Sales Tax Articles
Sales Tax State Activity Update - May 2008
Ashes to Taxes in South Dakota
The South Dakota Department of Revenue recently issued a Tax Fact which provides guidance to Funeral Directors on the taxability of the items they sell.
Funeral Services
Funeral services are defined as the professional service of a funeral director and staff including, but not limited to: the care, preparation and transportation of the remains; the sale of funeral merchandise; providing of the memorial services; cremation, if desired; and the providing of other funeral-related services or merchandise. Sales of funeral services and tangible personal property in South Dakota are subject to South Dakota sales tax.
Accommodations
Accommodations are services or tangible personal property purchased by the funeral home on behalf of the client. If the item being purchased by the funeral home is normally subject to tax, the funeral home can either pay sales tax to the vendor or issue an exemption certificate. If the funeral home paid sales tax at the time of purchase, the entire bill can be passed on to the customer without any additional sales tax due. If the bill is marked up when passed on to the customer, then this amount must be included in the gross receipts and subject to sales tax.
Prepaid Plans
A funeral director must place at least 85% of the cost of the funeral plan in trust until the time of need. The funeral director does not pay sales tax until the money is withdrawn to be used for actual funeral expenses. At that time, all gross receipts, including interest earned, is subject to the tax. The remaining 15% (or less) which is not placed in the trust account is subject to the tax at the time of receipt from the client. Penalties for broken contracts are subject to sales tax.
Bad Debts
Taxpayers reporting on the accrual method may take credit for bad debts on the return for the period during which the bad debt is written off as uncollectible in the claimant's books and records and is eligible to be deducted for federal income tax purposes. If a taxpayer subsequently collects the debt in whole or in part, the tax on the amount collected shall be paid and reported on the next return due after the collection.
The full tax fact can be viewed on the South Dakota Website.
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