We have a non-denominational cemetery in my town; the Archdiocese of Newark has one in a neighboring town. There are key differences in how they operate; people buy plots in ours, while they buy burial rights in theirs. People sell their plots in ours in the local newspaper; theirs can’t be sold like that because it is a right to be buried, not the space itself.
As I understand it (this story has been in the news a lot over the past year), the Church has to pay sales tax on items they actually sell.
Yes, technically the church is simply collecting the tax, the buyer is paying it. However the church does not pay property tax, income tax, or any other tax really. I think from my distant past years in retail (high school) the church doesn't pay sales tax on their purchases of supplies either. A business owner must pay all of these. And in NJ where the story is taking place, that extra burden is not small.
Basically the market is distorted when some participants have a large tax burden but competitors do not.