoor plants
• Identifying, preventing or curing plant diseases
• Pruning, bracing, spraying, fertilizing and watering plants
• Planting, mowing, trimming and edging grass or other ground cover
• Planting and maintaining flower gardens
• Trimming, spraying, and maintaining trees

Nontaxable Services

• Mowing pipeline or highway rights-of-way
• Trimming trees away from power lines
• Harvesting, cultivating, mowing and fertilizing farm or forest land
• Mowing cemeteries

You should separately state charges for nontaxable services from charges for taxable services. Otherwise, your total charge will be presumed taxable if the taxable portion is greater than 5 percent. You or your customer may overcome the presumption through documentary evidence that establishes the percentage related to nontaxable services. Your invoices or contracts should clearly identify the services you perform.

Landscape Designers and Architects

The professional services of landscape designers and architects are not subject to sales and use tax. These services include consultations, research, preparation of design plans and other engineering or architectural services. You should separate your charge for nontaxable professional services from any charges for taxable landscaping services, or the total charge will be presumed taxable if the taxable portion is greater than 5 percent. Again, you or your customer may overcome the presumption through documentary evidence.

Lawn Care and Landscaping by the Self-Employed

Lawn care and landscaping (other than pest control services requiring a license) are nontaxable when done by a self-employed individual who:

1. does the actual lawn care or landscaping services;
2. has no employees, partners or other persons providing the services;
3. has gross receipts from the services of less than $5,000 during the most recent four calendar quarters.
4. If your income from landscaping and lawn care exceeds $5,000 during the most recent four calendar quarters, you must begin collecting tax on these services on the first day of the quarter after the threshold is exceeded. When your gross income from these services falls below $5,000 for the most recent four calendar quarters, the exemption resumes on the first day of the next quarter.

Construction

Landscaping services do not include the construction or repair of decks, retaining walls, fences or pools, or the installation of underground sprinkler systems. These activities are either new construction, or repair or remodeling of real property. Be sure to separate landscaping charges from charges for new construction or for repair or remodeling because different rules apply.

Nonresidential real property repair or remodeling is a taxable service. The service provider must collect sales tax on the total charge to the customer for materials, labor and other expenses. The service provider may issue a resale certificate to the supplier when purchasing materials transferred to the customer. Refer to Rule 3.357 regarding Real Property Repair, Remodeling, and Restoration; Real Property Maintenance.

No tax is due on labor to repair or remodel residential real property or to build new structures (residential or nonresidential). The type of contract determines how tax is paid on the materials incorporated into the realty. If the construction contract is lump sum (one charge, including labor and materials), the contractor pays tax when purchasing the materials and does not collect tax from the customer. If the contract is separated (separate charges for labor and materials), the contractor collects sales tax from the customer on the charges for materials but not for labor. A separated contractor may purchase the building materials tax-free by issuing a resale certificate. Refer to Rule 3.291 on Contractors.

Landscaping of New Residential Structures

Landscaping and lawn care are not taxable when purchased by a contractor or home builder as part of the improvement of real property with a new residence. This exclusion applies to the construction of model homes and speculative homes that will be sold for residential use, but not to an improvement being used as an office. For example, tax is due on landscaping of a sales office, even if it’s located in the residential development. If you landscape a new residential structure for a contractor, you are responsible for billing and collecting tax until the contractor provides certification stating that the service is part of an improvement of real property with a new residential structure. If it is later determined that the work does not qualify as nontaxable, the person who issued the certification will be held liable for the tax.

The landscaping materials used for new residential structures are taxable. In a lump sum contract (one amount for materials and labor), the landscaper pays tax when purchasing the materials and does not collect tax from the customer. If the contract is separated (separate charges for materials and labor), the landscaper collects tax from the contractor or homebuilder on the charge for materials and can give a resale certificate when purchasing materials.

Materials, Supplies, and Equipment

Give a resale certificate to the supplier when purchasing fertilizer, plants, flowerbed edging, herbicides, and processed dirt, sand and gravel used in taxable landscaping or lawn care. These materials are transferred to the care, custody and control of your customer as part of your taxable service. When landscaping a new residential structure for a contractor or homebuilder, keep in mind the difference between lump sum and separated contracts in paying or collecting tax on these materials.

You must pay sales tax on the supplies and equipment used in landscaping and lawn care. There is no exemption for the purchase or rental of wheelbarrows, lawn mowers, string trimmers, gloves and other equipment, tools, and supplies.

Reselling a Landscaping Service

Sometimes you may hire a third party to provide some of the landscaping services that you sell. In that case, give the third party a resale certificate instead of paying sales tax and collect tax from your customer on the total charge, including the third party’s charge.

If you would like to read the original document on the Texas State Comptroller of Public Accounts website, you may find the document HERE.

An assumed name certificate (aka: Doing Business As or DBA), is a certificate filed with the county clerks office showing that an individual is engaged in business within that county under a particular business name.

To file for your assumed name certificate, you will need to make a visit to your local county clerks office and ask for assistance in filing for a DBA. Depending on the county, this is generally a simple one page form that you can fill out at the county clerks office and give back to them. Then after paying your filing fee, which generally runs between $10 – $20 dollars, they will check their database to confirm that no other businesses in that county are operating under the business name you have chosen. If no such other business exist, you will be issued your assumed name certificate. This certificate is required to be able to open up your commercial checking account at your bank, which is deffinately suggested.

STEP 2: Opening A Commercial Checking Account

Having a commercial checking account is important for several reasons. First off, having a seperate business checking account makes it easy to seperate your personal finances from your business expenses. This is actually a very critical step when it comes to tax time as you will want to be able to claim on your tax return, the initial startup expenses you will incur when starting your business.

Secondly, as customers pay you for your services, you will need a means of depositing their payments. Though it is a common misconception to think that you will be able to start up and only accept cash payments, you WILL miss possible jobs as people do not always have the cash on hand to pay. Thus you will either not receive a possible contract, or you will be requested to return at a later date for payment. This is deffinately something you do not want to get in the habit of doing as it requires a second trip to the residence, thus increasing your non-productive time and well as costing you fuel and travel expenses.

STEP 3: Establishing A Business Phone Line

Though I have known serveral new startup companies who have tried to use their cell phone or home phone as their business line to save up front money, this is not recommended. As there really aren’t any benefits to doing the above, I will only list the draw backs of using your home phone or cell phone as your primary means of communication.

First and foremost, almost immediately after you file for your state sales tax number, your phone will ring off the hook for about two months with every Tom, Dick & Harry credit card company, marketing company, insurance company, etc., etc… trying to sell you something. As state sales tax information is public domain, these companies scan all the new businesses that have filed for a state sales tax number and begin bombarding them with promotional phone calls. If you are using your cell phone as your business line, then your cell phone bill can certainly cost you more money than the initial setup cost of a business phone line.

Secondly, if you are using your home phone as your business line, then you will run into issues when trying to claim this as a business expense on your tax return. A dedicated business line can be claimed on your tax return as an expense with no problems.

Third, if you perform quality work and do even a minimal amount of business promotion, your business WILL GROW. And as it grows and develops, you will start receiving more and more phone calls. As customers aren’t always the most courteous about what times of the day or night that they decide to contact you, you will develop problems in maintaining anything remotely close to normal business hours.

STEP 4: Filing For Your State Sales Tax Certificate

A big misconception is that a person operating a lawn care company does not have to collect state sales taxes. In the vast majority of situations this is entirely inaccurate. You can view the State of Texas requirements for lawn care businesses HERE. In the State of Texas, sales and use tax permits are distributed and handled through the Texas Comptroller of Public Accounts office.

Filing for a resale sales tax certificate is very simple and can be accomplished in a couple of different methods. The first and probably the simplest is to file for your certificate online. We have provided a link to the Texas Comptroller Of Public Accounts website for filing for a sales tax permit HERE.

The second method, and though not complicated, does require travel time and expense. And that is to visit your local Comptrollers Office personally and file for your certificate.

In Closing

You have now completed the vast majority of the initial business requirements for startup. Though you will face a host of other business decisions prior to having your new lawn care business established and fully operational. The above steps are only the first initial chores that must be accomplished prior to beginning your business. Other decisions you will make regarding your new lawn maintenance business startup will include:

• Equipment (Buy or Lease)
• Advertising
• Establishing Service Fees
• Accounting / Billing Issues
• Employees
• Scheduling
• Income Diversification

We will try and cover these topics in more detail seperately. Click HERE to return to our Commercial Lawn Maintenance Business Tips page for additional articles.