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Virginia Has a Sheep Tax… It Raises $8,000 Per Year

2 min readBy: Scott Drenkard

I’ve been digging through Virginia’s Annual Reports by the Department of Taxation working on some other research, and I had a few chuckles reading through the taxes in the category of “Other Funds Revenues” (page 2 here). In case you were wondering, Virginia has an excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. on eggs that collects $1.8 million per year, an excise taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. on peanuts (which are a state treasure) that collected just $172,000 in 2012, and a tax on soft drinks (which are poor policy for a variety of reasons) that collected $191,000 in 2012. But the most peculiar thing in this report is the line item that simply reads “Sheep” and collected $9,000 in FY 2011 and $8,000 in FY 2012.

Turns out that there is a sheep assessment in Virginia, and every sheep or lamb sold is subject to a $0.50 excise tax. This is all detailed on form SH-1. This levy, which again, collects $8,000 dollars per year, is actually filed quarterly by sheep handlers. Really, the only redeeming feature about this levy is that if you’re buying your sheep for the express purpose of resale in the next 10 days, it doesn’t apply. That’s a good thing, because we wouldn’t want any sheep tax pyramidingTax pyramiding occurs when the same final good or service is taxed multiple times along the production process. This yields vastly different effective tax rates depending on the length of the supply chain and disproportionately harms low-margin firms. Gross receipts taxes are a prime example of tax pyramiding in action. .

The money goes to the Sheep Industry Board, which is “responsible for the promotion and economic development of the sheep industry in the Commonwealth.” Some elements of this board seem reasonable, and this assessment aims to be like a user feeA user fee is a charge imposed by the government for the primary purpose of covering the cost of providing a service, directly raising funds from the people who benefit from the particular public good or service being provided. A user fee is not a tax, though some taxes may be labeled as user fees or closely resemble them. in that some of the money is dedicated to protecting against coyote attacks on sheep. However, it’s not immediately clear to me that coyote protection is a goal that requires forcing everyone in the industry to “buy in” in the form of a state-administered levy. I’d bet some farmers do just fine protecting their stock against coyotes with good fences.

If you check out the Sheep Industry Board funding projects for 2011-2012, the coyote control portion of their efforts seems to be just a $5,000 grant to USDA Wildlife Services. Less defensible items on the report include that they gave $300 to sponsor the “Lamb Carcass Extravaganza,” $550 to sponsor the Virginia FFA Sheep Production Proficiency Award, and used $290 to purchase promotional material from the American Sheep Industry Association and the American Lamb Board. This last one is particularly strange, as those industry groups hypothetically already represent the sheep industry by handing this material out—rendering the argument in favor of a special levy to fund the Sheep Industry Board a bit weaker.

I realize that these line items are relatively small peas, and they probably don’t represent the worst example of government mismanagement of tax dollars. But then again, it’s important to balance this minimal collection of $8,000 per year with the compliance cost of filing these assessments every quarter. I’d anticipate it’s probably pretty tiring to fill out these forms. It is, after all, counting sheep.

More on Virginia.

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