Tax Type
Retail Sales and Use Tax
Description
Agriculture; Ostrich farming
Topic
Taxability of Persons and Transactions
Date Issued
05-16-1994
May 16, 1994
Re: Request for Ruling: Retail Sales and Use Tax
Dear*************
This will reply to your letter of October 24, 1993 on behalf of the*******(the "Taxpayer") regarding the application of the sales and use tax to ratite farming.
FACTS
The Taxpayer is a producer's organization representing Virginia farming of ostriches and other ratites, including emus, rheas and cassowaries. You indicate that these birds are traditionally farmed for meat, leather, feathers and other products; however, the current domestic market is principally for the development of breeding stock.
The Taxpayer requests a ruling as to whether ratite farming qualifies for the agricultural exemption from the sales and use tax.
DETERMINATION
Va. Code §58.1-609.2(1) provides an exemption from the tax for:
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- breeding and other livestock; semen; breeding fees; baby chicks; turkey poults; rabbits; quail; llamas;... necessary for use in agricultural production for market ... and agricultural supplies provided the same are sold to and purchased by farmers for use in agricultural production, which also includes fish, quail, rabbit and worm farming for market.
Historically, the department has exempted farmers from taxation on their livestock but has limited its definition of livestock to traditional farm animals such as cattle, pigs, chickens, sheep, etc. Nontraditional farm animals were subject to taxation unless specifically exempted in the Code.
However, as amended in 1993, Va. Code §3.1-796.66 of the Comprehensive Animal Laws defines "livestock" to include:
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- domestic or domesticated: bovine animals; equine animals; ovine animals; porcine animals; cervidae animals; capradae animals; animals of the genus Lama; [and] ratites....
Inasmuch as the Code of Virginia currently provides a comprehensive definition of "livestock," that same definition will be applied to the agricultural exemption set forth in the sales and use tax laws. As a precaution, however, meeting the definition requirement of §3.1-796.66 is not by itself sufficient to exempt an activity from the tax, and animals used in an activity that is not agricultural in nature remain taxable. For example, equine animals used for racing or showing, as well as any animal used or intended as a pet or companion do not qualify for the agricultural exemption.
Therefore, in order to qualify for the exemption pursuant to §58.1-609.2(1), two criteria must be met: i) a farmer must be engaged in the raising of crops, livestock (as defined in §3.1-796.66), or certain other specified farming activities such as quail and worm farming; and ii) exempt purchases must be used by the farmer in agricultural production for market.
Accordingly, ratite farming, including the purchase of ratite breeding stock by a farmer for agricultural production for market, is exempt from the sales and use tax. When making exempt purchases, a certificate of exemption, Form ST-18, must be provided to suppliers.
If you require any additional information regarding this matter, please contact the department.
Sincerely,
Danny M. Payne
Acting Tax Commissioner
OTP/7461I
Rulings of the Tax Commissioner