Sales Tax Bulletin - No. 37

STB 37

Retailers of personal computer goods and related equipment

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Date of Issue: 13 April 1999

Valid from 13 April 1999

About this bulletin

This bulletin explains how retailers of personal computer goods and related equipment are affected by the changes to the sales tax law effective 1 September 1998. The changes are included in the law as Part 7A of the Sales Tax Assessment Act 1992 (STAA).

The changes are intended to combat sales tax evasion in relation to personal computers and certain related equipment (referred to as Part 7A goods). The changes are significant for the personal computer industry and involve more stringent requirements for buying and selling Part 7A goods free of sales tax.

Retailers previously able to buy or import goods free of sales tax for sale in exempt circumstances, now generally have to pay sales tax when they buy or import Part 7A goods and claim a refund from the Tax Office when those goods are sold in exempt circumstances.

This bulletin is a public ruling for the purposes of section 77 of the STAA and may be relied upon by any person to whom it applies. It replaces any previous private or public rulings if they are inconsistent with the bulletin and is current as at 13 April 1999.

Who are retailers?

Retailers are people who sell to end users. This includes people who sell to end users as part of supply, service or maintenance contracts.

Examples of end users are:

• • a member of the public buying a computer for personal use;

• • a business buying a computer for its own use in its business activities;

• • a hospital buying computers for its own use;

• • a car manufacturer using Part 7A goods as components in the cars it manufactures; and

• • a finance company that leases Part 7A goods to other people.

What are Part 7A goods?

Part 7A goods are goods that, if imported, would be covered by the following descriptions and corresponding customs tariff classifications:

This list has been updated to take into account changes that have occurred since Part 7A was passed by Parliament. There may be further changes. If in doubt please contact the Sales Tax Computer Helpline on 1800 634 905.

Retailers who pay sales tax when they buy or import Part 7A goods

Most retailers pay sales tax when they buy or import goods. This has not changed.

Previously, if you were a retailer who bought Part 7A goods for sale in exempt circumstances, you were able to buy or import those goods free of sales tax using Exemption Declaration form ED3.

You can no longer use Exemption Declaration form ED3 when you buy or import Part 7A goods. You must pay sales tax. You may claim a refund from the Tax Office when you sell those goods in exempt circumstances (see 'Refunds' on page 7).

Retailers who may buy or import Part 7A goods free of sales tax

Retailers who are registered for sales tax

If you are registered for sales tax, you may buy or import goods free of tax where you have grounds for quoting your sales tax registration number and are accredited (see 'Accreditation for retailers' below).

Retailers who lease Part 7A goods

If you lease Part 7A goods in exempt circumstances, you can only buy or import them free of sales tax if you are accredited (see 'Accreditation for retailers' below).

Retailers with section 84 approval

If you sell almost exclusively in exempt circumstances, you may apply to the Tax Office for approval under section 84 of the STAA to buy or import goods free of sales tax. To buy or import Part 7A goods free of sales tax, you must also be accredited (see 'Accreditation for retailers' below).

Retailers with subsection 91F(4) approval

If you sell a very high proportion of Part 7A goods in exempt circumstances, you may apply to the Tax Office for approval under subsection 91F(4) of the STAA to seek accreditation (see 'Accreditation for retailers' below). Approval will only be granted in exceptional circumstances.

If subsection 91F(4) approval is given, you may apply for accreditation. If accreditation is subsequently obtained, you will be able to buy or import Part 7A goods free of sales tax where those goods will be sold to a person who has quoted for them.

Accreditation for retailers

Retailers are accredited as 'dealers'. For information about how to apply for accreditation, see Sales Tax Bulletin Number 38 Dealers in personal computer goods and related equipment, available from the Tax Office.

How do customers buy goods from you free of sales tax?

Customers not registered for sales tax

Persons who are not registered for sales tax but who are entitled to claim sales tax exemption under an Item in Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992, must give you a completed Exemption Declaration form ED2A to buy Part 7A goods free of sales tax. Form ED2A is available from the Tax Office. It may be incorporated into order forms.

Examples of those entitled to claim sales tax exemption under an Item in Schedule 1 are 'always exempt persons' buying goods for their own use, (such as government departments and schools) and other end users who are entitled to claim sales tax exemption because the goods they are buying will be used in a particular way (such as a subcontractor using the goods to carry out part of the manufacturing process for a manufacturer).

Customers who are registered for sales tax

Unless they satisfy the Low Purchase Value Test (LPVT) described below, people who are registered for sales tax must be accredited to buy Part 7A goods free of sales tax (see 'How do accredited people buy Part 7A goods free of sales tax' on page 5).

The low purchase value test

If a person is registered for sales tax and does not intend to sell the goods, they will satisfy the LPVT if they meet the following tests:

• • the sales tax free value of their purchases of Part 7A goods from all sources for the last 12 months, including the current purchase, is less than $6,000 (1st Test); and

• • they have a reasonable expectation that the sales tax free value of their purchases of Part 7A goods from all sources for the next 12 months will be less than $6,000 (2nd Test).

Example

A person is registered for sales tax and does not intend to sell the goods.

On 1 November 1998 they buy some Part 7A goods. Their Part 7A purchases between September 1998 and October 1999 are:

	21 September 1998	$3,000
	1 November 1998	$2,000
	15 October 1999	$3,500 (expected)
1st Test:	Purchases in last 12 months	$3,000
	Current purchase	$2,000
		$5,000
2nd Test:	Expected purchases	$3,500

They satisfy both tests as the current and past purchases are less than $6,000 and the expected purchases are less than $6,000.

Therefore they satisfy the LPVT.

If however, their purchase on 21 September 1998 was $4,500 then:

1st Test:	Purchases in last 12 months	$4,500
	Current purchase	$2,000
		$6,500
2nd Test:	Expected purchases	$3,500

They do not satisfy the first test as their past and current purchases are more than $6,000.

Therefore they do not satisfy the LPVT.

Customers who satisfy the low purchase value test

Customers who satisfy the LPVT test, must give you a signed statement to that effect to buy Part 7A goods free of sales tax. They must use form M52 (available from the Tax Office or at our Internet site, ATOassist). This form includes a quotation of their sales tax registration number, which they still need to give you.

Customers who do not satisfy the low purchase value test

Customers who buy Part 7A goods with a sales tax free value of more than $6,000 in any 12 month period do not satisfy the LPVT. They can only buy Part 7A goods free of sales tax if they are accredited. See 'How do accredited people buy Part 7A goods free of sales tax' on page 5.

Customers who lease Part 7A goods

Customers who lease Part 7A goods for their own use in exempt circumstances, can do so by quoting a sales tax registration number or an exemption declaration. They do not need to be accredited.

Customers, for example a finance company, who buy Part 7A goods to lease in exempt circumstances, must be accredited to buy those goods free of sales tax from you. See 'How do accredited people buy Part 7A goods free of sales tax' below.

Exporting Part 7A goods

If you sell Part 7A goods to a customer who will export them, they must give you a quotation of their sales tax registration number (in which case they must also be accredited), a Statement of Purchaser's Intention to Export Goods or a Quotation of Exemption Declaration as appropriate, to buy those goods free of sales tax. These two forms are available from the Tax Office. If you paid sales tax on those goods, you may claim a refund from the Tax Office.

You must retain sufficient detail to satisfy the Tax Office that the goods have actually been exported. You must have records which show details such as dates, flight numbers, customs broker details, freight forwarder names, customs declarations, detailed descriptions of the goods including serial numbers, original purchase details of the goods and copies of the sales invoices for those goods.

Accreditation

What is accreditation?

Accreditation is the process used to approve people who wish to buy Part 7A goods free of sales tax. Once a person is accredited, they receive an accreditation number.

How do accredited people buy Part 7A goods free of sales tax?

For an accredited person to buy Part 7A goods free of sales tax from you:

• • they must still give you a quotation of their sales tax registration number or an exemption declaration; and

• • they must now also give you their accreditation number; and then

• • you must obtain an authorisation for the transaction from the Tax Office (see 'Authorisation' below).

How do I check if someone is accredited?

You can do this by using the Interactive Voice Response system described on page 6, by using our Internet site, ATOassist, or by contacting the Sales Tax Computer Helpline on 1800 634 905.

Can accreditation be revoked?

Yes, if a person no longer satisfies the requirements for accreditation, their accreditation can be revoked. If this occurs they cannot continue to buy Part 7A goods free of sales tax.

Authorisation

From 1 September 1998, if a person is accredited, a quote to buy Part 7A goods free of sales tax will only be effective if the quote is authorised by the Tax Office.

When you sell to a person who quotes (and gives you their accreditation number), you are responsible for obtaining the authorisation (see 'How to get Authorisations' on page 6).

When you obtain an authorisation, it applies only to transactions between you and that person. It is your responsibility to satisfy yourself about the identity of that person.

When you obtain an authorisation, you should record the authorisation number provided. Without such evidence you may be liable for the sales tax.

Types of authorisation

Authorisations are of two types, transaction authorisations and standing authorisations.

A transaction authorisation covers all quotations for Part 7A goods made by the quoter for seven days, unless otherwise advised by the Tax Office.

A standing authorisation covers all quotes for Part 7A goods for an indefinite period, or as advised by the Tax Office. If you have a standing authorisation in place with a customer and that person's accreditation number is revoked, you will be advised that the standing authorisation is no longer valid.

How to get authorisations

You can obtain standing authorisations using the processes described below or by using a paper form available from the Sales Tax Computer Helpline on 1800 634 905.

1. E-mail and secure electronic authorisations

Transaction and standing authorisations can be obtained by using the electronic forms available at our Internet site, ATOassist, under 'Electronic Registration'. These forms can be transmitted electronically to the Tax Office. You can obtain authorisation for up to 30 customers at a time.

The Tax Office will respond electronically. If approval is given, the customer's preferred trading name (as recorded by the Tax Office) and the authorisation number will be provided.

2. The Interactive Voice Response (IVR) system

The IVR system enables you to obtain authorisations by phoning 13 32 86. You can:

• • obtain an authorisation; and/or

• • check that an accreditation number is valid and be given the name associated with that accreditation number.

The IVR system has prompts at each stage. You will be asked for your accreditation number or phone number. As an unaccredited person you should use your phone number. You will also need your customer's accreditation number and, for a transaction authorisation, you will need the tax free selling price of the goods.

If your request is authorised, the IVR system will provide you with an authorisation number.

3. Internet authorisation

You can obtain transaction authorisations by going to 'Internet Authorisation' at our Internet site, ATOassist. There are lists of the names and accreditation numbers of accredited people and people whose accreditation has been revoked. You can perform a search or download the lists.

If a person's name and accreditation number appear in the accreditation list, quotes by that person are authorised until the 'Effective Until Date' displayed on the screen.

The accreditation list is updated on a weekly basis, usually on Tuesday night, and a new authorisation number applies each week. You will need to check the accreditation list and obtain new authorisations when the authorisation number has expired.

4. Sales Tax Computer Helpline

If the other facilities are unavailable you may contact the Sales Tax Computer Helpline on 1800 634 905 to obtain an authorisation for a particular transaction.

Refunds

If you buy Part 7A goods at a price that includes sales tax and then wish to claim a refund of that tax, you must be covered by a credit ground in the sales tax legislation (but see 'New credit rules' below).

To apply for a refund you will need to complete a form entitled Application for a Refund of Sales Tax for a Retailer, available from the Tax Office.

New credit rules

If you buy Part 7A goods on or after 24 October 1997, at a price that includes sales tax and then claim a refund of that tax, your claim can be denied if the Commissioner of Taxation believes that:

• • sales tax has not been, and is unlikely to be, paid on the goods; and

• • the person liable to pay the tax does not intend to do so; and

• • at the time when you bought the goods, you either were aware, or could reasonably be expected to be aware, that no tax had been, or would be, paid on the goods.

To ensure these rules are not applied to you, you should only deal with reputable suppliers who follow normal business practices. In assessing whether you are buying Part 7A goods from a reputable supplier, some of the factors you should consider are:

• • does the sales tax inclusive price appear genuine?

• • does the supplier insist on a non-traceable method of payment, in particular cash or third party cheque?

• • does the supplier operate from established business premises?

• • does the supplier have telephone and fax numbers, or merely a mobile phone?

• • does the supplier provide proper documentation?

These factors are a guide only. If you have any doubts about the supplier, you should exercise care.

Do you need more information?

If you need more information about Part 7A of the sales tax legislation please contact:

• • our Internet site, ATOassist

• • the Sales Tax Computer Helpline on 1800 634 905.

For general sales tax enquiries, please contact the Tax Office:

• • by phone on our national enquiry number 13 28 66 - you can ring this number from anywhere in Australia for the cost of a local call;

• • in person by visiting the enquiry counter at certain Tax Offices - Tax Office addresses are listed in the TaxPack, and in your White Pages telephone directory;

• • by A Fax from Tax, our 24 hour fax information service - simply call 13 28 60 (local call cost) on your phone or fax and follow the voice prompts; or

• • at our Internet site, ATOassist www.ato.gov.au

ATO references:
NO NAT 2823 4.99