Labrador Retriever Forum
A friend of mine of another breed is really getting hammered by the tax man. She does not have a offical master license in the State of Washington and has always considered herself a hobby breeder and has dogs that have done well in the ring. Well, she placed all of her dogs on limited registration with spay and nueter contracts, and everything was fine.
Well, now the tax man is saying that unless they went out the door as breeding prospects she owes sales tax on every puppy placed. And if she did place on full registration then the people she placed the puppy with better have a tax number on file with her. Now when you charge sales tax you HAVE to let the adoptive family KNOw they are paying sales tax. I didn't know what to tell her. I have never paid sales tax on a puppy before and have never heard of a breeder having to pay sales tax. Any thoughts on this and does anybody know of a good lawyer knowledgeable in this sort of thing? I told her I would try to ask around, because I just have no idea.
This is Washington State Law,sorry I didn't want to confuse the "2" Washington's.
That is true, we charge sales tax on every pup we sell unless is out of state, you still have to claim the income.
If you are writing off your dog hobby as a business then you should pay sales tax! 
I am in Iowa and have charged and collected sales tax from the beginning per my state's requirements.
If the dog is shipped out of state, no tax. IF the out of state person comes here to pick up the pup, sales tax.
MK
If you have a CPA, look to see if there is a exclusion for "occasional sales" which describes most kennels!
That's kinda how she got in this mess. Her CPA said because she wasn't a business she didn't have to charge sales tax. Well, Washington State says differently.
If she isn't claiming a business, then why would she need a license to charge sales tax. What are the laws in Washington? Is it for anything that you sell off your property that is tangeable?
Tax laws are changing and have changed and even as a hobby breeder most states require paying tax on a pup sold IF it is placed in state. Out of state pups would not have sales tax charged. When you show deposits into bank accounts even for a hobby, its documented and eventually uncle sam catches up. If you experience a "loss" as a hobby breeder, that still needs to show on your tax forms.
So then when i sell my hot tub and dining room furniture I have to collect and pay in sales tax? I had a potential puppy buyer write 4 times with one line--how much? I ignored him. Finally I wrote back $1000. Next one line--"does $1000 cover all taxes and fees?" It creeped me out. I didn't respond.
I think the states are trying to figure out a way to get more money from Hobby/Kennels! Kind of like sticking their hands in the pot. I think they are also going to change the definition of Hobby Breeder!
What is a Hobby breeder in terms of amount of litters they have? Do 2 litters a year or 12 a year constitute a Hobby Breeder? By changing the tax laws they will be able to identify, what we are all doing.
Everything will be traceable and they will be able to enforce these laws. Now the other question is what about all the news paper ads for sales of puppies, it should be interesting how they will get taxes out of those people, they are no different then our sales of puppies and dogs.
Keep your eyes open to local/state legislation regarding this issue. It sounds very much like what the HSUS is pushing...more and more ways to restrict how many litters/puppies you produce and, as an incentive for states to pass the bills, the prospect for increased revenues for state coffers.
The bill that recently died in Ohio had clauses written in that would have required each breeder to "register" (i.e. pay a fee) a litter with the LOCAL authorities prior to selling the pups; this would be on top of the puppies' AKC registration.
As states look for more and more ways to increase revenue, we're going to have to be extremely diligent regarding getting our voices heard in opposition to so much oppressive legislation.
You may also want to check with another CPA. In most states, if something is truly a HOBBY (as most of us are), then we shouldn't have to pay taxes on the "income"...which most of us also realize isn't "income"...it's just an "expense offset"!
Have a great weekend!
From frozen, snowy Ohio!
Yes, this is true in Washington State. Dogs fall under "Livestock for Breeding". You're sales contract my state somewhere on it that it is a registerable animal with some type of registry, most us are AKC. It also must state that the animal "is breedable". Both these things will get you out of having to charge and collect sales tax.
How did "The TAX Man" find out about your friend? I'm just curious.
I've always charged sales tax on puppy sales (MN & WI) unless the puppy was shipped out of state. In WI, must do even if the puppy is sold for breeding stock. I believe most states consider puppy income "taxable income", thus you need to keep track of expenses to offset the income and file a Schedule C. If you're NOT reporting puppy/dog income, could be in trouble just for that, even as a hobby breeder. It's something we engage in on a regular basis, different than selling a used couch or TV.
I'm curious what most breeders are doing along these lines. By the time I write off all dog-related expenses, including travel, show expenses, facility improvements/repairs, a percentage of utilities, depreciation on dog-related equipment and home office expenses, I usually have a substantial loss to declare. A lot of bookkeeping but at least I'm "legal".
If I did that, I'd fully expect to be asked to defend it in reference to tax fraud or evasion. I doubt it would hold up in court.
