Tax-free puppy purchase? Tax exemption for pet adoptions from nonprofit shelters considered

If you purchase a dog or cat from an animal shelter, should you pay sales tax? You wouldn’t, under a bill held over Wednesday by the House Taxes Committee.

Rep. Bob Gunther (R-Fairmont) sponsors HF312 that would provide a sales tax exemption for most purchases and sales by nonprofit animal shelters. It could end up in an omnibus tax bill.

While nonprofit shelters not having to pay sales taxes when making purchases didn’t inspire any debate, the idea of prospective pet owners not paying sales tax when buying from a shelter didn’t sit well with Elaine Hanson, representing the Minnesota Pet Breeders Association, the Minnesota Council of Dog Clubs and the Minnesota Outdoor Heritage Alliance.

“It amounts to a subsidy for the taxpayers to get them to make their purchase from a nonprofit, rather than from someone who is producing purpose-bred dogs,” Hanson said. “There just doesn’t seem to be any equitable reason, in our view, for providing that kind of subsidy. It would be somewhat similar to saying that if you buy a used car, you don’t have to pay sales tax; if you buy a new car, you do. And, further, exempting that used car dealer’s sales from income tax.”

The Department of Revenue estimates that the sales tax exemption would lower state revenues by $850,000 in Fiscal Year 2020.

“There’s a $6.85 incentive per $100 to buy a random source animal from a nonprofit rather than a purpose-bred animal,” Hanson said. “We’re just concerned about the inequity of that.”

Gunther countered that “the people who go to an animal shelter or a dog pound to adopt an animal that they were preparing to euthanize – this animal was roaming the streets – is a completely different person from those who want to buy an animal for specific purposes. A good hunting dog can cost well over $1,000. That person looks at bloodlines and everything else. We’re talking about two completely different species here.”

The bill was laid over for possible inclusion in the omnibus tax bill.  

The companion, SF566, sponsored by Sen. Dan Sparks (DFL-Austin), awaits action by the Senate Taxes Committee.