TAXATION RULING NO. ST 2309

ST 2309

SALES TAX : HORSE SADDLES, BRIDLES AND RUGS: CONDITIONAL EXEMPTION CERTIFICATES.

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FOI status:

May be releasedFOI number: I 1206824

PREAMBLE

Sub-item 1(38A) in the First Schedule to the Sales Tax (Exemptions and Classifications) Act exempts from sales tax agricultural machinery, implements and apparatus (and parts therefor) for use in agricultural industry, viz:-

Saddlery, harness, trace chains and horse rugs for use exclusively, or primarily and principally, in carrying out agricultural operations.

FACTS

2. There are many different kinds of horse saddles on the market. They vary in design, size and characteristics to equip them for particular, sometimes specialist, uses. There are, to name some, stock saddles, general purpose saddles, show jumping and dressage saddles, western roping saddles, side saddles and racing and exercise saddles.

3. Stock saddles are relatively heavy and are commonly used in general stock and station work and for breaking horses. General purpose saddles are sometimes used in agricultural operations. Both types are used for other purposes, e.g. competitive campdrafting, polocrosse, trail riding and general recreational uses.

4. The other kinds of saddles vary in weight, shape and other characteristics to fit them for use for show jumping, dressage events, pony club riding, horse racing and exercising etc.

5. Bridles and other gear vary in design to suit special uses. Horse rugs are unlikely to be distinguishable for particular uses.

RULING

6. Horse saddles, bridles, rugs etc. are ordinarily taxable at 20%. Where, however, they are sold for use exclusively, or primarily and principally, in agricultural industry in carrying out agricultural operations they are conditionally exempt under sub-item 1(38A). Agricultural operations include, for example, general stock and station work and mustering sheep and cattle. Generally, the kinds of saddles which are used in agricultural operations and qualify for exemption are stock saddles and, to a lesser extent, general purpose saddles.

7. Saddles which are not for use primarily and principally in carrying out agricultural operations do not qualify for exemption. Stock saddles and general purpose saddles for use mainly for sporting and recreational purposes, e.g. competitive campdrafting, polocrosse and trail riding, do not qualify for exemption.

8. The lighter saddles designed for special uses, e.g. in dressage events, pony club activities, racing and exercising, rarely, if ever qualify for exemption.

9. To obtain sales tax exemption for goods specified in sub-item 1(38A) a purchaser is required to furnish to the vendor a certificate (known as an "exemption certificate") that the particular goods are for use exclusively, or primarily and principally, in carrying out agricultural operations. Exemption certificates may be hand-written, typed, or printed (by rubber stamp or other printing methods) but must be signed by the person claiming exemption.

10. Where a vendor is not a registered person and purchases the goods from a registered wholesaler for resale to persons who require them for exempt purposes the vendor may obtain the goods free of sales tax by furnishing to the registered wholesaler a written certificate stating that the goods will be sold exclusively to persons for use in exempt circumstances only.

11. Vendors of saddles have experienced some difficulty in ensuring that purchasers who supply certificates referred to in paragraph 9 are entitled to exemption, i.e., it is difficult for them to be satisfied that the saddles are for use at least primarily and principally in agricultural operations rather than in recreational or similar pursuits. In some cases it has been found that exemption has been claimed by the purchaser and allowed by the vendor for goods which were not for exempt use.

12. Wholesalers who are registered for sales tax purposes and retailers selling goods to customers claiming conditional exemption should satisfy themselves of the following matters :-

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where conditional exemption is claimed to apply they should obtain from their customers and retain in their records signed conditional exemption certificates addressed to "The Commissioner of Taxation and the Commonwealth of Australia".

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in each case the certificates should state precisely the exempt purpose for which the goods are acquired in the terms of the relevant provision under which exemption is claimed,

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exemption from sales tax should not be granted where vendors have cause to believe, either from their own knowledge or from other sources, that the goods are not to be used for the purposes claimed.

13. A vendor to whom a certificate is supplied seeking exemption under sub-item 1(38A) has an obligation to take reasonable steps to ensure that the terms of the sub-item are met before allowing exemption. Where an appropriate exemption certificate has not been obtained and the facts are such that the goods are not exempt from sales tax, the vendors are liable to pay tax on the goods, whether or not they have charged any amount in respect of sales tax to their customers.

14. Some of the factors which point to a purchaser being entitled to exemption under sub-item 1(38A) in a particular case are -

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The vendor knows that the purchaser is a grazier, pastoralist or farmer engaged in agricultural operations in which horses are or are likely to be used.

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The vendor knows that the purchaser does not engage in non exempt activities e.g. show events or polocrosse.

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The particular saddles are of the class likely to be for use in agricultural operations, e.g. stock saddles or to a lesser degree general purpose saddles.

15. Some factors which point to a purchaser not being entitled to exemption in a particular case are -

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The purchaser is not engaged in agricultural operations either as a grazier etc or as an employee of a grazier etc.

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The purchaser is a member of a pony club, polocrosse team; a show rider; an operator of a trail riding business or riding school; a jockey or a member of a racing stable; a competitor in campdrafting; or simply a person who rides for fun.

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Even if the purchaser is engaged in agricultural operations, the saddle may be sold for other uses, e.g. show events, competitive campdrafting or polocrosse.

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The saddle is a specialist model, e.g. for use in show events, horse racing and exercising or by members of pony clubs.

16. Where a vendor decides that the factors in paragraph 14 are satisfied he would usually be in a reasonable position to allow conditional exemption with little more enquiry. Where the vendor knows or suspects otherwise, for example, that the purchaser uses horses for other than agricultural purposes or that the saddles are specially designed for operations other than agricultural or both, he would need to ask relevant questions about the intended use of the goods.

17. A vendor who has doubts whether any of the factors set out in paragraph 14 is satisfied should not allow exemption for relevant goods without resolving the doubts. Where, for example, a saddle is for specialist use, e.g. show use or racing, there would be a presumption that it would not be for exempt use. A similar presumption would also arise where a saddle of any model is not clearly purchased for use in agricultural operations.

18. As far as practicable the same tests apply to whether or not horse bridles and rugs are exempt under sub-item 1(38A).

19. Vendors of saddles, bridles and horse rugs who are uncertain whether to allow a sales tax exemption which has been claimed are invited to submit the exemption certificate to the Taxation Office in the capital city of their State, together with all relevant information which is available. This procedure is especially advisable if a vendor believes that the customer has mistakenly considered the transaction to be one eligible for exemption or where a vendor suspects that the use of the goods is unlikely to be for the purpose stated by the customer in the exemption certificate.

20. Certificates furnished to suppliers by purchasers seeking conditional exemption for goods purchased by them are required to be addressed to "the Commissioner of Taxation and the Commonwealth of Australia". It is important for persons giving the certificates to ensure that they do not make any statement in the certificates that is false or misleading in a material particular. There are severe penalties attached to giving statements to taxation officers which are false or misleading.

21. To avoid any risk of penalty a person purchasing saddles etc should claim exemption only if the saddles etc. are for use exclusively or primarily and principally in carrying out agricultural operations, e.g. farm work.

22. Likewise, retailers claiming exemption under the sub-item would avoid any risk of prosecution by making sure that certificates given by them to wholesalers are not false or misleading.

COMMISSIONER OF TAXATION
26 November 1986

References

ATO references:
NO 86/4623-6 85/5486-9
BO ADEL K 135/41 MELB 6/C5/SC4/1/1 (38A)

Date of effect:
IMMEDIATE

Subject References:
HORSE SADDLES

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