Publication 36, Veterinarians
Exemptions and Deductions
Although you must report all of your sales on your sales and use tax return, you may deduct amounts included for nontaxable sales or other allowable deductions before you calculate the tax you owe. This page describes some of the more common nontaxable sales and deductions that may apply in your practice. For more information, see publication 73, Your California Seller's Permit, and another resource is publication 61, Sales and Use Taxes: Tax Expenditures. Please refer to the Additional Information page for the complete list of regulations and publications referenced in this publication.
Recordkeeping
It is important that you maintain proper documentation for all tax-exempt sales and other deductions you claim on your sales and use tax return. You should be sure to maintain resale and exemption certificates and indicate purchasers’ names on corresponding sales invoices, and to maintain other information necessary to substantiate each exemption or deduction.
Sales for resale
Sales you make to others for resale are not subject to tax, provided you obtain a valid resale certificate from the purchaser. For more information on acceptance or use of resale certificates, see publication 73, or Regulation 1668, Resale Certificates.
Sales of feed
Feed for food animals
Your sale or use of feed for food animals is not subject to tax. Food animals are considered to be those animals, birds, or insects commonly used to produce food items that people eat, such as meat products, dairy products, eggs, and honey. Examples include cattle, swine, chickens, sheep, goats, quail, ostriches, turkeys, and bees.
This tax exemption applies regardless of the method you use to bill your customer. Feed, for sales and use tax purposes, includes products such as grain, hay, seed, and similar products. It does not include sand, charcoal, granite grit, or sulfur.
In addition, your purchases of feed for food animals are not taxable (see Purchases of feed for food animals).
Exemption certificates
If you sell feed for food animals and that feed can also be used for nonfood animals, you may need to obtain a feed exemption certificate from the purchaser. However, a certificate is not required for sales of:
- Two or fewer standard sacks of grain, and/or four or fewer bales of hay (for use as feed)
- Feed bearing a manufacturer’s label indicating that it is intended for food animals
Sales of feed for nonfood animals to be sold
The sale of feed for nonfood animals that will be sold by the purchaser in the regular course of business is not subject to tax. In addition, feed sales to breeders who will sell their nonfood animals’ offspring in the regular course of business are not taxable. You should obtain a feed exemption certificate from the purchaser to substantiate these sales.
Tax-exempt sales of drugs and medicines
Under certain circumstances, your sale or use of a veterinary drug or medicine is not taxable. The product must be sold for the prevention or control of disease in food animals, or in animals that will be sold by the purchaser in the regular course of business (see Drugs and medicines). For animals that will be sold, the drug or medicine must be intended for administration as an additive to feed or water rather than for direct administration. The table below summarizes how tax applies to the sale or use of drugs and medicines.
| Type of Animal | Drug or Medicine Administered | |
|---|---|---|
| in Feed or Water | Directly | |
| Food Animal | Nontaxable | Nontaxable |
| Nonfood animal if it or its offspring will be sold in the regular course of business | Nontaxable | Taxable |
| Other nonfood animal | Taxable | Taxable |
Notes
- Oral, hypodermic, external, or topical application, including injections, implants, drenches, repellents, and pour-ons.
Supporting documentation
When you make a nontaxable sale of drugs or medicine, your sale should be supported by a drug exemption certificate completed by the purchaser.
Please note: These rules also apply to your purchases of drugs and medicines (see Purchases of drugs and medicines).
Tax-paid purchases resold prior to use
If you pay an amount for sales or use tax on the purchase of an item and then resell the item before using it, you can take a deduction on your tax return. When you report the sale, you may deduct your cost for the item, not including any applicable tax, under Cost of Tax-Paid Purchases Resold Prior to Use. If you do not take the deduction, you may pay more tax than you owe.
Example: You purchase a case of prescription diet dog food for $20. Since you intend to use the dog food in a way that qualifies you as its consumer, your supplier applies tax to your purchase. Later, a customer comes into your practice with a prescription for diet dog food from another veterinarian. You sell the customer the case of dog food for $35 without providing any related professional services. The transaction is considered a retail sale.
You are required to report the $35 sale on your sales and use tax return (included in your gross receipts) and to pay sales tax on the transaction. However, since sales tax was applied to your initial dog food purchase, you can take a $20 deduction (your cost, not including tax) on your return, under Cost of Tax-Paid Purchases Resold Prior to Use.
Cash discounts on taxable sales
A cash discount on a retail sale is not subject to sales tax. For example, if you sell a dog kennel for $350 less a ten percent discount ($35), tax would be due on $315, the total amount you received in connection with the sale ($350 price – $35 discount = $315). Your invoice or receipt should clearly list the original price, amount of discount, amount subject to tax, and the amount of tax applicable to the sale (see publication 113, Coupons, Discounts, and Rebates, for additional information).
Bad debt deductions
If you reported tax on a sale and have been unable to collect payment from your customer, you may claim a deduction for the bad debt. Bad debts may take the form of:
- Checks returned unpaid by the purchaser’s bank which you have determined to be uncollectible, or
- Accounts from charge or credit sales found worthless.
You must charge off the bad debts for income tax purposes or charge them off in accordance with generally accepted accounting principles.
You should claim the deduction on the return filed for the period in which you found the account worthless and wrote it off. Your deduction cannot include the amount of tax applied to the sale, or any other nontaxable charges included in your total loss. When you calculate your deduction, make sure to deduct tax from the total loss at the rate in effect when the sale was made. You cannot deduct amounts you paid to collect the funds due.
If you later collect the money due for a bad debt (including worthless checks), any amount you previously claimed as a deduction must be reported as a taxable sale.
Please note: Since there are many rules governing deductions for bad debt losses, see Regulation 1642, Bad Debts.
Professional services and boarding charges
Charges for professional services and boarding charges that do not include taxable sales of products are not subject to tax. Receipts from these services included in Total (gross) sales on your sales and use tax return should be deducted under Other deductions before you calculate the tax you owe.
Revision July 2026