Sales Tax State Activity Update December 2005

North Carolina Digs into a “Grave” Service

Effective January 1, 2006, charges for services rendered in connection with funerals will be exempt from the sales and use tax, but sales of tangible personal property in connection with funerals will be subject to the general State rate and applicable local rate of tax. There will no longer be an exclusion or exemption for any portion of the expenses related to sales of tangible personal property.

Some examples of non-taxable services include charges for burial permit fees, stone deposits to guarantee the erection of a stone, ambulance service, cemetery lots, grave opening fees, death certificates and those services performed by funeral directors, morticians, undertakers, beauticians, and barbers. The charge for installation of taxable tangible personal property, such as the installation of a memorial stone or monument, is exempt from the sales and use tax if the charge is separately stated on the purchaser's invoice and in the seller's records.

Examples of taxable tangible personal property are coffins, caskets, vaults, memorial stones, monuments, grave markers, and similar property. The charges for taxable tangible personal property must be separately stated from the charges for services rendered.

There was no change in the application of tax to purchases by funeral directors, morticians, and undertakers of supplies and equipment used in conducting their businesses. Those items continue to be subject to the general State rate and applicable local rate of tax.

View the full notice on the North Carolina DOR Web Site. ( North Carolina Department of Revenue, Notice Funeral Expenses, November, 2005 )