TAXATION RULING NO. ST 2332

ST 2332

SALES TAX : ELECTRONICALLY OPERATED SWITCHES,CONTROL UNITS, THERMOSTATS, SENSORS AND DETECTORS.

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FOI status:

May be releasedFOI number: I 1210747

PREAMBLE

Sub-item 90C(1) in the First Schedule to the Sales Tax (Exemptions and Classifications) Act provides exemption from sales tax for electrical fittings and accessories (including electronically operated electrical fittings and accessories) and electrical materials, being goods of a kind used exclusively or primarily and principally as part of fixed electrical installations in consumers' premises.

2. Certain goods are excluded from exemption by paragraphs (a) to (j) of sub-item 90C(1). They include electronic equipment not in the nature of electrical fittings and accessories, goods which consume power, i.e. they rely on electricity to operate and fittings and accessories for those goods.

3. In the result exemption under sub-item 90C(1) may be said to apply to fittings and accessories primarily concerned with the supply or regulation of the flow of electricity to consumers, e.g. wiring, switches and sockets.

4. Prior to 24 August 1983 technological development in the use of electronic components in electrical fittings had created an anomaly whereby electrical fittings incorporated into fixed electrical installations in consumers' premises, e.g. a mechanically operated time switch, were exempt under sub-item 90C(1) while fittings performing the same function but electronically operated e.g. an electronically operated time switch, were excluded from exemption. Sub-item 90C(1) was amended in August 1983 to provide exemption for electronically operated electrical fittings and accessories that are of a kind used exclusively or primarily and principally as part of fixed electrical installations in consumers' premises. Electronic equipment not in the nature of electrical fittings and accessories remains taxable.

5. This office has recently been asked to consider the operation of sub-item 90C(1) in relation to a number of control systems. The systems contain a number of components including electronically operated electrical fittings and accessories. In each case it is necessary to look at the components of the system separately for the purpose of their sales tax classification.

Lighting Control System

6. The lighting control system considered for classification consists of two components - an infra-red sensor and a control unit. The system is mounted into the ceiling of a room and wired into the electrical system. As an individual enters the room the sensor detects the change in heat radiated and automatically activates the lighting. While the occupant remains in the room his body heat and movements are detected by the sensor thus maintaining "light on". Approximately 12 minutes after the occupant leaves the room the control unit turns the lights off. The time-delay feature prevents lights from switching off when the occupant leaves momentarily or remains motionless for short periods.

7. The sensor assembly consists of a polystrene cylinder that houses the infra-red sensor, a low voltage electronic control and an optical filter. The control unit is contained in a metal box and comprises a light-power switch relay, a low voltage electronic unregulated power supply and a multi-tap transformer.

Ruling

8. The lighting control system is primarily a switch. It is permanently wired into fixed electrical installations and replaces the normal wall switch. The lighting control system is considered to be an electronically operated electrical fitting and is exempt under sub-item 90C(1).

Automatic Exhaust System

9. This system consists principally of a switching box which controls the flow of power to an exhaust fan located in the ceiling of the bathroom or toilet. The switching box contains a transformer, diodes and a switch relay and is connected to a gravity mercury switch attached to the float arm of a toilet cistern by a length of bell wire. When the cistern is flushed and the float arm depressed the gravity mercury switch completes the circuit which allows the current to flow back to the switching box which in turn activates the exhaust fan. When the float arm returns to the horizontal position, the circuits are broken and the fan is turned off.

Ruling

10. The switching box of the automatic exhaust system is wired into the fixed electrical installation. It is an electronically operated electrical fitting and is exempt under sub-item 90C(1). The gravity mercury switch and the bell wire although connected to the fixed wiring are not part of the fixed electrical installation. They are not covered by sub-item 90C(1) and are taxable at the rate of 20%.

Temperature Control Equipment

11. Temperature control equipment considered is of the kind used in conjunction with air conditioning, heating and cooling systems. It consists of the following elements:-

a) Room Thermostat

12. Room thermostats are designed to control the temperature in a specified area. They are mounted on the wall of a room and wired to heating or cooling units. The thermostats contain switches which may be used to control the heating or cooling system manually and an adjustable setting knob containing a temperature scale which may be set to automatically control the system. An inbuilt sensor detects temperature changes in a room and when the temperature rises or falls to that which has been fixed on the scale, the system is automatically switched on and off.

Ruling

13. The basic function of a thermostat is that of a switch. For example, with a thermostatically controlled heater, the thermostat switches off the heater when the desired temperature is reached and switches it back on when the temperature drops. Where thermostats are wired into the fixed electrical installations and control the supply of electricity to appliances which are part of the electrical installation, the thermostats qualify for exemption under sub-item 90C(1). The room thermostat is a mechanical type switch and is exempt under sub-item 90C(1).

b) Air Temperature Detectors or Sensors

14. A sensor or a detector is a device that detects a change in the temperature in a specified area and relays that change by means of a signal to a controller which provides temperature control of heating and air conditioning plant. The detectors or sensors may be mounted on the wall in a room or in an air conditioning duct and are wired to controllers which are located in switchboards. The detectors have an adjustable temperature control setting and when the temperature rises or falls below that which has been set, the sensor detects the temperature change and relays a signal to the controller. The controller in turn switches the heating or air conditioning plan on and off as required.

Ruling

15. Detectors or sensors do not perform the function of switches. Rather they send signals to controllers which perform a switching operation. The detectors or sensors are not covered by sub-item 90C(1) and are taxable at the rate of 20%.

c) Electronic Thermostat and Sensors

16. This equipment is similar to that mentioned in paragraph (a) but, instead of a thermostat with an inbuilt sensor, in this case the sensor is remote from the thermostat. The sensor can be mounted up to 100 metres from the thermostat. Used in conjunction with a remote sensor, the electronic thermostat can be used to accurately control space temperature for heating or cooling purposes. The equipment controls the heating or cooling systems in a similar manner to that mentioned in paragraphs (a) and (b).

Ruling

17. The electronic thermostat and the sensor are separate items of equipment and fall for classification separately. While the electronic thermostat is more sophisticated than the thermostat mentioned in paragraph (a) it still performs the function of a switch. The electronic thermostat is exempt under sub-item 90C(1). The sensor operates in a similar fashion to that detailed in ruling (b) above and is taxable at the rate of 20%.

d) Zone Control System

18. The zone control is a system that has been specifically designed to provide temperature control in individual zones within buildings such as offices and hotels. Various components used in conjunction with variable air volume systems, induction units or fan coil units provide the temperature control required. A typical system comprises temperature detectors and controllers, selector units, two-step auxiliary units, override modules, control valve actuators, control valves, damper actuators and air pressure detectors. Changes in temperature within a room are detected by a temperature detector and passed on to a temperature controller. The temperature controller sends a signal to the signal selector unit which in turn activates the control valve actuator. In some cases a two-step auxiliary unit or override module is used instead of a signal selector unit. Their function is to accept signals from the temperature controller which are used to operate the actuator. The control valve actuator operates the control valves which regulate the flow of hot or chilled water to air heaters and coolers in fan coil units, induction units, etc. to control room temperature. The air pressure detector controls the air pressure in ventilating and air conditioning systems and the damper actuator is used to regulate dampers in the ductwork of variable air volume systems to vary the amount of air coming into the room or divert air from one room to another.

Ruling

19. The temperature detector and controller, signal selector unit, two-step auxiliary unit, override module and pressure controller are concerned with the regulation of other equipment by what is essentially a switching function. They are more sophisticated than the switches considered in sub-paragraphs (a) and (c) but basically perform the same function. They are exempt under sub-item 90C(1). The control valve actuator, control valves, damper actuator and air pressure detector are components for air conditioning systems and are taxable at the rate of 20%.

e) KEYBOARD

20. This unit consists of a main controller which is micro processor based and a number of modules which are located in the switchboard. It is designed for the control of heating, ventilation and air conditioning in large buildings. Sensors throughout the building provide information to the main controller which in turn send signals to modules which open and close the heating or cooling valves.

Ruling

21. The Keyboard is a micro computer which is programmable. It is electronic equipment and excluded from exemption under sub-item 90C(1) by paragraph (a). It is taxable at the rate of 20%. Sensors connected to the keyboard are also taxable at 20%.

f) Building Management System

22. The system consists of a number of outstations which monitor and control a wide range of functions including the air conditioning and ventilation of buildings and the lighting, lifts, fire alarms, security etc. Each outstation contains a micro computer which monitors its designated functions. The outstations are connected to a central computer which monitors the overall system. Detectors throughout the building provide information to the outstation which sends signals to the actuators and control valves which regulate the temperature in the building.

Ruling

23. The central computer system is taxable at the rate of 20%. The outstation is regarded as electronic equipment and is excluded from exemption under sub-item 90C(1) by paragraph (a). It is taxable at the rate of 20%. So also are the detectors, actuators and valves.

g) Micro Processor Optimiser

24. This is a computerised air conditioning control system. It is programmable and is used to switch power on and off to its associated heating or air conditioning plant or system as the temperature conditions require.

25. The microprocessor optimiser is considered to be electronic equipment and is excluded from exemption under sub-item 90C(1) by paragraph (a). It is taxable at the rate of 20%.

COMMISSIONER OF TAXATION
16 April 1987

References

ATO references:
NO 86/3991-4
BO Parra - X-1/90C/1

Date original memo issued:
15 August 1986

Subject References:
ELECTRONICALLY OPERATED ELECTRICAL FITTINGS AND ACCESSORIES

Legislative References:
SALES TAX (EXEMPTIONS AND CLASSIFICATIONS) ACT; ITEM 90C, FIRST SCHEDULE.