TAXATION RULING NO. ST 2331

ST 2331

SALES TAX : TROPHY ASSEMBLY

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FOI status:

May be releasedFOI number: I 1210726

PREAMBLE

The purpose of this Ruling is to explain the sales tax liability of retailers in the assembly of trophies.

2. The basic question at issue is whether the assembly of trophies constitutes manufacture for the purposes of the sales tax law. If it does, there is a requirement upon the retailers involved to become registered persons and account for sales tax on the sale value of trophies.

3. The definition of the term "manufacture" in sub-section 3(1) of Sales Tax Assessment Act (No. 1) embraces not only the ordinary understanding of the term but also includes the combination of parts or ingredients whereby an article or substance is formed that is commercially distinct from those parts or ingredients, except such combination that is customarily undertaken by users of the articles formed from the combination of the ingredients. The effect of the exception is that, if assembly is customarily undertaken by the user, it will not be manufacture.

FACTS

4. Trophies come in a number of forms. Some are complete in themselves, e.g. cups, goblets. There are others, however which consist of a number of components, e.g. a wood or marble base, medallions, figurines etc. The components of trophies in this latter category are often sold separately for ease of packing and to prevent damage which can easily occur to figurines etc. ordinarily attached to trophies. Whether they are sold in an assembled state or in their separate components they always retain their identity as trophies.

5. The work involved in assembling trophies can vary but in each case it is a simple process. It takes little time. Examples of the activities involved in the assembly of trophies include -

(a)

Pressing of a medallion into a plastic surround by finger pressure.

(b)

The screwing together by means of a central screwed rod, of a base and figurines and perhaps the adding of a stick on plaque.

(c)

The making up of a trophy by selection of various parts including figurines, plastic columns, centre shafts and a pedestal.

6. Trophies are not always assembled by retailers. Assembly may be completed by the final purchaser. When trophies need to be posted, for example, they may be packed in an unassembled state to facilitate handling. Trophies purchased by clubs are often assembled by the clubs, particularly where they are purchased in large numbers and, for ease of handling, have been supplied in component parts.

RULING

7. The assembly of trophies is not manufacture within the normal meaning of the term or within the expanded definition in sub-section 3(1) of Sales Tax Assessment Act (No. 1). It does not bring into existence an article or substance which is commercially distinct from the component parts. Even if it can be said to bring into existence a commercially distinct article the article results from a combination that is customarily undertaken by the final user.

8. Retailers engaged in the assembly of trophies are not required to be registered for sales tax on account of that activity. Generally component parts of trophies are taxable at the rate of 20%. Retailers will satisfy their sales tax liability by payment of tax to suppliers of trophies and trophy components at time of purchase.

COMMISSIONER OF TAXATION
9 April 1987

References

ATO references:
NO 86/7492-2
BO Hobart : S/CW/ST17/17 Melb : 6/B/SC24/151 Sydney : 22/B/D.6/49

Date of effect:
Immediate

Subject References:
TROPHY ASSEMBLY

Legislative References:
SALES TAX ASSESSMENT ACT (No. 1), SECTION 3.