puppy/kitten mills



commercial breeders


breeder: kathy bauck

breeder: rowell

breeder: dayna bell

pet stores



tax revenues

CVI data

issue: hoarders

  issue > tax revenues


Under Minnesota law (Minn. Stat. Sec. 297A.61), retail sales of dogs, cats, puppies and kittens are subject to sales tax.

In 2009, Animal Folks MN initiated and conducted a research project to determine if dog and cat breeders in Minnesota were following sales tax laws. 


Findings and Conclusions

• In 2009, 74% of breeders sampled did not have an active sales tax permit

A random sample taken of 100 Minnesota dog and cat breeding facilities in 2009 revealed that about 74% of these businesses did not have an active sales tax permit on file with the Minnesota Department of Revenue. Minnesota law provides that making retail sales without a permit is a gross misdemeanor (Minn. 289A.63 Criminal Penalties).

NOTE: Animal Folks MN gathers names of dog and cat breeding facilities in Minnesota (through classified ads and websites); the 100 names used in the study were a sample from this total. The list represented dog and cat breeding kennels (large and small, USDA-licensed and non-USDA-licensed) from all areas in Minnesota.

• Significant loss of revenue for the State of Minnesota

Based on this sample, it was apparent that many Minnesota dog and cat breeding facilities did not know that they required a sales tax permit and must collect/pay sales tax for animals sold or were ignoring the State's sales tax law by failing to collect and remit the tax due on their retail sales of dogs and cats (using cash transactions). It is safe to assume that the loss in Minnesota sales tax revenue is substantial. (See estimates below.)

• Cash sales and under-reporting of transactions

In order to maintain a low public profile, some breedeing facilities sell and ship animals (sight unseen) through websites or conduct cash transactions "off-premises." Not only do these tactics prevent consumers from viewing breeding conditions (in order to determine if the puppy or kitten is healthy and the breeding practices are humane), it also makes it difficult to accurately assess puppy/kitten production and sales for tax purposes.


Tax Information

Commercial dog and cat breeding is a business. Dogs, cats, puppies and kittens are bred and sold (as pets) to consumers in Minnesota and out of state.

The Sales Tax Fact Sheet (prepared by the Minnesota Department of Revenue) states: Sales and purchases of pets are taxable.

In addition to puppies and kittens, the sale of breeding animals (adult mother and father dogs) are also taxable, under Minnesota law, if the offspring are intended to be sold as pets. For example (per the MN Department of Revenue), "the sale of a breeder rabbit to a person who sells rabbit for food is not taxable, but the sale of a breeder rabbit to a person who sells rabbits for pets is taxable." Dogs and cats are bred to produce pets.

NOTE: Sales tax applies to retail sales. If a breeding facility sells to a pet store, for instance, that transaction is considered wholesale. The breeding business does not pay sales tax; the pet store would pay the sales tax when the animal is sold to the consumer. Breeding facilities that sell to pet stores are required to be licensed by the USDA. In 2009, the number of USDA-licensed facilities in Minnesota who bred and/or brokered dogs and cats was estimated to be 62 (per USDA inspection reports). In 2013, that estimate is 36 (dog and cat breeders/dealers who are USDA licensed). This number represents a small fraction of total dog and cat breeders in Minnesota.


Uncollected sales and income tax revenues in Minnesota

Animal Folks MN made initial estimates of puppy/kitten production in the State of Minnesota based on estimates of breeding facilities (large and small; USDA and non-USDA), average litter size and average price per puppy/kitten.

Our calculations are conservative due to limited or no oversight and record-keeping by the state or local governments in regards to this industry. Formulas used considered the following factors:

• estimated number of dog/cat breeders in Minnesota, including USDA-licensed and non-USDA licensed

• estimated wholesale versus retail sales for USDA-licensed facilities

• estimated average number of times female animal was bred per year

• estimated average number of puppies or kittens per litter (with understanding that size of litter can vary based on health of female, conditions of care, type of breeder, type of breed, and number of puppies/kittens that die at birth)

• estimated price per puppy or kitten (based on newspaper and website sales)

• estimated out-of-state Internet sales

• Minnesota sales tax rate (the Minnesota general sales and use tax rate increased from 6.5% to 6.875% beginning July 1, 2009)

• statistical comparisons to other states

• statistical comparisons to USDA reports documenting actual puppy production

These findings were submitted to the Minnesota Department of Revenue.

The Minnesota Department of Revenue also made their own estimates of uncollected sales tax for dog and cat breeders. They based their estimates on the definition of "commercial dog and cat breeder" in the dog and cat breeder bill from 2010 (House File 253). The bill narrowly defines commercial breeder as a person ... "who possesses 20 or more adult intact animals and who produces five or more total litters of puppies or kittens per year", which the Board of Animal Health has estimated to be 400 breeders.

Based on a profile of 400 dog/cat breeders, the MN Department of Revenue has estimated uncollected sales tax to be over $2 million yearly.

Breeder regulation would allow for licensing of dog and cat breeders. This licensing would make it easier to collect tax revenues, though it will take a few years to bring breeders into full compliance.

NOTE: The 400 breeders estimated above represents a portion of total dog and cat breeders in Minnesota; therefore, uncollected sales tax for this industry would be considerably higher than the $2 million+ (yearly) estimated. Also, uncollected income tax is not reflected in the figure above.


Other States: Tax evasion by dog/cat breeders

"I had my eyes completely opened to a new type of crime that has no strings to it," said Deputy K.A. McLeish of the Washington County (Ohio) sheriff's office, as quoted in The Columbus Dispatch in October 2009. "Anybody can start dealing dogs, and it's cash transactions across the board."

Sheriff department, state governments and animal organizations across the United States are starting to pay close attention to how dogs and cats are bought and sold.

The issue, in regards to unscrupulous or negligent breeders, is not only one of animal cruelty and neglect. The issue also involves the sale of "products" produced (i.e. dog, cat, puppy or kitten), how the transaction was conducted, and how the sale was reported for tax purposes.

As with all businesses, commercial breeders must follow the law — including tax laws. Other states have already addressed the problem. A few examples are below (all news articles are from 2009; some news is updated since these postings):


pdf: Indiana Attorney General News Release: Attorney General Greg Zoeller thanks State Rep. Linda Lawson

pdf: Indiana Attorney General News Release: Criminal tax evasion charges filed against Mauckport dog breeders


Ohio's Dept. of Taxation Catches Up to Puppy Mills


• pdf: Taxpayer Group Praises New Focus on the Underground Economy of Dog and Cat Sellers

pdf: Backyard breeders (trying to evade taxes) oppose spay/neuter laws

pdf: California Sales Tax Sheet


Bill would regulate 'puppy mills' *

(*Written in April 2009; Wisconsin breeder bill has passed.)


Governor signs Tennessee commercial breeder bill

(includes valid sales tax registration)


pdf: Crackdown on Iowa puppy mills will be bipartisan effort

(includes reference to breeder revenue and taxes)


Report it

Consumers who purchase a puppy or kitten from a Minnesota dog/cat breeder and know or suspect they have not paid sales tax can report the transaction to the Minnesota Department of Revenue Criminal Investigation Division at:

MN TAX FRAUD TIPLINE: 651-297-4195 or 1-800-657-3500

Tipline can also be found at the MN Department of Revenue's website:


You can call 24 hours and you can remain anonymous.

NOTE: Find out more about the tipline and what specific type of information is needed at the MN Department of Revenue website link above. There is also a mailing address posted. The more detailed the information, the more likely it is the case will be referred for a civil audit or a criminal investigation.


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