88-117 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Llama breeding and sales

Topic

Taxability of Persons and Transactions

Date Issued

05-20-1988

May 20, 1988

Re: Request for Ruling/Sales and Use Tax

Dear

This will reply to your letter of March 17, 1988, in which you request a ruling on the applicability of the sales and use tax to persons engaged in the breeding and sale of llamas.

§58.1-608.3 of the Code of Virginia provides an exemption from the sales and use tax for:

- breeding and other livestock...baby chicks, turkey poults...(and) all other tangible personal property, except for structural construction materials, 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, including fish and worm farming for market.

Before discussing the applicability of the above exemption to the breeding and sale of llamas, it should be noted that the Virginia courts have established a rule of strict construction in the interpretation of statutory exemptions from taxation. Under this rule, any doubt as to the applicability of an exemption is to be resolved against the one claiming the exemption, Commonwealth v. Research Analysis Corporation, 214 Va. 161, 198 S.E.2d 622 (1973).

In order to qualify exemption under §58.1-608.12, one must be a farmer engaged in agricultural production for market. The terms "farmer" and "agricultural" are not defined for purposes of the sales and use tax; therefore, we must look to their commonly accepted meaning. The definitions of these terms contained in Webster's New Collegiate Dictionary (1981) stress the cultivation of crops and the raising of livestock. As such, we must determine here whether llamas constitute "livestock."

Various out-of-state courts have interpreted the term "livestock" as meaning "domestic animals used or raised on a farm, especially those kept for profit," Van Clief v Comptroller, 126 A.2d 865, 211 Md. 191. I have enclosed for your review a 1979 opinion of the Virginia Attorney General, which also addresses this subject. A two-part test is established under this opinion: (1) is the animal domesticated? and (2) is it a farm animal?"

While llamas are clearly domesticated animals, I cannot conclude that they are farm animals. The llamas raised in this country typically do not serve an agricultural purpose (as do cattle, horses, pigs, sheep, etc.); rather, they are primarily used as companion animals.

This determination is further strengthened by the construction of §58.1-608.3 of the Code of Virginia, copy enclosed. The first part of the exemption refers to "breeding and other livestock,...baby chicks, (and) turkey poults." While chickens and turkeys are clearly domesticated animals, they are referred to separately from "livestock." Further, the original statute has been amended by the General Assembly to specifically include fish and worm farming (neither fish nor worms are within the traditional definition of "livestock"). Based on the construction of this statute, r must conclude that the General Assembly intended to limit the exemption to the raising of crops and traditional farm animals (cattle, horses, hogs, sheep, etc.), fish, and worms.

Based upon the foregoing and the rule of strict construction established by the Virginia courts; I must conclude that llamas do not constitute livestock and that persons engaged in the breeding and selling of llamas are not entitled to the exemption from the sales and use tax that is provided to farmers engaged in agricultural Production for market.

Sincerely,

W. H. Forst
Tax Commissioner

Rulings of the Tax Commissioner