TPS-TIE

Income derived from breeding activities or stud fees is taxable under the Service B&O tax classification.

Semen sold for artificial insemination of livestock is a retail sale, subject to the Retailing B&O tax. An exemption from the retail sales tax is available for sales of semen used to artificially inseminate livestock (RCW 82.08.0272).

Income received by businesses or independent contractors for training, jockeying, buggy driving, exercising, riding, showing, grooming, or shoeing/plating horses is taxable under the Service and Other Activities B&O tax classification.

The amounts received from purses, bonuses, awards, and prizes won within Washington State are subject to the Service B&O tax classification. No deductions are allowed for amounts paid to jockeys, trainers, or other costs of doing business.

Income received for boarding horses is subject to the Service and Other Activities B&O tax. The stable owner may not deduct the fees associated with veterinarian charges, farrier charges, transportation costs, etc., from the boarding gross income, unless the stable owner is acting as an agent on behalf of the horse owner and has no liability for payment of such expenses, and the stable’s books reflect the principal/agent relationship.

Sales of feed to horse owners: Sales of feed for horses are generally subject to the retail sales tax.

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).

Generally, there are two classifications of B&O tax for veterinary businesses: Service and Other Activities classification and the Retailing classification. Retail sales tax also applies on retail sales unless there is a specific exemption.

The Service and Other Activities B&O tax classification applies to the gross income derived from Veterinary services.

All consumers, whether a business, independent contractor, or individual, are required by law to pay retail sales tax or use tax on taxable goods to be used in Washington. Use tax is due on items purchased for use in Washington, if retail sales tax was not paid. For example, tack purchased out of state, or through catalogs or magazines, is subject to use tax, if retail sales tax is not included in the bill. Geldings and spayed horses purchased out of state for use in this state are also subject to use tax. The use tax rate is the same as the retail sales tax rate.

Business & Occupation (B&O) Tax: The B&O tax is the tax applied to the gross amount received from conducting business. There are different reporting classifications for retail sales, wholesale sales, professional services, etc. Each classification has its own tax rate. Persons performing more than one activity may be subject to B&O tax under more than one reporting classification.

We know that tax reporting for hospitals can be a challenge. That's why we have compiled a list of common problems found during Department of Revenue audit examinations, as well as solutions to avoid these common pitfalls.

For medical clinics not operated by a hospital or under a hospital license, please refer to our Medical Clinics Guide.