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The state is anticipates that the new sales tax on plantings will generate 81 million dollars a year.
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We are dealing with tangible items that will not be used again. Once we put a plant in the ground it will stay there. Consider a builder who nails up a 2x4. The homeowner will not take it down and use it in another form. The contractor therefore is the last person to use it. The contractor is considered the end user.
A nursery is selling the items to a homeowner or a contractor. Both will dig a hole and put the plant in the ground. Both the homeowner and the contractor is the end user. Both will install the item. Both will pay the sales tax on the material.
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When the tax laws were established years ago, this is the way it was defined. In order to make changes to it you would have to rewrite 46 pages of tax law.
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There are 200 auditors in the state. 100 are in the north and 100 are in the south. Each auditor does on average 25 audits per year. That works out to 5000 audits each year in New Jersey for sales tax. Each auditor brings in about 1 million dollars per year from the audits they perform. That works out to be 200 million dollars generated each year by the NJ State sales tax audit department.
In the past our industry has not been looked at as a group worth going after. Auditors would work with liquor establishments, deli’s, etc., places where there would be a high return for the work the auditor would do. Now, however, our industry is going to be looked at as a revenue builder for taxation.
Audits come directly from Trenton.
An audit will begin with a letter from the state telling you that they are going to do an audit of your sales tax records. You will start with a Pre Audit meeting. At this meeting you will have an opportunity to explain your business to the auditor and educate him on how you operate. Most auditors will never have done a landscape company before.
10% of audits will end after the initial consultation, 90% will go on to an audit.
As a general rule, in an audit, the charges will go back 4 years. If fraud is suspected they will go back 7 years. If no sales tax has been paid they will go back to the inception of the business.
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Keep everything when it comes to documenting the sales tax you paid and the sales tax you collected and paid to the State. The more records you have for an audit the better off you will be. If there are no or poor records, the auditor will have to make assumptions and you will pay based on what the state calculates, not what you actually did.
Always pay tax for the item and have a receipt for it. If you do not pay the tax and you are a contractor, when you are audited, you will pay the tax with penalties.
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All green or soft landscaping is taxable. The planting of trees, shrubs, hedges, flowers and plants as well as seeding, sodding, planting of any grass or ground cover.
The clearing and filling of land associated with the planting of any grass or plants listed above.
Billing
Itemized bills: Do not charge the client sales tax on the cost of the items you have already paid tax on. Client only pays sales tax on that portion of the bill that you have not paid tax on.Markup on any materials is taxable just as the labor is taxed.
Lump sum bills: Charge the client sales tax on the entire amount.
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Hardscaping is still non-taxable.
Itemized bills: Do not charge the client sales tax on the cost of the items you have already paid tax on. Charge sales tax on the mark up of any hardscape material. Do not charge sales tax on labor or equipment.
Lump sum bill: Do not charge sales tax on any of the hardscape work.
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- Landscaping on new homes/construction.
- Mulch jogging path.
- Mulching.
- Repairs and maintenance of any kind.
- Soil stabilization of any kind whether hydro seeding, seeding, plugging or sodding.
- The markup on materials you charge and itemize in any project.
- Fuel surcharges.
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- Drainage systems.
- Driveways whether macadam, gravel, cement or pavers.
- Fencing.
- Grass pavers (emergency vehicle access).
- Gravel jogging path.
- Landscape Lighting.
- Paver walks and patios.
- Sprinkler systems.
- Waterfall and ponds.
- Walls of any material.
- The markup and labor on any hardscape project when you lump sum the bill and do not itemize it.
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Is it a structure?
Will the town charge tax on it?
Is it a ratable? |
