Indiana Updates Sales Tax Bulletin #21: Lawn Care Applications Now Non-Taxable
Published on by Chaleise Fleming in State Local Tax, Tax Services
In July 2025, the Indiana Department of Revenue (DOR) released an important update to Sales Tax Bulletin #21, clarifying the tax treatment of lawn care applications and related services. This revision will significantly impact how businesses in the landscaping, pest control, and exterior services industries apply and collect sales tax, especially as the effective date of January 1, 2026, approaches.
Lawn care tax exempt
The revision bulletin’s central change is the exemption of lawn care application services from Indiana sales tax. Historically, if a lawn care company applied fertilizer or herbicide and billed the service and materials as a single charge, the entire transaction was treated as a taxable bundled transaction.
The DOR now views the primary objective of the transaction as the service itself, not the chemicals applied. Because of this, the transaction qualifies as an exception to the bundled transaction rule and renders the service non-taxable – even if materials and labor appear on a single line item.
Steps to take before 2026
To give lawn care providers adequate time to adapt, the Indiana Department of Revenue has set an effective date of January 1, 2026. This grace period allows businesses to prepare by updating their billing systems and point-of-sale software, adjusting pricing and invoicing formats, modifying tax collection procedures, and training staff on the updated sales tax rules. These steps will help ensure a smooth transition and continued compliance under the revised guidance.
However, the change also creates a tradeoff. Since the service itself is now exempt, the materials used in the service, such as fertilizer, pesticides, and applications, no longer qualify for the resale exemption. Businesses must now pay sales tax at the time of purchase on these items.
Applicability beyond lawn care
The DOR’s updated interpretation may also impact other exterior service providers beyond lawn care. Businesses offering services such as pool cleaning, pest control, and snow or ice removal should carefully evaluate how their offerings are structured and billed. The central consideration is whether the primary purpose of the transaction is the service itself or the tangible property being applied.
If the service is deemed the dominant component, the transaction may qualify as non-taxable under this revised guidance. However, if the tangible property (chemicals, materials sold with the service, etc.) is the focus, sales tax may still apply. Each bundled service must be assessed individually, with attention to how it is presented to customers and how fees are itemized or combined.
Prepare now, avoid issues later
This update is a welcome clarification for many service providers, but it introduces new compliance challenges. Businesses must review their current practices and ensure they’re prepared well in advance of the 2026 effective date.
What’s next
If you’re unsure how this update affects your business or whether your bundled services now qualify as exempt, our sales tax pros can help. Contact us today and we’ll walk you through the new guidance, assess your current billing structure, and help you implement changes with confidence. As always, we’re here to help.
