Are wood shavings a commercial dog breeder buys to bed breeding dogs and their puppies exempt from sales tax?

Plain-English summary

A commercial dog breeder operating a New York kennel buys wood shavings to use as bedding for its breeding dogs and their puppies, then sells the puppies at retail and wholesale. It asked whether those wood shavings are exempt from sales tax.

The Office of Counsel concluded the wood shavings are taxable. Selling the puppies does not bring the bedding within any exemption:

• Production-supply exemption (Tax Law section 1105-B): This exempts supplies used directly and predominantly in production, but only for an enumerated list of activities — manufacturing, processing, generating, assembling, refining, mining or extracting. Breeding or raising animals is not on that list, so supplies used to breed dogs do not qualify.
• Farming exemption (Tax Law section 1115(a)(6)(A)): This exempts property used predominantly in farm production. But the Sales and Use Tax Regulations spell out (20 NYCRR 528.7(b), Example 2) that "[t]he breeding of dogs, cats and other pets or laboratory animals is not farming."
• No other exemption applies, so the purchase is subject to sales tax under Tax Law section 1105(a).

What this means for you

Pet and animal breeders

Raising animals for sale is not "farming" for New York sales-tax purposes when the animals are pets or laboratory animals. The farm-production exemption and the production-supply exemption that help crop and livestock farmers and manufacturers do not extend to dog (or cat/pet) breeding, so your bedding, supplies and similar inputs are generally taxable.

"I sell the end product" is not enough

Making a taxable retail sale of the final product (here, puppies) does not automatically exempt the inputs. The input only becomes exempt if it fits a specific statutory exemption — and breeding pets fits neither the production-supply nor the farming exemption.

Common questions

Q: I sell the puppies and pay tax on those sales — why are my supplies still taxable?
A: Because the exemptions for production supplies and for farming are tied to specific listed activities, and breeding pets is not one of them. Selling the animals does not make the bedding exempt.

Q: Would the answer change for a livestock or crop farm?
A: Possibly. Genuine farm production can qualify for the section 1115(a)(6)(A) farming exemption. This opinion turns on the regulation's express statement that breeding dogs, cats, pets or lab animals is not farming.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.

Citations and references

• Tax Law section 1105(a) (sales tax on retail sales of tangible personal property)
• Tax Law section 1105-B (exemption for supplies used directly and predominantly in production)
• Tax Law section 1115(a)(6)(A) (exemption for property used predominantly in farm production)
• 20 NYCRR 528.7(b) (breeding of dogs, cats, pets and laboratory animals is not farming)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2016.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a16_24s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-16(24)S
Sales Tax
August 26, 2016

Office of Counsel
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE

ADVISORY OPINION

PETITION NO. S160201B

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTEDREDACTEDREDACTEDREDACTEDREDACTED (Petitioner). Petitioner, a
commercial dog breeder, asks whether wood shavings purchased and used to bed breeding dogs
and their puppies are exempt from sales tax.
We conclude that wood shavings used to bed breeding dogs and their puppies are not
exempt from sales tax imposed under Tax Law § 1105(a) because the exemptions under Tax
Law §§ 1105-B and 1115(a)(6)(A) of the Tax Law do not apply to dog breeding.
Facts
Petitioner is a commercial dog breeder who owns and operates a commercial dog
breeding kennel in New York. Petitioner purchases wood shavings to use to bed breeding dogs
and their offspring puppies. The puppies are later sold to the general public at retail prices and to
dealers at wholesale prices.
Analysis
Tax Law § 1105(a) imposes sales tax on “the receipts from every retail sale of tangible
personal property, except as otherwise provided in this article.”
Tax Law § 1105-B exempts from sales tax “supplies” used or consumed directly and
predominantly in the production of tangible personal property for sale “by manufacturing,
processing, generating, assembling, refining, mining or extracting . . . .” However, § 1105-B is
quite clear as to the types of production activities that qualify for the exemption; the breeding or
raising of animals is not encompassed in those enumerated activities. Accordingly, Petitioner’s
purchases of supplies, including woods shavings, that are used for breeding dogs are not exempt
from sales tax under § 1105-B.
Tax Law § 1115(a)(6)(A) exempts from sales tax retail sales of tangible personal
property used or consumed predominantly in the production for sale of tangible personal
property by farming. Section 528.7(b) of the Sales and Use Tax Regulations specifically lists in
Example 2 that “[t]he breeding of dogs, cats and other pets or laboratory animals is not farming.”
Petitioner’s purchases of tangible personal property, including wood shavings, used for breeding
dogs are not exempt from sales tax under Tax Law § 1115(a)(6)(A). Furthermore, we conclude
that no other exemption applies to the purchase of wood shavings described here or similar

-2-

TSB-A-16(24)S
Sales Tax
August 26, 2016

tangible personal property. Accordingly, Petitioner’s purchases at issue are subject to sales tax.

DATED: August 26, 2016

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

NOTE:

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the person
or entity to whom it is issued and only if the person or entity fully and accurately
describes all relevant facts. An Advisory Opinion is based on the law, regulations, and
Department policies in effect as of the date the Opinion is issued or for the specific
time period at issue in the Opinion. The information provided in this document does
not cover every situation and is not intended to replace the law or change its meaning.