Can a casket manufacturer deduct a 5% early-payment discount from the taxable receipt when it sells caskets to New York funeral directors?

Plain-English summary

Batesville Casket Company, headquartered in Indiana, sells burial caskets, cremation urns, and related products to New York funeral directors. Among the various discounts and rebates it offers, one lets a customer take a 5% discount off the base price if payment is received by the 15th of the month following delivery, per the terms shown on the customer's monthly statement.

New York's sales tax law explicitly defines a taxable "receipt" as the sale price without any deduction for "early payment discounts" — a rule aimed squarely at discounts offered purely to encourage prompt payment (as opposed to a true price reduction like a trade or volume discount, which IS deductible). Because Batesville's 5% discount is tied entirely to how quickly the customer pays, not to volume or negotiated pricing, it's exactly the kind of early-payment discount the statute disallows. That means Batesville must charge — and the customer must pay — sales tax on the full base price of the casket, even if the customer ultimately qualifies for and takes the 5% prompt-payment discount on the underlying invoice amount.

What this means for you

Wholesalers and manufacturers offering prompt-payment discounts to business customers

A discount conditioned purely on how fast the customer pays (a classic "2/10 net 30"-style early payment incentive) can never be subtracted from the taxable receipt — tax is computed on the full, pre-discount sale price regardless of which payment option the customer ultimately chooses.

Businesses offering multiple types of discounts

Distinguish carefully between discount types: a true price reduction (a trade discount, volume discount, or cash-and-carry discount reflecting a genuinely lower negotiated price) IS deductible from the taxable receipt, but a discount whose sole trigger is prompt payment timing is NOT, even if it's labeled the same way on an invoice or has an identical dollar effect.

Sellers to funeral directors specifically

Products sold to a funeral director for use in conducting funerals are specifically NOT treated as exempt resale purchases under New York law — they're taxed as ordinary retail sales to the funeral director, a rule this ruling confirms applies regardless of any early-payment discount analysis.

Common questions

Q: Is a discount for paying an invoice early always excluded from the sales tax calculation?
A: No — the opposite is true. An early-payment discount is specifically NOT deductible from the taxable receipt; tax applies to the full, pre-discount price regardless of whether the customer pays early and earns the discount.

Q: What kinds of discounts ARE deductible from a taxable receipt in New York?
A: Discounts that represent a genuine reduction in price — trade discounts, volume discounts, and cash-and-carry discounts — are deductible. The distinguishing feature of a nondeductible early-payment discount is that its only trigger is how quickly the customer pays.

Q: Are casket and funeral-product sales to funeral directors exempt as a resale?
A: No — New York specifically carves out sales of tangible personal property to a funeral director for use in conducting funerals from the normal resale exemption, so these sales are taxed as ordinary retail sales.

Citations and references

Statutes and rules:

• Tax Law § 1101(b)(3) (receipt definition; early payment discounts not deductible)
• Tax Law § 1105(a) (retail sales tax)
• Tax Law § 1115(a)(7) (funeral director resale exclusion)
• 20 NYCRR 526.5(d) (early payment vs. price-reduction discounts, with examples)

Prior advisory opinions relied on:

• Redman Homes, Inc., TSB-A-83(6)S (early payment discount not deductible from taxable receipt)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2005.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a05_6s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-05(6)S
Sales Tax
March 10, 2005

Office of Tax Policy Analysis
Technical Services Division
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S040617A

On June 17, 2004, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Batesville Casket Company, One Batesville Blvd., Batesville, IN 47006.
The issue raised by Petitioner, Batesville Casket Company, is whether the discount
described in the facts of this Petition is deductible from the computation of receipts subject to
sales tax.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner is headquartered in Batesville, Indiana and is a subsidiary of Hillenbrand
Industries. Petitioner sells burial caskets, cremation urns and related products to funeral
directors. Petitioner offers a variety of discounts and rebates to its customers for sales of
products shipped to New York. The particular discount that is the subject of this Advisory
Opinion is available to customers if payment is made by a specified discount date. Based on the
sample customer’s monthly statement that was submitted with the Petition, it appears that a 5%
discount is granted on the base price if payment is received by the 15th of the first month
following delivery as shown on the monthly statement.
Applicable law and regulations
Section 1101(b) of the Tax Law provides, in part:
When used in this article for the purposes of the taxes imposed by subdivisions
(a), (b), (c) and (d) of section eleven hundred five and by section eleven hundred ten, the
following terms shall mean:
*

*

*

(3) Receipt. The amount of the sale price of any property and the charge for any
service taxable under this article . . . valued in money, whether received in money or
otherwise, including any amount for which credit is allowed by the vendor to the
purchaser, without any deduction for expenses or early payment discounts.... (Emphasis
added)
Section 1105 of the Tax Law provides, in part:
On and after June first, nineteen hundred seventy-one, there is hereby imposed
and there shall be paid a tax ... upon:

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Sales Tax
March 10, 2005

(a) The receipts from every retail sale of tangible personal property, except as
otherwise provided in this article.
Section 1115 of the Tax Law provides, in part:
(a) Receipts from the following shall be exempt from the tax on retail sales
imposed under subdivision (a) of section eleven hundred five and the compensating use
tax imposed under section eleven hundred ten:
*

*

*

(7) Tangible personal property sold by a mortician, undertaker or funeral director.
However, all tangible personal property sold to a mortician, undertaker or funeral director
for use in the conducting of funerals shall not be deemed a sale for resale within the
meaning of paragraph (4) of subdivision (b) of section eleven hundred one of this chapter
and shall not be exempt from the retail sales tax.
Section 526.5(d) of the Sales and Use Tax Regulations provides, in part:
Discounts. (1) Discounts which are granted by a vendor, for the purpose of
encouraging prompt payment on an account, known as “early payment discounts” are not
deductible from receipts.
Example 1: A vendor grants a purchaser a 2 percent discount for paying the price
of a $100 camera within 10 days, and expects payment of the full price if paid
within 30 days. The sales tax, in a 7 percent area, is $7 on the taxable receipt of
$100, whichever method of payment the customer chooses.
*

*

*

(2) Discounts which represent a reduction in price, such as a trade discount,
volume discount or cash and carry discount are deductible in computing receipts.
Opinion
Petitioner sells funeral related products to New York funeral directors. Sales of these
products to funeral directors are not exempt under section 1115(a)(7) of the Tax Law and are
otherwise subject to New York State and local sales and use tax. Petitioner offers its customers a
5% discount if payment is made by a specified discount date. Pursuant to section 1101(b)(3) of
the Tax Law, this discount, which is an early payment discount, is not considered to be a
reduction in the selling price and is not deducted from the taxable receipts. (See Redman Homes,
Inc., Adv Op St Tax Comm, Feb 17,1983, TSB-A-83(6)S.) Tax is due on Petitioner’s total
charge to the customer, including in the amount of such taxable receipt the amount of any early

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Sales Tax
March 10, 2005

payment discount Petitioner allows its purchasers in respect of the purchaser’s prompt remittance
of the amounts billed.

DATED: March 10, 2005

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Technical Services Division

The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.