Sales Tax Bulletin - No. 24
STB 24
How it affects retailers-
This document has been Withdrawn.View the Withdrawal notice for this document.
Date of Issue: 1 January 1997
Valid from 1 January 1997
| Produced by the Withholding & Indirect Taxes Program of the Australian Taxation Office. |
About this bulletin
This bulletin contains general information about the sales tax law and how it affects retailers, i.e., persons who sell to end users or final consumers. 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 January 1997.
If, after reading this bulletin, you need more information on how the sales tax law affects your business, contact the Tax Office on 13 28 66 for the cost of a local call.
Sales tax and retailers
Sales tax is a once only tax on taxable goods that are manufactured or imported into Australia. Usually, the tax is paid on the last wholesale of goods, which is the sale to a person who will resell the goods. In practice this means that the sales tax liability will arise on the sale of the taxable goods by a wholesaler to a retailer, and the wholesaler will collect the tax and send it to the Tax Office. As a result, retailers do not generally charge sales tax on their sales.
When do retailers have to charge sales tax on taxable goods?
Retailers must charge sales tax on taxable goods:
- • that have been bought free of sales tax under quote and are sold in taxable circumstances;
- • manufactured by them and sold in the course of any business;
- • on which the retailer has incurred royalty costs; and
- • sold by them under indirect marketing arrangements, i.e., sales of goods not of their own manufacture by retail through commission agents.
When can I register for sales tax?
You can register for sales tax if you:
- • manufacture and sell goods in the course of any business, unless the small business exemption applies - see page 2 What is the small business exemption?;
- • sell goods under indirect marketing arrangements;
- • sell goods by wholesale;
- • sell raw materials to manufacturers;
- • sell goods to eligible Australian or foreign travellers; or
- • carry out manufacturing or processing activities on behalf of manufacturers.
If you do any of these things you should contact your local Tax Office for a copy of our booklet titled Sales Tax - How it affects you, which provides general information for people who have to pay sales tax.
What is the small business exemption?
The small business exemption is available to those people who:
- • were liable for $10,000 sales tax or less during the 12 months prior to the particular transaction; and
- • expect to be liable for $10,000 sales tax or less during the 12 months from the date of the particular transaction.
If you buy goods from a wholesaler or manufacturer entitled to the small business exemption you may find that they don't charge sales tax even though you didn't claim exemption. If you resell these goods by retail you don't have to charge sales tax on them.
If you'd like more information about the small business exemption contact your local Tax Office for a copy of Bulletin No. 18 titled Sales Tax - Small Business Exemption.
What if I sell to customers who claim exemption?
Retailers will often find that customers will want to buy taxable goods from them free of sales tax. You can sell taxable goods without charging the sales tax you paid at purchase in the circumstances set out below. For details of how you get the tax back see page 6 Refunds from the Tax Office.
What if I sell to a person who quotes a sales tax registration number?
People registered for sales tax must quote their sales tax number to claim exemption on goods they buy from you. A quotation of a sales tax registration number is not effective unless it is made at or before the time of the transaction to which it applies. The quotation must 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 |
The sales tax number will be a seven digit number (sometimes prefaced with the letter 'E').
To allow for goods being ordered over the phone the Tax Office has accepted a two stage quoting process. This allows an initial verbal quotation followed by the written confirmation. See page 5 What about phone orders?
Do my customers have to quote every time they buy goods from me free of sales tax?
No. Your customers can give you a single quotation to cover all tax free purchases in a period, where that period does not exceed one year.
A periodic quotation of sales tax number should be in the following form:
|
I hereby quote Sales Tax Registration 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. |
What if I sell goods that are to be exported?
Goods to be exported from Australia are generally not subject to sales tax.
Sales to eligible Australian or foreign travellers may be made sales tax free provided:
- • the travellers satisfy the conditions set out in the prescribed rules for export sales; and
- • the retailer meets certain requirements.
For more information contact your local Tax Office for a copy of our booklet titled Sales Tax - How to make export sales to overseas travellers and Bulletin No. 33 titled Sales Tax - Tax free sales to tourists.
What if I sell to exempt people or organisations?
The sales tax law names some organisations or people who can claim exemption, or uses for which goods are exempt from sales tax.
Some people or organisations who are not registered for sales tax can claim exemption by giving you an exemption declaration. A copy of the exemption declaration form (ED2) is on page 8. This declaration must be given at or before the time of the transaction.
Periodic exemption declarations may be given, up to a maximum of one year. A copy of periodic exemption declarations (ED2P and ED3P) are on pages 9 and 11.
It is important that the declarations are properly completed and signed by the person buying the goods.
Common exemption Item numbers for exempt organisations
As explained above, exempt organisations claim exemption by giving declarations showing an exemption Item number. Listed on page 4 are some organisations that commonly claim exemption from sales tax, and the exemption Item number that they should use on their exemption declarations - see also What about government departments? below.
| Exempt organisation | Exemption Item number |
|---|---|
| Non-profit university or school | 109 |
| Commonwealth and State Government departments | 126 |
| State/Territory bodies | 126A |
| Local government bodies | 127 |
| Public hospitals | 140(a) |
| Public benevolent institutions | 140(c) |
What about official order forms?
Exempt organisations, who use preprinted official order forms incorporating exemption declarations may use the following wording on the order forms:
|
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 an authorised representative of ___________________________(name of organisation) Quoter's signature Quoter's full name |
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:
|
I hereby declare that these goods are free of sales tax as they are for use by _______________________(name of 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.
What about phone orders?
In some cases purchasers may order goods over the phone and state their intention to either quote a sales tax registration number or an exemption declaration. You can invoice and deliver the goods free of sales tax to the purchaser as long as you get a written quotation of their sales tax number or exemption declaration from them within a reasonable time. The purchaser can forward the written quotation to you when they pay their account.
What if a registered or exempt person forgets to quote?
A quote of a sales tax registration number or an exemption declaration is not effective unless it is made at or before the time of the transaction to which it relates. You should not give purchasers a credit for the sales tax component of a sale if they give you a belated quotation after the original transaction. If you do, you are not entitled to a refund of the tax you have credited.
Persons who fail to quote when entitled to do so may be entitled to claim a refund directly from the Tax Office.
Record keeping
You must keep the quotations and declarations as evidence of selling the goods free of sales tax. You must also keep these records if you claim refunds of sales tax. These records should be kept for a period of 5 years after the completion of the transaction to which they relate.
Provided you obtain properly completed forms you will not be liable for the tax if the purchaser makes an incorrect exemption claim, unless you have reasonable doubts about the purchaser's bona fides or entitlement to claim exemption.
If you are unsure whether the person or organisation can claim exemption you should check with your local Tax Office before you sell the goods free of sales tax.
Refunds from the Tax Office
If you have paid sales tax on goods and you sell them for a price that doesn't include sales tax, you should apply for a refund of tax directly from your local Tax Office.
You will need to complete a refund application form and send it to your local Tax Office. A copy of the form is available from your local Tax Office. More copies of this form will be sent to you after we receive your first refund application.
The minimum claim you can make is $200 but you can add several claims together to make up this amount. You can make several claims on one refund form. For example, if several customers claim exemption you can put them all on the one form each month, if that is convenient for you.
Buying goods free of sales tax
Generally, retailers are not entitled to buy goods free of sales tax. However, you will be able to buy goods free of sales tax if you:
- • buy goods for sale to a person who has quoted a sales tax number or an exemption declaration. A copy of the declaration form (ED3) is on page 10 of this bulletin. Periodic quotations may be given up to a maximum of one year, see copies on pages 9 and 11;
- • are registered for sales tax and buy goods that you know you'll subsequently sell by wholesale;
- • are registered for sales tax and you sell more than 50% of your goods by wholesale (or indirect marketing); or
- • are registered for sales tax and make retail sales to eligible Australian or foreign travellers and satisfy the conditions set out in the prescribed rules for export sales.
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. Note: If you buy goods free of sales tax and then use them or sell them in circumstances where exemption does not apply, you will have to pay sales tax to the Tax Office. For more information on goods you can buy free of sales tax, please phone the Tax Office on 13 28 66 for the cost of a local call.
Tax on goods used by retailers
Containers
Containers such as bags, boxes, adhesive tape, wrapping materials and similar goods you use to wrap or package goods sold to your customers are taxable. Tax will be included in the price charged by the suppliers of these goods.
Advertising and stationery
Goods used to advertise your business are taxable. These goods include advertising brochures, leaflets, handbills, pamphlets, newspaper inserts, posters, and signs (including neon signs). Stationery such as invoices, purchase forms and receipts are also taxable. The manufacturers of these goods - printers, signwriters, etc. - will charge sales tax on these goods when they sell them to you.
Shop fittings and equipment
Most shop fittings and equipment are taxable. Again, sales tax will be included in the price you pay to the suppliers of these goods. Examples of taxable fittings and equipment include commercial furniture (such as shelving, racking, and display stands), computers, photocopiers, typewriters, fax machines, air conditioners, and security equipment.
Do you need more information?
If you have any questions or need more information about how the sales tax laws apply to you, please contact your local Tax Office:
ATO references:
NO NAT 1983.1.97