Edited version of your private ruling

Authorisation Number: 1012605654299

Ruling

Subject: GST and sale of goods through the internet

Question 1

Does the Company make a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it sells goods, through the internet to customers in Australia?

Answer

No.

Question 2

Does the Company make a taxable importation under subsection 13-5(1) of the GST Act when the goods are imported into Australia for delivery to the Company's Australian customers?

Answer

No.

Question 3

Does the Company make a taxable importation under subsection 114-5(1) of the GST Act when the goods are imported into Australia for delivery to the Company's Australian customers?

Answer

No.

Question 4

Does the Company make a taxable supply under section 9-5 of the GST Act when it sells goods, through the internet to customers located outside Australia?

Answer

No.

Relevant facts and circumstances

The Company is an Australian resident for taxation purposes and is registered for GST. The Company is contemplating an online retail business to sell products (Goods) to the customers (Customers) in Australia (Australian Customers) and overseas (Overseas Customers).

The Company will purchase the Goods from one or more wholesalers located overseas (Overseas Wholesalers). It is anticipated that the majority of the Customers will be:

• individuals who are not registered, nor required to be registered for GST; and

• located in Australia.

however neither of these two points can be confirmed until trading commences.

The Company will neither install nor assemble the Goods in Australia (as those terms are used for the purposes of paragraph 9-25(3)(b) of the GST Act). The Company will sell the Goods to the Customers in its own right and will not be acting in the capacity as an agent for any party, including the Overseas Wholesalers.

The Customers, Australian and Oversees, will access the Company's website to place their orders for the Goods and make a payment to the Company via the Company's website. The website will be maintained in Australia and orders etc. will be under the control of the Company's employees who will be located in Australia.

The Customers will agree to the Terms of Sale before their orders are accepted by the Company. The Terms of Sale govern the use of the Company's website, the order, the supply and replacement of goods and the jurisdiction for any litigation arising between the Company and the Customers. Once the Customer has agreed to the Terms of Sale, placed their order and made the payment, the Company will authorise the order to be placed with the Overseas Wholesaler.

The Goods have a value of less than $1,000 per item. In this regard the term vaIue means the customs value of the goods worked out or determined in accordance with Division 2 of Part VIII of the Customs Act 1901.

Under the arrangements between the Company and the Overseas Wholesaler the Goods will be delivered by the Overseas Wholesaler directly to the Australian Customers' addresses. The Company will then pay the Overseas Wholesaler for the Goods.

Under the Terms of Sale these Goods are referred by way of the defined term 'Direct Import Goods'. The Australian Customers agree to be the importers of the Goods for all legal purposes and also accept all liability for any taxes and duties that may be applied when the Goods are cleared through Australian Customs.

The Australian Customers also agree that the ownership of the Goods that they purchase is passed to them upon dispatch from the overseas storage facility i.e. the acquisition is on an ex-works basis. The purchase price of the Goods includes delivery costs. If an Australian Customer refuses to pay the delivery costs when ordering online the order will not be completed. The Goods will be delivered directly to the Australian Customer's address in Australia through the mail or by air cargo.

The Company will neither import the Goods, nor attend to the Customs formalities for clearing of the Goods. The Company will not be responsible for Australian Customs duty on the Goods; these conditions are expressly stated in the Terms of Sale.

The Australian Customers will receive an invoice when the online transaction is completed. A Customs copy of the itemised invoice, from the Overseas Wholesaler, for the Goods purchased will be attached to the package when it is shipped. When the Australian Customer accesses the Company website, they are aware that the Goods are sourced from overseas and the documentation on the parcel only shows the details of the Australian Customer.

Where required Customs will contact the Australian Customers and the Customers will be the party that complete the Customs formalities and pays any taxes on the importation.

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 9-25

A New Tax System (Goods and Services Tax) Act 1999 section 114-5

A New Tax System (Goods and Services Tax) Act 1999 Section 13-5

Customs Act 1901 section 71

Reasons for decision

Question 1

Summary

The Company does not make a taxable supply under section 9-5 of the GST Act when it sells goods, through the internet to customers in Australia.

Detailed reasoning

To make a taxable supply of goods, section 9-5 of the GST Act requires that the supply must be 'connected with Australia' as defined in section 9-25 of the GST Act. Subsection 9-25(3) of the GST Act is relevant for goods imported into Australia, for the supply to be connected with Australia the supplier must either:

• import the goods into Australia; or

• install or assemble the goods in Australia.

The Australian Taxation Office (ATO) considers that the entity that causes goods to be brought to Australia is the importer; this entity is the owner of the goods that ensures the goods are entered for home consumption (either itself or through an agent).

In the proposed arrangement there are several parties that cause the Goods to be brought to Australia; the Company, the Overseas Wholesaler and the Customers. Where the Customer is the only entity named (as addressee) on the parcel we accept that it is the Customer who is the owner of the goods and therefore the importer. We note that in the Terms of Sale the Customer agrees that he/she is the importer and the Company will not attend to Customs formalities.

Further, given the nature of the Goods, we consider that installation or assembly by the Company is not required. Therefore, the supply by the Company is not connected with Australia and cannot qualify as a taxable supply under section 9-5 of the GST Act.

Question 2

Summary

The Company does not make a taxable importation under subsection 13-5(1) of the GST Act when the goods are imported into Australia for delivery to the Company's Australian customers.

Detailed reasoning

To make a taxable importation under subsection 13-5(1) of the GST Act the Company is required to;

• import the Goods; and

• enter the Goods for home consumption within the meaning of the Customs Act 1901.

As discussed above, the ATO accepts that the Company will neither import the Goods nor enter the Goods under Customs law. As such the Company will not make a taxable importation.

Question 3

Summary

The Company does not make a taxable importation under subsection 114-5(1) of the GST Act when the goods are imported into Australia for delivery to the Company's Australian customers.

Detailed reasoning

Under subsection 114-5(1) of the GST Act you make a taxable importation if:

• the circumstances referred to in the third column of the table in the subsection occur; and

• you are referred to in the fourth column of the table as the importer in relation to those circumstances.

Item 2 in the table of subsection 114-5(1) of the GST Act identifies the entity that makes taxable importations for low value consignments by post. Similarly, item 3 in the table identifies the entity that makes taxable importations for other low value consignments. Currently a low value consignment is defined as having a Customs declared or assessed value of $1,000. Under the heading 'importer' in the fourth column of both item 2 and item 3 this is 'the person to whom the authorisation was granted' under section 71 of the Customs Act 1901.

We consider that this is the entity who also imports the goods for determining when a supply is connected with Australia under subsection 9-25(3) of the GST Act. In the Company's case, the person to whom the authorisation is granted is the addressee, i.e. the Australian Customer. Therefore the Company does not make a taxable importation under section 114-5(1) of the GST Act.

Question 4

Summary

The Company does not make a taxable supply under section 9-5 of the GST Act when it sells goods, through the internet to customers located outside Australia.

Detailed reasoning

As discussed in the response to Question 1, for the Company to make a taxable supply of the Goods, the supply must be connected with Australia. Supplies of goods wholly within Australia, supplies of goods from Australia and supplies of goods to Australia can be connected with Australia under section 9-25 of the GST Act. However, the situation you outline where the Company supplies the Goods from a place outside Australia to Customers who are also outside Australia does not meet the requirements of any provision in section 9-25.

Therefore the Company cannot make a taxable supply for these transactions.