THE SALES TAX

Ashburton Guardian, Volume 53, Issue 207, 14 June 1933, Page 3

THE SALES TAX

AN INTERPRETATION.

GOODS FOR MANUFACTURE. (Special to the “ Guardian.”) AUCKLAND, June 13. Am important contribution toward the interpretation 'of the sales tax legislation has been made by a communication from the Minister of Customs (the lit. Hon. J. G. Coates). For the first time a definition has been given in general terms of the application of the tax to goods used in processes of manufacture.

The Minister’s letter is a reply to correspondence in which he was asked to interpret the classification “materials used otherwise than in the manufacture of goods for sale.” Representations have been made to the Minister by various interests to the effect that actually all goods purchased by a manufacturer are inevitably “used” in the manufacture of goods for sale, and that any .modification of this view -would involve multiplication of the tax upon the final product. The essence of this contention is that all the costs of manufacture and distribution enter into the sale value of the final product and that if some of the costs are taxed there must be departure from the principle that there is to be only one payment of sales tax.

Facilitating Administration. “It appears to me,” says Mr Coates in his reply, “that a consideration of the Act, as passed by Parliament, and a study of the history of its passage through the Legislature, do not confirm the view that it was the intention of Parliament that all materials, whether employed directly or as instruments in the processes of production, should in effect be exempt from sales tax. For example, under subsection (3) of section 11 of the Act, power is given to the Governor-Gen-era 1-in-Council not to grant refunds in ‘such cases’ as may be prescribed. It must, therefore, be presumed that it did not. necessarily follow that all classes of materials used directly or indirectly in the manufacture of goods would he entitled to refund. I may sav that it appears probable .that it mav yet be necessary to consider the advisability of using this .authority to make the measure more workable.

Use in Manufacture. “The position is that, as a general rule, the following would be regarded as materials used in .the manufacture of goods: — (1) Materials that are physically incorporated in the finished product, and (2) Materials that are not physically incorporated in the finished product, but are employed directly in the process of production in the course of which they are wholly consumed or are recovered to a greater or lesser extent from the operations for future use.

Machinery and Distribution. “The following would not be regarded as materials used in the manufacture of goods:— (a) Plant, machinery and tools, also materials vised in .their operation or maintenance. (b) Articles and materials used in the maintenance or repair of buildings. (e) Articles vised, directly or indirectly in the distribution or sale of goods.

“The liability of sales fax of such goods would,-depend upon whether or not they were included in any list of exemptions for the time being in force under section 12 of the Act. The following are examples of the foregoing: (a) Typewriters and weighing machines, also lubricating oil therefor; (b) electric lamp bulbs, electric switches, and paint; (c) office stationery, furniture and equipment, motor vehicles and advertising matter for the sale of goods.’’