TAXATION RULING NO. ST 2443

ST 2443

SALES TAX : MOTOR VEHICLE TYRES - SUPPLY AND FITTING OF TYRES

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FOI status:

May be releasedFOI number: I 1010925

PREAMBLE

This Ruling considers the sales tax position of the supply and fitting of tyres to motor vehicles, in particular whether they are sales of goods by wholesale or by retail.

2. The definition of "Sale of goods by wholesale" in subsection 3(1) of Sales Tax Assessment Act (No.1) includes:-

(i)

a sale of goods to a person who buys the goods for the purpose of re-sale or for the supply to some other person in the circumstances specified in subsection (4);

but notwithstanding anything contained in the foregoing provisions of this section, does not include:-

(f)

the supply of goods by a person to some other person in the circumstances specified in subsection 3(4).

3. Subsection 3(4) deems a person to have sold goods, if in the performance of any contract (not being a contract for the sale of goods) under which he has received, or is entitled to receive, valuable consideration, he supplies goods, the property in which (whether as goods or in some other form) passes, under the terms of the contract, to some other person.

4. The sales tax position can be affected also by whether a person is a retailer/wholesaler or a wholesaler/retailer. Under sales tax regulation 11, a retailer/wholesaler is a person who sells principally by retail, that is, the total average yearly sales by retail are, or would be, in the opinion of the Commissioner, not less than 50% of the total value of the average yearly sales, whether by retail or otherwise. Under the same regulation a wholesaler/retailer is a person who sells principally by wholesale, that is the total average yearly sales by wholesale are, or would be, in the opinion of the Commissioner, not less than 50% of the total value of the average yearly sales, whether by wholesale or otherwise.

FACTS

5. Tyre vendors ordinarily sell tyres directly to retailers and service stations. They may also fit tyres direct to vehicles owned by dealers or individuals. Retailers who operate as tyre specialists generally supply and fit tyres to motor vehicles or wheel rims supplied to them for that purpose. The vehicles may be supplied by individuals, dealers, service stations or business houses. In fitting the tyres the specialist retailers may sometimes charge a separate fitting fee.

6. Motor vehicles (and rims for tyres) are usually delivered to a tyre specialist or a tyre vendor for the supply and fitting of tyres in the following circumstances:-

(a)

by a service station on behalf of a customer where the service station contracts directly with the specialist;

(b)

by the end consumer such as the owner of the vehicle;

(c)

by a business house, e.g., a transport company, a taxi; or

(d)

by a used motor car dealer who delivers a used vehicle from his trading stocks;

RULING

7. A tyre vendor or specialist in fitting tyres to a vehicle is a party to a contract for the sale of goods and not to a contract for work and labour during the course of which goods are incidentally supplied. The decision in Collins Trading Co Pty Ltd v. Maher [1969] VR 20 supports this approach. The Court held that the installation of an oil heater was a sale of goods with installation and not a work and labour contract.

8. The contracts for sale of tyres by tyre vendors and specialists are therefore not covered by subsection 3(4) and the sale value on which tax is calculated and the taxing point will depend on whether the tyres are sold by wholesale or by retail.

9. The sale by a tyre vendor or specialist of the kind covered by paragraph 6 (a), that is, to a the service station for resale to its customer, is a sale of goods by wholesale. The sale is in the same position for sales tax purposes as a sale by wholesale to a service station that stocks tyres for resale by retail. Tax is payable on the amount for which the tyres are sold and the tax payable is required under the sales tax law to be stated separately on the invoice delivered to the service station. A tyre vendor normally would sell tyres principally by wholesale and would operate from a tax-free stock and it is simply a matter of charging tax on the sale value of the tyres.

10. Most tyre specialists, however, are principally retailers and operate from tax-paid stocks. They are still required to account for tax on the selling price of the tyres to the service station as outlined for tyre vendors in paragraph 9 but they are entitled to claim a rebate of the tax paid by them on the purchase of the tyres.

11. The sale of tyres in the circumstances set out in paragraphs 6 (b), (c), and (d) are sales by retail. Where a tyre vendor holding tax-free stocks makes retail sales, tax is payable on the price for which the tyres would ordinarily be sold by wholesale in similar quantities. A tyre vendor may have a range of wholesale prices depending on the volume of purchases. The wholesale price which is closest in volume terms to the retail sale is the price on which tax should be paid.

12. Where all sales by a specialist are by retail, or the retail sales are made from a tax-paid stock, the sales tax liability will be satisfied by the payment of tax to the supplier at the time of purchase of the tyres. However, where the specialist is a wholesaler/retailer, ordinarily the tyres would be drawn from a tax-free stock and tax would be payable on the wholesale price for which similar tyres are sold in the same or similar quantities by wholesale.

COMMISSIONER OF TAXATION
6 October 1988

References

ATO references:
NO 88/3435-1

Date of effect:
Immediate

Subject References:
SUPPLY AND FITTING OF TYRES
TYRES - SUPPLY AND FITTING OF

Legislative References:
SALES TAX ASSESSMENT ACT (NO.1) 1930; SUBSECTIONS 3(1) AND
3(4)