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Ruling

Subject: Wine equalisation tax

Question 1

Are your sales indirect marketing sales?

Answer

Yes.

Question 2

Are you entitled to quote your ABN to Customs when you import the wine?

Answer

Yes.

Question 3

Are you entitled to calculate WET payable using the half retail price method?

Answer

Yes.

This ruling applies for the following periods:

From 1 August 2011

The scheme commences on:

During 2011

Relevant facts and circumstances

You purchase wine overseas.

You select the wine to be purchased based on what you can sell through Entity B in Australia.

Title in the wine passes from the supplier of the wine to you at the point of sale overseas.

You import these wines into Australia.

You insure the wine against the risk that the wine is lost, spoilt, or damaged when it is exported from overseas to Australia.

You intend to quote your ABN to Customs at importation.

You only make retail sales of the wine in Australia through your agent Entity B.

Entity B holds an Australian retail liquor licence.

There is no physical retail outlet. Entity B sells the wine online, or via mail order or telephone.

You do not retain stock on hand in Australia. Sometimes your stock is held in a warehouse overseas, pending sales through Entity B in Australia.

Title in the wine passes from you to the customer after clearance from Australian Customs and once the customer has paid Entity B for the wine.

You entered into a written agreement with Entity B, in which you appointed Entity B to act as your agent in Australia.

According to the agreement, retail sales of various wines imported by you into Australia will be made through Entity B.

Relevant legislative provisions

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

A New Tax System (Wine Equalisation Tax) Act 1999 section 5-20

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

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

A New Tax System (Wine Equalisation Tax) Act 1999 section 13-5

A New Tax System (Wine Equalisation Tax) Act 1999 section 23-5

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

Reasons for decision

Question 1

Summary

Your sales are indirect marketing sales.

Detailed reasoning

Section 5-20 of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act) defines indirect marketing sales. It states:

A sale of *assessable wine is an indirect marketing sale if it is a *retail sale made by an entity (the marketer) that is not the *manufacturer of the wine and the sale is made:

(a) under an arrangement that provides for the sale of the wine to be made by an entity that is acting for the marketer but is not an employee of the marketer; or

(b) from premises that:

(i) are used, mainly for making retail sales of wine, by an entity or entities other than the marketer; and

(ii) are held out to be premises of, or premises used by, the other entity or entities.

* To find definitions of asterisked terms, see section 33-1 of the WET Act.

Is the wine assessable wine at the time of sale?

Indirect marketing sales must occur in relation to assessable wine according to section 5-20 of the WET Act. Therefore your wine must be assessable wine at the time of sale in order for the sale to possibly be an indirect marketing sale.

Section 33-1 of the WET Act provides the following relevant definitions:

· 'Assessable wine' means Australian wine or imported wine.

· 'Imported wine' means wine that has been imported (whether or not the wine was manufactured in Australia).

· 'Import' means import goods into Australia.

· 'Sale' includes barter or exchange.

The meaning of 'sale' is discussed in Wine Equalisation Tax Ruling 2009/1 Wine equalisation tax: the operation of the wine equalisation tax system (WETR 2009/1). Paragraph 94 states that for the purposes of the WET Act, 'sale' includes the transfer of the ownership of wine for both monetary and non-monetary amounts.

Paragraph 95 states that in accordance with sale of goods legislation in force in the States and Territories of Australia, for a sale to have taken place, the property in the goods must be transferred from the seller to the purchaser.

You make retail sales of the wine in Australia through Entity B who is authorised to act as your agent. Entity B does not have a physical retail outlet. The wine is sold online, or via mail order or telephone.

You do not retain stock on hand in Australia. Sometimes your stock is held in a warehouse overseas, pending sales through Entity B in Australia.

At the time Entity B enters into the contract for the sale of wine with a customer, the wine is overseas. At this point in time, the wine is not assessable wine.

However, you state that title in the wine passes from you to the customer after clearance from Australian Customs and once the customer has paid Entity B for the wine. Therefore this is the time of sale. At this point, the wine is in Australia and is therefore assessable wine.

Is the sale a retail sale?

Under section 5-20 of the WET Act, an indirect marketing sale must be a retail sale.

Section 33-1 of the WET Act provides the following relevant definitions:

· 'Retail sale' means any sale that is not a wholesale sale.

· 'Wholesale sale' generally means a sale to an entity that purchases for the purpose of resale.

Your wine is sold online, or via mail order or telephone. You state that these sales are only retail sales. You have not provided any information to indicate that the entities that purchase your wine do so for the purpose of resale. On this basis, the sales are retail sales.

Are you the manufacturer of the wine?

According to section 5-20 of the WET Act, an indirect marketing sale must be made by an entity that is not the manufacturer of the wine.

You state that you purchase wine from wineries overseas. Therefore you are not the manufacturer of the wine.

Does the sale satisfy paragraph (a) or (b) of section 5-20?

Under paragraph 5-20(a) of the WET Act, an indirect marketing sale must be made under an arrangement that provides for the sale of the wine to be made by an entity that is acting for you but is not your employee.

You entered into a written agreement with Entity B, in which you appointed Entity B to act as your agent in Australia. According to the agreement, retail sales of various wines imported by you into Australia will be made through Entity B.

Your circumstances satisfy the requirements paragraph 5-20(a) of the WET Act. It is therefore unnecessary to consider whether paragraph 5-20(b) of the WET Act applies.

Conclusion to Question 1

You satisfy all of the requirements of section 5-20 of the WET Act. You therefore make indirect marketing sales.

Question 2

Summary

You are entitled to quote your ABN to Customs.

Detailed reasoning

Quoting is a mechanism used to exempt an assessable dealing from WET. Section 13-5 of the WET Act provides the standard grounds for quoting. Under paragraph 13-5(1)(a), you are entitled to quote your ABN for a dealing with wine if, at the time of quoting, you have the intention of selling the wine by wholesale, or by indirect marketing sale, while the wine is in Australia.

You intend to quote your ABN to Customs when you import the wine into Australia, in order to exempt the Customs dealing from WET. Your basis for quoting is that, at the time of quoting, you intend to sell the wine by indirect marketing sale while the wine is in Australia.

At the time you quote, your wine is already subject to an agreement to be sold by Entity B on your behalf. At the time you quote, you therefore have an intention to fulfil this agreement and make the sale, which is an indirect marketing sale.

You therefore meet the requirements of paragraph 13-5(1)(a) of the WET Act and are entitled to quote your ABN to Customs.

Question 3

Summary

You are entitled to calculate your WET liability using the half retail price method because you sell your wine by indirect marketing sale.

Detailed reasoning

The assessable dealings table in section 5-5 of the WET Act sets out the WET liability for wine for each assessable dealing.

Subsection 5-5(4) of the WET Act provides that the assessable dealings table does not apply to a dealing with wine unless the wine is assessable wine immediately before the time of the dealing, and is in Australia at the time of the dealing.

As we have established in Question 1, your wine is assessable wine immediately before the time of sale and is in Australia at the time of sale. Therefore, the assessable dealings table applies.

Assessable dealing AD12d in section 5-5 of the WET Act sets out the WET liability for imported wine sold by indirect marketing sale. The seller's WET liability arises at the time of the sale. The taxable value of the dealing is the notional wholesale selling price of the wine.

Subsection 9-25(2) of the WET Act states that, in working out the notional wholesale selling price, the half retail price method is used unless you have chosen to use the average wholesale price method.

You intend to calculate the taxable value using the half retail price method, so the average wholesale price method does not need to be considered.

Subsection 9-35(1) of the WET Act states that the notional wholesale selling price for a retail sale of grape wine, worked out using the half retail price method, is 50% of the price of the sale.

As an indirect marketing sale is a type of retail sale, you may use the half retail price method in calculating the taxable value of the sale.

Subsection 5-5(3) of the WET Act explains that the amount of WET is calculated by multiplying the taxable value of a dealing by 29%.

Your WET liability on an indirect marketing sale will therefore be 29% of 50% of the price of the sale.