Taxpayer is an Indiana company which provides pest control
services and lawn care...
The Department's audit determined that Taxpayer failed to
collect sales tax on "turf maintenance contracts," which are taxable
retail transactions. Taxpayer argued that it was not responsible for collecting
sales tax on sales to customers who were exempt from sales tax. Thus, Taxpayer believes
that the Department's assessments were overstated.
…
The Department's Sales Tax Information Bulletin 21 (May
2002), 25 Ind. Reg 3939 ("Information Bulletin 21") addressing issues
concerning "Lawn Care Applications," states, in relevant part, that:
Sales by a Lawn Care Company
The relationship between a lawn care company and its
customer is contractual. The customer agrees to pay a set price and the company
agrees to apply the necessary chemicals to a lawn for its proper care and
maintenance. The chemical cannot be purchased separately from the company and
applied by the customer. A unitary transaction is the purchase of tangible
personal property and services under a single agreement for which a total
combined charge is calculated. A retail unitary transaction is a unitary
transaction that is also a retail transaction. A retail transaction means a
transaction that constitutes selling at retail. A lawn care application is a
retail transaction because the lawn care company acquires tangible personal
property (chemicals) and transfers them to its customers for consideration in
the ordinary course of its regularly conducted business.
The sales tax is imposed on the gross retail income received
in a retail unitary transaction. The gross retail income received includes the
price of the property transferred plus any bona fide charges made for
preparation, fabrication, alteration, modification, finishing, completing,
delivery, or other service performed in respect to the property before its
transfer. Because the chemicals are not transferred until they are applied to
the lawn, the application charges are included in the company's gross retail
income. Therefore, the entire contract price is subject to the Indiana sales
tax. (Emphasis in original).
…
In this instance, the Department's audit noted that Taxpayer
offers "lawn care applications" to its customers, which are taxable
unitary retail transactions outlined in Information Bulletin 21. Taxpayer thus
is a retail merchant and should have collected and remitted the sales tax on
its sales of "lawn care applications." Taxpayer did not do so. Nor
did Taxpayer provide the exemption certificates, which it collected from its
customers, to the Department's auditor during the audit. The auditor was
therefore unable to verify whether certain sales were exempt from the sales
tax.
…
There is no question that Taxpayer entered into retail
transactions for which – absent an exemption – Taxpayer was required to collect
sales tax. Subsequent to the hearing, Taxpayer supplied exemption certificates
from its customers for certain of its sales. The Department, Audit Division, is
requested to review the late-filed exemption certificates and to make whatever
adjustments it deems appropriate.
…
Taxpayer is reminded that sales tax becomes due at the time
of the transaction; either the purchaser is exempt at the time of the
transaction or it is not exempt. If the purchaser claims an exemption, the
exemption certificate should be obtained at the time the transaction occurs
otherwise the burden of proving the transaction was exempt becomes measurably
more difficult.
