Burial Vaults are Subject to Sales Tax
October 29, 2020
This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated September 25, 2020.
The facts as presented in your letter ruling request are summarized as follows:
Applicant is a Missouri funeral home that, as part of its service, sells burial containers/vaults (Vaults) to its customers. Vaults are normally required by local cemeteries. When the customer purchases a vault from Applicant, Applicant orders a Vault from a Vault company, who delivers the Vault to the cemetery on the day of the funeral. The Vault company provides special equipment to seal the Vault and to lower the Vault into the ground. A Vault is made of reinforced concrete and weighs up to three thousand pounds.
On the day of the burial, the Vault is set up above ground. After the committal, the casket is lowered into the Vault and then the Vault is lowered into the grave. Once the Vault is lowered into the ground, the Vault is covered with dirt. The only time Applicant's customer comes into contact with the Vault is when the customer arrives at the cemetery for the committal.
Is the purchase of the Vault subject to Missouri state and local sales tax?
Yes. The purchase of the Vault is subject to Missouri state and local sales tax.
Section 144.020.1, RSMo, provides that "[a] tax is hereby levied and imposed upon all sellers for the privilege of engaging in the business of selling tangible personal property or rendering taxable service at retail in this state." Section 144.010.1(13), RSMo, defines "Sale at Retail" as "any transfer made by any person engaged in business as defined herein of the ownership of, or title to, tangible personal property to the purchaser, for use or consumption and not for resale in any form as tangible personal property, for a valuable consideration."
Applicant purchases a Vault from the Vault company, who is engaged in the business of selling Vaults. Therefore, the sale of a Vault to Applicant is a sale at retail, making the purchase of the Vault subject to Missouri state and local sales tax.
Who is required to pay sales tax on the purchase of a Vault form the Vault company?
Applicant is required to pay sales tax on its purchase of the Vault from the Vault company.
Vaults are considered fixtures. "Personal property may be so annexed to real estate that it is part of the land, a 'fixture.'" Buchholz Mortuaries, Inc. v. Director of Revenue, 113 S.W.3d 192, 193 (Mo. banc 2003). A fixture "is shown by (1) annexation to the land; (2) adaptation to the location; and (3) intent of the annexor at the time of annexation." Id. Applicant takes the purchased Vault and inserts it into the customer's grave and covers it with dirt after insertion. A Vault is adapted to the land and it is the intent of Applicant to annex the Vault to the land by lowering the Vault in the grave after the casket has been inserted in the Vault. Therefore, a Vault is considered a fixture.
Missouri Code of State Regulations 12 CSR 10-112.010(2)(A) defines "Contractor" as "[a]ny person entering into an agreement to improve, repair, replace, erect or alter real property." Applicant is a contractor, who enters into an agreement with its customer to purchase the Vault and lower the Vault into the grave once the customer's casket has been placed in the Vault. A Vault is a fixture that adapts to the land and the Applicant's intent is to adapt the Vault to the cemetery once the casket has been placed inside it. Therefore, because Applicant is hired by its customer to purchase the Vault and lower it into the grave, Applicant is a contractor.
Missouri Code of State Regulations 12 CSR 10-112.010(1) provides:
In general, a contractor is the final user and consumer of the materials and supplies used and consumed in fulfilling a construction contract and which become part of a completed real property improvement. Consequently, persons selling materials and supplies to a contractor are subject to tax on the gross receipts from all such sales because the purchase is not for resale as tangible personal property.
Applicant enters into an agreement with its customer to purchase a Vault that Applicant will lower into a grave once the casket has been inserted into it and then cover it with dirt. Vaults are normally required by cemeteries for casket burials. Vaults alter real property and adapt to real property. At the time of the Vault purchase, Applicant's intent is to adapt the Vault to the cemetery. Therefore the Vaults Applicant purchases are fixtures. As the Vault is a fixture, Applicant is the end user of the Vault. Therefore, Applicant is required to pay any Missouri state and local sales tax owed on the purchase of the Vault from Applicant's Vault supplier.
This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals. If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change. For this reason, the interpretation set forth above should be reviewed on a regular basis. Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.
Should additional information be needed, please contact Senior Counsel Thomas A. Houdek, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475 (phone 573-751-0961), or me.