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Ruling

Subject: Calculating wine equalisation tax (WET) on imported wine

Question 1

Which method is used to calculate the WET applicable to sales to bottle shops, restaurants and wine clubs?

Answer

The method of calculating WET is selling price (excluding WET & GST) x 29%.

Question 2

Which method is used to calculate the WET applicable to online sales direct to customers?

Answer

The method of calculating WET is the 'notional wholesale selling price' (NWSP) x 29%.

Question 3

Which method is used to calculate the WET applicable to bottles used for tasting?

Answer

The method of calculating WET is GST importation value x 29%.

This ruling applies for the following periods:

From date of ruling

The scheme commenced on:

1 January 2012

Relevant facts and circumstances

You are registered for goods and services tax (GST).

You import wine.

You quote your Australian business number (ABN) to Customs on importation.

You sell more than 80% of your wine to:

· bottle shops,

· restaurants, and

· wine clubs.

You make online sales to end users.

You provide some bottles of wine to the retailers to taste for selection purposes.

Your preferred method of calculating the NWSP is the 'half retail price method'.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-75

A New Tax System (Goods and Services Tax) Act 1999 subsection 13-20(2)

A New Tax System (Wine Equalisation Tax) Act 1999 subsection 5-5(3)

A New Tax System (Wine Equalisation Tax) Act 1999 subsection 5-5(4)

A New Tax System (Wine Equalisation Tax) Act 1999 section 9-5

A New Tax System (Wine Equalisation Tax) Act 1999 section 9-25

A New Tax System (Wine Equalisation Tax) Act 1999 subsection 9-25(2)

A New Tax System (Wine Equalisation Tax) Act 1999 section 9-35

A New Tax System (Wine Equalisation Tax) Act 1999 section 33-1

Reasons for decision

Question 1

Summary

The WET applicable for wine sold by wholesale to bottle shops, restaurants and wine clubs is calculated as:

29% x sale price (excluding WET and GST)

Detailed reasoning

The WET system imposes tax on sales, importations and other assessable dealings with wine. Where an entity makes a wholesale or retail sale of wine and no exemption applies, then that sale is a taxable dealing and WET is payable.

Subsection 5-5(4) of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act) sets out all assessable dealings that may occur in relation to wine. Assessable dealing AD11b applies to wholesale sales of imported wine.

Subsection 5-5(3) of the WET Act states that the amount of WET payable on a taxable dealing with wine is equal to 29% multiplied by the taxable value of that dealing.

Section 9-5 of the WET Act provides that the general rules for working out taxable value are set out in the Assessable Dealings Table (ADT) at subsection 5-5(4) of the WET Act.

The ADT states that the taxable value for assessable dealing AD11b is the price (excluding GST and WET) for which the wine was sold.

The term 'price' is defined at section 9-75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). Broadly, it means the consideration given (such as money paid or a payment 'in kind') to receive title to the goods.

You sell wine to bottle shops, restaurants and wine clubs. As these entities purchase the wine from you for the purpose of resale, you are making a wholesale sale, as defined by section 33-1 of the WET Act. Therefore assessable dealing AD11b applies and the WET payable is 29% of the total sale price (excluding WET and GST).

For example:

An importer sells grape wine to a wholesaler for $120 per dozen before tax.

Wine tax payable by the importer is:

$120 x 29% = $34.80

GST payable by the importer is:

($120 + $34.80) x 10% = $15.48

Question 2

Summary

The WET applicable for wine sold online to customers is calculated as:

29% x [sale price (including WET and GST) x 50%]

Detailed reasoning

Assessable dealing AD12b from the ADT at subsection 5-5(4) of the WET Act applies to retail sales of imported wine.

The ADT states that the taxable value for assessable dealing AD12b is the NWSP.

Section 9-25 of the WET Act provides two methods by which the NWSP can be calculated; the 'average wholesale price method' or the 'half retail price method'. Subsection 9-25(2) further provides that the 'half retail price method' is used unless you are able to, and have, chosen to use the 'average wholesale price method'.

Subsection 9-35(1) of the WET Act states that the 'half retail price method' for a retail sale of grape wine is calculated as 50% of the price (WET and GST inclusive) of the sale.

You make online sales to end users. As these entities do not purchase the wine from you for the purpose of resale, you are not making a wholesale sale. Therefore, you are making a retail sale, as defined by section 33-1 of the WET Act. Assessable dealing AD12b applies and the WET payable is 29% of half of the price for which you sold the wine (including WET and GST).

Paragraphs 144 -145 of WETR 2009/1 provide a relevant example of a calculation of WET using the half retail price method:

1.44 Good Wines Winery Ltd sells a bottle of grape wine at the cellar door to a retail customer for $22 (including wine tax and GST). The winery uses the half retail price method to calculate the notional wholesale selling price for its retail sales.

145. Wine tax payable by the winery is:

(50% x $22) x 29% = $3.19

GST payable by the winery is:

$22.00 ¸11 = $22.00

Question 3

Summary

The WET applicable for wine provided to retailers for tasting is calculated as:

29% x the GST importation value

Detailed reasoning

Assessable dealing AD13c from the ADT at subsection 5-5(4) of the WET Act applies to an application to own use (AOU) by an entity that obtained the wine under quote.

An AOU is defined at section 33-1 of the WET Act, and relevantly includes:

· consuming the wine;

· giving the wine away, or transferring property in the wine under a contract that is not a contract of sale;

· granting any right or permission to use the wine;

Paragraph 80 of Wine Equalisation Tax Ruling 2009/1 Wine equalisation tax: the operation of the wine equalisation tax system (WETR 2009/1) provides some common examples of wine being applied to own use. Among them it includes 'wine given to retailers, restaurants and so on, as samples'.

The ADT provides that, where the applier locally entered the wine under quote, the taxable value for assessable dealing AD13c is the 'GST importation value'.

Section 33-1 of the WET Act defines the 'GST importation value' of a local entry as the amount equal to what would be the value of the local entry (disregarding any wine tax), for the purposes of the GST Act, if it were a taxable importation within the meaning of that Act.

Subsection 13-20(2) of the GST Act broadly states that the importation value for GST purposes is the customs value plus the costs of transport, insurance and duty.

Paragraph 156 of WETR 2009/1 provides further support that this definition applies for the purposes of calculating WET.

You provide a small amount of the wine that you import under quote to retailers to sample. You do not charge them for this wine. Dealing with wine in this way is an AOU. As such, assessable dealing AD13c applies and WET is calculated as 29% of the GST importation value.

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