Washington Animal Rescues Avoid Huge Revenue Hit
In early 2015, the Washington Department of Revenue (DOR) determined that nonprofit Washington animal rescues must collect and remit retail sales tax on adoption fees. This applied to adoption fees collected in the future and retroactively.
Chaos reigned in the animal adoption community as people calculated their rescues would not only lose a significant chunk of their adoption fees, they would have to pay tax on adoption fees they collected prior to the when the new policy was enacted.
Sally Andrews from the Puyallup Animal Rescue calculated that it will owe DOR $20,000 to cover tax on its past adoptions. For people who run smaller rescues that have to scrape and scrounge for every penny and often fund their rescues out of their own pockets, that’s a huge amount of money that most of them did not have.
“Taxing revenue collected as fees from adoptions, prospectively or retroactively, will have serious, detrimental impacts on highly valued charitable work performed by our state’s nonprofit animal welfare organizations,” said Rick Hall of the Washington Alliance for Humane Legislation.
Mr. Hall’s group began working with the Puyallup Animal Rescue, the Washington Federation of Animal Care and Control Agencies, and Pasado’s Safe Haven, to convince DOR staff that nonprofit animal rescues should be excluded from paying sales tax on adoption fees.
Their efforts paid off. By mid-2015, DOR had revised its policy to exclude animal adoption fees from the retail sales tax. In publicizing its new policy, DOR recognized that its policy and tax rulings in the past were inconsistent with respect to the application of the tax. As a result, most animal rescue groups didn’t collect taxes on their fees for animal adoption.
DOR staff recommended the new policy to resolve ambiguities and improve clarity and fairness.
Exemptions Codified into Law
This policy was formalized in state law during the 2017 legislative session when the Washington Legislature passed and Governor Inslee signed SSB 5358.
The bill made technical corrections to state tax law and formalized/clarified tax policies and procedures regarding nonprofit animal rescues and administered by the DOR.
But the policy and tax law corrections didn’t give nonprofit rescues a blanket tax exemption.
The DOR limited sales tax exemptions to an “Animal rescue group” registered as a nonprofit that:
- Is exempt from federal income taxation under 26 U.S.C. Sec. 501(c) of the federal internal revenue code as it exists on July 23, 2017; or is registered as a charity with the Washington secretary of state under chapter 19.09 RCW, whether such registration is required by law or voluntary;
- Has as its primary purpose the prevention of abuse, neglect, cruelty, exploitation, or homelessness of animals; and
- Exclusively obtains dogs, cats, or other animals for placement that are:
- Stray or abandoned
- Surrendered or relinquished by animal owners or caretakers;
- Transferred from other animal rescue organizations; or
- Born in the care of such nonprofit organization other than through intentional breeding by the nonprofit organization.
Charities Still Must Pay
#2 and #3 apply to any animal rescue group, even the shady ones; however, #1 does lay out standards they must meet to get the exemption:
The rescue MUST be a registered as a 501(c)(3) charity with the IRS, OR a charity with the Washington Secretary of State.
Some Washington dog rescues don’t qualify for the exemption and must collect tax on their adoption fees. I’ll write about them in another post.
Many thanks to the DOR for listening to the rescue community’s concerns and changing the law to exempt qualified animal rescues from paying tax on adoption fees.
Click here for a detailed summary of the policy by the Washington Alliance for Humane Legislation.