Do the food and supplies a company buys to raise dogs and ferrets for sale qualify for New York's manufacturing or production exemptions from sales tax?

Plain-English summary

Marshall Research Animals, Inc. raises beagle dogs and ferrets in closed breeding colonies (no animals bought in from outside) and sells them to specific customers at the requested age, size, and sex. All the animals are held for resale. The company asked whether the food and similar supplies it uses to raise the animals qualify for exemption under New York's production exemptions — Tax Law 1105-B, 1115(a)(12), or 1115(c).

The Department said no — the feed and supplies are taxable.

• The two equipment/utility exemptions don't apply here. 1115(a)(12) exempts machinery and equipment used directly and predominantly in production, and 1115(c) exempts fuel, gas, and electricity used in production. The company's question is about supplies — food and similar items — not machinery or utilities, so neither exemption is relevant.
• The supplies exemption (1105-B) is limited to listed production activities. Since March 1, 1981, 1105-B exempts supplies used directly and predominantly in producing tangible personal property for sale "by manufacturing, processing, generating, assembling, refining, mining or extracting." Raising or breeding animals is not among those enumerated activities.
• Raising animals is not "manufacturing." The company argued that raising animals is manufacturing. But the sales tax law doesn't define "manufacturing," so the Department used its ordinary dictionary meaning — making raw materials into a product, by hand or machinery, on an organized plan. Raising beagles and ferrets is not manufacturing in that ordinary sense. So the feed and supplies get no 1105-B exemption.
• Result. Receipts from selling animal food and similar items to the company are subject to New York State sales tax under Article 28, plus any applicable local tax. (A related question — whether this activity is "farming" and whether feed qualifies for the resale exclusion — was addressed separately in Marshall Research Animals, Inc., TSB-H-80(262)S.)

What this means for you

The production exemptions have a fixed list of qualifying activities. 1105-B doesn't exempt "anything that makes a product for sale." It exempts supplies used in manufacturing, processing, generating, assembling, refining, mining, or extracting. If your activity isn't on that list, the supplies exemption doesn't reach it, no matter how much value you add.

"Manufacturing" gets its plain meaning. Because the term is undefined in the sales tax law, the Department reads it the ordinary way — turning raw materials into a product. Biological growth (raising animals, and by the same logic many agricultural activities) is generally not "manufacturing."

Match the exemption to what you're actually buying. The machinery exemption (1115(a)(12)) and the fuel/utility exemption (1115(c)) are separate from the supplies exemption (1105-B). Asking for the wrong one wastes the request — here, the company was buying supplies, so only 1105-B could even be in play.

Common questions

Q: I raise animals for resale. Is my feed exempt as a production supply?
A: Under this opinion, no. Raising animals is not one of the production activities listed in 1105-B (manufacturing, processing, generating, assembling, refining, mining, extracting) and is not "manufacturing," so the feed and supplies are taxable.

Q: The animals are held for resale — doesn't that make the feed exempt?
A: This opinion addresses the production-exemption question and answers no. Whether feed might qualify under a resale/farming theory was treated separately in the earlier TSB-H-80(262)S; the production exemptions do not apply.

Q: What about equipment or utilities I use in the operation?
A: Those are governed by 1115(a)(12) (machinery/equipment) and 1115(c) (fuel/utilities), which this opinion found not germane to a supplies question. They have their own tests and would need to be analyzed on their own facts.

Citations and references

Tax Law:

• 1105(a) — imposes sales tax on receipts from retail sales of tangible personal property
• 1105-B — exempts supplies used directly and predominantly in producing TPP for sale by manufacturing, processing, generating, assembling, refining, mining, or extracting; raising animals is not among these
• 1115(a)(12) — exempts machinery and equipment used directly and predominantly in production (not germane; inquiry was about supplies)
• 1115(c) — exempts fuel, gas, and electricity used in production (not germane; inquiry was about supplies)

Prior opinion referenced:

• Marshall Research Animals, Inc., TSB-H-80(262)S — addressed whether the activity is farming and whether feed qualifies for the resale exclusion

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1985.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a85_52s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-85(52)S
Sales Tax
November 8, 1985

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S840926A

On September 26, 1984, a Petition for Advisory Opinion was received from Marshall
Research Animals, Inc., R.R. Box 91, North Rose, New York 14516.
The issue raised is whether certain items of tangible personal property used or consumed by
Petitioner in the operation of its business qualify for exemption from sales and use tax under sections
1105-B, 1115(a)(12) or 1115(c) of the Tax Law.
Petitioner is engaged in the business of raising and selling beagle dogs and ferrets. Petitioner
states that the animals are raised in closed colonies, that is, the animals are not purchased outside the
colonies but are produced through Petitioner's own breeding program. The animals are all held for
resale in the ordinary course of business and are supplied to specific customers at the age, size and
of the sex that is requested by the customer.
The items of tangible personal property that Petitioner proposes to exempt from tax are
supplies such as food and similar items used by Petitioner in producing the animals.
Section 1105(a) of the Tax Law imposes a sales tax on "The receipts from every retail sale
of tangible personal property, except as otherwise provided in this article." Exemptions from this
tax are provided for by sections 1105-B, 1115(a)(12) and 1115(c) of the Tax Law.
As of March 1, 1981 section 1105-B of the Tax Law exempts from State sales tax "supplies"
used or consumed directly and predominantly in the production of tangible personal property for sale
"by manufacturing, processing, generating, assembling, refining, mining or extracting. . . ."
Section 1115(a)(12) of the Tax Law provides for an exemption from State sales tax for
"[m]achinery or equipment for use or consumption directly and predominantly in the production of
tangible personal property . . . for sale, by manufacturing. . . ."
Section 1115(c) of the Tax Law provides for an exemption from State sales tax for "[f]uel,
gas, electricity. . . and gas . . . [and] electric . . . service. . . for use or consumption directly and
exclusively in the production of tangible personal property. . . for sale, by manufacturing. . .".
Petitioner's inquiry pertains to "supplies" and not machinery, equipment or utilities.
Therefore, Tax Law sections 1115(a)(12) and 1115(c) are not germane.

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-85(52)S
Sales Tax
November 8, 1985

As to Tax Law section 1105-B, the statute is quite explicit as to the types of production
activities that qualify for the exemption; the breeding or raising of animals is not among the
enumerated activities. However, Petitioner avers that the raising of animals constitutes a
manufacturing process within the meaning of section 1105-B of the Tax Law.
The word "manufacturing" is not defined within the sales and use tax law. However, the
ordinary meaning of the word "manufacturing" as contained in Webster's Third New International
Dictionary, 1981, is: "1: to make (as raw materials) into a product suitable for use [the wood. . . is
manufactured into fine cabinetwork]. . . 2a: to make from raw materials by hand or by machinery.
. . b: to produce according to an organized plan and with division of labor. . . ."
Petitioner is not manufacturing beagle dogs or ferrets within the ordinary meaning of
"manufacturing". Therefore, its purchases of food and related supplies do not qualify for exemption
from tax under section 1105-B of the Tax Law.
Accordingly, receipts from the sale of animal food and similar items to Petitioner are subject
to the state sales tax imposed under Article 28 of the Tax Law, as well as any applicable local sales
tax.
The issues as to (1) whether the commercial raising and feeding of dogs and ferrets
constituted farming and (2) whether the purchase of feed for use in raising such animals qualified
for the resale exclusion were addressed in Marshall Research Animals, Inc., State Tax Commission
Advisory Opinion, TSB-H-80(262)S.

DATED: August 28, 1985

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth herein.