When was Florida sales tax due on burial merchandise promised under a cemetery company's cancelable preneed plan?

Subject

Preneed Burial and Entombment Agreements

Plain-English summary

Sales tax was not due when the cemetery company's preneed plan was signed. The Department treated it as an executory contract because the merchandise was not actually or constructively delivered, and title or possession did not pass, until the plan became at-need.

At delivery, the cemetery company had to collect tax at the rate then in effect. The taxable measure was the burial merchandise's stated contract sales price or its cost price at delivery, whichever was greater.

The ruling distinguished the cemetery company's plan from a complete funeral contract offered by its affiliated licensed funeral home. Complete funerals were described as exempt, while cemetery sales of tangible personal property outside a complete funeral were taxable.

What this means for you

The ruling did not make preneed burial merchandise exempt. It changed the timing of tax because the plan delayed delivery and passage of title until future need.

Common questions

Q: Was signing the installment agreement the taxable event? No, on this plan's terms.

Q: When did tax become due? Upon actual or constructive delivery when the plan became at-need.

Q: Which tax rate applied? The rate in effect on the delivery date.

Citations and references

• Fla. Stat. §§ 212.02(16)(a), 212.06(1)(a), 212.08(2)(a) — sale, installment tax, and funerals
• Fla. Stat. § 672.401 — passage of title
• Fla. Admin. Code rr. 12A-1.035, 12A-1.051, 12A-1.052, 12A-1.054(1) — funeral and cemetery rules
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93A-021

Original ruling text

Apr 06, 1993

Re: TAA 93A-021
Sales Tax - Preneed Burial and Entombment Agreements
Offered by a Cemetery Organization
Sections 212.02(16)(a); 212.06(1)(a); 470.024; 497.006;
497.048(1)(11); 639.085; 639.09; and 639.20, F.S.
Rules 12A-1.035; 12A-1.052; and 12A-1.051, F.A.C.
Petitioner: XXX (Herein "Cemetery Company")
FEI#: XXX

Dear :

This response is in reply to your September 1, 1992, petition
for the Department's issuance of a Technical Assistance
Advisement ("TAA") pursuant to s. 213.22, F.S., concerning the
captioned matter and party. Your petition has been carefully
examined and the Department finds it to be in compliance with
the requisite criteria set forth in Chapter 12-11, F.A.C.
Therefore, the Department is herewith granting your request for
the issuance of a TAA and the ensuing discourse shall embody
said ruling.

DISCUSSION OF FACTS

Your petition imparts the following information regarding the
issue under advisement herein:

"[Cemetery Company] is a Florida S Corporation which was
incorporated on January 1, 1932. [Cemetery Company's]
business activities in Florida include the sale of preneed
burial or entombment agreements, as well as other related
funeral services and merchandise....

"Under the terms of the [Cemetery Company's] preneed
contracts customers agree to pay for the funeral service,
entombment and related merchandise in installments over a
period of time to be agreed upon by the parties. No
merchandise is delivered until payment is made in full or

upon fulfillment of the contract. The agreements are
cancelable by the purchaser and fully transferable. The
execution of the agreement is not a taxable event for the
following three reasons:

"1. No merchandise is delivered at the time of execution
of the agreement;
"2. The purchaser has the right to cancel the transaction;
and
"3. The agreement is fully transferable, including to outof-state transferees."

Moreover, examination of the supporting documentation to your
petition reveals that Cemetery Company is organized and duly
licensed as a cemetery company and that it has an affiliated
corporation located on adjacent property which is organized and
duly licensed as a funeral home ("Funeral Home").

Of the two contracts submitted with your request, only one is
offered by the Cemetery Company while the other is offered by
the Funeral Home. The contract offered by the Cemetery Company
is entitled "Family Burial Security Plan" and its terms and
conditions provide for the furnishing of such items and articles
as mausoleums, burial space, lawn crypts, niches, caskets,
vaults, urns, bronze memorials, inscriptions, and emblems. Some
of these denominated items would fall into the category of real
property (mausoleums and burial space) while the other items
constitute personal property. The contract offered by the
Funeral Home is entitled "Pre-arranged Funeral Service
Agreement", and as the title implies it is a contract which
provides for the provision of funeral services, but also covers
such other things as embalming and other body preparation; use
of facilities for the viewing of remains, visitation, and
funeral ceremony; use of automotive equipment for transfer of
remains, funeral coach, and family limousine; and miscellaneous
items such as memorial books, memorial folders, acknowledgement
cards, and other necessary funeral supplies.

REQUESTED ADVISEMENT

You endeavor to evoke the Department's advice regarding the

following:

"The matter in question is whether or not such preneed
burial agreements are subject to sales tax as an
installment sale at the moment of transaction. This is an
issue that the Department of Revenue has addressed
previously in TAA 89A-058."

RELEVANT STATUTORY AND REGULATORY REFERENCES

The ensuing passages of statutory and regulatory law, are
pertinent to disposition of the issue advanced by petitioner.

Chapter 497, F.S., applies to all cemeteries and s. 497.006(1),
F.S., provides that no person shall operate a cemetery without
first obtaining a license from the Department of Banking and
Finance, unless specifically exempted from Chapter 497, F.S.

Section 497.048, F.S., provides in part:

"(1) This section applies to all cemetery companies
licensed pursuant to this chapter that offer for sale or
sell personal property or services which may be used in a
cemetery in connection with the burial....
"(10) This section does not apply to persons holding a
license or certificate under chapter 470 or chapter 639
when performing services or selling items authorized by
such chapter...."

Chapter 470, F.S., applies to funeral directing, embalming, and
direct disposition, and s. 470.024(2), F.S., provides that no
person shall conduct, maintain, manage, or operate a funeral
establishment unless an operating license has been issued by the
Department of Professional Regulation for that funeral
establishment.

Chapter 639, F.S., governs preened funeral merchandise or
service contracts (s. 639.085, F.S.). Of this chapter, section
639.09(3), F.S., provides:

"No person may obtain a certificate of authority under this

chapter for the preened sale of services unless such person
or its agent, in the case of a corporate entity, holds a
license as a funeral establishment or as a direct disposal
establishment under chapter 470."

Section 639.20, F.S., provides further discussion relating to
cemeteries:

"The provisions of this chapter do not apply to any person
who holds a license under the provisions of chapter
497...."

Section 212.06(1)(a), F.S., provides in part:

"... The full amount of the tax on a credit sale,
installment sale, or sale made on any kind of deferred
payment plan shall be due at the moment of the transaction
in the same manner as on a cash sale."

Section 212.08(2)(a), F.S., provides in part:

"... There shall also be exempt from the tax imposed by
this chapter... funerals.... Funeral directors shall pay
tax on all tangible personal property used by them in their
business."

Rule 12A-1.035, F.A.C., provides:

"12A-1.035 Funerals.
"(1) Supplies used by funeral homes in the conduct of their
business are taxable.
"(2) When an auto rental corporation rents private cars,
station wagons or other motor vehicles to funeral homes on
a monthly charge and funeral homes provide their own
drivers, the rental is taxable....
"(3) When an auto renting company rents hearses, limousines
or other motor vehicles to funeral homes and supplies the
driver, the renting company is performing a service and the
rental is exempt.
"(4) The charge for ambulance services is exempt.
"(5) If a rental company furnishes a motor vehicle with a

driver to another rental concern which in turn furnishes
the vehicle and driver to a funeral home, the charge is for
a service and is exempt."

Rule 12A-1.052, F.A.C., provides:

"12A-1.052 Cemetery Organizations.
Cemetery organizations are dealers and must procure
dealers' certificates of registration and collect the sales
tax on sales of tangible personal property to the ultimate
consumer. When such organizations brick up graves or
construct foundations for monuments, etc., the provisions
of Rule 12A-1.051 will apply...." (Emphasis Supplied)

DISCUSSION OF LAW

Both preneed and at-need contracts to furnish a complete funeral
will be exempt from sales tax as provided by s. 212.08(2)(a),
F.S., even though these contracts may be itemized as required by
s. 470.035, F.S. Under contracts of this nature, the funeral
directors should pay sales tax on all tangible personal property
used by them in their business.

Both preneed and at-need contracts for the sale of tangible
personal property (contracts which do not include services
necessary to be considered a complete funeral, such as contracts
for the sale of a casket) are subject to sales tax.

The Cemetery Company does not appear to be a licensed funeral
home establishment and the agreement the Cemetery Company offers
(Family Burial Security Plan) which is the subject of this
ruling does not furnish a complete funeral. Cemetery
organizations should charge sales tax on their sales of tangible
personal property as provided in Rule 12A-1.052, F.A.C., when
these sales are not part of the sale of a funeral.

Rule 12A-1.054(1), F.A.C., provides in part:

"12A-1.054 Tax Due at Time of Sale.
"(1) The full amount of the tax on cash sales, credit
sales, installment sales or sales made on any kind of

deferred payment plan shall be due at the moment of the
transaction...."

As provided by Rule 12A-1.054, F.A.C., under both preneed and
at-need contracts for the sale of tangible personal property,
the tax is due at the moment of the sale.

Your letter contends that the execution of the agreement is not
a taxable event, as no merchandise is delivered at the time of
execution of the agreement.

Section 212.02(16)(a), F.S., defines the term "sale" as:

"Any transfer of title or possession, or both, exchange,
barter, license, lease, or rental, conditional or
otherwise, in any manner or by any means whatsoever, of
tangible personal property for a consideration." (Emphasis
Supplied)

Section 672.401, F.S., provides the following relating to the
passing of title under the Uniform Commercial Code:

"(1) Title to goods cannot pass under a contract for sale
prior to their identification to the contract (s. 672.501),
and unless otherwise explicitly agreed the buyer acquires
by their identification a special property as limited by
this code.... Subject to these provisions and to the
provisions of the chapter on secured transactions (chapter
679), title to goods passes from the seller to the buyer in
any manner and on any conditions explicitly agreed on by
the parties."
"(2) Unless otherwise explicitly agreed title passes to the
buyer at the time and place at which the seller completes
his performance with reference to the physical delivery of
the goods, despite any reservation of a security interest
and even though a document of title is to be delivered at a
different time or place...."

The following case summaries typify juristic analysis and
construction by Florida courts of the foregoing statutes
governing title passage:

In the matter of Eli Witt Co., 2 B.R. 492 (Bankr. Fla. 1980),
the court offered the following commentary: "Under Uniform
Commercial Code, as adopted by Florida, title passes to buyer at
the time and place that seller completes performance with regard
to physical delivery of goods...."

In re Communications Co. of America, Inc., 84 B.R. 822 (Bankr.
M.D. Fla. 1988), the court held that title to equipment vested
in buyer at time of delivery and that seller's attempt to
reserve title pending full payment of the purchase price by
purchaser served only to create for seller a security interest
in the equipment.

Moreover, BLACK'S LAW DICTIONARY, Sixth Edition, page 428,
defines the term "delivery" as:

"The act by which the res or substance thereof is placed
within the actual or constructive possession or control of
another. Poor v. American Locomotive Co., C.C.A.Ill., 67
F.2d 626, 630. What constitutes delivery depends largely
on the intent of the parties. It is not necessary that
delivery should be by manual transfer. Jones v. Young, Tex.
Civ. App., 539 S.W. 2d 901, 904.... (Emphasis Supplied)

"Constructive delivery is a general term, comprehending all
those acts which, although not truly conferring a real
possession of the thing sold on the vendee, have been held, by
construction of law, equivalent to acts of real delivery. A
constructive delivery of personalty takes place when the goods
are set apart and notice given to the person to whom they are to
be delivered, or when, without actual transfer of the goods or
their symbol, the conduct of the parties is such as to be
inconsistent with any other supposition than that there has been
a change in the nature of the holding. `Constructive delivery'
is a term comprehending all those acts which, although not truly
conferring a real possession of the vendee, have been held by
construction of law equivalent to acts of real delivery.
Lakeview Gardens, Inc. v. State ex rel. Schneider, Kan., 557
P.2d 1286, 1290.

Other useful discussion and analysis of the elements comprising
and constituting "delivery" is found in C.J.S. Deeds s. 181:

"Delivery has been described as a composite act; a thing in
which both parties must join and the minds of both parties
concur.

"However, a manual act is not necessary to constitute a
delivery, and the word does not necessarily import an actual
physical tradition of possession from one hand to another, for
there may be a delivery without handling the property or
changing its position.

"The word `delivery' has been variously defined by the
juristic authorities; and in its legal sense it may denote
either a transfer of title or merely a transfer of possession.

"As used in connection with the transfer of title to
property, the word has been construed frequently by courts, and
there have grown up at least two meanings, one signifying an
actual or physical, and the other a symbolical or constructive,
transfer of property; and in this sense has been defined as
meaning the act by which one party parts with his title and
possession to property, and the other acquires the right and
possession thereto.

"In its other sense relating to the giving of mere
possession, the term imports a surrender of parting with
possession for a permanent purpose, and has been defined as the
transfer of possession, actual or constructive, from one person
to another...."

CONCLUSIONS OF LAW

Our analysis of the contractual terms and conditions of the
"Family Burial Security Plan" ("Plan"), as cast, leads the
Department to conclude that the elements of delivery (actual or
constructive) will not be satisfied until the Plan turns
at-need. This finding is supported by the fact that of the
proceeds from the Plan, the Cemetery Company deposits an amount
equal to 110% of the wholesale cost of the merchandise for

future delivery to a trust fund pursuant to an indenture of
revocable trust with a bank or savings and loan association
having trust powers or a trust company pursuant to s. 639.11,
F.S., which trust funds are later used to provide the burial
merchandise at the time the Plan turns at need. The mandatory
balance of the trust funds are not released by the trustee to
the Cemetery Company until the beneficiary's death certificate
is presented to the trustee. Thus, the Plan does not result in
the occurrence of actual or constructive delivery and hence no
passage of title or possession unless and until the Plan turns
at need.

Therefore, as so lead by the statutory definition of sale
contained in section 212.02(16)(a), F.S., when interpreted
together with the statutory guidelines on delivery and the
juristic analysis and construction thereof, set out in the
foregoing discussion, the Department hereby enters its finding
that the Plan is not an executed sales contract but more in the
nature of an executory type contract which guarantees delivery
of merchandise and services at some future date. Accordingly,
no sales tax will be due at the inception of the Plan, but
instead the sales tax will be due at the time of delivery
(actual or constructive) of the burial merchandise (tangible
personal property) specified in the Plan which we understand
does not occur unless and until the Plan turns at need.
Moreover, the applicable rate of sales tax will be that rate in
effect on the date of delivery of the burial merchandise, and
the tax will be calculated on the burial merchandise sales price
as stated on the contract (Plan) or on the cost price of the
burial merchandise, whichever price is greater at the time of
delivery.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the Department only
under the facts and circumstances described in the request for
this advice as specified in s. 213.22, F.S. Our response is
predicated on those facts and the specific situation summarized
above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment than

expressed in this response.

You are further advised that this response and your request are
public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details which might lead to
identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect confidential
information, we request you notify the undersigned in writing
within 15 days of any deletions you wish made to the request or
this response.

Sincerely,

Daniel M. Wagner, Jr.
Tax Law Specialist

DW/
Con. #4267