Industry Topics for Agricultural Industry Español

Sales and Use Taxes in General

In California, all sales are taxable unless the law provides a specific exemption. In most cases, taxable sales are of tangible personal property, which the law defines as an item that can be seen, weighed, measured, felt, or touched.

Use tax is a companion to California's sales tax, and is due whenever you purchase taxable items without payment of California sales tax from an out-of-state vendor for use in California. You also owe use tax on items that you remove from your inventory and use in California when you did not pay tax when you purchased the items. To pay use tax, report the purchase price of the taxable items under “Purchases Subject to Use Tax” on your sales and use tax return. Those purchases become part of the total amount that is subject to tax.

Sales of Animals

Generally, sales of animal-related products, such as tack, cages, and pet supplies are taxable. However, some sales of animals and supplies are exempt from tax.

Tax does not apply to the purchase or sale of food animals that are commonly used in producing food or are intended for human consumption. Sales of animals that do not meet the definition of food animals are taxable sales, regardless of their use. See publication 66, Agricultural Industry for a list of common food and nonfood animals.

Sales of Feed

Feed includes grain, hay, seed, kibble, and similar products. Tax does not apply to sales of feed for food animals.

Some feed, like alfalfa, can be used for either food or nonfood animals. When selling this type of product, you should obtain a CDTFA 230-T, Exemption Certificate Animal Life, Feed, Drugs and Medicines, to support the exempt sales. You should itemize all invoices that include taxable and nontaxable sales.

Specific Exceptions:

You do not need a seller's permit or pay sales tax if the only products you sell are feed for the following:

• Food animals.
• Nonfood animals that are to be sold in the owner's business operations.
• Breeding animals and their offspring both being held for resale in the owner's business operations.

Hay growers fall in this category provided they either:

• Produce their hay for sale only to beef cattle feedlots or dairies.
• Sell their hay exclusively through a farmer-owned cooperative.

You do not need exemption certificates for the following nontaxable sales:

• Feed ordinarily used only in the production of meat, dairy, or poultry products used as food.
• Two or fewer standard sacks of grain, four or fewer bales of hay (used for feed) or both.
• Feed bearing a manufacturer's label indicating that it is intended for food animals.

Feed sold for a nonfood animal is generally taxable. There are two exceptions, if the feed is sold for the following purposes, you may accept a CDTFA 230-T, Exemption Certificate Animal Life, Feed, Drugs and Medicines:

• To feed animals that will be sold in the purchaser's business operations, i.e. kibble for puppies at a pet store.
• To feed breeding animals whose offspring will be sold in the purchaser's business operations, i.e. bone meal to bird breeders who sell the chicks.

Sales of feed to boarding and training facilities

Facilities that charge a flat fee to their customers are responsible for paying the tax on items they purchase such as feed, grains, hay or other merchandise.

Facilities that separately itemize taxable charges for the feed they sell may purchase the items with a resale certificate and they are required to report those taxable sales.

Note: If a boarding or training facility boards animals owned by ranchers and farmers, items they purchase may be eligible for a partial exemption described under Farming Exemptions.

Drugs and Medicines

Under certain circumstances, tax does not apply to your sale, or a buyer's purchase or use of drugs or medicines that will be administered to animals, as explained below. Drugs and medicines are products intended to prevent or control disease in animals. In addition, vitamins and insecticides labeled for livestock, including poultry, may be considered drugs and medicines. Under certain circumstances, oxygen can also be considered a drug.

Drugs and medicines include, but are not limited to:

• Legend drugs
• Pills and capsules
• Liquid medications
• Injected drugs, including vaccines
• Ointments
• Intravenous fluids
• Medicated soaps

To qualify as nontaxable, the drugs and medicines must be intended for the prevention or control of disease in any of the following:

• Food animals.
• Animals to be sold as part of business operations.
• Breeding animals whose offspring will be sold as part of business operations.

See publication 66, Agricultural Industry for a list of common drugs and medicines.

The table below shows how tax applies for transactions involving animal drugs and medicine:

Notes

1. Oral, hypodermic, external, or topical application, including injections, implants, drenches, repellents, and pour-ons.
   
   Any time you make a nontaxable sale of drugs, medicine, or oxygen, you should obtain a timely CDTFA-230-U, Exemption Certificate Animal Life, Drugs and Medicines, completed by the purchaser with all required information, and keep a copy with your records. See Regulation 1587, Animal Life, Feed, Drugs and Medicine, for more detailed information and exemption certificates.