TAXATION RULING NO. ST 2211

ST 2211

SALES TAX : EARTH MOVING AND CONSTRUCTION EQUIPMENT

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FOI status:

May be releasedFOI number: I 1206186

PREAMBLE

There is no specific exemption in the sales tax law for earthmoving and construction equipment. It may qualify for conditional exemption under items 14, 74, 78 or 78B in the First Schedule when sold for use in the mining industry, by a Government Department, local government body or public authority, or for use in carrying out certain specified government contracts. Where conditional exemption does not apply earthmoving and construction equipment for use in constructing, maintaining or repairing buildings or other structures, or roads, dams, pipelines, drains, trenches, tunnels or other works attracts sales tax at the rate of 10% under paragraph (c) of sub-item 7(1) Third Schedule. There will be other situations where the equipment will be subject to sales tax at the general rate of 20%.

RULING

2. Some retailers of earthmoving and construction equipment are registered for sales tax purposes, i.e. because they sell spare parts by wholesale. Where retailers so registered establish that over 50% of sales of earth moving and construction equipment are made in conditionally exempt circumstances sub-regulation 14(2) may be applied to permit them to purchase the equipment free of tax under quotation of certificate.

3. Other retail dealers, whether registered or not, will be required to pay 20% sales tax on their purchase of the equipment unless, at the time of purchase, a retail sale of the goods in conditionally exempt circumstances or circumstances to which paragraph (c) of sub-item 7(1), Third Schedule applies has already been arranged. In the latter circumstances the retailer may tender an appropriate conditional exemption or conditional rate certificate, as the case may be, to obtain the equipment free of tax or with 10% tax paid.

4. Retailers may not purchase with 10% tax paid equipment which is to go into general retail stock.

5. Where equipment on which 20% sales tax has been paid is sold in conditionally exempt or conditionally rated circumstances the retailer will need to go back to his supplier for a rebate of the tax paid above the applicable rate. The supplier may then seek a refund from the Australian Taxation Office.

6. In cases where a registered retailer purchases equipment free of tax under quotation of certificate but sells the goods by retail in circumstances in which sales tax at the rate of 10% or 20% is payable, sub-section 4(1) of Sales Tax Assessment Acts (Nos 2, 3 and 7) requires the retailer to pay sales tax on a sale value equal to the fair market value of the goods if sold by the dealer by wholesale. If the registered retailer sells comparable goods by wholesale the wholesale selling price would be an appropriate sale value for the retail sales. Where the retailer makes no wholesale sales of earth moving and construction equipment but has purchased the equipment free of tax under quotation of certificate and sold it in taxable circumstances, a mark-up of 5% on the into store cost, including inward freight costs, of the retailer is acceptable as a fair and reasonable wholesale value for the purposes of sub-section 4(1).

7. Where a registered retailer imports earthmoving and construction equipment free of tax under quotation of certificate and sells it by retail in taxable circumstances sub-section 4(1) of Sales Tax Assessment Act (No.6) authorizes a sale value of the fair market value of the equipment if sold by the retailer by wholesale. If the retailer does not make any wholesale sales of the equipment a sale value of landed into store cost plus 5% would be a fair and reasonable wholesale value.

COMMISSIONER OF TAXATION
20 December 1985

References

ATO references:
NO 83/5022-1
BO SYD - 27/B4/D.18/39

Date of effect:
Immediate

Related Rulings/Determinations:

ST 2299

Subject References:
EARTH MOVING AND CONSTRUCTION EQUIPMENT

Legislative References:
SALES TAX (EXEMPTIONS AND CLASSIFICATIONS) ACT 1935; ITEMS 14,
74,
78
AND 78B, FIRST SCHEDULE;
ITEM 7, THIRD SCHEDULE.
SALES TAX REGULATION 14.
SALES TAX ASSESSMENT ACTS (No. 2) section 4
SALES TAX ASSESSMENT ACTS (No. 3) section 4
SALES TAX ASSESSMENT ACTS (No. 6) section 4
SALES TAX ASSESSMENT ACTS (No. 7) section 4