TAXATION RULING NO.ST 2078

ST 2078

SALES TAX : SUNSCREEN PREPARATIONS : COSMETICS

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FOI status:

May be releasedFOI number: I 1078654

PREAMBLE

Item 38A in the First Schedule to the Sales Tax (Exemptions and Classifications) Act, exempts the following sunscreen preparations from sales tax :-

Preparations -

(a)

that are put up and sold for use as substances to be applied to the skin for the purpose of screening out solar ultra-violet rays, but not including -

(i)

goods of the following kinds, namely, face creams, face oils, face lotions, body creams, body oils, body lotions, rouge, lip-sticks, eye-brow pencils and eye shadows, being goods that are cosmetics, cosmetic preparations or goods in the nature of cosmetic preparations; or

(ii)

other goods that are cosmetics, cosmetic preparations or goods in the nature of cosmetic preparations; and

(b)

in respect of which there is in force a certificate given for the purposes of this item by the Director-General of Health, or by an officer appointed by him for the purpose, that certifies that the preparations are preparations that provide an acceptable level of protection from solar ultra-violet rays.

2. The purpose of this Taxation Ruling is to provide guidance as to the types of preparations which the Commissioner of Taxation regards as "cosmetics", "cosmetic preparations" or "goods in the nature of cosmetic preparations" and which are excluded from the scope of the exemption item. In addition, attached to this Taxation Ruling are lists of preparations which are exempt from sales tax under item 38A, First Schedule (Attachment A) and of preparations which are excluded from the exemption item and subject to tax.

3. Before discussing the scope of the excluding provisions of sub-paragraphs (a)(i) and (a)(ii) to item 38A, however, it is important to stress that, for a preparation to be accepted as one put up and sold for use as a substance to be applied to the skin for the purposes of screening out solar ultra-violet rays, it is essential that its label and inner and outer containers in which the preparation is marketed and other promotion literature, brochures etc. with which it is sold or advertised for sale appropriately describe the preparation as a substance to be applied to the skin to screen out solar ultra-violet rays.

RULING

4. Whether a particular preparation to be applied to the skin is a "cosmetic", "a cosmetic preparation" or is "in the nature of a cosmetic preparation" is considered to be a question of fact or a question of impression and fact (cf. Downland Publications Ltd v Deputy Federal Commissioner of Taxation 83 ATC 4173 esp. Gibbs C.J. at p. 4139) to be gained from all of the circumstances in which the preparation is marketed.

5. In determining this question it is not sufficient in itself for a preparation to qualify for exemption for it merely to be labelled with claims that the preparation screens out solar ultra-violet rays. All of the circumstances in which the preparation is marketed need to be considered including the form of the preparation, its ingredients, the manner in which it is promoted for sale and its suggested intended use.

6. In the absence of a definition of the term "cosmetic" in the sales tax law the word is considered to have its everyday meaning. In this regard the Collins English Dictionary defines the word "cosmetic" as :-

(i)

Any preparation applied to the body especially the face with the intention of beautifying it;

(ii)

Serving or designed to beautify or improve the body especially the face; and

(iii)

Having no other function than to beautify

7. The Shorter Oxford English Dictionary defines the word "cosmetic" as follows :-

(a)

Having power to beautify (especially the complexion);

(b)

(i)

a preparation for beautifying the hair; skin or complexion; and

(ii)

the art of adorning or beautifying the body.

8. Having regard to all of the circumstances in which particular preparations are marketed and to the ordinary meaning of the word "cosmetic", those preparations which are marketed to beautify the skin or complexion are regarded as cosmetics, cosmetic preparations or goods in the nature of cosmetic preparations for the purposes of excluding paragraph 38A(a)(i) or (ii), First Schedule.

9. Where a preparation is labelled or otherwise advertised or promoted as a beauty preparation or, for example, makes claims about beautifying the skin or assisting it to remain or become fresh, soft, smooth and free of creases or wrinkles, this would indicate that the preparation is a cosmetic, cosmetic preparation or is in the nature of a cosmetic preparation.

10. On the other hand, where a preparation is labelled or otherwise advertised or promoted as a sunscreen preparation and its formulation is consistent with it being a sunscreen preparation, the fact that it may claim to moisturise the skin or to promote tanning of the skin (without any beautifying claims) would not, of itself, preclude it from exemption. Such claims are not, of themselves, regarded as being inconsistent with the preparation being put up and sold for use as a sun-screening substance for the skin.

COMMISSIONER OF TAXATION
23 May 1984

APPENDIX

ATTACHMENT A

PREPARATIONS EXEMPT UNDER ITEM 38A IN THE FIRST SCHEDULE TO THE SALES TAX (EXEMPTIONS AND CLASSIFICATIONS) ACT

ATTACHMENT B

PREPARATIONS TAXABLE AT 32.5% UNDER ITEMS 20 OR 23 IN THE SECOND SCHEDULE TO THE SALES TAX (EXEMPTIONS AND CLASSIFICATIONS) ACT OR TAXABLE AT THE GENERAL RATE OF 20% AS INDICATED:

References

ATO references:
NO ST 11/270 P13 F128

Date of effect:
Immediate

Related Rulings/Determinations:

ST 2041
2048

Subject References:
SUNSCREEN PREPARATIONS
COSMETICS

Legislative References:
SALES TAX (EXEMPTIONS AND CLASSIFICATIONS) ACT ITEM 38A FIRST SCHEDULE

Case References:
- Downland Publications Ltd v Deputy Federal Commissioner of Taxation
83 ATC 4137