Edited version of your private ruling

Authorisation Number: 1012058828085

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Ruling

Subject: GST and agency relationships

Question

Under section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), do you have an obligation to remit to the Commissioner the GST contained in the payments that you receive from purchasers, for the items that you sell as the agent of the entities?

Decision

No, you do not have to remit to the Commissioner the GST contained in the payments received by you from purchasers for the items that you sell as the agent of the entities.

However, you are required to remit GST on the fee that you charge the entitities for the service that you provide to them. Further, you are required to remit GST on the items that you sell in your own right.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You, operate a website for the following two purposes:

· to facilitate the sale of certain items on-behalf of other entities (where you act as the agent to sell those items on-behalf of the entities),

· to sell other items in your own right.

You are registered for GST

When an entity wants to sell a particular item, you offer to take a photo of a sample of the item and put it into your website. For that service you charge a fee inclusive of GST to the entity

Clients could purchase these items through your website. It is like any internet buying. If a client wants to purchase a particular item from your website, they will purchase it and make an electronic payment to your internet account. Every week you collect this money and remit it to the relevant entities after deducting any bank fees involved.

You do not buy or sell any of these items. You act as a facilitator for the sale of the items. You do not make any profit out of the sale of those items.

When the clients buy those items through your website, they come to know that you sell other items and they buy them too. Apart from the fee charged for the photos, That is the only advantage you get from facilitating the sale of the items.

As the entities are registered for GST, when they sell these items to clients, they incur a GST liability. So the money you remit to the entities may contain GST to be paid by the entities.

Relevant legislative provisions

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999.

Section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999.

Reasons for the decision

Section 9-40 of the GST Act provides that you must pay the GST payable on any taxable supply that you make.

Section 9-5 of the GST Act states:

You make a taxable supply if:

· you make the supply for *consideration; and

· the supply is made in the course or furtherance of an *enterprise that you *carry on; and

· the supply is *connected with Australia; and

· you are *registered, or *required to be registered.

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

(terms marked with asterisks (*) are defined in section 195-1 of the GST Act)

Goods and Services Tax Ruling GSTR 2000/37 (GSTR 2000/37) refers to goods and services tax - agency relationships and the application of the law. The following paragraphs of GSTR 2000/37 are relevant for resolution of the issues in this case:

10. An intermediary may be authorised by another party to do something on that party's behalf. Generally, the intermediary is called an agent. The party who authorises the agent to act on their behalf is called the principal…..

11. For commercial law purposes, an agent is a person who is authorised, either expressly or impliedly, by a principal to act for that principal so as to create or affect legal relations between the principal and third parties.

12. The principal is bound by the acts of an agent as a result of the authority given to the agent. In cases of actual authority, the relationship between a principal and an agent is a consensual one so that no party can claim to be a principal's agent unless both parties consent to the creation of the agency.

20. Where a principal makes a taxable supply or a creditable acquisition through an agent, the GST payable by the principal or the input tax credit to which the principal is entitled would be attributable according to the basic attribution rules set out in sections 29-5 and 29-10 unless a special attribution rule applies….

45. …. When an agent is authorised to undertake a transaction on behalf of the principal, thereby binding the principal to the legal effects of the transaction, then the transaction is made by the principal through the agent.

55. If you are an agent at general law, you are an agent for GST purposes unless Subdivision 153-B applies. Accordingly, if you are an agent (where taxable supplies are made through you), the principal is liable for any GST payable on the supplies. Also, if you are an agent (where creditable acquisitions are made through you), the principal is entitled to any input tax credits.

From the facts given above, it can be concluded that you are authorised expressly or impliedly to act on behalf of the entities in selling their items through your website. Therefore, you act as an agent of the entities.

Apart from the fees charged to place photos of sample items in your website, you do not charge any agency commissions or fees to the entities for providing these agency services. You provide these services at no extra cost to the entities, as these services indirectly help you to sell other items that you sell in your own right through your website.

The facts indicate that the title to the items that you sell on-behalf of the entities never passes to you and always remains with the relevant entity. Therefore, when a client purchases an item that you sell on-behalf of an entity through your website the relevant entity supplies it to the client. As an agent, you merely collect the consideration from the client and remit it to the relevant entity.

As the title to the items never passes to you, you do not make any supply of items to the clients. Therefore, you do not satisfy paragraph 9-5(a) of the GST Act. Consequently, you do not make any taxable supply of items. Accordingly, you do not incur any GST liability when the clients purchase items through your website.

The entity supplies an item to the client for consideration and satisfies paragraph 9-5(a) of GST Act. If the entity satisfies the other requirements of section 9-5 of the GST Act, the entity makes a taxable supply and incurs a GST liability.

Your GST obligations:

The fee you charge the entities

Your service to the entities for which you charge a fee is taxable supply. You are required to remit GST for this service.

Other items that you sell through your website in your own right

You make a taxable supply of those items and you have advised us that you include them in your Activity Statement.