Tax Commission

Introduction

This publication provides tax information relating to nurseries, florists, landscapers and related industries. General sales and use tax information is available in Publication 25.

Tax Commission publications are reference tools. They are not all-inclusive and should not be used as legal references.

Tax laws may change due to legislative action. Changes to law will supersede any information in this publication.

Who is an Agricultural Producer?

An agricultural producer is primarily engaged in the production of ornamental plants; nursery products such as bulbs, florists’ greens, flowers, shrubbery, flower and vegetable seeds and plants; and trees and sod. Producers also include tree nurseries or tree farms.

What can an Agricultural Producer Purchase Tax Free?

Four kinds of sales tax exemptions apply to purchases by agricultural producers:

1. the resale exemption,
2. the agricultural exemption,
3. non-returnable containers and labels, and
4. exemption for the purchase of items that become a component part of a final taxable product.

If a purchase does not qualify under one exemption, it may qualify under another.

When making a purchase or sale exempt from sales tax, the purchaser completes form TC-721, Exemption Certificate, which is retained by the seller.

Resale Exemption

Owners of nurseries, flower shops and other related businesses may purchase items for resale tax free, then collect sales tax from the retail purchaser. However, items purchased for use by the business owner in producing or storing plant material may not be purchased tax free under the resale exemption. The following example illustrates this point:

Example 1

A florist may purchase fresh flowers, vases, ribbon, and cards from a wholesale distributor tax-free for use in the flower arrangements that the florist sells to its retail customers. However, the florist must pay sales tax on the purchase of vases used to store or display the flowers in coolers until the flowers are sold at retail. In the first instance, the vase is sold to the retail customer as part of an arrangement. In the second instance, the vase is not sold to a retail customer, but is used in the operation of the business.

An exception to the resale exemption exists when the retailer sells and installs trees, shrubs, plants, sod, sprinkling systems, fencing, pavers, landscaping timbers or other items which are converted to real property upon installation. An item is considered converted to real property when it is affixed to the real estate and installed in a manner that suggests it will remain in place over the useful life of the item. When a retailer sells and installs items of this nature, the retailer is considered a real property contractor. The real property contractor – not the property owner –is liable for sales tax on the purchase price of items installed because the real property contractor is the last person to own the items as tangible personal property. Examples 2 and 3 illustrate the tax liability for items that become part of a landscape.

Example 2

A homeowner hires a landscape contractor to install landscaping which includes trees, shrubs, sod, and an artificial pond. The landscaper purchases the plants and materials to create the pond from a supplier, installs them, and charges the homeowner for the total final project. Because the landscaper converts the items to real property, the landscaper must pay sales tax on his cost of the items. The amount charged by the landscaper to the homeowner is not subject to sales tax.

Example 3

A homeowner purchases plants, sod and materials for building an artificial pond. The homeowner then contracts with another party to install the items in the landscaping. In this case the homeowner is the last person to own the items as tangible personal property, and the homeowner must pay sales tax on the purchase price of these items. The installer is merely selling a non-taxable service. The charge by the installer to the homeowner is not subject to tax.

The above examples describe items typically converted to real property upon installation. Example 4 demonstrates a landscape contract that includes items not converted to real property upon installation.

Example 4

Assume the landscaper in Example 2 also supplied moveable benches as part of the landscape. Because the benches will not be affixed to the real property in a manner that suggests intent to leave them in place over their useful lives, they remain tangible personal property. The landscaper is a real property contractor with regard to the plants, sod and materials used to build the pond, but he is making a taxable retail sale of the benches to the homeowner. The landscaper will pay sales tax on his purchase of the items that will be converted to real property, but he may purchase the benches tax-free for resale. In billing the entire project to the homeowner, the landscaper must state the amount of tax imposed on the taxable items (the benches).

Example 5

A mall developer designs the mall facility to include a permanent indoor landscape, which includes long-term trees and shrubs. The developer contracts with a landscaper to provide and install the plants. As in Example 2 above, the landscaper is acting as a real property contractor and must remit the sales tax on his purchase of the landscape plants.

If the landscaper in these examples originally purchased the materials for the landscape tax-free, then converted them to real property under a furnish and install contract, the landscaper must report and pay sales tax on those items as goods consumed.

Incorrect Seller Practices

A seller that sells tangible personal property under a furnish and install contract (see examples 2 and 5) may not:

1. collect sales tax on that tangible personal property;
2. offset the use tax the seller owes on its own purchase of the tangible property by any sales tax the seller inappropriately collected on the sale of that property; or
3. show the tax due on the seller/installer’s purchase of construction materials (or any amount labeled as tax, computed at the current tax rate, or that otherwise appears to be tax) as a separate item on an invoice or contract provided to the customer.

A seller that inappropriately collects sales and use tax on property sold under a furnish and install contract is required by Utah law to remit the tax to the Tax Commission, unless the tax is refunded to the purchaser.

What can an Agricultural Producer Sell Tax Free?

A seller who sells items of tangible personal property or provides services must collect and remit sales tax on that sale unless the sale is exempt under one of the exemptions described in this section.

Sale for Resale

An agricultural producer may sell items of tangible personal property tax-free if the purchaser provides the agricultural producer with a resale exemption certificate.

Example 8

A sod farm operator sells sod to a nursery for resale to its retail customers. The sale by the operator to the nursery is tax exempt under the resale exemption. The sale by the nursery to the retail customer is taxable.

Example 9

A sod farm operator sells sod directly to a homeowner for installation by the homeowner. This is a retail sale that does not qualify for exemption as a sale for resale, unless it fits within the exemption for sales of seasonal produce described in the next section.

Translation

To help visitors understand information on this page in a variety of languages, the Tax Commission has added a link at the bottom to an automated translation service. This type of service is not perfect, and context or meaning may be inaccurately or incompletely translated. As a result, the Tax Commission cannot guarantee the accuracy of translated information. Anyone relying on translated information does so at their own risk. In the event of any disagreement or ambiguity between a translation and the original English document, the original English document is correct.

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