TECHNICAL ASSISTANCE ADVISORY 95-002 SUBJECT: CONSUMERS SALES AND SERVICE TAX AND USE TAX -- Safe Harbor Determination for consumers sales and service tax to be collected by funeral directors based upon percentage of total sales This Technical Assistant Advisory is issued in reply to a request for a Technical Assistance Advisory, as provided in W. Va. Code §11-10-5r, based upon facts submitted in support of the said request.FACTS This Technical Assistance Advisory is a declaration of the policy to be followed by the West Virginia Department of Tax and Revenue for purposes of consumers sales and service tax and use tax collection, reporting and remittance by West Virginia funeral directors and embalmers. Title 110 of the Code of State Regulations, Series 15, Section 59 (1992) sets forth the legislative regulations applicable to the taxability of tangible personal property and services sold by funeral directors or embalmers for consumers sales and service tax and use tax purposes. That regulation reads as follows: § 110-15-59. Funeral Directors. 59.1 Taxable Sales. - The following sales of tangible personal property or services by funeral directors or embalmers are subject to the West Virginia consumers sales and service tax because they are not sufficiently related to or do not constitute exempt professional services: Sales of caskets Sales of burial vaults or boxes Sales of clothing for dressing the deceased Sales or rentals of folding chairs to be used at funerals or other services Sales or rentals of tarpaulins for use at funerals or services Sales or rentals of candelabra for use at funerals or services Sales or rentals of candles for use at funerals or services Sales of wreaths or door sprays Sales or rentals of funeral cars or the providing of funeral car services Sales or rentals of limousines or the service of providing limousines for transportation to the cemetery or to other memorial or similar services Sales or rentals of flower cars or the providing of flower car services Sales of the service of procuring burial permits Sales of the service of procuring, obtaining or providing certified copies of death certificates Sales of chapel service or the service of procuring such service Sales of flowers or the service of providing, procuring or handling of flowers Rental of tents for use at the funeral or at other memorial or similar services Rentals of temporary vaults Rentals of, or sales of the service of providing, lowering devices for use at the grave Sales of the service of arranging or providing the services or clergymen, singers, organists or other similar services Billings for reimbursement of out-of-town funeral directors' charges Sales of the service of placing of death notices in newspapers or in other media 59.2 Exempt Sales. - The following sales of tangible personal property or services by funeral directors or embalmers are not subject to the West Virginia West Virginia consumers sales and service tax either because they are part of or directly related to, or themselves constitute professional services or constitute alterations or realty: Sales of the service of embalming bodies Sales of the service of dressing bodies Sales of the service of providing automobiles for transportation of the deceased to railroads, air carriers or other carriers Sales of the service of taking the remains to or getting remains from railroads, air carriers or other carriers or transporters of the body Sales of the service of attendance at coroner's inquests Removal charges Sales of the service of cremation Reimbursement for air, railroad or truck transportation of bodies or reimbursement for tickets for travel by the funeral director or embalmer directly related to and a part of the professional service Telegram, telephone, cable or radio charge reimbursements to the funeral director or embalmer directly related to and a part of the professional service Sales of pall bearer service Sales of the service of opening or closing of graves or tombs Sales of the service of lining graves Sales on perpetual care trust fund depositsDISCUSSION AND ANALYSIS The accounting and record keeping necessary to accurately collect, report and remit the tax pursuant to this list of taxable and nontaxable sales and services can be extensive and burdensome. In recognition of this fact, the West Virginia Department of Tax and Revenue has established an alternative method for the computation, collection, reporting and remittance of the consumers sales and service tax and use tax. Title 110, Code of State Regulations, Series 15, Section 3.4.1.1 (1992) allows the Tax Commissioner to establish safe harbor provisions for purposes of the consumers sales and service tax and use tax. That provision reads as follows: 3.4.1.1 Apportionment of sales price. - In instances where a transaction involves the sale of taxable personal property or taxable services, and the sale of nontaxable property or services, and the method of billing does not delineate what portion of the sales price is taxable, the Tax Commissioner may establish safe harbors which will assist in the development of uniform apportionment calculations for similarly situated taxpayers. The Tax Commissioner must file appropriate administrative [notice] in the State Register at least thirty (30) days prior to the effective date of the subject matter of the safe harbor being established. The West Virginia Department of Tax and Revenue has completed a review of a statistically relevant sample of the records of West Virginia funeral directors and embalmers to determine what portion of the transactions of West Virginia funeral directors and embalmers are typically subject to the consumers sales and service tax and use tax.CONCLUSION Pursuant to this determination, the West Virginia Department of Tax and Revenue hereby establishes a safe harbor rule whereby West Virginia funeral directors and embalmers may calculate the West Virginia consumers sales and service tax and use tax as seventy percent (70%) of total charges (including cash advances, reimbursements and all other charges) and may collect and remit the tax based upon this calculation. Seventy percent of total charges will be deemed taxable, and thirty percent of total charges will be deemed not taxable. If the funeral director or embalmer fails to use the safe harbor percentage based calculation set forth herein, it will be necessary for the funeral director or the embalmer to specifically account for the tax based upon the classification of taxable and nontaxable sales and services set forth in the regulations. If this percentage calculation and collection method is used, the funeral director or embalmer need not specifically account for the tax, based upon the specific services provided and the tangible personal property sold. In circumstances where an itemized billing is generated for a purchaser, the consumers sales and service tax should nevertheless be applied to 70% of total sales shown on the itemized billing or invoice. In any circumstance where a purchaser feels that this procedure results in an overpayment of the consumers sales and service tax, the purchaser should be informed that the tax has been applied pursuant to the requirements of the safe harbor rules of the Department of Tax and Revenue, and the purchaser may seek a refund of any consumers sales and service tax overpayment by applying for a refund of the overpayment and submitting proof of such overpayment to the Department of Tax and Revenue within the two year statute of limitations. If the funeral director or embalmer fails to use the safe harbor percentage based calculation set forth herein, it will be necessary for the funeral director or the embalmer to specifically account for the tax based upon the classification of taxable and nontaxable sales and services set forth in the regulations. The total charges which make up the base for calculation of the safe harbor percentage do not include payments received on preneed funeral contracts and placed in trust pursuant to law prior to the fulfillment of the contract or used to purchase an insurance policy, the proceeds of which will be used to purchase a funeral. The tax must be calculated and remitted on such preneed funeral contract payments when the service is rendered. Total charges which make up the base for calculation of the safe harbor percentage include funds withdrawn from trust or from an insurance policy or insurance carrier or otherwise paid to the funeral director or embalmer upon fulfillment of a preneed funeral contract. In circumstances where the funeral director or embalmer receives preneed funeral contract payments, but fails to place the funds derived therefrom in trust or into an insurance policy designed to fund the preneed funeral on a timely basis pursuant to law, such payments shall be treated as immediately subject to the consumers sales and service tax upon receipt, and shall be treated as part of the total charges which make up the base for calculation of the safe harbor percentage, notwithstanding the fact that the preneed funeral contract may not be fulfilled until a later time. Declaration of Precedential Value Under W. Va. Code §11-10-5r(b), a Technical Assistance Advisory has no precedential value, except to the taxpayer who requests the advisory, unless the Tax Commissioner specifically states that it has precedential value. This Technical Assistance Advisory is declared to have precedential value to any West Virginia funeral director or embalmer. The provisions of this Technical Assistance Advisory shall apply to any matter or assessment of tax currently pending before the Department of Tax and Revenue, and shall apply to any audit or review henceforth undertaken or any assessment henceforth issued by the Department of Tax and Revenue. Publication Under W. Va. Code §11-10-5r(e), the Tax Commissioner is required to release Technical Assistance Advisories to the public after they are modified to delete identifying characteristics.Issued January 9, 1995 James H. Paige III Secretary/Tax Commissioner