Income received for the sale of pharmaceuticals is subject to Retailing B&O tax and retail sales tax. Certain animal pharmaceuticals are exempt from retail sale tax when sold to farmers and veterinarians. To qualify for the exemption the animal pharmaceutical must be administered to a horse that is raised by a farmer for the purpose of producing an agricultural product for sale. Also, the animal pharmaceutical must be approved by the United States Department of Agriculture (USDA) or the United States Food and Drug Administration (FDA).
Therefore, sales of pharmaceuticals to farmers for the purpose of producing foals for sale are exempt, if the horse is a breeding animal registered with a nationally recognized breeding association. The sale is subject to Retailing B&O tax, but not subject to retail sales tax. To validate the exemption from retail sales tax, the horse owner must give a completed Farmers' Certificate for Wholesale Purchases and Sales Tax Exemptions to the seller stating that the horse is registered with a nationally recognized breeding association, and is for breeding purposes. Pharmaceuticals for geldings or spayed mares are subject to the retail sales tax.
The purchase of pharmaceuticals for horses raised for the purpose of racing, showing, riding, and jumping are not exempt from retail sales tax. However, if at some time in the future the horse is no longer raised for racing, showing, riding, or jumping and instead raised by a farmer for the purpose of breeding and the horse is recognized with a national breeding association, the exemption will apply.