SecProbe.io

CORRESP
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August 1, 2005

Mr. Larry Spirgel

Assistant Director

Securities and Exchange Commission

Division of Corporate Finance

Washington, DC 20549

Re:         Carriage Services, Inc.

Form 10-K for the fiscal
year ended December 31, 2004

Filed March 30, 2005

Form 10-Q for the
quarters ended March 31, 2005

File Number: 1-11961

Dear Mr. Spirgel:

Thank you for your
comments regarding the above referenced filing. We appreciate your assistance
in ensuring our filings comply with the applicable disclosure requirements. The
following sets forth the comments made in your letter dated July 20, 2005 and
our responses thereto:

Annual Report filed on Form 10-K for the year ended
December 31, 2004

1.                 Comment:     Item
7. MD&A—Critical Accounting Policies and Estimates, pages 13-14

Funeral and Cemetery
Operations, page 13

Refer to your discussion of allowances. You state that “allowances for
customer cancellations, refunds and bad debts are provided at the date that the
sale is recognized as revenue based on our historical experience.” In
conjunction with your discussion of other estimates, revise your disclosures in
future filings to provide greater insight into the quality and variability of
information regarding financial condition and operating performance by
discussing how accurate the estimates/ assumptions have been in the past.

The Commission’s Interpretive Release on Management’s Discussion and
Analysis of Financial Condition and Results of Operation in December 2003
provides disclosure requirements for critical accounting estimates. Critical
accounting estimates and assumptions are based on matters that are highly
uncertain . For this reason, you are required to analyze their specific sensitivity
to change, based on other outcomes that are reasonably likely to occur and
would have a material effect on financial condition or operating performance. Further,
you are to provide quantitative as well as qualitative disclosure when quantitative
information is reasonably available and will provide material information for
investors. None of the critical accounting estimates that you include in your
current disclosures include the sensitivity analysis for other quantitative
information as required per this release. In future filings, revise your
disclosures to include sensitivity analysis and other quantitative information
when it is reasonably available. You should address the questions that arise
once the critical accounting estimate or assumption has been identified, by
analyzing, to the extent material, such factors as how you arrived at the
estimate, how accurate the estimate/ assumption has been in the past, how much
the estimate/ assumption has changed in the past, and whether the estimate/
assumption is reasonably likely to change in the future. For additional
guidance, refer to Item 303 of Regulation S-K and SEC Interpretive Release no.
33-8350, “commission Guidance

Regarding Management’s Discussion and Analysis of Financial Condition
and Results of Operations,” which is located on our website at: http://www.sec.gov/rules/interp/33-8350.htm.

Response: In future
filings, we will revise our disclosures to provide greater insight into the
quality and variability of the allowances for contract cancellations, refunds
and bad debts, as well as the other critical accounting estimates and
assumptions, by discussing how accurate the estimates and assumptions have been
in the past. Furthermore, we will revise our disclosures to include sensitivity
analysis and other information when it is reasonably available, such as how we
arrived at the estimate and whether the estimate is reasonably likely to change
in the future.

2.                 Comment: Financials—Consolidated Statement of
Operations, page 30

Please state separately your revenues and costs of revenue by goods and
services. Refer to Rule 5-03 of Regulation S-X.

Response: In future
filings, we will separately state our revenues and costs of revenues by goods
and services. In the past we have not separately stated the revenues by goods
and services because of the variability by market in pricing separately the
goods and services, which together constitute a funeral service or a burial. Also,
in the past, we have not separately stated the costs by goods and services for
a funeral service or a burial because many of the costs are not easily separable.

3.                 Comment: Financials—Consolidated Statement of
Operations, A/P and Accrued Liabilities, page 30

Please present Accounts Payable separately from Accrued Liabilities on
the face of the Consolidated Balance Sheet, in accordance with Rule 5-02,
paragraph 19, of Regulation S-X.

Response: In future
filings, we will separately state Accounts Payable and Accrued Liabilities on
the face of the Consolidated Balance Sheet.

4.                 Comment: Note 1—Basis of Presentation and Summary
of Significant Accounting Policies, pages 34-38

Deferred Obtaining Costs,
page 35

Provide us a breakdown of the other deferred direct related costs of
originating pre need sales contracts.

Response: Other deferred
direct related costs of originating preneed sales contracts include the payroll
taxes and insurance related to the commissions paid to the salesperson, the
cost of obtaining customer lists, the cost of establishing the new trust or
insurance arrangements securing the contracts and establishing the payment plan
for the customer (coupon book or ACH), and the cost of contract setup. Directly
related payroll taxes and insurance are approximately 11 percent of deferred
costs and the other related costs are approximately 17 percent of deferred
costs. These costs are consistent from period to period.

We have recently evaluated
our accounting for deferred obtaining costs and we have determined that a more
preferable method of accounting in the future is to expense all of these costs
as incurred and will report this accounting change in 2005.

5.    Comment: Tell us how you ensure appropriate recognition of
deferred obtaining costs when it is currently based on third-party actuarial
probabilities of expected performance of services or delivery of merchandise
and not actual performance. Tell us if you are able to directly relate each
element of deferred

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acquisition cost with a corresponding contract. Please cite the
accounting guidance used as the basis for your policy and include this disclosure
in future filings.

Response: Historically,
we have recognized deferred obtaining costs as expense based on third-party
actuarial probabilities of expected performances because we believed that
method provided reasonably accurate matching of revenues and direct selling
costs in the same period, particularly because the probabilities were developed
using our specific portfolio of contracts. In addition, until recently we could
not directly identify each element of deferred acquisition cost with a corresponding
contract. We have recently implemented a new accounting system that provides
specific matching of a contract’s deferred cost to the contract. There is no
accounting guidance specific to deferred costs to which we can refer other than
Concepts Statement 6, paragraphs 144-149.

We have recently evaluated
our accounting for deferred obtaining costs and determined that a more preferable
method of accounting in the future is to expense all of these costs as incurred
and will report this accounting change in 2005.

6.                 Comment:     Note
4—Preneed Receivables and Trust Investments, pages 41-45

Preneed Cemetery
Receivables and Trust Investments, page 41

Why do you not show the allowance for cemetery contract cancellations
in a manner similar to that shown for funeral contract cancellations on page
42? If this amount is immaterial, please state so.

Response: The amount of
the allowances for non-current cemetery receivable cancellations was $382,000,
which we considered immaterial for purposes of the footnote disclosure. In
future filings, we will reconsider disclosing the allowance based on materiality.

The
Company acknowledges that:

—             The Company is responsible for the adequacy and
accuracy of the disclosure in Company filings;

—           Staff comments or changes to disclosure in response to
staff comments do not foreclose the Commission from taking any action with
respect to the filing; and

—           The Company may not assert staff comments as a defense
in any proceeding initiated by the Commission or any person under the federal
securities laws of the United States.

We appreciate your
assistance in ensuring that the Company provides appropriate disclosures in its
public filings. Should you have any questions about the above responses, please
feel free to contact the undersigned at (713) 332-8475.

  Very truly yours,

  /s/ Terry Sanford

  Terry E. Sanford

  Vice President, Corporate Controller

  and Assistant Secretary

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