TAXATION RULING NO. ST 2039

ST 2039

SALES TAX : CREDITS OF TAX INCLUDED IN VOLUME REBATES, INCENTIVE REBATES, PROMOTIONAL REBATES AND DEFERRED CREDITS

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FOI status:

FACTS

Rebates, known variously as volume rebates, promotional rebates and deferred credits are commonly offered by manufacturers and wholesale merchants to their retail customers as incentives to the retailers to increase the volume of their purchases from the taxpayers. The rebates are allowed periodically either by payment by cheque or by issuing a credit note. They are generally calculated on the basis of either the volume or the value of sales made to each retailer in a prescribed period. Availability of the rebate is often circularised to retail customers or negotiated with them at the time purchases are made. However, in some cases allowances are not attributable to the achievement of specific purchase levels but are related to some other factor e.g. advertising expenses or display costs. The rebates allowed to a retailer may either be calculated on the total invoice price of the sale i.e. tax inclusive, or may be calculated on net invoice value of the goods excluding sales tax i.e. tax exclusive.

RULING

2. Where volume rebates, incentive rebates, promotional rebates or deferred credits are allowed by a manufacturer or wholesale merchant to a retailer in accordance with terms or conditions - express or implied - of sales of goods in respect of which sales tax is payable, the rebates or credits effect a reduction in the sale value of the goods with a consequent reduction in the amount of sales tax payable. While this is equally true whether the rebate is calculated on a tax inclusive basis or a tax exclusive basis, a reduction in sale value only occurs where the rebate is attributable to the volume or value of the sales made to the retailer concerned. Allowances given for advertising expenses, etc. are not accepted as reducing the sale value of goods.

3. Manufacturers and wholesale merchants who provide volume rebates, etc. are entitled to claim in their sales tax returns credits in respect of the tax content of rebates payable on sales of taxable goods.

4. Because the retailer receives the benefit of the reduction in the amount of sales tax payable where volume rebates, etc. are allowed, it would normally be accepted, for the purposes of section 26(1) of Sales Tax Assessment Act (No.1) or the corresponding provisions of the other Assessment Acts, that the tax in question has been passed on by the taxpayer to the retailer.

COMMISSIONER OF TAXATION
15 July 1983

References

ATO references:
NO ST 19/D3

Date of effect:
Immediate

Subject References:
VOLUME REBATES
INCENTIVE REBATES
PROMOTIONAL REBATES
DEFERRED CREDITS

Legislative References:
SALES TAX ASSESSMENT ACT (NO.1), S26(1)