TAXATION RULING NO. ST 2252

ST 2252

SALES TAX : TONIC WINES

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FOI status:

May be releasedFOI number: I 1206257

PREAMBLE

Item 38 in the First Schedule to the Sales Tax (Exemptions and Classifications) Act operates to exempt from sales tax drugs and medicines used in the prevention, cure or treatment of sickness or disease in human beings.

2. Subject to certain exclusions item 1 in the Sixth Schedule operates to tax at the rate of 10% cider, mead, perry, sake, wine and other similar fermented alcoholic beverages, other than beverages that contain not more than 1.15% by volume of alcohol.

3. Consideration has been given to whether tonic wines are exempt as medicines under item 38, First Schedule, or taxable at 10% under item 1, Sixth Schedule. If they are not covered by either of the items tonic wines are taxable at the general rate of 20%.

FACTS

4. Tonic wines are a mixture of grape wine blended with herbs and, in some cases, iron, flavourings and other ingredients. The grape wine content seems to be in the range of 85% to 95%. Their alcohol content ranges from 17% to 18.5%.

5. The products are marketed as tonic wines or tonics. Although in one case the labelling suggests that some ingredients, such as iron, may be useful in the prevention of particular ailments, the labelling of the products is essentially limited to general claims of good health or well being to be derived from consumption of the product, e.g. by stimulating the appetite, aiding digestion, toning up the body, etc. There is no stipulation that they should be used for medicinal purposes nor is a specific dosage indicated. They are marketed as suitable for drinking straight or with mineral water or fruit juice.

6. While one tonic wine is registered with the Victorian Health Commission as a proprietary medicine, it is understood that the purpose of registration is to enable the Commission to exercise control over the claims made in respect of registered products and is not an acknowledgment that the product is a medicine.

RULING

7. In Commissioners of Customs and Excise v. Beecham Foods Ltd. (1972) 1 All ER it was held that "Ribena", a blackcurrant syrup with added vitamin C, was not exempt as a medicine under the United Kingdom purchase tax legislation. The House of Lords held that Ribena was not a medicine but a health drink. It was a product conducive to general health and was marketed as a health drink for everyone.

8. Notwithstanding that the decision of the House of Lords relates to different legislation it is considered that it should be applied to the sales tax classification of tonic wines. Accordingly, as tonic wines are sold as health drinks rather than for the treatment or prevention of specific ailments, they are not included in item 38 and are not exempt from sales tax.

9. It is accepted that tonic wines are wines or other similar fermented alcoholic beverages for the purposes of item 1, Sixth Schedule. Tonic wines are taxable at the rate of 10%.

COMMISSIONER OF TAXATION
3 June 1986

References

ATO references:
NO 85/7308-5
BO Adel. STC 6/1

Date of effect:
Immediate

Subject References:
WINE
TONIC WINE

Legislative References:
SALES TAX (EXEMPTIONS AND CLASSIFICATIONS) ACT; ITEM 38, FIRST SCHEDULE;
ITEM 1, SIXTH SCHEDULE