A sales tax exemption for vampires – Wacky Tax Wednesday

The vampire lobby can’t be happy about California Governor Brown’s veto of Senate Bill 898, which seeks a sales and use tax exemption for animal blood.

One of the reasons I love my job is that I can sit down at my desk, turn on my computer, and learn that the California legislature is in favor of exempting animal blood from sales and use tax. Who knew? Not being involved in the medical industry, I have never once thought about the taxability of blood before today. Now that I know it’s a thing, I want to know more.

It turns out that California provides an exemption “for certain sales of human blood and containers thereof.” Dig deeper and it gets a bit gruesome: the exemption applies to “human whole blood, plasma, blood products, and blood derivatives, or any human body parts held in a bank for medical purposes.” Should help Dr. Frankenstein’s bottom line.

Jesting aside, if blood, organ and tissue are discussed in tax law, it’s almost related to medical purposes. These products can help save lives. And SB 898 sought to save animal lives, as well. It would exempt, until January 1, 2022, “the sale … and the storage, use, or other consumption … of animal whole blood, plasma, blood products, and blood derivatives, sole by a nonprofit animal blood banking business for use in the cure, mitigation, treatment, or prevention of injury or disease in animals pursuant to a specified state law.”

Not surprisingly, the California bill has the support of many veterinary clinics, surgeons, and medical associations, all of which argue there is a need to “ensure the protection of this vital service.” They say that it’s logical to apply an exemption to these animal products since there is a similar tax exemption for human blood banks. Yet the measure is opposed by the Nonprofit Animal Blood Bank — not because it thinks these products should remain taxable, but because of its “limited application to nonprofits” (it would basically benefit one business). California cities and counties oppose it because it would “erode the already shrinking local sales tax base.”

Gov. Brown wasn’t discriminating against vampires or Frankensteins. He’s in line with the cities and counties, opposing the legislation because it would reduce state and local revenue by approximately $80,000 (including a $38,400 reduction in the General Fund). In his mind, sales and use tax exemptions should be proposed during budget discussions, when all spending proposals can be “weighed against each other at the same time.”

But did the governor consider the greater ramifications of not reducing the cost of blood? Has he not read Bram Stoker? Seen “Only Lovers Left Alive?” Visited Forks? The Senate sure has — it’s considering a veto override.

Pricy places to be a vampire

My curiosity piqued, I wanted to know what other states exempt blood — animal, human, or otherwise.  In 2008, the Tax Foundation reported that “39 states exempt all or most purchases by nonprofit

[human] hospitals”, including blood, tissue, etc. This is good news for vampires, assuming they’re well connected and prefer human blood (standard procedure for vampires, except for the Cullen family).

Even more states now exempt human blood and similar products. The sale, use, storage, or other consumption of human blood has been exempt from Rhode Island sales and use tax since July 1, 2015. Blood plasma is exempt from Wyoming sales and use tax when it is sold under a prescription. Sales of human tissue are not subject to Oklahoma tax.

Back when Anne Rice was writing her Vampire Chronicles, blood products and human tissue transplants were exempt under Louisiana law. Yet they are now temporarily subject to sales and use tax — part of a plan to boost the state’s sagging revenue. The tax took effect on April 1 and the rate decreases over time as follows: 4% from April 1, 2016 – June 30, 2016; 2% from July 1, 2016 – June 30; and 0% beginning July 1, 2018.

It would be prohibitively time consuming to try to uncover information relating specifically to sales tax and animal blood and body products in every state. But according to the Veterinary Information Network, “Most states consider animals to be tangible personal property and tax animal products accordingly, even when the purpose relates to veterinary medicine.”

That’s true in Texas. The Texas Controller of Public Accounts writes, “Animals are tangible personal property. As such they are subject to sales tax unless specifically exempted in the sales tax law. Therefore, the sale of animal blood or blood cells is taxable.”

And the situation is similar in Washington State, where an exemption for “sales of human blood, tissue, organs, bodies, or body parts” is allowed provided the sale is “for medical research and quality control testing purposes.”  However, state law makes clear that “materials consisting of both human and animal components are not ‘human blood, tissue, organs, or body parts’ and do not qualify for this exemption.” The Cullens are definitely out of luck if they ever need to shop for their blood. And those avant-garde animal/human blood cocktails? Taxable for sure.

Sales tax software takes the bite out of sales tax compliance. Learn more.

photo credit: Lars Plougmann Vampire princess via photopin (license)