Sales Tax Determination

STD 1999/3

Glass Products

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FOI status:

May be releasedFOI number: I 1015668

Background

There has been confusion expressed within the glass industry in respect of the classification of glass products. Representatives of the glass industry, on behalf of their members, have sought clarification of this issue.

Discussions with industry representatives indicate that various processes are applied to glass. At one level, glass is cut to size with little, if any, further work being applied. At the highest level, glass is highly processed, often for a particular use or application.

This Determination discusses the classification for sales tax purposes of glass (including silvered glass) and goods made from glass.

Issues

1. Does the application of a process (for example, cutting and arrising, bevelling, toughening,^[F1] laminating,^[F2] mitring, wiping, polishing, flat grinding or diamond edging ^[F3]) to a sheet of glass, or silvered glass result in the manufacture of assessable goods?

2. What is the classification of glass goods for sales tax purposes?

Decision

1. Where the application of a process to a sheet of glass results in glass goods, which can be clearly identified as specific products in their own right, this process constitutes the manufacture of assessable goods. For example: table tops, mirrors, motor vehicle glass and shelves.

2. The classification of glass goods for sales tax purposes is determined according to the identity of the goods at the time of the assessable dealing.

Glass that is exempt from sales tax

If, at the time of the assessable dealing, the nature of the glass cannot be clearly and objectively determined by reference to such things as its shape, size and edge work as a specific product made out of glass, then it is exempt from sales tax under paragraph (k) of subitem 39(1) in Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992 (ST(E&C) Act).

Glass doors (including mirror doors) of a kind ordinarily used as raw materials in the construction or repair of buildings, fixtures, structures or other works that are attached to land, are exempt from sales tax under paragraph (n) of subitem 39(1) in Schedule 1.

Mirror tiles of a kind ordinarily used as raw materials in the construction or repair of buildings, fixtures, structures or other works that are attached to land, are exempt from sales tax under paragraph (a) of subitem 39(1) in Schedule 1.

Glass that is taxable

If, at the time of the assessable dealing, the nature of the glass product can clearly and objectively be determined by reference to such things as its size, shape and edge work as a product made out of glass, then the product is classified according to what it is identified as being. For example:

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a glass table top for household furniture is covered by subitem 1(2) in Schedule 2 to the ST(E&C) Act. It is taxable at the Schedule 2 rate, currently 12%.

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a glass door for a household cabinet is covered by subitem 1(2) in Schedule 2 and is taxable at the Schedule 2 rate, currently 12%;

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framed and mounted mirrors are covered by subitem 1(1) in Schedule 2 and are taxable at the Schedule 2 rate, currently 12%; and

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motor vehicle glass is covered by Item 1 in Schedule 4 and is taxable at the Schedule 4 rate, currently 22%.

Date of effect

This Determination confirms previous advice and is effective immediately. It replaces Sales Tax Ruling ST 2412 from the date of effect of this Determination.

Reasons

We have based our decision on the following legislative provisions:

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Section 5 of the Sales Tax Assessment Act 1992;

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Subitems 39(1)(a), 39(1)(k) and 39(1)(n) in Schedule 1 to the Sales Tax (Exemptions and Classification) Act 1992;

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Subitems 1(1) and 1(2) in Schedule 2 and Item 1 in Schedule 4 to the Sales Tax (Exemptions and Classification) Act 1992.

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and case law:

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McNicol v. Pinch [1906] 2 KB 352;

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FC of T v. Jax Tyres Pty Ltd 85 ATC 4001; (1985) 16 ATR 97

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Re Searls Ltd (1932) 2 ATD 129;

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DFC of T v. Stronach (1936) 55 CLR 305.

1. Manufacture of assessable goods

The definition of manufacture in section 5 of the Sales Tax Assessment Act 1992 (STAA) incorporates the ordinary meaning of manufacture and is extended to include, among other things, production.

In the case of McNicol v. Pinch, Darling J stated at 361:

The essence of making or of manufacturing is that what is made is a different thing from that out of which it is made.

The observation of Darling J was quoted and enlarged by Lockhart J in FC of T v. Jax Tyres Pty Ltd where his Honour stated at ATC 4004; ATR 101:

To manufacture an article necessarily involves producing a different article from the articles, materials or ingredients from which it was made.

In Re Searls Ltd it was suggested that the bringing into existence of a 'new saleable article' is manufacture. However, the requirement to be a new saleable article is merely one of the many factors that may be considered in arriving at a conclusion on whether or not manufacture is involved.

In DFC of T v. Stronach, the process of cutting a stone building block into the size and shape in which it was intended to be used was considered to be manufacture. Dixon J commented at 312 that the stone was:

subject to a process or treatment resulting in an alteration of its form or condition.

The stone was cut, chiselled and planed into blocks of a specific size and shape for use in a particular building.

Where a larger sheet of glass is simply cut to a smaller, more manageable size for transportation, storage or handling purposes, manufacture has not taken place. Similarly, where a sheet of glass has been cut to size and the sides have been arrised simply for handling purposes, that is, it has not been processed for a specific application, manufacture has not taken place.

Where a sheet of glass is cut to size and is subject to further processing for a particular identifiable use or application, for example, a coffee table or boardroom door, then manufacture has occurred and the resultant product now has a specific use or application which is different from that of a sheet of glass.

2. Classification of glass products

Taxation Ruling SST 11 Sales tax: a guide to the classification of goods under the sales tax law states that classifying goods means determining which of the Items in the ST(E&C) Act applies to the goods. This then determines the rate of sales tax (if any) that applies to the goods.

The first step to classifying goods for sales tax purposes is to identify the goods in an objective way. Objective identification means the goods should be identified as a matter of fact, guided by popular usage and common knowledge. The actual intentions of the manufacturer, or the particular description given to the goods by the manufacturer or others, are not necessarily conclusive.^[F4]

There are various processes that are applied to glass depending on its intended use. Glass can be cut, arrised, bevelled, toughened, laminated, mitred, wiped, polished, flat ground or diamond edged.^[F5]

When looking at the classification of glass products, it is not how the glass has been processed, but what it has been processed for, that is important.

Glass that is exempt from sales tax

Paragraph (k) of subitem 39(1) in Schedule 1 to the ST(E&C) Act exempts glass^[F6] if it is of a kind ordinarily used as raw materials in the construction or repair of buildings, fixtures, structures or other works that are attached to land. This exemption may apply even if the goods are used in more than one way. The important question is not whether the particular glass goods are used in the way specified in the Item, but whether these goods belong to a class or genus of goods that is commonly used in that way.^[F7]

Glass covered by paragraph 39(1)(k) may have been cut to size and arrised, but as long as it cannot be objectively identified as a particular product in its own right at the time of the assessable dealing, it is exempt from sales tax.

Paragraph (n) of subitem 39(1) in Schedule 1 to the ST(E&C) Act exempts doors and door frames if they are of a kind ordinarily used as raw materials in the construction or repair of buildings, fixtures, structures or other works that are attached to land. Glass for use as a door will usually have been toughened and laminated. Where glass is to be toughened, all other processes to be applied, for example, polishing of the edge, drilling of holes and/or notching, need to be undertaken before the toughening process. Glass to be toughened must be arrised, otherwise it will crack during the toughening process.

Glass for certain purposes, for example boardroom doors, once it exceeds certain thicknesses, may not need to be toughened as it is already very strong. Such glass is likely to be cut to size, have holes drilled in it and have arrised and highly polished edge work.

Paragraph (a) of subitem 39(1) in Schedule 1 to the ST(E&C) Act exempts structural building units or architectural building units if they are of a kind ordinarily used as raw materials in the construction or repair of buildings, fixtures, structures or other works that are attached to land. Where silvered glass is cut to size for use as mirror tiles, it is exempt under this subitem.^[F8]

Glass that is taxable

Where, at the time of the assessable dealing, the nature of the glass product can be clearly identified then it takes on the character of a product made from glass and is not covered by subitem 39(1)(k) in Schedule 1. Where the product is not covered by any other Item in Schedule 1, it is taxable at the rate applicable to the product.

Sometimes, the products made from a sheet of glass may be difficult to classify. A large sheet of glass may be either a sliding door or a conference table top. A smaller sheet of glass may be a coffee table top, a glass shelf or a door panel. It may also be a glass cabinet door or a window pane.

If, by reference to the size, shape and nature of edge work on a glass product at the time of the assessable dealing, it can be clearly identified as a particular product then it should be classified accordingly. For example: a round piece of glass, with polished edge work and a hole drilled in the middle would be classified as an outdoor table top; a sheet of glass which has arrised edges and either a finger hole drilled on one side or a shallow groove can be clearly identified as a sliding cabinet door. These goods are covered by subitem 1(2) in Schedule 2 to the ST(E&C) Act and are currently taxable at a rate of 12%.

Motor vehicle glass is also easy to identify, as it must satisfy an Australian safety standard - AS 2080 - that is embossed on the glass. This glass product is taxable at the Schedule 4 rate, currently 22%.

Communication of the Decision

This Determination has been made available for publication by the sales tax publishing houses. It will also be made available to organisations whose members deal in goods covered by this Determination including the Victorian Glass Merchants' Association and the Australian Glass and Glazing Association.

Commissioner of Taxation
19 May 1999

APPENDIX A

References

ATO references:
NO 99/2983-5

Related Rulings/Determinations:

ST 2352
ST 2412
SST 11

Subject References:
building materials
glass
glass products
manufacture
sales tax classification

Legislative References:
STAA: section5
ST(E&C)A: Subitems 39(1)(a), 39(1)(k) and 39(1)(n) in Schedule 1
ST(E&C)A: Subitems 1(1) and 1(2) in Schedule 2
ST(E&C)A: item 1 in Schedule 4

Case References:
DFC of T v. Stronach
(1936) 55 CLR 305

FC of T v. Jax Tyres Pty Ltd
85 ATC 4001
(1985) 16 ATR 97
McNicol v. Pinch
[1906] 2 KB 352
Re Searls Ltd
(1932) 2 ATD 129