Edited version of your written advice

Authorisation Number: 1012907805747

Date of advice: 9 November 2015

Ruling

Subject: WET - Indirect Marketing Sale

Question 1

Are you making 'indirect marketing sales' of wine in Australia?

Answer

Yes

Question 2

If you are making indirect marketing sales of wine in Australia, are you entitled to calculate the wine equalisation tax (WET) payable on its sales of wine in Australia using the notional wholesale selling price?

Answer

Yes

Question 3

Are you entitled to quote its ABN to the Department of Immigration and Border Protection (Customs) for wine imported into Australia?

Answer

Yes

The scheme commences on:

On or after 1 July 2015

Relevant facts and circumstances

• You are registered for goods and services tax (GST), wine equalisation tax (WET) and deferred GST (DGST).

• You, account on a cash basis and report on a monthly basis.

• You and xxx have entered into a written agreement appointing xxx as your exclusive distribution and marketing agent.

• xxx arranges the export of wine on your behalf to Australia. You retain ownership of the wine when it is exported.

• xxx maintains a warehouse which is used to store wine.

• Customers are provided details of the wine available at the warehouse including brochures and order forms.

• xxx markets your wines through various means including:

• A website that contains an order form for the wines; and

• Wineries from which you purchase wine also have order forms available to customers.

• If a prospective customer wishes to enquire about the wines on offer and the prices of the wines, they can obtain details from various wineries.

• Regardless of who provides them with this information, all orders are sent to xxx.

• You do not have any role in approving and processing orders.

• You instruct xxx about which wines are available for sale and the price that is to be charged for those sales.

• xxx has no role in determining the prices charged for the wines on offer.

• Once an order is received by xxx and processed, a confirmation of the order details is supplied to the customer by email (or mail).

• Once the range of wines and the prices to be charged have been communicated to xxx by you, you do not have any role in agreeing to accept orders or the fulfilment of those orders.

• xxx arranges the collection, collation and export of all orders of wine.

• xxx bears no commercial risk in relation to the wine and does not have title to the wine at any time.

• Customers are aware that xxx has entered into these transactions on your behalf as all order forms and brochures indicate that fact.

• xxx is remunerated for these services by way of commission.

• xxx will from time to time conduct a marketing strategy to further the extent of orders.

• Weekly meetings are scheduled between you and xxx primarily to discuss and decide which wines you should purchase and market to your customers.

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

• The sale of wine in Australia will mainly be retail sales to end consumers.

Relevant legislative provisions

A New Tax System (Wine Equalisation Tax) Act 1999

Section 5-5

Subsection 5-5(3)

Section 20

Subsection 9-25(2)

Subsection 9-25(3)

Subsection 9-35(1)

Section 13-5

Section 33-1

Division 7

A New Tax System (Goods and Services Tax) Act 1999

Division 165

Question 1

Summary

The sales of wine imported from overseas for sale by you to end consumers in Australia are 'indirect marketing sales'.

Detailed reasoning

The general law meaning of the term 'agent' is a person who is authorised by a 'principal' to act for that principal so as to create or affect legal relations between the principal and third parties. The principal is bound by the acts of the agent as a result of the authority given to the agent. Generally, what a person may do himself or herself, the person may do by an agent.

Our view of principal/agent relationships is outlined in Goods and Services Tax Ruling GSTR 2000/37 'Goods and services tax: agency relationships and the application of law' (GSTR 2000/37).

Paragraph 28 of GSTR 2000/37 provides a number of factors that may indicate the existence of an agency relationship, although no single factor in itself is determinative. These include:

• any description of you as an agent, having authority to act for another party, in an agreement (expressed or implied) between you and the other party;

• any exercise of the authority that you are given to enter into legal relations with a third party;

• whether you bear any significant commercial risk;

• whether you act in your own name;

• whether you are renumerated for your services by way of commissions and whether you are entitled to keep any part of your remuneration secret from another party; and

• whether you decide the price of things that you might sell to third parties.

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.

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.

• '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 of WETR 2009/1 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.

Section 33-1 of the WET Act provides that a 'retail sale' means any sale that is not a 'wholesale sale' and further provides that a 'wholesale sale' is a sale to an entity that purchases for the purpose of resale.

As the imported wine is generally not being sold by you for the purpose of resale when you make a sale to an end consumer in Australia, you are making retail sales of the wine.

You are not the manufacturer of the wine.

Based on the above facts, this is considered that you satisfy all the requirements of section 5-20 of the WET Act and therefore, the arrangement described above is considered an indirect marketing sale arrangement.

We conclude that xxx does perform the role of an 'agent' by entering into sale agreements on your behalf. We also believe that after reviewing all the information presented, and based on the principles set out in GSTR 2000/37.

Question 2

Summary

You are entitled to calculate the WET payable on indirect marketing sales of wine to end consumers in Australia using the notional wholesale selling price.

Detailed reasoning

The assessable dealings table in section 5-5 of the WET Act sets out the 'normal taxable value' for each assessable dealing with wine. The amount of WET payable on a dealing is calculated by multiplying the 'taxable value' of the dealing by 29%.

Assessable dealing AD12d in the assessable dealings table in section 5-5 refers to imported wine sold by indirect marketing sale. The seller's WET liability arises at the time of the sale and 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. Subsection 9-25(3) goes on to provide that you can only use the average wholesale selling price method in specific circumstances and only in relation to grape wine.

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 9-35(1) describes how to calculate your WET liability using the half retail price method. It 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. Subsection 5-5(3) goes on to explain 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 be 29% of 50% of the price of the sale of the wine in Australia.

Question 3

Summary

You are entitled to quote your ABN to Customs.

Detailed reasoning

Quoting is a mechanism to relieve or defer wine tax on wine to a later assessable dealing or to give effect to exemption from wine tax for a particular supply of wine.

If a quote is made by an entity in respect of an assessable dealing with wine, then that dealing is exempt from wine tax. A quote must be made at or before the time of the dealing to which the quote relates. For a local entry of imported wine, the quote must be made to Customs at or before the time of importation.

The only form of quotation is the quotation by an entity registered for GST of their ABN. Although quoting an ABN enables wine to be supplied without wine tax being payable, the supply may still be subject to GST.

Grounds for quoting

Section 13-5 of the WET Act provides four standard grounds for quoting an ABN.

There is a quoting ground if, at the time of quoting, the quoter intends to (emphasis added):

• sell the wine by wholesale or indirect marketing sale while the wine is in Australia;

• sell the wine by any kind of sale while it is in Australia and the quoter is, at the time of quoting, mainly a wholesaler;

• use the wine as a material in manufacture or other treatment or processing, whether or not it relates to or results in other wine; or

• make a supply of wine that will be GST-free.

Under paragraph 13-5(1)(a) of the WET Act, 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.

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