Death and Sales Taxes
Benjamin Franklin is credited in Bartlett's Familiar Quotations, 10th ed. (1919) with the saying "...in this world nothing can be said to be certain, except death and taxes" in a letter to Jean-Baptiste Leroy dated 13 November 1789. And I have found that is certainly true as I prepare for an upcoming audit of a mortuary. It’s been funny to me, the look on people’s faces when I tell them that I’ll be auditing a funeral home and the number one question, even from my fellow agents, is “What do they sell?”
I’ve been fortunate that I’ve never had to go through the process of burying a loved one, so this has been a learning experience for me. The funeral home does more than just offer a place for the service or viewing. They also help with choosing, and buying, caskets and urns for remains, as well as other services like bagpipers or doves. How these charges are presented impacts the taxability. In Colorado, services, like bagpipe playing or funeral planning are non-taxable. But if the charge for services are included as part of the price of tangible personal property, the whole bill is taxed. So it’s important for funeral businesses to make sure they are separately stating their goods from services when determining the tax to collect.
The other thing I have come across are sales out of the taxing area. For instance, if I order a product from a vendor in Denver to be delivered to me in Aurora, the vendor is only required to collect the tax common to both cities, in this example that would be state sales and RTD/Science and Cultural District taxes. What if I have a funeral at a cemetery in Aurora, but arrange to have a Denver based funeral home do the preparations? According to Special Regulation 31: Morticians the tax is charged to the location of the funeral home, not the delivery location. One argument I have heard is that the tangible personal property is being delivered out of the jurisdiction, so local tax shouldn’t be collected. This is incorrect though. The key is that the initial use of the goods is occurring at the funeral home. The body is prepared there, the goods are being used their prior to delivery. This initial use triggers the imposition of sales tax.