TAXATION RULING NO. ST 2336

ST 2336

SALES TAX : CASINGS IMPORTED FOR RETREADING AND SALE BY WHOLESALE AND RETAIL

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FOI status:

May be releasedFOI number: I 1210962

PREAMBLE

Taxation Ruling No. ST 2107 deals with the sales tax liability of retreaded tyres. Where local casings are retreaded sales tax is payable on equipment and materials used in the retreading operations. No further tax is payable when the retreaded tyre is sold, whether by wholesale or retail.

2. Where imported casings are retreaded the Ruling states that liability to sales tax will depend on whether the retreaded tyres are for sale by wholesale or retail. Casings imported for retreading and sale by retail attract sales tax at the time of importation. Sales tax is payable also on materials and equipment used in the retreading operations. No further tax becomes payable when the retreaded tyre is sold by retail.

3. The Ruling states further that, where casings are imported for retreading and sale by wholesale, liability is determined under Sales Tax Assessment Act (No.6). This results in sales tax being payable on the wholesale selling price of the retreaded tyre and, also, on equipment used in retreading operations.

4. The Ruling draws a distinction between the sales tax liability of local and imported casings retreaded and sold by wholesale. In the former case sales tax liability is restricted to equipment and materials used in the retreading process. In the latter, sales tax liability is based on the wholesale selling price of the retreaded tyre and the equipment used in the retreading process.

5. The distinction has created difficulties for retreaders of imported casings who sell the retreaded casings by wholesale and retail, particularly where the retreaded casings are held in a common stock for sale by wholesale or retail as occasion demands.

6. Liability to sales tax on casings imported for retreading and sale by wholesale has been further considered. There is scope for the view that Act (No.6) does not apply to an imported casing retreaded and sold by wholesale because the goods imported, i.e. casings, are different from the goods ultimately sold, i.e. retreaded tyres. On this view an importer applies the imported casings to his own use in the retreading process and, as the sales tax law does not permit a registered wholesaler to quote his certificate on the importation of goods to be applied to his own use, sales tax liability is determined under Sales Tax Assessment Act (No.5). This means that sales tax would be payable on the sale value of the casing and not on the sale value of the retreaded tyre.

RULING

7. In the interests of placing tyre retreaders on a uniform basis as far as is possible it has been decided that liability to sales tax on casings imported for retreading and sale by wholesale should be determined under Sales Tax Assessment Act (No.5). This means that the sales tax liability of persons engaged in retreading tyres will be determined as follows:-

Local Casings

Where a retreader retreads tyre casings which have previously gone into use or consumption in Australia, i.e. worn local casings, sales tax is payable on all equipment and materials used in the retreading operations. No further liability is incurred whether the retreaded tyre is sold by wholesale or retail.

Imported Casings

Where casings are imported for retreading sales tax will be payable at Customs at the time of importation of the casings. Sales tax is payable on all casings imported not merely those used in the retreading process. Sales tax is also payable on the purchase of materials and equipment used in the retreading operations. No further tax becomes payable when the retreaded tyre is sold by wholesale or retail.

8. The effect of this Ruling is that a person who is engaged in the retreading of tyres will not be required to be registered for sales tax on account of that activity.

9. Taxation Ruling No. ST 2107 is modified accordingly.

COMMISSIONER OF TAXATION
4 June 1987

References

ATO references:
NO 86/6910-4

Subject References:
RETREADED TYRES

Legislative References:
SALES TAX ASSESSMENT ACT (NO.5)