Pet adoption fees charged by nonprofit animal rescue organizations
This article clarifies the taxability of income received by nonprofit animal rescue organizations from pet adoption fees, donations, sales, and fundraising activities. It doesn't address the sales of pets by animal breeders, pet stores, or other businesses. For information on sales by these businesses, see our Dog Breeders tax guide.
Past advice from the Department to nonprofit animal rescue organizations was inconsistent. This guidance is prospective and takes effect July 1, 2015. The Department will not assess business & occupation (B&O) tax on pet adoption fees received by these organizations under the Service and Other Activities classification for tax periods before that date.
Pet adoption fees
Gross income received by a nonprofit animal rescue organization from mandatory pet adoption fees is subject to B&O tax under the Service and Other Activities classification. The fee is for services associated with the care and placement of rescued animals.
No deductions are allowed when calculating the B&O tax for costs incurred by the organization in caring and finding homes for these rescued animals. Also, pet adoption fees aren't eligible for the B&O tax exemption for amounts received from qualified fundraising activities. For more information, see “Fundraising activities” below.
Small Business B&O Tax Credit (SBC)
The Small Business B&O Tax Credit (SBC) may help offset the B&O tax in whole or in part, based on the total amount of B&O tax due. Currently, those nonprofit animal rescue organizations whose annual taxable income is $56,000 or less and whose only taxable income is from pet adoption fees will have no B&O tax due as the SBC fully offsets the B&O tax.
Organizations with taxable income over $56,000 may be eligible for the SBC on a sliding scale. Use our e-file system to automatically calculate the credit.
Other sources of income
Monetary donations: You may deduct amounts received as contributions or donations from your gross income, if the donor receives no significant goods or services for the contributions or donations (RCW 82.04.4282). Money donated beyond the mandatory adoption fee may qualify for this deduction. These amounts should be included in the gross income reportable under the Service and Other Activities classification, then deducted under “Qualified Initiation Fees; Dues; Contributions Received.”
These amounts, while they must be reported, won't affect the calculation of the SBC. Donations and contributions are deducted from your gross income and therefore aren't included in the taxable income subject to the B&O tax.
Donations of goods and services: Nonprofit organizations do not owe sales or use tax on goods or services donated to them(WAC 458-20-169, section 4(c)(i)).
Sales of tangible goods: Nonprofit animal rescue organizations that separately charge for pet food, leashes, collars, medicine, etc., must collect and remit sales tax on these sales. The organization is also subject to the B&O tax under the Retailing classification on these sales.
Fundraising activities (exemption does not apply to pet adoption fees): The Department interprets “fundraising” as an activity separate and apart from the activity for which the funds are raised and involves soliciting donations (RCW 82.04.3651; WAC 458-20-169)
Pet adoption fees and other income received from a nonprofit animal rescue organization's day-to-day activities are not qualified fundraising activities. A qualifying fundraising activity is one where the nonprofit organization holds a periodic event specifically for the purpose of soliciting or accepting contributions (donations) to fund other activities that further the goals of the nonprofit organization.
Examples of qualifying fundraising activities include:
- The nonprofit animal rescue organization holds an annual dinner/auction to raise money to cover the costs of spaying/neutering animals.
- The nonprofit organization holds car washes on three Saturdays in the spring to raise money for food and pet supplies to be provided by the organization to persons that foster animals awaiting adoption.
- The nonprofit organization holds a raffle for two weeks to raise money for new pet carriers to be used in the transportation of pets to and from vet visits, foster homes, etc.
- The nonprofit organization sells t-shirts and hats with the organization's logo printed on them for three weeks in the fall to raise money for the care and feeding of animals in their care.
Sales or use tax is due on purchases
If a nonprofit animal rescue organization purchases consumable items (such as pet medication, food, toys, office supplies, and cleaning supplies), or computers, equipment, furniture, or retail services, these purchases are subject to sales tax. Use tax is due if sales tax was not paid at the time of purchase.