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Animal shelters seek tax exemption

Published (1/28/2011)
By Lee Ann Schutz
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Joey, a rescued puppy from Last Hope, Inc., in Farmington, shows his affection for Rep. Pat Garofalo as the representative presents a bill that would exempt rescued pet sales from sales tax during a Jan. 25 hearing of the House Taxes Committee. (Photo by Tom Olmscheid)Milo and Joey were silent testifiers in support of a bill that would exempt from state sales tax the sale of animals by nonprofit animal shelters.

The two puppies are from Last Hope, Inc., a nonprofit, volunteer-operated animal rescue in Farmington. Sandra Shirley, a rescue volunteer, told the House Taxes Committee the bill would save them nearly $15,000 annually in sales tax payments — money that could go toward veterinary and food costs for the animals. She said voluntary animal adoption fees collected last year did not cover their expenses.

“We made up for it with private donations. With the economy, our donations are slowing down,” she said.

Sponsored by Rep. Pat Garofalo (R-Farmington), HF36 would allow the exemption if the organization’s main purpose is animal rescue and the price of the animal does not exceed reasonable costs incurred in its care prior to its sale. The estimated cost to the General Fund for the exemption in fiscal year 2012 would be $306,000.

The bill was laid over for possible inclusion in an omnibus tax bill. It has no Senate companion.

Rep. Jim Davnie (DFL-Mpls) questioned the ability to charge sales tax on what, in essence, could be considered a donation to the organization.

“I thought I understood that if I received something of value in exchange for the donation I could not then claim the donation as a deduction,” he said.

Joel Michael, a nonpartisan House Research Department analyst, explained the difference between a personal income tax deduction for a donation and the bill’s intent for a sales tax exemption to an organization.

“The question in this case is whether the individual adopting the animal is making a true donation or if they are paying for the animal. If you look at the bill, it doesn’t say donations … but sale as defined under the sales tax,” he said.

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