Yes and No
I get this question all the time. Tea Tree oil (Melaleuca) has a phenolic compound that can be hard for a dog's body to process, but ONLY IN HIGH DOSES! The oral toxic dose of phenol in dogs is about 0.22 grams per pound of body weight 0.22 grams is about 4 drops of tea tree oil
Most dogs are 10 to 20 pounds To hit toxic levels, you would have to apply 40 drops of tea tree oil to their body at one time. ANYBODY or any dog given a high amount of phenolic compounds would develop toxicity issues.
When applying use common sense. As long as use 1-3 drops of Tea Tree at a time and diluting for your pet is the best practice.
* The phenolic toxicity in cats is unknown, but we do know that cats are more sensitive than dogs. I advise to avoid Tea Tree altogether when it comes to cats.
Study on toxicity levels of Tea Tree on dogs:
Products containing Tea Tree:
Famous Healing Salve: (6 drops used for 2 ounces. Would have to use the whole jar on a 1 pound dog to have high enough toxicity levels.)
Famous Ear Infection & Cleanser: (8 drops for 4 ounces. Would have to use the entire bottle on a 2 pound dog to have high enough toxicity levels.)