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Federation takes action to protect animal welfare agencies faced with taxes on adoption fees.

 

Retail Sales Tax and Business & Occupation Tax: Do They Apply to Animal Adoption Fees?

A few months ago, the Washington Department of Revenue (DOR) issues rulings to several nonprofit animal welfare organizations stating that the fees they charge and collect for animal adoptions are subject to both the state’s retail sales tax (RST) and the business & occupation (B&O) tax. 

Since that time, representatives from the Federation, Motley Zoo Animal Rescue, Puyallup Animal Rescue, Tacoma Pierce County Humane Society, and Washington Alliance for Humane Legislation have been working with DOR in an effort to reverse its decision and exempt legitimate animal adoptions from these taxes.

Historically, DOR’s stance on taxing animal adoptions has been confusing and rulings issued by the agency contradicted one another.  For example, in years past, rulings were issued to individual animal welfare organizations stating that the RST and B&O tax do not apply to fees collected for animal adoptions; while other, more recent rulings have been issued stating that both those taxes apply. 

Here’s where things stand as of May 19, 2015:

Retail Sales Tax. The DOR has made an executive decision to exempt animal adoptions from RST by classifying that activity as a “service,” which by law is not subject to RST.  We are working with DOR to help the agency prepare criteria to distinguish legitimate animal adoptions from animal sales (sales by retailers or breeders, for instance). 

Business & Occupation Tax. The DOR is working with us to determine if the B&O tax applies to animal adoptions performed by non-governmental organizations (by law, it does not apply to government agencies performing animal adoptions, such as city or county shelters). The B&O tax is based on gross revenues, and if it applies to animal adoptions, the “service and other activities” B&O tax rate is 1.5 percent, although certain tax credits may apply.  Under state law, some types of fundraising activities performed by nonprofit organizations are exempt from the B&O tax.  We have asked DOR to consider revenues collected from animal adoptions performed by nonprofits to be for “fundraising” purposes and exempt from this tax.  DOR is considering our request and should decide soon whether or not the “fundraising” exemption applies to animal adoption fees collected by nonprofit entities.  If the DOR decision is not favorable, appeal options are available.

Legislation. We appreciate the willingness of DOR’s managers to listen to our concerns on this tax issue and work toward a resolution that is fair and sensible.  Like us, DOR recognizes that a favorable position on animal adoption taxation is more stable if it’s codified in state law. We will work with DOR to formalize any favorable tax policy on animal adoptions through legislation in 2016.

Check back periodically for news and ways you can ensure that DOR hears our voices as we all work to place companion animals into loving, forever homes.

If you have questions about your agency’s current tax status, please speak with your Tax Advisor or Auditor for guidance. If you have questions or comments, or wish to offer professional support to the Federation on this tax matter, please contact jme Thomas or Kay Joubert of the Washington Federation: info@wafederation.com

 

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