Could a Virginia business breeding canines for pharmaceutical companies buy feed, medicines, and vaccines under the agricultural exemption?

Subject

Canine breeder did not qualify for the agricultural purchase exemption

Plain-English summary

Virginia ruled that a business breeding canines for pharmaceutical companies could not buy feed, medicines, or vaccines tax-free under the agricultural exemption. The exemption required a farmer raising crops, livestock as statutorily defined, or another specifically listed agricultural product for market.

Canines were not included in the cited livestock definition, and the business was not conducting one of the other listed farming activities. The medicines-and-drugs language also required sales to a veterinarian for direct use on agricultural production animals or resale to a farmer; these products were sold directly to the breeder.

The Department found no other Retail Sales and Use Tax Act exemption for the purchases, even though the breeder's customers supplied exemption certificates for their purchases of the animals.

What this means for you

• A resale business involving animals is not automatically agricultural production under Virginia's exemption.
• The statutory livestock list and specified farming activities control.
• Medicine and vaccine eligibility can depend on who buys the product as well as the animal and use.
• A customer's exempt purchase does not by itself exempt the breeder's inputs.

Common questions

Were the canines treated as livestock?

No. They were outside the livestock definition quoted in the ruling.

Did the customers' exemption certificates exempt the breeder's supplies?

No. The ruling separately analyzed the breeder's own purchases.

Was another exemption available?

Virginia said no other exemption applied on the facts presented.

Citations and references

• Va. Code § 58.1-609.2(1).
• Va. Code § 3.2-6500.
• P.D. 94-152.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 09-31

Original ruling text

March 31, 2009

Re: Request for Ruling

Retail Sales and Use Tax

Dear *:

This will reply to your letter in which you request a ruling regarding the application of the retail sales and use tax to activities engaged in by your company (the "Taxpayer").

FACTS

You represent that the Taxpayer has a facility located in Virginia. The Taxpayer is in the business of breeding canines for resale to the pharmaceutical industry. All sales are to companies that provide tax exemption certificates. The majority of the Taxpayer's customers request canines that must meet their specific needs (gender, weight, blood type and age).

You ask if certain purchases (feed, medicines and vaccines) can be purchased exempt of the retail sales and use tax pursuant to the agricultural exemption provided in Va. Code § 58.1-609.2 1 or any other exemption.

RULING

Virginia Code § 58.1-609.2 1 exempts from the retail sales and use tax:

Commercial feeds . . . breeding and other livestock; . . . baby chicks; turkey poults; rabbits; quail; llamas; bees; . . . medicines and drugs sold to a veterinarian provided they are used or consumed directly in the care, medication, and treatment of agricultural production animals or for resale to a farmer for direct use in producing an agricultural product for market; . . . and agricultural supplies provided the same are sold to and purchased by farmers for use in agricultural production, which also includes beekeeping and fish, quail, rabbit and worm farming for market.

As explained in Public Document 94-152 (05/16/94), inasmuch as the Code of Virginia provides a comprehensive definition of "livestock," that same definition is applied to the agricultural exemption set forth in the sales and use tax laws. Virginia Code § 3.2-6500 (derived from former § 3.1-796.66) of the Comprehensive Animal Care Act defines "livestock" to include:

all domestic or domesticated: bovine animals; equine animals; ovine animals; porcine animals; cervidae animals; capradae animals; animals of the genus Lama; ratites; fish or shellfish in aquaculture facilities, as defined in § 3.2-2600; enclosed domesticated rabbits or hares raised for human for or fiber; or any other individual animal specifically raised for food or fiber, except companion animals.

In order to qualify for the exemption pursuant to Va. Code § 58.1-609.2 1, two criteria must be met: (1) a farmer must be engaged in the raising of crops, livestock (as defined in Virginia Code § 3.2-6500) or other specified farming activities such as quail or worm farming; and (2) exempt purchases must be used by the farmer in agricultural production for market.

Based on the information provided, the Taxpayer does not meet the criteria for exemption. First, it is not clear that the Taxpayer is a farmer. Even if the Taxpayer is considered a farmer, it is not engaged in raising crops, livestock (as defined in Virginia Code § 3.2-6500) or the other specified farming activities. In addition, the information provided indicates the medicines and vaccines are sold to the Taxpayer and not to a veterinarian, as required by the statute to qualify for the exemption. Accordingly, the agricultural exemption in Va. Code § 58.1-609.2 1 is not available for the Taxpayer's purchases of feed, medicines or vaccines. Furthermore, based on the facts presented, no other exemption in the Retail Sales and Use Tax Act is applicable to these purchases.

The Code of Virginia sections and public document cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions regarding this ruling, you may contact the Appeals and Rulings unit at *.

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-2994753394