Lawn Care and Landscaping Business Taxes: What Owners Need to Know

Lawn care is one of the most common ways a Parker County business gets started: a mower, a trailer and a few neighbors who would rather pay than sweat. It grows quickly in a place with a long growing season, and the tax side grows with it. Here is what owners of mowing and landscaping businesses run into, in the order they usually run into it.

Income is everything that comes in

Cash from a customer at the curb is income. So is a check, a card payment, a Venmo transfer and a monthly bank draft. Businesses that report only the card and check income and treat cash as invisible have a revenue number that does not match their fuel purchases, their equipment, or their lifestyle, and that inconsistency is exactly what draws attention. Deposit everything into a business account and let the deposits be your income record.

Commercial customers, such as property managers and HOAs, will usually send you a 1099-NEC at year end. Reconcile it against your own records rather than accepting it as your total, since it covers only what that one payer sent.

Equipment: expense it or depreciate it

Mowers, trimmers, blowers, trailers and skid steers are business assets. Smaller items can typically be deducted in the year of purchase. Larger purchases may be expensed under the accelerated rules that apply to business equipment or depreciated over several years, and the choice affects this year's bill and future years' bills. The important habit is keeping a list of every piece of equipment with its date and cost, because that list drives the deduction and, eventually, the tax result when you sell or trade it. We explain that second half in Depreciation and the Recapture Nobody Warned You About.

Trucks and mileage

A truck pulling a trailer full of equipment is a business vehicle, but most owners also drive it home and to the grocery store. That makes the business-use percentage the key number. You can deduct either the standard mileage rate or the actual costs of operating the truck, applied to the business percentage, and each method has rules about when it can be chosen. Either way, a mileage log is required, and a reconstructed log is a weak one. Keep it in the cab or on your phone as you go. Mileage Logs: What Actually Has to Be In One covers the details.

Helpers: employees or contractors

The first hire is where lawn businesses most often go wrong. A helper who rides in your truck, uses your equipment, works the hours you set and is paid by the hour is an employee under the rules that matter, regardless of what you call him or whether you send a 1099. Treating employees as contractors creates payroll tax exposure that compounds. The rules are covered in Employee or Independent Contractor?, and the first-hire mechanics are in Hiring Your First Employee.

A genuine subcontractor, such as an irrigation specialist with his own truck and other customers, is a different story, and that person should give you a W-9 before the first payment.

Texas sales tax applies to most of this work

This is the one that catches owners off guard. Texas treats lawn maintenance and landscaping as taxable services in most situations, which means the business collects sales tax from customers and remits it to the Comptroller. There are limited exceptions, and the treatment of things like new construction landscaping, tree work and materials can differ, so it is worth getting this right early. A business that has been mowing for three years without a permit has a bigger problem than one that registers in month one. Start with Texas Sales Tax for Small Business Owners.

Seasonal income and estimated payments

Revenue peaks from spring through early fall and thins out in winter. That pattern makes quarterly estimated payments harder, since the money comes in unevenly. The practical answer is to set aside a fixed percentage of every deposit during the busy months, so the winter quarters are covered before winter arrives. Safe harbor rules based on the prior year's tax can protect you from underpayment penalties while you settle into a rhythm.

Records that make the return simple

• A separate business bank account and card
• An equipment list with dates and prices
• A mileage log kept as you drive
• Receipts for fuel, parts, repairs, fertilizer and materials
• Payroll records for employees and W-9s for subcontractors
• Sales tax reports and the permit number

When the business outgrows a sole proprietorship

Once profit is consistent, an LLC and possibly an S election become worth a real conversation. Neither is automatic, and the S election in particular only makes sense at a certain level of profit after paying a reasonable salary. We run those numbers for lawn and landscape businesses across Weatherford, Hudson Oaks and Brock every year.

This article is general information, not tax advice. Depreciation rules, mileage rates and sales tax treatment change, so confirm the details for your own business.

Running crews and behind on the tax side? Call RD Precision Tax Service in Weatherford at (817) 480-6649, or request a free estimate. Our small business tax preparation covers the return, the payroll questions and the sales tax setup.