TAXATION RULING NO. ST 2030

ST 2030

RETREADED TYRES

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FOI status:

May be releasedFOI number: I 1104373

PREAMBLE

Taxation Ruling ST 2026 stated that the processes involved in retreading tyres constitute manufacture for sales tax purposes. The question of where the liability to pay sales tax on retreaded tyres lies in a variety of situations has now been examined. Factual situations which may arise and illustrate the operation of the law are as follows:

FACTS

(1) Service station supplies worn casings, the property of the service station, to a retreader for retreading and return for sale by the service station to its customers in general.

RULING

(a)

Subject to (b) the retreader is the manufacturer of the retreaded tyres even though some of the materials out of which the retreaded tyres are manufactured (the worn casings) are not owned by him;

(b)

the retreaded tyres are for sale by the service station and have been manufactured in part out of materials supplied by it to the retreader - the service station is deemed by the definition of "manufacturer" (s.3(1) Sales Tax Assessment Act (No.1)) to be the manufacturer and the retreader is deemed not to be the manufacturer but is by definition a "wholesale merchant";

(c)

paragraph (f) of the definition of "sale of goods by wholesale" specifically excludes the sale between the retreader and the service station;

(d)

the retreader is therefore a wholesale merchant selling retreaded tyres by retail;

(e)

the service station is a deemed manufacturer who sells the retreaded tyres by retail - thus there are two retail sales in the chain of transactions;

(f)

the retreader is liable for tax by virtue of sections 3 and 5 of Sales Tax Assessment Act (No.3) and the sale value is fixed under section 4(2)(e) as the amount charged by the retreader;

(g)

the service station sells the tyres by retail and is liable for tax by virtue of sections 17(1) and 19 of Sales Tax Assessment Act (No.1) and the sale value will be determined under section 18(1)(b);

(h)

as the retreaded tyres are for sale by retail the service station is not permitted to quote its certificate under regulation 12;

(i)

double taxation is avoided by the operation of regulation 49(2); and

(j)

as no tax is thereby payable by the service station registration can be dispensed with under section 11(3A) if it has no other liability.

FACTS

(2) The owner of the worn casing supplies it to the retreader for retreading and return to the owner for his own use.

RULING

(a)

the retreader is the manufacturer of the retreaded tyre;

(b)

the retreader is deemed by virtue of section 17A of Sales Tax Assessment Act (No.1) to have sold the retreaded tyre to the customer at the time it is delivered to the customer; and

(c)

the retreader is liable for tax under sections 17(1) and 19 of Sales Tax Assessment Act (No.1) and tax is payable on the sale value fixed by section 18(1B)(b) which is the amount charged by the retreader in respect of the retreading of the customer's case.

FACTS

(3) As in (2) but with a service station interposed between the owner of the casing and the retreader.

RULING

(a)

subject to (c) the retreader is the manufacturer of the retreaded tyres even though some of the materials out of which the retreaded tyres are manufactured (the worn casings) are not owned by him;

(b)

the retreaded tyres are not for sale by the service station but are deemed to have been sold by it to its customer by section 17A(1) of Sales Tax Assessment Act (No.1) because of the operation of sub-section (2) of that section;

(c)

the service station is deemed to have sold the retreaded tyres to its customer - it is the manufacturer of the retreaded tyre and the retreader is by definition a wholesale merchant;

(d)

section 17A deems a sale from the service station to the customer - the sale from the retreader to the service station would be a sale of goods by wholesale except for excluding paragraph (f) in the definition of "sale of goods by wholesale";

(e)

the retreader therefore makes the sale to the service station by retail and is liable for tax on the sale under sections 3 and 5 of Sales Tax Assessment Act (No.3);

(f)

the sale value is fixed by section 4(2)(e) as the amount charged by the retreader to the service station;

(g)

the service station is liable for tax by virtue of sections 17(1) and 19 of Sales Tax Assessment Act (No.1) and the sale value is determined by section 18(1B)(b) as the amount charged to the customer by the service station;

(h)

the service station is not permitted to quote its certificate;

(i)

double taxation is avoided by the operation of regulation 49(2); and

(j)

as no tax is therefore payable by the service station registration can be dispensed with under section 11(3A) if it has no other liability.

FACTS

(4) A retreader retreads cases owned by him and supplies the retreaded tyres to retailers or users.

RULING

the retreader is a manufacturer selling retreaded tyres by wholesale and/or retail and the normal provisions of the law apply. The sale value in these circumstances is determined by section 18(1) of Sales Tax Assessment Act (No.1). Where a retreader gives a credit for worn casings supplied by the retailer or user, the sale value is not reduced by the amount of any credit.

Taxation Ruling ST 2026 is effective on and after 1 June 1983. Sales tax on retreaded tyres on hand at 31 May 1983 incorporating cases previously used in Australia will be payable on the basis existing prior to 1 June 1983, i.e. on the value of retreaded rubber, etc. used in the retreading process.

COMMISSIONER OF TAXATION
3 June 1983

References

ATO references:
NO ST 23/1 P2 F123

Date of effect:
01.06.83

Related Rulings/Determinations:

ST 2107
ST 2026

Subject References:
RETREADED TYRES
TYRES - RETREADS
MANUFACTURE

Legislative References:
SALES TAX ASSESSMENT ACT (NO.1) S 3
SALES TAX ASSESSMENT ACT (NO.1) S 17
SALES TAX ASSESSMENT ACT (NO.1) S 17A
SALES TAX ASSESSMENT ACT (NO.1) S 18
SALES TAX ASSESSMENT ACT (NO.3) S3
SALES TAX ASSESSMENT ACT (NO.3) S 4
SALES TAX ASSESSMENT ACT (NO.3) S 5
SALES TAX REGULATIONS - REG.12
SALES TAX PROCEDURE ACT S 12