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Edited version of private advice

Authorisation Number: 1051535789582

Date of advice: 27 June 2019

Ruling

Subject: GST and sale of books

Question 1

Based on the information you have provided to us, what is the GST status of your supplies of books you have written and sold from 1 July 2018?

Answer

After considering all the information you have provided we consider that from 1 July 2018 you provide the following distinct supplies regarding the books you have written and sold:

  1. A supply of printed books
  2. A supply of rights to entities located worldwide
  3. A supply of eBooks to customers worldwide through online platforms.

The GST status for each supply as from 1 July 2018 is as followed;

1.    supply of printed books

supply

Connected with Australia

Consideration for the supply

GST status

Included in turnover

Books including USB memory sticks for e-books sold at convention/event in Australia

Yes. The book is made available to the purchaser in Australia

 

Money collected at time of sales

 

Taxable supply. Sale is subject to GST

yes

Books including USB memory sticks for e-books sold at event/convention

outside Australia

No, the books are made available to the purchasers outside Australia as the books located outside Australia at the time the event/convention is held.

Money collected at time of sales

 

GST does not apply as sale is outside the scope of GST

no

Book mail from Australia to customer in Australia

Yes Book is sent to customer in Australia

Money collected at time of sales

Taxable supply. Sale is subject to GST

yes

Book mail from Australia to customer located outside Australia

No Book is delivered to customer located outside Australia

Money collected at time of sales

GST -free export of book where book is mailed within 60 days upon receipt of payment or the issue of the invoice to the customer.

yes

Printed books sold to Australian company

Yes. Books are made available in Australia as they are printed in Australia and sold to the company in Australia.

Total amount collected by the Australia company from its customers less the entitled wholesale discount

Taxable supply Sale is subject to GST

Yes

Printed books sold to overseas companies

No. Books are not made available to the overseas company in Australia as they are printed outside Australia and sold to them outside Australia.

Total amount collected by the overseas companies from their customers less the entitled wholesale discount

GST does not apply as sale is outside the scope of GST

no

2.    Supply of rights

supply

Connected with Australia

consideration

GST status

Included in turnover

Supply of rights made to entity located in Australia

Yes. The supply of right is done through a business that you carry on in Australia

 

Royalty amount received

·         Where the right is for use in Australia - supply is a taxable supply. GST is to be collected for the supply

·         Where the right is for use overseas - the supply is a GST-free supply under item 4(a) in the table in subsection 38-190(1) of the GST Act. No GST is to be collected

Yes

yes

Supply of rights made to entities located outside Australia

Yes. The supply of rights is done through a business that you carry on in Australia

 

Royalty amount received from each entity located outside Australia.

GST-free supply under item 4(b) in the table in subsection 38-190(1) of the GST Act as the entities are non-residents that are not in Australia when the rights are granted.

yes

 

3.    Supply of eBooks to customers worldwide through online platforms.

supply

Connected with Australia

consideration

GST status

Included in turnover

Supply of eBooks to customers located in Australia

Yes the supply is made through the business you carry on in Australia

Total amount the online platform collected from the customer at the time of sale.

 

Taxable supply and subject to GST

 

Yes

 

Supply of eBooks to customers located outside Australia

Yes the supply is made through the business you carry on in Australia

Total amount the online platform collected from the customer at the time of sale.

The supply is GST-free under item 4(a) in the table in subsection 38-190(1) of the GST Act. No GST is to be collected on the sale

yes

 

Question 2

You have registered voluntarily for GST from 1 July 2018. Will you be required to be registered for GST from 1 July 2019 to 30 June 2020?

Answer

Where you determine that your current or projected annual turnover as at 31July 2019 will reach A$75,000 or over you will be required to be registered for GST. In this instance you will need to change your GST reporting from annual to either quarterly or monthly reporting on or before 28 October 2019 under subsection 151-25(2) of the GST Act.

Relevant facts and circumstances

You are an individual who writes books and sold them either printed or electronically through online platforms. You are registered for GST.

You upload your books on various online book retailer and distribution sites to be sold online by those retailers and distributors to readers around the world.

Your books are digital files which the retailers and distributors then convert into their preferred eBook format or print format and offer for sale through their own sales channels and their partner sales channels, with your permission in exchange for payments which you consider to be royalties (royalties) on the sales. When they sell a book, they accept payment and tax from the buyer, send the book to the reader, and report to you that a sale has occurred. In some cases, this reporting is daily, but can be monthly or quarterly, often several months after the sales have occurred.

Your income is royalties from the sale of each book that the various retailers and distributors sell.

In addition, you sell a small number of paperback and eBook copies of your books in person at signing events and conventions. You sell the paperbacks are printed and shipped to you directly to readers, accept payment and hand over/post copies of the signed books. For the eBooks you format and sell on USB memory sticks, hand over to the buyer after processing their payment at the event or convention.

Occasionally, a reader in Australia will contact you, asking if they can purchase a signed copy of one of your books. When that happens, you either order print copies from the printing company to be delivered to your home, or use existing stock you have previously ordered for events, invoice the reader through Paypal, sign the book, and send it to them.

Sale of printed books

You have provided us with a copy of the Printing Agreement you have with printing companies located worldwide. The printing companies sells print books, which they produce and print based on the electronic files you submit to them on their dashboard. They deliver the books to the retailer and therefore you believe that the printing company supplies them to the retailer.

You set the recommended retail price and wholesale discounts within the printing company's dashboard, which you assume is the price (retail less the wholesale discount) they charge the retailer. Their monthly reports to you indicate this is the sale price they charge the retailer, from which you receive your royalties.

Sale of eBooks

You sell your eBooks online through various platforms to customers located worldwide. You have provided us with a copy of the terms and conditions you have with the online platforms which are located worldwide.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 section 23-5

A New Tax System (Goods and Services Tax) Act 1999 section 23-10

A New Tax System (Goods and Services Tax) Act 1999 section 38-190

A New Tax System (Goods and Services Tax) Act 1999 section 151-25

Reasons for decision

Note: Where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in section 195-1 of the GST Act.

Detailed reasoning

Question 1

Taxable supply

GST is payable on a taxable supply. Your supply is a taxable supply under section 9-5 of the GST Act if:

a)    the supply is for consideration

b)    the supply is made in the course of an enterprise that you carry on; and

c)    the supply is connected with Australia; and

d)    you are registered or required to be registered for GST.

However, your supply is not a supply to the extent that it is GST-free or input taxed.

Characterisation of supply

Before we determine the GST status of your supply we first must determine the character of your supplies.

After considering all the information you have provided we consider that you provide the following distinct supplies regarding the books you have written and sold:

  1. A supply of printed books
  2. A supply of rights
  3. A supply of eBooks to customers worldwide through online platform.

We will now consider each of the above supplies.

1.    Supply of printed books

From the information given, you supply books:

a)    that are either printed by the printing company or copied on USB drive and which you deliver directly to your customers at events, conventions or by mail.

b)    that are printed by the printing companies which they purchase after the printing is done.

Sale of books directly to your customers

Customers are in Australia

When you sell your books (including the ones on USB memory) directly to your customers at events and conventions held in Australia or mailed to customers located in Australia your sale of books to these customers is a taxable supply under section 9-5 of the GST Act as:

·         you make the sale for consideration (payment received from the customer)

·         the sale is made in the course of the business that you carry on;

·         A sale of book is connected with Australia where either of the following applies:

§  the books are delivered or made available in Australia to the recipient of the supply; or

§  the sale involves the books being removed from Australia; or

§  the sale involves the goods being brought to Australia and you import the goods into Australia.

In your case, the sales is connected with Australia as you deliver or make the books available to the customers at the Australian convention or event or mailed them to the customer in Australia.

·         you are registered for GST; and

·         the sale is neither GST-free nor input taxed under the GST law.

In this instance your sale of printed books to the customers in Australia is subject to GST. You will include GST in the price you charge the customers and include the sale in your annual turnover when calculating your current and projected annual turnover for GST purposes.

Books mail to customers located outside Australia

Where the customers are located outside Australia and you mail the books to the overseas customers your sale of books to these customers is GST-free under item 1 in the table in subsection 38-185(1) of the GST Act where you mail the goods within 60 days of receipt of payment or issuing an invoice to the overseas customers. This sale is included when calculating your current and projected annual turnover for GST purposes.

Customers are outside Australia

Where the event or convention is held outside Australia and your customers are located outside Australia at the time you gave the bought books to them your sale of books to the customers located outside Australia is not connected with Australia. The sale of books is outside the scope of GST and GST is not included in the sale. You also do not include the not connected sales when calculating your annual turnover.

Sale of books to printing companies

Overseas printing companies

When you sell your books that are printed by the overseas companies and which they purchased from you to sell to their customers, your sale of books to them is not connected with Australia as these printed books are located outside Australia. In this instance you have not made them available to the overseas printing companies in Australia.

The sales are not included when calculating your annual turnover for GST purposes and the consideration for the sales is the gross amount that the overseas companies have received from their customers less the wholesale discount.

Australian printing company

When you sell your books that are printed by the Australian company and which it purchased from you to sell to its customers, your sale of books to the Australian company is connected with Australia as these printed books are located in Australia and therefore you have made them available to the Australian company in Australia.

The sales are included when calculating your current and projected annual turnover for GST purposes. The consideration for the sales is the gross amount XX has received from its customers less the wholesale discount.

2.    Supply of rights

After considering your agreement with the publishing entities and the terms and conditions we consider you are making a supply of rights to the publishing entities worldwide.

Your supply of rights to the publishing entities satisfies paragraphs 9-5(a) to 9-5(d) of the GST Act as:

·         your make the supply of rights for consideration (payments received from each amazon); and

·         you supply the rights through a business that you carry on; and

·         your supply of rights is connected with Australia as it is made through a business that you carry on in Australia; and

·         you are registered for GST.

However, your supply of rights is not a taxable supply where it is GST-free or input taxed under the GST law.

Your supply of rights is not input taxed under the GST law.

GST-free supply

Under item 4 in the table in subsection 38-190(1) of the GST Act (item 4), a supply that is made in relation to rights is GST-free if:

a)    the rights are for use outside Australia; or

b)    the supply is to an entity that is not an Australian resident and is outside Australia when the thing supplied is done.

Supply to Australian publishing entity

Where you make the supply of rights to the Australian publishing entity your supply of rights is not GST-free where the rights are for use in Australia. You will need to collect GST on the supply and you will include this supply of rights in your annual turnover when calculating your GST turnover for GST purposes.

However, where the rights are for use outside Australia your supply of rights is GST-free under paragraph (a) of item 4. You do not need to collect GST on the supply but you will include this supply of rights in your annual turnover when calculating your GST turnover for GST purposes.

Supply to overseas publishing entities

Where you made the supply of rights to the overseas publishing entities your supply of rights is GST-free under paragraph (b) in item 4 as the publishing entities are not in Australia when the rights is granted. You do not need to collect GST on the supply and you will include the supply of rights in your annual turnover when calculating your GST turnover for GST purposes.

3.    Supply of eBooks to customers worldwide through online platforms

After considering the information you have provided we consider that you make the supply of e-books in your own right when selling them online through online platforms to customers worldwide.

Your supply of eBooks satisfies paragraphs 9-5(a) to 9-5(d) of the GST Act as:

·         your make the supply for consideration; and

·         you supply the eBooks through a business that you carry on; and

·         your supply of eBooks is connected with Australia as it is made through a business that you carry on in Australia; and

·         you are registered for GST.

However, your supply of eBooks is not a taxable supply where it is GST-free or input taxed under the GST law.

Your supply of eBooks is not input taxed under the GST law.

GST-free supply

A supply of eBooks is GST-free under item 2 in the table in subsection 38-190(1) of the GST Act (item 2) if the supply is made to a non-resident who is not in Australia when the supply of eBook is done; and

a)    the supply is neither a supply of work physically performed on goods situated in Australia when the work is done nor directly connected with real property in Australia; or

b)    the non-resident acquires he thing in carrying on the non-resident enterprise but is not registered or required to be registered for GST.

From the facts given, the online platforms provide you with a list of the markets where the books have been sold and as per the list the customers are located worldwide.

Customers located in Australia

Where the books are sold in an Australian market, item 2 does not apply and your sale will be subject to GST. The sale is included in your annual turnover when calculating your GST annual turnover for GST purposes.

Customers located outside Australia

Where the customers are located outside Australia, your sale is GST-free under paragraph (a) in item 2 as the customers are not in Australia when the sale is made and the sale is neither a neither a supply of work physically performed on goods situated in Australia when the supply of eBook is none nor directly connected with real property in Australia.

In this instance you will not collect GST on the sale of eBooks to the overseas customers but will include the sales in your annual turnover when calculating your annual turnover for GST purposes.

Note: the new law of low imported digital products that starts from 1 July 2017 does not apply to your sale as you are an Australian merchant. For more information on EDP and merchants selling through an EDP go to https://www.ato.gov.au/Business/International-tax-for-business/GST-on-imported-services-and-digital-products/Who-charges-GST/

Question 2

Under section 23-5 of the GST Act you are required to register for GST if you are carrying on an enterprise and your GST turnover meets the registration turnover threshold which currently is A$75,000 (A$150,000 for non-profit organisation).

Under subsection 23-10(1) of the GST Act you may choose to register for GST if your GST turnover is below the registration turnover threshold.

Your annual turnover is your gross income for sales that are connected with Australia excluding the GST you included in sales to your customers.

You reach the GST registration turnover threshold if your:

·         'current GST turnover' (turnover for the current month and the previous 11 months) totals $75,000 or more ($150,000 or more for non-profit organisations), or

·         'projected GST turnover' (total turnover for the current month and the next 11 months) is likely to be $75,000 or more ($150,000 or more for non-profit organisations).

We have advised you in question 1 which sales are connected with Australia. If as at 31 July 2019 your current or projected turnover is A$75,000 or more you will be required to be registered for GST.

In this instance you will need to change your GST reporting from annual to either quarterly or monthly reporting on or before 28 October 2019 for your new GST reporting to start from 1 July 2019 under subsection 151-25(2)(a) of the GST Act.

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