Edited version of private advice

Authorisation Number: 1051738004284

Date of advice: 9 September 2020

Ruling

Subject: GST and consignment sales

Question

Are you acting as agent when you sell goods on behalf of your members that are held on consignment?

Answer

Yes, you are acting as agent where you have an agreement that specifies you agree to sell the goods on behalf of the member. Therefore, you are not liable for GST payable on supplies you make in your capacity as agent for them. However, you will need to pay GST for the commission that you receive.

This ruling applies for the following period:

1 November 20xx to 30 June 20xx

The scheme commences on:

1 November 20xx

Relevant facts and circumstances

You have been registered for GST since 1 November 2017.

It is a community run group selling locally made goods.

Consignors who are also members sell their items at your facility must fill in a membership form.

The Contract Terms for members mentioned in the terms are as follows:

The Commission rate is as listed:

·         4 sessions per month: 3%

·         3 sessions per month: 5%

·         2 sessions per month: 10%

·         1 session per month: 20%

·         No sessions per month: 30%

-        Any goods which are not sold and not collected after a stocktake will be donated to local charities.

-        You will not be responsible for theft or damage. All goods are put at member's risk.

Your representative advised us of the following:

·         Currently your consignment sales are treated as "Sale or Return" however they believe that you meet all the requirement for "Agency Sales".

·         Of approximately x consignors, only about x would have an ABN and most likely not be registered for GST.

·         The consignors are mostly classed as hobbyists due to the low amount of income that they earn from selling products at your site.

·         Perishables that go out of date or products that are classed as 'rejected' are removed from the shelves and the Consignor is advised to collect the products to dispose of them. You do not pay for any of these items.

·         When a sale is made by you on behalf of the Consignor the EFT receipt and/or hand written receipt is in your name along with your ABN declared on the receipt.

Reasons for Decision

These reasons for decision accompany the Notice of private ruling for xx

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Summary

Subsection 7-1(1) provides that GST is payable on taxable supplies. Under section 9-5 one of the requirements for making a taxable supply is that you make a supply for consideration.

Under section 9-10 a supply is not just a supply of goods or services. Supplies can also be made in relation to rights, obligations and information for GST purposes. Under section 9-15 the term 'consideration' is broadly defined as including any payment, or any act or forbearance, 'in connection with', 'in response to' or 'for the inducement' of a supply.

Therefore, to determine if you have made a taxable supply for which you received the payment, it is first necessary to consider whether you have made a supply for consideration.

Agency relationship

In examining if you are acting in a capacity as an agent and supply anything for GST purposes, Goods and Services Tax Ruling GSTR 2000/37 provides guidance in relation to agency relationships. GSTR 2000/37 explains the general law and what is meant by agency relationships and states at paragraphs 10 to 11:

10. An entity may be authorised by another party to do something on that party's behalf. Generally, the authorised entity 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.

In your circumstances, when considering the Contract Terms, it is the Commissioners' view that there is an agency relationship between you and the consignors. As such, you will not be liable to pay GST on the sale. However, you must pay GST on the commission you receive.

Furthermore, in accordance with Section 29-10, the GST credits are attributable to the tax period in which the payment was made, or later tax periods, subject to the four-year time limit under section 93-5 of the GST Act. Therefore, you will only be able to amend your Business Activity Statements subject to the four-year time limit.