TAXATION RULING NO. ST 2365

ST 2365

SALES TAX : SALE OF AUTOMOTIVE PAINTS AND SUPPLIES TO PANEL BEATERS

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FOI status:

May be releasedFOI number: I 1211292

PREAMBLE

Sub-section 3(4) of Sales Tax Assessment Act (No. 1) deems a person to have sold goods if, in the performance of any contract (not being a contract for the sale of goods) under which he has received or is entitled to receive valuable consideration, he supplies goods the property in which (whether as goods or in some other form) passes, under the terms of the contract to some other person. Sub-section 3(1) of Sales Tax Assessment Act (No. 1) defines a sale of goods by wholesale to include the supply of goods to a person for supply to some other person in the circumstances specified in sub-section 3(4).

2. The scope of sub-section 3(4) is very wide. It deems a sale to take place wherever property in goods passes from one person to another in the performance of a contract under which the former is entitled to receive valuable consideration. A sale is deemed to take place, whether or not the goods lose their identity or their character as goods, during the course of the operations in which the contract is performed.

3. Taxation Ruling No. ST 2165 dealt with the application of sub-section 3(4) to certain service industries. The question has now arisen whether the supply of paint to a panel beater or motor vehicle repairer is within the scope of sub-section 3(4) and is therefore a wholesale sale or whether the paint is applied to the panel beater's own use and is therefore a retail sale.

FACTS

4. Certain taxpayers are engaged in the distribution of materials of the kind used by panel beaters, for example, paints, abrasives, adhesives, tapes, fillers, compounds, polishes and detailing products. They make sales of automotive paints to panel beaters who use them in repainting vehicles for customers in the course of carrying out repairs and also for complete re-sprays. It is claimed that the sales of the paints are retail sales because the materials are consumed during the course of the repairs or the re-sprays and therefore are applied to the repairer's own use rather than sold to the customer.

RULING

5. The essential purpose of the service contract for the repair is to restore the paint condition of the motor vehicle. The attachment of goods such as automotive paints, fillers, etc is part of the contract and the application of the paint and fillers is intended to be permanent. It is considered that the property in the paint passes to the customers. The fact that the paint takes a different form on the vehicle does not prevent a sale of the paint taking place because sub-section 3(4) extends to situations where property in goods passes where the goods take on a different form.

6. Thus, where the repairer, for valuable consideration, repairs the motor vehicle of a customer, and in the course of carrying out those repairs (including complete re-sprays) supplies paints which become part of the motor vehicle, then the paints so supplied are deemed by sub-section 3(4) to be sold by the repairer to the customer.

7. It follows that the sale of the paint by the supplier to the panel beater is a wholesale sale because the goods are deemed by sub-section 3(4) to be on-sold to the customer. Being a wholesale sale, tax is payable on the price charged by the supplier for the paint to the panel beater.

COMMISSIONER OF TAXATION
22 October 1987

References

ATO references:
NO 83/5376-0

Related Rulings/Determinations:

ST 2165

Subject References:
SALE OF GOODS BY WHOLESALE
DEEMED SALES

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