Sales Tax Slice: Sellers Face a Grave Decision on Headstone Transactions, Memorializing the Importance of Tax Planning

Sales and use tax professionals should know the difference between real property and personal property.  It’s easy, right?  Real property is land and the things attached to it, and personal property is the rest.  But what if the answer weren’t always so straightforward?

Consider a bulletin that the Wisconsin Department of Revenue issued this month regarding cemetery monument dealers’ transactions of cemetery monuments (think: headstones).  The bulletin explains in detail when the state characterizes sales of headstones as sales of real property and when it deems those transactions as sales of tangible personal property (TPP).  Indeed, the bulletin provides no less than 16 examples to clarify the department’s position.

Distinguishing between the two property types is important.  Wisconsin, like many states, imposes sales and use tax on sales of TPP but not on sales of real property.  And with simple upright headstones selling for between $1,500 and $3,000 on average these days, beaucoup bucks are at stake when planning for how to structure the transaction.

So, when is the headstone real property, and when is it TPP?  In Wisconsin, the tax treatment of a dealer-sold headstone turns on whether the monument dealer installs it.  That is to say, if the monument dealer not only sells the headstone but also installs it into a cement foundation, then the transaction is a nontaxable sale of real property.  But if the monument dealer sells that same headstone to a company and ships it to the company without also installing it, then the transaction is a taxable sale of tangible personal property.

The bulletin also recognizes that monument dealers purchase headstones, too, and more importantly that the dealers sometimes do not know whether they will resell the headstones as real property or TPP.  In those situations, the dealer can purchase the headstones tax-free and use resale certificates later, or it can pay sales tax on the initial purchase and later claim a deduction for the headstones’ prices.

Even if you don’t sell cemetery monuments or are not a Wisconsin taxpayer or tax professional, the message is clear: obtaining a favorable result on a contemplated transaction often requires careful planning.

Continue the discussion on LinkedIn: When should sales of headstones be sales of real property, and when should those sales be sales of tangible personal property.

For more information about state tax issues, sign up for a  free trial on Bloomberg BNA’s Premier State Tax Library.

By Ryan J. Voorhees