When was Florida sales tax due on preneed funeral merchandise, and when did the complete-funeral exemption apply?

Plain-English summary

Florida said sales tax on merchandise sold through the described preneed agreements was due when the merchandise was actually or constructively delivered after full payment—not when the customer signed the contract. Until then, neither title nor possession transferred, so the agreement was an executory contract promising future delivery rather than a completed sale.

At delivery, the applicable tax rate was the rate then in effect. The ruling said tax was calculated on the merchandise's contract sales price or its cost price, whichever was greater at that time.

The result changed for a complete funeral package. When the taxpayer and a commonly owned funeral home worked together to market and provide the complete funeral, the funeral exemption applied to the customer's delivery, provided the taxpayer had paid sales tax to its vendor when buying the merchandise.

But merchandise did not become exempt merely because the customer directed its delivery in connection with an unrelated funeral home's service. Without jointly marketing a complete funeral, the taxpayer had to collect and remit tax on the merchandise when delivered.

What this means for you

Funeral homes and cemetery businesses

Classify each contract by what the business is actually selling. A complete funeral package received different treatment from a contract for selected merchandise or services that did not amount to a complete funeral.

Preneed contract administrators

Track the delivery date and the contract's payment status. Under the ruling's facts, no actual or constructive delivery occurred until the agreement was fully paid, and that delivery date controlled the rate and reporting period.

Accountants and tax professionals

Distinguish customer-facing exemption treatment from tax paid on the business's own purchase. For the approved complete-funeral arrangement, the merchandise was exempt when delivered to the customer only because the taxpayer paid tax to the vendor upon purchase.

Common questions

Q: Was tax due when a customer signed a preneed merchandise contract?
A: No. The ruling found no completed sale at inception because neither title nor possession transferred then.

Q: When did tax become due on a taxable preneed merchandise sale?
A: When the merchandise was actually or constructively delivered, which the stated contract did not allow until it was fully paid.

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

Q: What amount was taxed?
A: The merchandise sales price stated in the contract or the merchandise's cost price, whichever was greater at delivery.

Q: Was merchandise included in a complete funeral package taxable to the customer?
A: No when the taxpayer and its commonly owned funeral home marketed the complete funeral and the taxpayer paid tax to its vendor for the merchandise.

Q: Was merchandise exempt when delivered alongside services from an unrelated funeral home?
A: No. Without jointly marketing a complete funeral, the taxpayer had to collect and remit tax on the merchandise.

Q: Can another funeral or cemetery business rely on this TAA?
A: Not automatically. The advisement states that it binds the Department only under the facts and circumstances described in the request, and later legal changes or judicial interpretations may produce a different result.

Citations and references

• Fla. Stat. § 212.02(16)(a) — sale defined by transfer of title or possession
• Fla. Stat. § 212.06(1)(a) — tax on credit, installment, and deferred-payment sales
• Fla. Stat. § 212.08(2)(a) — funeral exemption and tax paid by funeral directors on business property
• Fla. Stat. § 497.421 — preneed trust disbursement condition described by the ruling
• Fla. Stat. § 672.401 — passage of title to goods
• Fla. Admin. Code rr. 12A-1.035, 12A-1.052, and 12A-1.054 — funeral-home supplies, cemetery organizations, and time of sale
• In re Eli Witt Co., 2 B.R. 492 (Bankr. Fla. 1980), and In re Communications Co. of America, Inc., 84 B.R. 822 (Bankr. M.D. Fla. 1988) — delivery and passage of title
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96A-059

Original ruling text

Dec 03, 1996

Re: Technical Assistance Advisement (TAA) 96A-059
Sales Tax - Preneed Agreements for Funeral and Cemetery
Services and Merchandise
Sections 212.02(16)(a) and 212.06(1)(a), F.S., and Chapters
470, 497, and 672, F.S.
Rules 12A-1.035; 12A-1.052; and 12A-1.051, F.A.C.
Petitioner: XXX (herein referred to as the "Taxpayer")

Dear :

This response is in reply to your April 19, 1996, petition
requesting the Department's issuance of a Technical Assistance
Advisement pursuant to s. 213.22, F.S., and Chapter 12-11,
F.A.C., regarding the referenced matter and parties. An
examination of your petition has established that you have
complied with the statutory and regulatory requirements for
issuance of a TAA. Therefore, the Department is hereby granting
your request for issuance of a TAA.

DISCUSSION OF FACTS

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

1. Taxpayer and Florida affiliates, through cemetery and
   funeral home locations, are engaged in the cemetery
   and funeral service business throughout the State
   Florida pursuant to ss. 470 and 497, [F.S.].
2. As typical in the case of funeral and cemetery
   industries, taxpayer enters into preneed arrangements
   with its customers. These arrangements allow
   customers to pre-select funeral and cemetery services
   and merchandise. The customer agrees to make advance
   payments under the contract terms.
3. "Funeral" or "Funeral Service" means the observances,
   services or ceremonies held to commemorate the life of
   a specific deceased human being, and at which the

human remains are present pursuant to s. 470.002(13),
F.S.

4. "Burial Service", "Funeral Service" or "Service" means
   any service offered or provided by any person in
   connection with the final disposition,
   memorialization, interment, entombment, or inurement
   of human remains pursuant to s. 497.005(13), F.S.
5. "Burial Merchandise", "Funeral Merchandise" or
   "Merchandise" means any personal property offered or
   sold by any person for use in or in connection with
   the final disposition, memorialization, interment,
   entombment or inurement or human remains pursuant to
   s. 497.005(12), F.S.
6. s. 470.0087(1)(e), F.S., establishes that the practice
   of funeral directing may only be performed by a
   licensed funeral director and include such functions
   as directing, being in charge or apparent charge of,
   or supervising, directly or indirectly, any funeral
   service held in a funeral establishment, cemetery, or
   elsewhere.
7. Merchandise is sold on a preneed basis through Retail
   Installment Contract Cemetery Interment Rights,
   Merchandise and Services Purchase/Security Agreements
   or Preneed Funeral Merchandise and/or Service
   Contracts ([hereinafter] collectively referred to as
   "Cont[r]acts").... These are standard contracts used
   by Taxpayer and its related entities in Florida to
   market Services and Merchandise.
8. Under the terms of the Contracts the customer agrees
   to pay for funeral services, entombment and related
   merchandise in installments over a period of time to
   be agreed upon by the parties.
9. No Merchandise is delivered until full payment is made
   under terms of the Contracts.
10. The Contracts are unilaterally cancelable by the
    purchaser. If canceled within 30 days of execution,
    purchaser is entitled to a full refund.
11. Taxpayer, in accordance with Florida Statutes may
    either: (i) deposit percentages or payments received
    in trust under s. 497.417, F.S., or comply with the
    financial responsibility alternatives in s. 497.423 or

497.425, F.S.; [Form 604-FL] or (ii) deposit to a
trust in accordance with Florida Statutes, an amount
equal to 110% of the merchandise wholesale cost sold
for future delivery, or 30% of the purchase price
collected for such merchandise, whichever is greater
[Form 604T-FL].

12. Customers, through the use of Contracts, may purchase,
    on a preneed basis, selected Services and/or
    Merchandise from either, or both, of the contracts.

Examination of the Contracts submitted with your petition
reveals that the Contract is structured in such manner that the
customer can contract on a preneed basis for a complete funeral
(full merchandise and services) or alternatively the customer
can contract for select services and/or merchandise which do not
result in a complete funeral.

REQUESTED ADVISEMENT

You request the Department's advice regarding the following:

I. If under the terms of the Contracts a customer agrees
to pay for Merchandise in installments over a period
of time and the terms of the Contracts provide that:
(i) upon payment in full of the Total Sales Price to
Seller or Seller's assignee, Seller will convey to
Purchaser all rights, title or interests in the within
described Internment Rights, and (ii) Purchaser shall
have 30 days from date of execution of this agreement
to cancel this agreement and receive a total refund of
all monies paid; does the taxable event for sales tax
purposes occur when the Merchandise is delivered
rather when the contract is executed?
II. If Taxpayer delivers Merchandise in conjunction with a
Funeral, marketed in conjunction with a funeral home
related by common ownership to the Taxpayer, is the
merchandise exempt from sales tax when it is delivered
to the customer, provided Taxpayer pays sales tax to
the vendor upon purchase of the merchandise?
III. If Taxpayer does not join with an unrelated funeral
home to market a complete Funeral, but delivers

Merchandise at the direction of the customer in
Conjunction with a Funeral, is the Merchandise exempt
from sales tax to the vendor upon purchase of the
Merchandise?

DISCUSSION OF LAW

We consult the following provisions of statutory law, regulatory
law, and case law in addressing the issues under advisement
herein.

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(1), F.A.C., provides:

(1) Supplies used by funeral homes in the conduct of their
business are taxable.

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)

Both preneed and at-need contracts which provide that the

funeral director will 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 which provide 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 on
the full selling price.

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.

Under the provisions of s. 497.421, F.S., the funds held in
trust for the purchase of funeral merchandise cannot be
disbursed for the purchase of the contracted merchandise until
the trustee is furnished a copy of the contract beneficiary's
death certificate. Consequently, there is no transfer of title
or possession and, therefore, no completed sale of the
merchandise until the contract turns at need.

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 judicial 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 or 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

RESPONSE, ISSUE I: Our analysis of the contractual terms and
conditions of the Contracts, as cast, leads the Department to
conclude that the elements of delivery (actual or constructive)
will not be satisfied until the Contact is fully paid. This
finding is supported by the fact that under the terms and
conditions of the Contract, neither title nor possession to
Merchandise transfers until the Contracts are paid in full.

Thus, at the inception of the Contracts executed on a preneed
basis there is no occurrence of actual or constructive delivery
and hence no passage of title or possession unless and until
such time the Contracts are paid in full.

Therefore, pursuant to the statutory definition of the term
"sale" contained in section 212.02(16)(a), F.S., when
interpreted together with the statutory guidelines on delivery
and the judicial analysis and construction thereof, set out in
the foregoing discussion, the Department hereby enters its
finding that the Contracts executed on a preneed basis do not
constitute executed sales contracts but are more in the nature
of executory type contracts which guarantee delivery of
merchandise and services at some future date. Accordingly, no
sales tax will be due at the inception of the Contracts executed
on a preneed basis, 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
Contract, which we understand does not occur unless and until
the Contract is fully paid. 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 Contracts or on
the cost price of the burial merchandise, whichever price is
greater at the time of delivery.

RESPONSE, ISSUE II: If Taxpayer delivers Merchandise in
conjunction with a Funeral, marketed in conjunction with a
funeral home related by common ownership to the Taxpayer, it is
evident that the parties are working in concert to sell a
complete funeral package. Therefore, the exemption for funerals
under s. 212.08(2)(a), F.S., would clearly apply. Accordingly,
the merchandise would be exempt from sales tax when it is
delivered to the customer, provided Taxpayer pays sales tax to
the vendor upon purchase of the merchandise.

RESPONSE, ISSUE III: If Taxpayer does not join with an unrelated
funeral home to market a complete Funeral, but delivers
Merchandise at the direction of the customer in conjunction with
a Funeral, the exemption for funerals under s. 212.08(2)(a),
F.S., would not apply. The Department in construing the
statutory exemption for funerals must adhere to, and be guided
by, the long-standing and fundamental precept of statutory
construction, established by the Florida Supreme Court. Such
principles of construction mandate that exemptions from, or
exceptions to, taxing statutes are special privileges granted by
the legislature and must be strictly construed against the
taxpayer and in favor of the administering agency. See Asphalt
Pavers v. Dept. of Revenue, 584 So.2d 57 (Fla. 1 DCA 1991); Dade
Cty. Taxing Auth. v. Cedars of Lebanon, 355 So.2d 1205 (Fla.
1978); Williams v. Jones, 326 So.2d 425 (Fla. 1975); Straughn v.
Camp, 293 So.2d 689 (Fla. 1974); United States Gypsum Company v.
Green, 110 So.2d 409 (Fla. 1959). This doctrine of strict
construction cannot be reconciled with the liberal
interpretation of the funeral exemption necessary to support
that the Taxpayer and the unrelated funeral home were working in
concert to sell a complete funeral. Therefore, under such

circumstances, the Taxpayer is required to collect and remit tax
on the Merchandise. If the Merchandise is sold pursuant to the
Contracts (preneed), then the tax is due with the return due for
the month in which the Merchandise is delivered.

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/
Control No. 25404