Tax Type
Retail Sales and Use Tax
Description
Racehorses; Application of agricultural exemption; Breeding horses
Topic
Exemptions
Property Subject to Tax
Taxability of Persons and Transactions
Date Issued
08-23-1991
August 23, 1991
Re: Request for Ruling: Retail Sales and Use Tax
Dear*********************
This will reply to your letter of August 20, 1991 in which you request a ruling on behalf of your client, *****************("the Taxpayer"), on the applicability of the sales and use tax to horses used for breeding.
FACTS
The Taxpayer operates a multi-state thoroughbred horse business. A racehorse owned by the Taxpayer has been permanently retired from racing due to injury and will be returned to Virginia for use exclusively in the breeding of horses for market.
The Taxpayer requests a ruling whether the agricultural exemption applies to the racehorse at the time of its importation into Virginia.
DETERMINATION
The sales and use tax agricultural exemption is set forth in Va. Code §58.1-608(A)(2)(a). Virginia Regulation (VR) 630-10-4 interprets this statute and provides in pertinent part that:
-
- The production for sale of colts on a horse farm is regarded as "agricultural production." Horses used exclusively for the purpose of breeding colts for sale and the feed and supplies for such horses can be purchased tax exempt by the farmer-horse breeder. Horses purchased for racing or showing are subject to the tax since they are not used exclusively for breeding purposes. The tax must also be paid on feed and supplies for such horses.
Applying the facts in this case to the statutes and regulation cited above, I find that the Taxpayer's horse will qualify for the agricultural exemption at the time it is imported into Virginia as it is permanently retired from racing and used exclusively in the breeding of horses for sale. A horse will be deemed "permanently retired from racing" when the racing career of the horse is permanently terminated and the horse permanently sent back to the farm to be used exclusively for the purpose of breeding horses for sale. See P.D. 91-129 (7/22/91), copy enclosed. As such, the exemption may apply to the feed and supplies for such horses prior to the time the horse is actually bred for the first time. The Taxpayer's records should clearly show when a particular horse has been permanently retired from racing for purposes of breeding.
I would note that this ruling would not serve to exempt any transactions occurring prior to the termination of the horse's racing career.
I hope this answers your questions, but please contact the department if you need any additional information.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner