Current through Register Vol. 24-06, March 15, 2024
(1)
Introduction. This rule
explains:
(a) The application of business and
occupation (B&O), retail sales, and use taxes to the business activities of
cemeteries;
(b) The application of
B&O and retail sales taxes to amounts derived by cemeteries from
prearrangement contracts (commonly referred to as "preneed" or "prepaid"
arrangements) for the sale of interment rights, merchandise, and services.
For purposes of this rule, the term "cemeteries" includes
cemeteries, burial parks, crematories, columbaria, and mausoleums. Refer to WAC
458-20-153 (Funeral
establishments) for funeral establishment tax-reporting information.
The funeral and cemetery board regulates private cemeteries.
Refer to Title 68 RCW and
Title 98 WAC for information on the laws and administrative rules governing
cemeteries.
(2)
General tax reporting responsibilities.
(a)
Sales of interment services and
interment rights. The gross proceeds attributable to cemetery activities
are taxable when the amounts are shown as income in the books and records or
when services are performed or merchandise is delivered, whichever is earlier.
Amounts derived from interment services such as document
recording, opening and closing the interment space, and placing grave liners or
vaults in the interment space are subject to the service and other activities
B&O tax. Sales or transfers of plots, crypts, and niches for the interment
of human remains, irrespective of how the document of transfer is described
(e.g., deed, certificate of ownership, or certificate of interment rights), are
charges for the right of interment, an interest similar to a license to use
real estate. Thus, the gross income from sales of interment rights is subject
to B&O tax under the service and other activities
classification.
(b)
Sales of merchandise, including installing, repairing, cleaning,
altering, or improving property. The gross proceeds from retail sales of
tangible personal property such as monuments, markers, memorials, nameplates,
outer burial containers (e.g., vaults or grave liners), boxes, urns, vases,
benches, plants, shrubs, and flowers are subject to B&O tax under the
retailing classification. Retailing B&O tax also applies to charges by
cemeteries for installing, repairing, cleaning, altering, or improving tangible
personal property of or for consumers. Cemeteries are also responsible for
collecting and remitting to the department of revenue (the department) retail
sales tax on retail sales of tangible personal property and charges for
installing, repairing, cleaning, altering, or improving tangible personal
property of or for consumers unless specifically exempt by law. Thus, charges
for installing markers and monuments are subject to retailing B&O and
retail sales taxes.
(c)
Sales
to the federal government. Sales of tangible personal property directly
to the federal government are exempt from the retail sales tax, though the
seller remains subject to B&O tax unless a specific exemption applies.
Sales of tangible personal property to other persons, whether paid with federal
funds or through a reimbursement arrangement, are fully subject to the retail
sales tax. For additional information about the taxability of sales to the
federal government, refer to WAC
458-20-190 (Sales to and by the
United States-Doing business on federal reservations-Sales to foreign
governments).
(3)
Cemeteries purchasing tangible personal property. Generally,
retail sales tax is due when purchasing tangible personal property such as
tools and supplies used or consumed by cemeteries when providing interment
services.
(a)
Items purchased for
resale. Tangible personal property purchased for resale without
intervening use is not subject to retail sales tax. Property commonly purchased
for resale by cemeteries includes, but is not limited to, monuments, markers,
memorials, nameplates, liners, vaults, boxes, urns, vases, benches, plants,
shrubs, and flowers. Cemeteries purchasing tangible personal property for
resale must provide to the seller a reseller permit to document the wholesale
nature of the sale as provided in WAC
458-20-102 (Reseller
permits).
(b)
Deferred sales
and use tax. If the seller does not collect retail sales tax on a retail
sale, the buyer must remit the retail sales tax (commonly referred to as
"deferred sales tax") or use tax directly to the department, unless
specifically exempt by law. For detailed information about use tax, refer to
WAC 458-20-178 (Use tax).
(4)
Prearrangement
contracts. Cemeteries often enter into prearrangement contracts with
customers for the purchase of merchandise and services, unconstructed crypts or
niches, or undeveloped graves to be furnished at a future date. Executed
contracts are paid in either a lump sum or in installments. Unless otherwise
exempt, the law requires cemeteries to place a percentage of all funds
collected in payment of each prearrangement contract in a prearrangement trust
account. As of the effective date of this section, the amount required in a
prearrangement trust account is equal to the greater of (for merchandise) fifty
percent of the contract price or the wholesale cost of the item, (for services)
fifty percent of the contract price, or the direct cost of providing the
service. Withdrawal of trust funds may only occur upon fulfillment or
cancellation of the contract. See
chapter
68.46 RCW.
(a)
When does tax liability
arise? Amounts placed into prearrangement trust accounts are subject to
excise tax upon withdrawal from the prearrangement trust accounts. In other
words, the amounts are taxable upon fulfillment or cancellation of the
contract. Refer to subsection (2) of this section (General tax reporting
responsibilities) for the tax treatment of amounts related to the fulfillment
of the prearrangement contract.
(b)
Retail sales tax - Prearrangement trust accounts. If retail sales
tax paid by the buyer is placed into a prearrangement trust account, the retail
sales tax is reported and remitted to the department upon fulfillment of the
prearrangement contract.
If retail sales tax paid by the buyer is not placed into a
prearrangement trust account, the tax must be reported on the excise tax return
for the current reporting period and remitted to the department.
Upon cancellation of a prearrangement contract, a refund of
retail sales tax remitted by a cemetery to the department is subject to the
time limitations on refunds provided by
RCW
82.32.060. For example, the law prohibits the
department from refunding retail sales tax to a cemetery for a prearrangement
contract that is canceled five years after the retail sales tax associated with
the contract is remitted to the department. See also WAC
458-20-229
(Refunds).
(c)
Contract cancellation and trust administration fees. Amounts
retained by a cemetery from a canceled prearrangement contract are subject to
service and other activities B&O tax, except that any amount allocable to a
retail sale of merchandise is subject to retailing B&O and retail sales
taxes. Administration fees deducted from a prearrangement trust fund by the
administrator are also subject to the B&O tax under the service and other
activities classification.
(5)
Examples. The following
examples identify a number of facts and then state a general conclusion
regarding the taxability of cemeteries. The tax results of other situations
must be determined after a review of all of the facts and circumstances. Use
these examples only as a general guide.
(a)
John and Jane Doe contracted with ABC Cemetery Association (ABC) for the
interment of a deceased relative. The interment rights, merchandise, and
services provided by ABC include an interment plot, an outer burial container,
burial of the decedent, a marker, and installation of the marker. In addition,
ABC charges a document-recording fee.
(i) ABC
is subject to service and other activities B&O tax on charges for the
interment plot, burial of the decedent, and the document-recording
fee.
(ii) The charges for the outer
burial container, marker, and marker installation are subject to retailing
B&O and retail sales taxes.
(b) John and Jane Doe entered into a
prearrangement contract with ABC for the purchase of interment rights,
merchandise, and services provided upon their deaths. John and Jane made a down
payment when signing the contract and agreed to pay the balance in sixty
monthly installments. The interment rights, merchandise, and services purchased
by John and Jane include interment plots, outer burial containers, burial of
their remains, markers, and installation of the markers. The contract itemizes
retail sales tax and provides for a finance charge on the unpaid balance.
ABC places all receipts under prearrangement contracts,
including the finance charges, into a prearrangement trust account.
ABC must report:
(i)
The amounts received for the interment plots under the service and other
activities B&O tax classification at the time the income is recognized on
the books and records or upon fulfillment of the contract, whichever is
earlier;
(ii) The amounts received
for the burial of remains, the document-recording fee, and the finance charges
under the service and other activities B&O tax classification at the time
they perform the services; and
(iii) Retailing B&O and retail sales
taxes on the sale of the outer burial containers, markers, and marker
installation in the reporting period during which they deliver the merchandise
and perform the installation.
Statutory Authority:
RCW
82.01.060(2) and
82.32.300. 78-06-083 (Order 78-3),
§ 458-20-154, filed 6/1/78; Order ET 70-3, § 458-20-154 (Rule 154),
filed 5/29/70, effective 7/1/70.