Washington – Dogs Sold for Breeding Purposes are Not Exempt

SALT Report 3078 – The Washington Department of Revenue issued a ruling regarding whether dogs sold for breeding purposes qualify for the livestock exemption.  In this case, the Taxpayer owns and operates a dog breeding and kenneling business. In 2000, the Taxpayer’s accountant informed him that dogs that are registered and sold for breeding are not subject to sales tax.

Based on this advice, the Taxpayer began asking its customers whether they were purchasing their dog for breeding purposes, or as a pet. If sold for breeding purposes, the Taxpayer would include this information in the sales contract along with specific instructions regarding how to register the dog with the American Kennel Club, and an organization that keeps track of pedigreed dogs available for breeding.

In 2011, the Department conducted an audit of the Taxpayer.  Upon completion the auditor, determined that the breeding dogs were not entitled to the exemption for sales of “livestock” as provided in RCW 16.36.005 and WAC 458-20-210.  The Taxpayer was issued a sales tax and B&O tax assessment, to which it filed an appeal.

Upon review of the case, the Department stated that the exemption for livestock sold for breeding purposes is limited to horses, mules, donkeys, cattle, bison, sheep, goats, swine, rabbits, llamas, alpacas, ratites, poultry, waterfowl, game birds, and other species designated by statute.  However, dogs are not included on the list of qualifying animals and therefore, they are not eligible for the “livestock” exemption provided in RCW 16.36.005.

Additionally, the Department dismissed the Taxpayer’s argument that he had relied on information issued by the Department of Revenue in 2000, which was later supported by his accountant.  The Department confirmed that in 2000 there was a distinction, for sales tax purposes, between dogs sold for breeding and dogs sold as pets; however legislation in 2001 amended the definition of “livestock” and removed that distinction.

As a result, the Department ruled that it was the Taxpayer’s duty to become informed of any changes in the law that may affect its tax liabilities and his appeal was denied.

For Further Information

Washington Department of Revenue – Tax Determination #13-0055


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