In the United States, over 10,000 state and local jurisdictions impose sales and use taxes. 45 states and the District of Columbia impose the taxes, as do a plethora of city, county, and other local governmental units. Only Alaska, Delaware, Montana, New Hampshire, and Oregon do not impose a sales or use tax, although Alaska permits local jurisdictions to levy the taxes. Indeed, sales and use taxes account for twenty to twenty-five percent of total state and local tax collections.
Every taxing jurisdiction has its own set of laws related to these taxes. When that fact is combined with the number of taxing jurisdictions, it is no surprise that sales and use taxes are riddled with complexities. In the equine industry, the complexity is heightened by the mobile or transient nature of Thoroughbreds and Showhorses. This overview and the accompanying map are intended to aid buyers and sellers in beginning the analysis of their potential sales and use tax obligations when buying and selling horses for racing, showing, and breeding.
After the DISCLAIMER below, this overview has three sections. The first section explains sales and use taxes from 30,000 feet, as the saying goes. It includes information about property and services typically subject to tax, the difference between the “sales” tax and “use” tax, why use taxes matter, and the state(s) where sales or use taxes should be paid. The second section addresses exemptions—first exempt transactions, second exempt property, and then, exemption certificates. Finally, there is a quick look at the mysteries of sales taxation of breeding fees and transactions involving shares in horses.
The information referenced reflects law in effect as of September 30, 2021.