Edited version of your private ruling

Authorisation Number: 1012310161989

Ruling

Subject: GST and commission

Questions:

1. Will the supply that you will make to Australian product providers be subject to goods and services tax (GST) where these products will be sold to third party buyers on your website?

2. Will the supply that you will make to non-resident product providers be subject to GST where these products will be sold to third party buyers on your website?

Answers:

1. Yes, the supply you will make to Australian product providers in return for the commission payments will be subject to GST, where these products will be sold to third party buyers on your website.

2. No, the supply you will make to non-resident product providers in return for the commission payments will not be subject to GST, where these products will be sold to third party buyers on your website.

Relevant facts and circumstances

You are an Australian company and are registered for GST.

You have a website and you are considering to have agreements with Australian and non-resident product providers (sellers) to have their products uploaded, sold and distributed from that website. Your sellers will upload and sell online instructional guides to independent third parties (purchasers) via the website. The purchasers will make the payments directly to you when purchasing the products online. You will retain a percentage of the payments collected as commission and will forward the balance to the sellers.

You have provided us with a copy of the terms and conditions between you and the sellers.

You provided the following information:

· You consider you will be acting as an agent on behalf of the sellers to sell their products on your website as you will not have any ownership rights over the instructional guides as per terms and conditions.

· You will provide a forum to your sellers to distribute the instructional guides. Your sellers will be either a resident of Australia or a non-resident and they will set the price for the products. The purchasers will either be a resident of Australia or a non-resident.

· The non-resident sellers will not be carrying on a business in Australia. The only interaction between you and the seller will be online through the website service.

· You consider you will be supplying services to the sellers as per terms & conditions.

· There will be no agreement between you and the third party purchasers.

· The non-resident sellers will generally be individuals. However, companies will not be excluded from selling their products on your website.

· The individual non-resident sellers will not have any third parties in Australia that would be involved in your supply to them. They will not be in Australia in relation to the supplies you will make to them.

· The purchasers will pay you in full for the product they purchased. You will withhold a percentage as commission then forward the remainder to the seller. The commission will be based on the sale of the products.

· The purchaser will download the products they wish to purchase online from your website. The only contact the purchaser will have with you will be through the website.

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 38-190.

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-190(1).

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-190(3

A New Tax System (Goods and Services Tax) Act 1999 Section 195-1.

Reasons for decisions

Questions 1 and 2

 Characterisation of your supply

From the facts received, you will carry on the following activities under the arrangement you are considering to have with the sellers:

· You will provide a forum for the sellers to upload/list, sell and distribute their products on your website. You will not charge any fees to the sellers when they register as a seller with you and when they upload/list the products on your website.

· You will collect the payments from the purchasers and issue them with a tax invoice.

· You will retain a percentage of the payments collected as commission and forward the balance to the sellers.

Based on the information received and from the above, we consider you will be making a supply of website advertising sales agency services (supply of services) to the sellers and the consideration for the supply is the commission. Further, the sellers will be selling the products to the third parties via your website and the consideration of their supplies will be the full amount paid by the third parties.

The next step is to determine the GST status of your supply of services to the sellers.

GST status of supply of services

To be a taxable supply, the supply must meet the conditions under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). This section provides that you make a taxable supply if:

 you make the supply for consideration; and

(a) the supply is made in the course or furtherance of an enterprise that you carry on; and

(b) the supply is connected with Australia; and

(c) you are registered or required to be registered for GST.

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

Supply to Australian sellers

Based on the information received, your supply of services will satisfy paragraphs (a) to (d) of section 9-5 of the GST Act as:

 you will receive the commission as consideration for the supply;

(a) the supply will be made in the course of an enterprise (business) that you carry on;

(b) the supply will be connected with Australia as you will be making the supply through an enterprise that you carry on in Australia; and

(c) you are registered for GST.

 However your supply of services will not be a taxable supply to the extent that they will be GST-free or input taxed.

Your supply of services to the Australian sellers will neither be input taxed nor GST-free under any provision in the GST Act. Accordingly, based on the information received, your supply of services to Australian resident sellers will be a taxable supply under section 9-5 of the GST Act and you will be liable for GST on the commission received.

Supply to non-resident sellers

Your supply to the non-resident sellers will satisfy paragraphs 9-5(a) to 9-5(d) of the GST Act as you will receive consideration for the supply and the supply will be made through a business that you carry on. Further the supply will be connected with Australia as they will be made through a business that you carry on in Australia and you are registered for GST.

However your supply of services will not be a taxable supply to the extent that they will be GST-free or input taxed.

Your supply of services will not be input taxed under any provision in the GST Act. The next step is to consider whether the supply will be GST-free.

GST-free

Subsection 38-190(1) of the GST Act specifies the circumstances where the supply of things other than goods or real property for consumption outside Australia is GST-free. Relevant to your supply of services to the sellers is item 2 in the table in subsection 38-190(1) of the GST Act (Item 2).

Item 2 provides that a supply is GST-free if the supply is made to a non-resident who is not in Australia when the thing supplied is done and:

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

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

For a supply to be within the scope of Item 2, the supply must be made to a non-resident who is not in Australia when the thing supplied is done. The expression 'not in Australia' requires that the non-resident is not in Australia in relation to the supply.

Not in Australia in relation to the supply

In the case of supplies made to an individual, we consider the physical location of the individual establishes whether that individual is in Australia when the thing supplied is done.

An individual is in Australia if that individual is physically in Australia. An individual is in Australia in relation to the supply if the individual is involved with the supply while in Australia.

A non-resident company is in Australia if the company carries on its business or activities in Australia:

· at or through a fixed and definite place of its own for a sufficiently substantial period of time; or

· through an agent at a fixed and definite place for a sufficiently substantial period of time.

Further, a non-resident company is in Australia in relation to the supply if:

· the supply is solely or partly for the purposes of the Australian presence; or

· the presence of the company is involved in the supply, unless the only involvement is minor

Application of facts to item 2

Based on the facts you provided, your supply of services will be mainly to individual non-resident sellers who will not be in Australia at the time of supply. In this instance your supply of services will be GST-free under paragraph (a) of Item 2 as:

· the individual seller is a non-resident and will not be in Australia in relation to the supply when the service will be made; and

· the supply will neither be a supply of work physically performed on goods situated in Australia nor a supply directly connected with real property situated in Australia.

Further, your supply of services may also be GST-free under paragraph (b) of Item 2 if the sellers acquire your services for their business purposes and are not registered or required to be registered for GST.

However, the scope of Item 2 is limited by subsection 38-190(3) of the GST Act which provides that a supply covered by Item 2 is not GST-free if:

· it is a supply under an agreement entered into, whether directly or indirectly with a non-resident; and

· the supply is provided or the agreement requires it to be provided, to another entity in Australia.

Based on the information received, subsection 38-190(3) of the GST Act will not be applicable as the sellers will not be requesting you to provide your supply of services to another entity in Australia. Further the services you supply will be made and provided to the non-resident sellers and not to the purchasers.

Accordingly, your supply of services to the individual non-resident sellers will be GST-free under paragraph (a) of item 2.

For more information on Item 2 and subsection 38-190(3) of the GST Act please refer to the Goods and Services Tax Rulings GSTR 2003/7, 2004/7 and 2005/6 which are available at www.ato.gov.au

Summary

Based on the information received, your supply of services to Australian sellers will be a taxable supply under section 9-5 of the GST Act and you will be liable to pay GST on the commission you will receive for these supplies.

Further based on the information received, your supply of services to non-resident sellers will be GST-free under paragraph (a) of item 2 in the table in subsection 38-190(1) of the GST Act. You will not be liable for GST on the commission you will receive for these supplies.