THE SALES TAX

Evening Post, Volume CXV, Issue 136, 12 June 1933, Page 8

THE SALES TAX

IMPORTANT RULING

GOODS USED IN MANU-

FACTURE

An important contribution towards interpretation of the sales tax legislation has been made by a eommuniea•tion from the Minister of Customs (the Rt. Hon. J. G. Coates). For the first timo a definition has been given in general terms of the application of the tax to goods used in processes of manufacture. , Tho Minister's letter is a reply to correspondence in which ho was asked to interpret tho classification '' materials used otherwise than in tlic 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 aro inevitably "used" in the manufacture of goods for sale, and that any modification of this view would involve multiplication of tho tax upon the- final product. The essence of this contention is Jhat all tho costs of manufacture and distribution enter into the sale value of the final product arid that if some of the costs arc taxed there must be departure from the principle that there is to be only one -payment of sales tax. INTENTION OF PARLIAMENT. "It appears to me," said .Mr. Coates in his reply, "that a consideration of tho Act, as passed by Parliament, and a study of the history of its passage through tho 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 sub-section (3) of seetibn 11 of the Act, power is given to the Governor-General 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 bo entitled to refund. I may say that it appears probable that it may yet be necessary to consider tho advisability of using this authority to make the measure more workable. POSITION DEFINED. "The position is that, as a general rule, the following would be regarded as materials used in tho manufacture of goods:— • '' (1) Materials that are physically incorporated in the finished product, and "(2) Materials, that aro not physiQally incorporated in the finished phoduct, 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 tho operations for future use; "The following would not be regarded as materials used iin tho manufacture of goods:— "(a) Plant, machinery, and tools, also materials used in their operation or maintenance. "(b) Articles and materials used in the maintenance or repair of buildings. ■.■'■_ "(e) Articles used directly or indirectly in the distributing or sale of goods. ■ "Tho liability to sales tax of such goods .would depend upon -whether or not they were included in any list of exemptions for the timo being in force under section 12 of the Act. Tho following aro 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 tho sale of goods."