The wool tax is not a single levy. Wool moving through the United States can trigger four separate obligations depending on where you sit in the supply chain: a federal import tariff on foreign wool, a mandatory checkoff assessment on domestic production and imports, federal income tax on wool sales, and in some cases state sales tax. Which ones apply to you depends on whether you raise sheep, import fiber, or sell directly to consumers.
Import Tariffs on Foreign Wool
Wool entering the country is classified under Chapter 51 of the Harmonized Tariff Schedule, which covers wool, fine or coarse animal hair, horsehair yarn, and woven fabric.1United States International Trade Commission. Harmonized Tariff Schedule of the United States – Chapter 51 There is no flat percentage. The duty depends on the fiber’s grade and processing stage, with the grade expressed in numbers like 40s, 44s, or 46s that correspond to fiber fineness.2U.S. Customs and Border Protection. Classification of Fibers and Yarns Under the HTSUS
Most raw wool actually enters duty-free. Under headings 5101.11 and 5101.19, greasy shorn wool graded 44s or finer carries a general rate of zero. Certain residual categories that don’t fit the finer-grade subheadings face roughly 18.7 cents per clean kilogram under the general rate. Countries with free trade agreements — including Australia, Canada, Chile, Israel, and Jordan — receive preferential rates that reduce or eliminate even those duties.3Harmonized Tariff Schedule. HTS Search The U.S.-Australia Free Trade Agreement, for example, eliminated tariffs on qualifying textile goods between the two countries.4International Trade Administration. Summary of Australia FTA Textiles
Rates can shift quickly. Executive orders in 2025 imposed reciprocal tariffs on goods from numerous countries, and wool may be affected depending on the country of origin. Check the current HTS before finalizing landed cost on any shipment.
When You Need a Customs Bond
Any commercial wool shipment valued over $2,500 requires a customs bond before it clears U.S. Customs and Border Protection.5U.S. Customs and Border Protection. When Is a Customs Bond Required The bond guarantees payment of duties, taxes, and fees. A single-entry bond covers one shipment; a continuous bond covers all entries over a 12-month period and carries a minimum of $50,000, reviewed annually. Shipments under $2,500 generally skip the bond, though exceptions apply for goods subject to antidumping duties or other agency requirements.
The Mandatory Checkoff Assessment
Every pound of greasy wool sold domestically is subject to a mandatory assessment under the Sheep Promotion, Research, and Information Act of 1994.6Office of the Law Revision Counsel. 7 USC 7101 – Findings and Declaration of Policy This is the wool industry’s federal checkoff, comparable to the promotion and research programs that fund beef and dairy campaigns.
The statutory rate is 2 cents per pound of greasy wool. The Board and the Secretary of Agriculture can adjust the rate by up to two-tenths of a cent per year, and it can never exceed 4 cents per pound.7Office of the Law Revision Counsel. 7 USC 7104 – Required Terms in Orders The statute is specific about greasy wool — the unwashed fiber as it comes off the sheep — not clean wool.
The buyer collects the assessment, not the producer. When someone purchases greasy wool from a producer, feeder, or handler, the purchaser deducts the assessment from the payment and remits it to the National Sheep Promotion, Research, and Information Board. If you process your own wool rather than selling greasy fleece, you owe the equivalent assessment at the time of sale and remit it to the Board yourself.7Office of the Law Revision Counsel. 7 USC 7104 – Required Terms in Orders
Imported wool and wool products are assessed at 2 cents per pound of degreased wool or its equivalent. U.S. Customs collects this at the border and forwards it to the Board. Exported greasy wool is assessed at the same 2-cent-per-pound rate, paid by the exporter.
One boundary worth naming: the sheep and wool checkoff is not the same program as the Lamb Promotion, Research, and Information Board, which runs its own assessments on lamb products using Form LP-81. If you sell both lamb and wool, you deal with two separate boards.
Penalties for Skipping the Assessment
A person who willfully violates the order or its regulations faces a civil penalty of up to $1,000 per violation. Willful failure to pay or collect an assessment triggers an additional penalty equal to the full amount of the unpaid assessment.8Office of the Law Revision Counsel. 7 USC 7107 – Enforcement If the Secretary of Agriculture issues a cease-and-desist order and you ignore it, the penalty runs up to $500 per day, with each day treated as a separate offense.
Reporting Wool Income on Your Federal Return
Wool sales are farm income, reported on Schedule F (Profit or Loss From Farming) with your Form 1040. Under the cash method, wool you raised is reported on Line 2, “Sales of livestock, produce, grains, and other products you raised.” Under the accrual method, the equivalent entry is Line 37.9Internal Revenue Service. Schedule F (Form 1040) Profit or Loss From Farming Purchased wool that you resell goes on Line 1a instead, because you didn’t raise it.
Breeding sheep used for wool production qualify for MACRS depreciation over a 5-year recovery period under both the General Depreciation System and the Alternative Depreciation System.10Internal Revenue Service. Publication 225 (2025), Farmer’s Tax Guide Depreciation begins when the animal reaches maturity — the point at which it can be bred or shorn — not the date of purchase. Lambs bought for a wool flock generate no depreciation deduction until they are old enough to produce usable fleece.
The checkoff assessment is itself a deductible business expense, along with shearing, feed, veterinary care, and other ordinary costs of running the operation. All of these flow through Schedule F and reduce your taxable farm income.
Sales Tax on Wool
State treatment of raw wool depends on who is buying. In wholesale and business-to-business transactions, raw wool sold for resale or as an ingredient in a finished product is generally exempt when the buyer provides a resale certificate; sales tax is collected later, when the finished garment reaches the end consumer.
Direct-to-consumer sales are different. Raw fleece sold at a fiber festival or farm store to someone who plans to spin it for personal use may be taxable, depending on the state. Some states exempt unprocessed agricultural products broadly; others tax fiber sold to end users. The rules hinge on your state’s specific agricultural exemptions, so confirm with your state department of revenue before you assume a retail sale is exempt.