Does a funeral home or cemetery need to charge sales tax on an outer-burial container sold as part of a preneed or at-need funeral contract?

Plain-English summary

A funeral-industry taxpayer asked the Comptroller a series of questions about when sales tax applies to an "outer-burial container" (a vault or similar container that goes around a casket) sold as part of a preneed (paid in advance) or at-need (paid at time of death) funeral contract.

The core rule: whether services come bundled with the container controls the tax result.

• If the funeral home or cemetery also provides services — the funeral service itself, opening/closing the grave, or furnishing and erecting a monument — it should not charge the consumer sales tax on the outer-burial container, whether sold preneed or at-need. Instead, the funeral home or cemetery pays sales tax to its own supplier when it purchases the container (Rule 3.304).
• If the container is sold without any accompanying services, the funeral home or cemetery must collect sales tax from the consumer.
• That "with services = no tax to consumer" rule also controls delivery: if a container was sold preneed without tax (because services were included), delivering it later still doesn't trigger consumer-facing sales tax.
• If sales tax was collected from a consumer in error, it must be refunded to the consumer (or, if already remitted, the seller gets reimbursed by the state after refunding the consumer) — subject to a four-year refund window (Rule 3.325). Rule 3.338(c) covers how a seller adjusts its own return to get credit for tax it already paid its supplier.

What this means for you

Funeral homes and cemeteries

Track whether each outer-burial container sale is bundled with services (funeral service, grave opening/closing, monument furnishing/erection) or sold on its own. Bundled-with-services sales mean you pay tax on your own purchase of the container and don't collect from the consumer; standalone container sales mean you must collect tax from the consumer. This applies the same way whether the contract is preneed or at-need.

Accountants and tax professionals

If a client discovers it collected tax in error on a bundled preneed/at-need container sale, the refund path runs through Rule 3.325 (four-year limit, consumer must be repaid before the seller is reimbursed) and Rule 3.338(c) for adjusting supplier-paid-tax credits on the seller's own return.

Common questions

Q: Is an outer-burial container taxable when sold with funeral services?
A: No, per this letter — the funeral home/cemetery instead pays tax on its own purchase of the container from its supplier.

Q: Is it taxable when sold by itself, with no funeral services?
A: Yes, per this letter — the seller must collect sales tax from the consumer.

Q: Does it matter if the sale is preneed versus at-need?
A: No — the same services-bundled-or-not rule applies to both preneed and at-need sales, and to delivery of a preneed-sold container.

Q: What if tax was collected by mistake?
A: It must be refunded to the consumer (within four years of when the tax was due); the seller can then seek reimbursement from the state after refunding the consumer.

Citations and references

Statutes and rules:

• 34 Tex. Admin. Code Rule 3.304 (morticians and monument builders)
• 34 Tex. Admin. Code Rule 3.325 (tax refunds and tax credits; four-year refund limit)
• 34 Tex. Admin. Code Rule 3.338(c) (credit for tax paid to suppliers)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9810911L

Original ruling text

October 19, 1998

Dear Ms. **:

Thank you for your recent letter concerning the sales tax responsibilities of
funeral homes or cemeteries selling preneed funeral contract merchandise.

1) Should a funeral home or cemetery charge a consumer sales tax on the
preneed sale of an outer-burial container when executing a preneed funeral
contract?

Answer: A funeral home or cemetery should not charge sales tax on the charge
for an outer-burial container when executing a preneed funeral contract if the
funeral home or cemetery will provide services, i.e., the funeral services or
opening and closing the grave or furnishing and erecting the monument. The
funeral home or cemetery must pay sales tax to its supplier when the
outer-burial container is bought for use in providing the funeral services or
services to open and close the grave.

However, if the outer-burial container is sold without the provision of
services, sales tax must be collected by the funeral home or cemetery. See the
enclosed Rule 3.304 concerning morticians and monument builders.

2) Should a funeral home or cemetery charge a consumer sales tax on the
at-need sale of an outer-burial container?

Answer: No, not when the funeral home or cemetery provides services as
described in the answer to Question 1.

3) Should a funeral home or cemetery charge a consumer sales tax upon delivery
of an outer-burial container that was previously sold to the consumer on a
preneed funeral contract without any sales tax?

Answer: No, not when the funeral home or cemetery provides services as
described in the answer to Question 1.

4) When should the sales tax, if any, be paid on the sale of an outer-burial
container? Who should pay this sales tax? Is this an allowable tax to be
passed along to consumers on preneed funeral or at-need funeral contracts?

Answer: The funeral home or cemetery should charge sales tax when an
outer-burial container is sold without the provision of services by the funeral
home or cemetery as described in the answer to Question 1.

5) If a funeral home or cemetery has charged and collected sales tax under any
of these circumstances, in error, are these taxes refundable back to consumers?
Does this scenario change if the funeral home or cemetery has already paid the
collected sales taxes to the Comptroller?

Answer: Any money collected as sales tax from consumers in error should be
refunded to the consumer or paid to the State of Texas. The funeral home or
cemetery will be reimbursed for the sales tax paid to the state after it has
refunded the sales tax to the consumer. See the enclosed Rule 3.325 concerning
tax refunds and tax credits. Tax refunds are limited to four years from the
date the tax becomes due and payable to the state.

I am also enclosing Rule 3.338 concerning credit for tax paid to suppliers.
This rule gives the procedure for sellers to make adjustments for reporting
sales tax items sold on which the seller paid sales tax to its supplier. See
section (c).

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

You may call me toll free 1-800-531-5441, extension 3-4683 if you have any
questions or need more information. The direct line is 512/463-4683. You may
also write to Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Eddie C. Washington
Tax Policy Division