Sales Tax Bulletin - No. 13
STB 13
Buying goods free of sales tax-
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Date of Issue: 1 December 1996
Valid from 1 December 1996
| Produced by the Withholding & Indirect Taxes Program of the Australian Taxation Office. |
About this bulletin
This bulletin explains how to buy goods free of sales tax. It is a public ruling for the purposes of section 77 of the Sales Tax Assessment Act 1992 and may be relied upon by any person to whom it applies. It replaces any previous private or public rulings, if they are inconsistent with the bulletin, and is current as at 1 December 1996.
If after reading this bulletin you need more information, contact the Tax Office on 13 28 66 for the cost of a local call.
Buying goods free of sales tax
The sales tax law allows certain people to buy goods free of sales tax by quoting their sales tax registration number or an exemption declaration. It is important that you only buy goods free of sales tax when you are entitled to do so. There are penalties if you buy goods free of sales tax incorrectly.
What goods can registered people buy free of sales tax?
If you are registered you can buy the following goods free of sales tax:
- • goods to be used as certain business inputs in manufacturing;
- • goods you will sell by wholesale or through indirect marketing arrangements, e.g., sales of goods not of your own manufacture by retail, such as through commission agents;
- • goods you will sell if more than 50% of all goods are sold by wholesale;
- • goods you will sell to a particular purchaser who has:
- - quoted you their sales tax number; or
- - quoted you an exemption declaration;
- • goods which are to exported;
- • goods you will lease in exempt circumstances;
- • goods to be used as containers for exported goods.
What if I sell almost exclusively to tax free customers?
If you sell almost exclusively to purchasers claiming exemption, such as primary producers or manufacturers, you can ask the Tax Office for approval to buy goods free of sales tax. Approval may also be given for particular lines of goods.
You can also ask for approval to buy goods free of sales tax if you sell mainly by retail but make more than 50% of sales to:
- • people who quote a sales tax registration number or an exemption declaration; and
- • people who will resell the goods.
How do registered people buy goods free of sales tax?
People who are registered for sales tax may obtain goods free of sales tax by quoting their sales tax registration number to the supplier of the goods.
A quotation of sales tax registration number should be made in writing at or before the time of the purchase. The quotation can be made on the order for the goods, or any other document that contains definite identification of the goods that are the subject of the quotation and which is kept by the supplier, eg., delivery slip, acknowledgment of receipt, duplicate invoice etc.
A quotation of sales tax number should be in the following form:
|
I hereby quote Sales Tax Registration Number Name of person authorised to quote Signature of person authorised to quote Date |
People who wish to show the name of the public officer on the form while allowing an authorised person within the company to sign on the public officer's behalf, may include a statement 'for and on behalf of the public officer (name shown)' on the form.
WARNING: The sales tax law provides for a penalty of $2000 and/or double the amount of tax underpaid where a person quotes a Sales Tax Registration Number when not entitled to, or in any other way falsely quotes.
Do I have to quote each time I buy goods?
No, you can now give your supplier(s) a single quotation to cover all your tax free purchases in a period, where that period does not exceed one year.
This is called a periodic quotation of sales tax number and should be in the following form:
|
I hereby quote Sales Tax Registration Number [insert number] in respect of all goods obtained by me during the period ____________ to ____________ inclusive, except goods in respect of which I notify you to the contrary at or before the time of the relevant assessable dealing with those goods. Name of person authorised to quote Signature of person authorised to quote Date Note: The maximum period that can be covered by a periodic quotation is one year. |
Do I need approval from the Tax Office to use a periodic quotation?
There is no need to ask for approval from the Tax Office before using a periodic quotation. Purchasers and suppliers can agree on any period, not exceeding one year, that best suits their needs.
Who can accept a periodic quotation?
A periodic quotation of sales tax number can be accepted by any supplier.
What if I buy goods for non-exempt purposes after having given a periodic quotation?
If you've given your supplier a periodic quotation, you could, during the period covered by this quotation, buy some goods which don't qualify for exemption. If you know this before buying the goods, you should tell your supplier that you are not claiming exemption. The notification should be in the following form:
|
I hereby notify you that I am not quoting for the purchase of the following goods: Description of goods Date of transaction Name of person authorised to make this declaration Signature Date |
If you buy goods free of sales tax and then use them in such a way that they don't qualify for exemption, you will have to pay sales tax to the Tax Office.
For more information on periodic quotations contact your local Tax Office on 13 28 66 for the cost of a local call.
What if I order goods over the phone?
The Tax Office has approved a two-stage quoting process when goods are ordered and exemption is claimed over the phone. This process consists firstly of an oral reference to the sales tax registration number or exemption Item number when ordering the goods, followed up by the written quotation within a reasonable time.
In practice, this will allow a purchaser to claim exemption over the phone, and provide the signed written quotation when paying the account. A single written statement that the goods were bought under quotation can cover all goods quoted for during the whole billing period, either by listing the invoice numbers on the quotation or by referring to the statement which includes the invoice numbers.
What if I order goods by facsimile?
Where goods are ordered by facsimile, the full form of quotation should be used.
What if I order goods by electronic data interchange?
If you are registered and you buy goods from a particular supplier by means of electronic data interchange, you need not give a written quotation of Sales Tax Registration Number provided the following conditions are satisfied:
- 1. the supplier agrees to accept an electronic order from you;
- 2. if the electronic order is lost or there are any other problems, the supplier must be able to provide evidence to the Tax Office that a quotation has taken place (e.g., keep a hard copy);
- 3. you accept full responsibility for the correctness of any quotation you provide; and
- 4. you must indicate on the electronic order that your sales tax registration number is being quoted.
For more information on this procedure, contact your local Tax Office on 13 28 66 for the cost of a local call.
What goods can unregistered people buy free of sales tax?
If you are not registered you can buy the following goods free of sales tax:
- • goods you will sell to a particular purchaser who has:
- - quoted you their sales tax number; or
- - quoted you an exemption declaration;
- • goods you will use to satisfy an exemption Item;
- • goods you will export under a contract of sale that requires you to export the goods while they are still new goods;
- • containers for goods to be exported; and
- • goods you will lease in circumstances that qualify for exemption.
What if I sell almost exclusively to tax free customers?
If you sell almost exclusively to purchasers claiming exemption, such as primary producers or manufacturers, you can apply to the Tax Office for approval to buy goods free of sales tax. Approval may also be given for particular lines of goods.
You can also ask for approval to buy goods free of sales tax if you sell mainly by retail but make more than 50% of sales to:
- • people who quote a sales tax registration number or an exemption declaration; and
- • people who will resell the goods.
How do unregistered people buy goods free of sales tax?
People or organisations who are not registered for sales tax claim sales tax exemption by quoting an exemption declaration.
A quotation of exemption declaration should be made in writing at or before the time of the purchase. The quotation can be made on the order for the goods, or any other document that contains definite identification of the goods that are the subject of the quotation and which is kept by the supplier, eg., delivery slip, acknowledgment of receipt, duplicate invoice etc.
The exemption declaration should be in one of the forms set out at pages 10 to 17 of this bulletin depending on the circumstances.
ED1 sets out a general form which can be used in all circumstances under which exemption may be claimed. People will place a tick beside the words which describe how they will use the goods.
ED2 to ED7 set out a shortened form of words where the purchaser is using one particular quoting ground. ED2 will be used by people claiming exemption under an exemption Item. For an illustrative list of these people see Which people or organisations can use an exemption declaration? on page 9.
WARNING: The sales tax law provides for a penalty of $2000 and/or double the amount of tax underpaid where a person quotes a Sales Tax Exemption Declaration when not entitled to, or in any other way falsely quotes.
Do I have to quote each time I buy goods?
No, you can now give your supplier(s) a single quotation to cover all your tax free purchases in a period, where that period does not exceed one year.
A periodic quotation of exemption declaration by exempt people or organisations should be in the form shown on page 17. The equivalent periodic quotation forms for EDs 3 to 7 are available from your local Tax Office.
Do I need approval from the Tax Office to use a periodic quotation?
There is no need to get approval from the Tax Office before using a periodic quotation. Purchasers and suppliers can agree on any period, not exceeding one year, that best suits their needs.
Who can accept a periodic quotation?
A periodic quotation of exemption declaration can be accepted by any supplier.
What if I buy goods for non-exempt purposes after having given a periodic quotation?
If you've given your supplier a periodic quotation, you could, during the period covered by this quotation, buy some goods which don't qualify for exemption. If you know this before buying the goods, you should tell your supplier that you are not claiming exemption. The notification should be in the following form:
|
I hereby notify you that I am not quoting for the purchase of the following goods: Description of goods Date of transaction Name of person authorised to make this declaration Signature Date |
If you buy goods free of sales tax and then use them in such a way that they don't qualify for exemption, you will have to pay sales tax to the Tax Office.
What if I order goods over the phone?
The Tax Office has approved a two-stage quoting process when goods are ordered and exemption is claimed over the phone. This process consists firstly of an oral reference to the exemption item number when ordering the goods, followed up by the written quotation within a reasonable time.
In practice, this will allow a purchaser to quote over the phone, and provide the signed written quotation when paying the account. A single written statement that the goods were bought under quotation can cover all goods quoted for during the whole billing period, either by listing the invoice numbers on the quotation or by referring to the statement which includes the invoice numbers.
What if I order goods by facsimile?
Where goods are ordered by facsimile, the full form of quotation should be used.
Can I quote on only some goods on an order?
If you intend to quote on only some of the goods included in an order, invoice or other document, you must clearly identify the goods for which you are quoting.
Can I quote after I've bought the goods?
No. A quotation of sales tax registration number or exemption declaration is not effective unless it is made at or before the time of the transaction to which it applies. A credit from the Tax Office is available to registered people who have borne sales tax on goods for which they were entitled to quote their sales tax registration number, but failed to do so.
Similarly, a credit from the Tax Office is available to unregistered people who have borne sales tax on goods for which they were entitled to quote an exemption declaration, but failed to do so provided:
- • the total tax overpaid is $200 or more;
- • the claim is made within three years of the date of purchase; and
- • the goods were not purchased before 17 December 1995.
Who can sign the quotation?
Quotations of sales tax registration numbers or exemption declarations should be signed by:
- (a) in the case of an individual - by that individual;
- (b) in the case of a partnership - by any one of the partners resident in Australia;
- (c) in the case of trustees - by any one of the trustees resident in Australia, or where there is no trustee resident in Australia, by the agent in Australia of the trustees; and
- (d) in the case of a company - by the public officer of the company.
Where it is not possible or practicable for such people to sign quotations, they may authorise another person to sign quotations in their name. The people authorised must have enough knowledge of the business so that they can speak with authority for the owner of the business about how the goods being acquired free of sales tax will be used. It's not necessary to advise the Tax Office who is authorised to sign, but a record should be kept.
How do I quote on customs entries?
Where people are importing goods and wish to obtain them free of sales tax they should quote their sales tax registration number or an exemption declaration to Customs.
You can authorise your Customs Agent to quote your sales tax registration number or exemption declaration on your behalf. Where such an authorisation is given, it is your responsibility to ensure that the Customs agent quotes in accordance with the sales tax law.
Customs agents must also comply with the requirements of the Customs law in respect of any quotation of a sales tax registration number or an exemption declaration.
What about official order forms?
Exempt organisations, including schools, councils and hospitals who use preprinted official order forms incorporating exemption declarations may use the following wording on the order forms:
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To the Commissioner of Taxation, The goods described on this order are intended to be used so as to satisfy Exemption Item______ in Schedule 1 to the Sales Tax (Exemptions and Classifications) Act 1992. Accordingly I quote this declaration as authorised representative of the school/council/hospital (delete whichever does not apply). Quoter's signature Quoter's full name |
The organisation must maintain adequate control over the issue of orders and keep proper records of its tax-free purchases. The person quoting must have the authority to quote the declaration and must ensure that all the information in the form is correct.
What about government departments?
Government departments and exempt authorities who use preprinted official order forms incorporating exemption declarations may use the following wording on the order forms:
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I hereby declare that these goods are free of sales tax as they are for use by [here insert the name of your department or authority] Name of person authorised to sign Signature of person authorised to sign Date |
What about government credit cards?
A number of Federal and State government departments and exempt authorities have received special approval from the Tax Office to use their government corporate credit cards to buy goods free of sales tax, without the need to give suppliers an official purchase order and a quotation of exemption declaration. The sales slips, which must be kept by suppliers as a record, will show the imprint transferred from the embossed credit card. The imprinted details will include the name of the department or authority, together with the credit card number which will be within a unique number range approved by the Tax Office. These sales slips will be accepted by the Tax Office as evidence that goods have been supplied to a government department or authority that is entitled to exemption.
Where the approved government corporate credit card is used to buy goods by mail order or telephone, the supplier will record the name of the department or authority and the credit card number quoted against the sale. Provided the department or authority is one that is entitled to claim exemption from sales tax and the card number is within the unique range of numbers approved by the Tax Office, the information recorded by the supplier will be accepted by the Tax Office as evidence that the goods have been sold to a government department or authority. The information recorded by the supplier will be verified when the department or authority reimburses the relevant bank for the goods.
Government departments or authorities that wish to obtain approval to use corporate credit cards to buy goods free of sales tax without the need to give the supplier an official purchase order and quotation of an exemption declaration, should contact their nearest Tax Office for further details.
Which people or organisations can use an exemption declaration?
The following list shows some of the people or organisations who can claim sales tax exemption on goods they will use. The relevant Item number to be placed on the exemption declaration (usually ED 2 or ED 2P, see pages 11 and 17) is also shown:
| Certain subcontractors | Item 36 |
| Non-profit schools or universities | Item 109 |
| School or university promotion bodies | Item 110 |
| Commonwealth and State Governments | Item 126 |
| State or Territory bodies Item | 126A |
| Local Government bodies | Item 127 |
| Public hospitals and public benevolent institutions | Item 140 |
| Charitable fund raising bodies | Item 141 |
| Churches (where goods are for use in church services) | Item 155(1) |
Do you need more information?
If you have any questions or need more information about how to buy goods free of sales tax, please contact your local Tax Office:
- • by phone on our national sales tax enquiry number 13 28 66. You can ring this number from anywhere in Australia for the cost of a local call; or
- • in person by visiting the enquiry counter at your nearest Tax Office. Tax Office addresses are listed in TaxPack, as well as in the White Pages telephone directory.
ATO references:
NO NAT 2032.12.96