A grave-opening/closing service provider for funeral directors asked the Comptroller several questions: is backhoe/truck/driver grave-opening and closing labor taxable, is it a taxable equipment 'rental' if billed separately, how is selling and installing a concrete burial vault taxed, and is setting up a tent and chairs at graveside a taxable rental?

Plain-English summary

This 1993 Texas Comptroller letter answers four questions from a company that provides grave-opening/closing and related services to funeral directors. The taxpayer had previously gotten phone guidance from a Comptroller employee (Mr. John Christian), who then transferred divisions, so a colleague (Wanda Hutcheson, Tax Administration Division) wrote back to formally answer the same questions in one letter — and to correct one of the earlier phone answers.

The core theme across all four answers is that labor and services for the funeral industry are generally not taxable, but how you bill for the equipment used to perform that labor matters. Separately stating a charge for a backhoe, truck, or trailer — even with an operator — risks being recharacterized by an auditor as a taxable equipment "rental" under Rule 3.294(c)(3), so the letter recommends either billing a lump sum or labeling any separately stated equipment charges as "cost reimbursements."

What this means for you

Grave opening/closing service providers

The labor to open and close a grave (using a backhoe, truck, trailer, and driver) is not taxable. But if you bill the funeral director a separate line-item charge for the equipment itself, an auditor may treat that as a taxable equipment rental. The letter's practical advice: pay tax yourself when you buy or lease the equipment and vehicles, and then either (a) charge a single lump-sum fee for the whole job, or (b) if you do itemize, call those equipment line items "cost reimbursements" rather than rental charges.

Burial vault manufacturers/installers

If you manufacture concrete burial vaults, paint them to order, deliver them, and set them into the ground at the cemetery, the Comptroller treats you as a contractor performing new construction (because you're incorporating the vault into the ground). That triggers the standard contractor tax framework:

• As a lump-sum contractor, you pay tax on all materials, equipment, and supplies you buy, rent, use, or consume for the job (vault materials, paint, equipment) — and you collect no tax from the funeral director.
• As a separated contractor, you can buy the vault and paint tax-free for resale, but you owe tax on your own consumable supplies and equipment, and you must collect tax from the funeral director on the separately stated charge for the incorporated materials (which can't be less than your own cost). Your labor/skill charges stay nontaxable either way.

Graveside tent and chair setup

Setting up a tent and chairs at the graveside — done alongside your other services like opening/closing the grave or installing the vault — is a nontaxable service, not a taxable equipment rental, regardless of whether you bill it separately or lump it in with the vault/installation price. You do, however, owe tax yourself on the tents and chairs you use to perform this service. Notably, the letter flags that this corrects contrary advice the same taxpayer had previously received by phone from Mr. Christian.

Funeral directors

If your vault-and-installation contractor bills you a lump sum, you owe no tax on that charge (or on an accompanying tent/chair charge), and you should not collect tax from the family for funeral services no matter how they're billed. But separate sales of tangible property you make yourself, apart from rendering funeral services, are taxable under Rule 3.304(b).

Common questions

Q: Is the labor to open and close a grave with a backhoe, truck, and driver taxable?
A: No, that labor is not taxable. But watch your billing: a separately stated charge for the equipment itself (even with an operator) can be treated as a taxable "rental" under Rule 3.294(c)(3). Charge a lump sum, or label separate equipment charges as "cost reimbursements," to avoid that risk in an audit.

Q: Is selling and installing a concrete burial vault taxable?
A: It's taxed under the contractor rules because installing the vault counts as new construction. A lump-sum contractor pays tax on all materials/equipment/supplies used and collects nothing from the funeral director. A separated contractor can buy the vault/paint tax-free for resale but must collect tax from the funeral director on the separately stated incorporated-materials charge (no less than the contractor's own cost), while labor/skill charges remain nontaxable.

Q: Is setting up a tent and chairs at the graveside a taxable rental?
A: No. When it's done as part of your other services (grave opening/closing and/or vault installation), it's a nontaxable service, not a rental — whether billed separately or lumped into the vault/installation price. You still owe tax yourself on the tents and chairs you use.

Q: If a lump-sum charge covers the vault, installation, and tent/chairs, does the funeral director owe tax, and should the funeral director collect tax from the family?
A: The funeral director owes no tax on that lump-sum charge. The funeral director should not collect tax from the family for funeral services regardless of how they're billed (Rule 3.304(a)). Separate sales of tangible property by the funeral director, apart from the funeral services themselves, are taxable (Rule 3.304(b)).

Q: Does this letter apply to my business?
A: Not automatically. It's based on the specific facts this taxpayer presented in 1993, and different or additional facts could lead to different answers, as the letter itself notes. It also can only be relied on for a detrimental-reliance claim by the taxpayer it was issued to.

Citations and references

Rules cited:

• Rule 3.294(c)(3) (separately stated equipment charges as taxable "rentals," even with an operator)
• Rule 3.304(a) (funeral director should not collect tax from family for funeral services)
• Rule 3.304(b) (separate sales of tangible property by a funeral director are taxable)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9304235L

Original ruling text

April 19, 1993

Dear **:

Thank you for your telephone calls and letter addressed to Mr. John Christian
regarding the taxability of services you provide to the funeral industry. Mr.
Christian has transferred to another division within the agency and has asked
that I answer your letter. Your questions follow, with responses:

1. We provide the service of opening and closing graves to the funeral
   director. This service generally includes a backhoe, truck, trailer, and driver
   who performs the entire task. Is this taxable?

Response: The labor to open and close graves is not taxable. I should alert you
to the fact that separately-stated charges for equipment are often considered
taxable "rentals" under our Rule 3.294 (c)(3) even when an operator accompanies
the equipment. To avoid any confusion in a future audit, I recommend the
following: You should pay tax at the time of purchase on the equipment and
motor vehicles you use to perform your services. When you perform a grave
opening/closing job, you should either: (a) charge a lump-sum fee for the
service, or (b) if you charge separately for the backhoe, truck, trailer, and
driver, you should clearly identify the equipment charges as "cost
reimbursements" so the auditor will not assess tax as though they were rentals.

2. We manufacture concrete burial vaults at our plant and stock them. When a
   vault is ordered by a funeral director it is painted according to the
   customer's specifications, loaded onto a truck, delivered to the cemetery, and
   lowered into the grave along with the casket once the graveside service has
   been completed. Is this taxable? Presently, some people are charging tax on the
   vault and its combined installation if it is billed in a lump sum. We currently
   do not pay tax on the materials that go into the manufactured product. If we
   began to pay tax on all raw materials that go into the manufacturing process we
   would then not have to bill the customer for the installed product under the
   contractor criteria. Please consider this when determining if this is a taxable
   sale.

Response: For tax purposes, you are considered a contractor performing new
construction when you incorporate a burial vault into the ground. A lump-sum
contractor must pay tax on all materials bought, rented, used or consumed in
the performance of the contractor. That includes vault materials, paint,
equipment and supplies used on the job. A lump-sum contractor collects no tax
from the customer (funera1 director).

A separated contractor may buy, tax free for resale, materials (the burial
vault and the paint) that will be incorporated into the customer's realty. He
owes tax on consumable supplies and equipment used on the job. He must collect
tax from the customer (funeral director) on the separately-stated contract
price for incorporated materials, which may not be less than the contractor's
cost. The charges for skill and labor are not taxable.

3. Occasionally, as part of the installation or as a separate item, we provide
   the setting of a tent and chairs at the graveside. This service is generally
   performed at the same time the vault is installed and by the same person.
   Sometimes the installation fee is included with the vault price, sometimes it
   is billed separately. Is this taxable?

Response: Mr. Christian has asked me to point out that contrary to the answer
he gave you on the phone, setting up a tent and chairs at a graveside as part
of your other services (opening and closing and/or incorporating a vault) is
considered a nontaxable service and not a "rental" of the tents and chairs.
Your company must pay tax on all tents and chairs that you use to perform this
nontaxable service. This response is the same whether you bill the funeral
director separately for the tent and chairs or lump those charges together with
the vault price and installation.

4. On the telephone, you asked Mr. Christian the following additional question:
   If we charge a lump-sum price for a vault and installation, do we have to
   collect tax from the funeral director on the lump-sum charge? Does the funeral
   director collect tax from the family?

Response: The funeral director owes no tax on a lump-sum charge for a vault and
installation or an accompanying charge for tents and chairs provided by your
company as part of your services. The funeral director should not collect tax
from the family on charges for funeral services, no matter how they are billed.
Rule 3.304 (a). Separate sales of tangible property by a funeral director,
apart from the rendition of any funeral services, are taxable. Rule 3.304 (b).

This opinion is based on the facts presented. Different or additional facts,
though similar, might lead to different answers. If you have further questions,
please feel free to write or call me at 1-800-531-5441, extension 3-4633.

Sincerely,

Wanda Hutcheson
Tax Administration Division