The Arkansas Department of Finance and Administration (DFA) recently ruled that lawn care services for residential rental properties were not subject to sales tax.
The taxpayer purchased lawn care services for residential single-family homes that it rented out. Arkansas taxes lawn care and landscaping services. However, "lawn care" is defined as "the maintenance, preservation, or enhancement of ground covering of nonresidential property." Arkansas defines "residential" property to mean "a single-family residence used solely as the principal place of residence of the owner or occupant." The definition excludes multi-family dwellings such as apartment buildings, condominiums, and duplexes, but includes single-family dwellings leased to the occupant. The DFA determined that even though the rental homes were owned by a business entity, the rentals were residential property because they were single-family dwellings used as residences. As a result, the lawn care services performed on those properties were not taxable.
The DFA clarified that lawn care services for any commercial property owned by the vacation rental business, including vacant lots, would be taxable.