Deputy Federal Commissioner of Taxation v Taubmans (NSW) Pty Ltd

[1966] HCA 18

HIGH COURT OF AUSTRALIA

Windeyer J.

DEPUTY FEDERAL COMMISSIONER OF TAXATION v. TAUBMANS (N.S.W.) PTY. LTD.

(1966) 115 CLR 570

31 March 1966

Sales Tax (Cth)

Sales Tax (Cth)—Liability—Goods "applied . . . to his own use"—Colour cards purchased by paint wholesaler from manufacturer—Supplied to retailers to be made available to intending purchasers of paint—Business samples—Sales Tax Assessment Act (No. 4) 1930-1936, s. 3.*

Decision

March 31.
WINDEYER J. delivered the following judgment: -
This case is said to be a test case. It is important to the defendant, and I assume it may be important to other persons also, and it is important to the Commissioner. But as I have formed a firm opinion about it, I do not think any good purpose would be served by my reserving my judgment. (at p571)

2. All the authorities that would be helpful have been brought to my attention by counsel, and the provisions of the Acts bearing upon the matter have been canvassed. It seems to me that the meaning of the Act in question and its application in this case is reasonably plain. (at p571)

3. The action is an action to recover moneys for sales tax said to be due by the defendant. The defendant disputes liability. The evidence in chief on which the plaintiff relies is a certificate under s. 10 of the Sales Tax Procedure Act 1934-1953 (Cth), but I must decide the case on the oral evidence that was given. (at p571)

4. The case turns upon the question of whether the particular goods were applied by the defendant to its own use within the meaning of s. 3 of the Sales Tax Assessment Act (No. 4) of 1930-1936. The sales tax legislation as a whole, the Acts that impose the tax, those that provide for its assessment, and those dealing with the procedure for its collection and for exemption of certain goods, are interconnected. They form one legislative scheme. And in some respects, not directly material, I think, to these proceedings, they are supplemented by regulations. (at p571)

5. The general purpose and procedure of the scheme of taxation was explained by Sir Owen Dixon in the case of Deputy Federal Commissioner of Taxation (S.A.) v. Ellis &Clark Ltd. (1934) 52 CLR 85, at p 91 . I do not think it necessary to do more than refer to what his Honour there said. As he pointed out, the scheme broadly places "the tax as nearly as may be upon the sale of goods which immediately precedes retail distribution". (at p572)

6. The scheme however necessarily involves making some provision for the case of manufacturers and importers who themselves sell by retail, and of merchants who - although they sell chiefly by wholesale and not principally by retail - might actually sell goods by retail and for manufacturers or wholesalers who apply goods they have made or bought to their own use. In the result the effect, so far as Act No. 4 is concerned, is that "the buyer from the manufacturer, if he is or ought to be registered, must pay tax when he sells, unless the buyer from him is registered and quotes his certificate, and he must pay tax if he takes into his own use or consumption the goods he has bought from the manufacturer" (1934) 52 CLR, at p 90 . The question, broadly stated, in this case is whether or not the taxpayer has taken the goods in question into its own use or consumption - that being merely a translation of the effect of the words in s. 3 to which I have referred, the words "applied those goods to his own use". (at p572)

7. The facts, so far as relevant, are as follows: the defendant company carries on the business of a wholesale merchant, selling what is called decorative paint - a term which I understand to embrace paints used primarily for interior decoration as distinct from industrial paints. It is associated with another company which manufactures these goods. Both the manufacturing company and the defendant, the selling company, are in fact subsidiaries of a holding company. (at p572)

8. The defendant sells its wares through retail storekeepers. Those storekeepers who sell them are visited from time to time by travellers employed by the defendant. They take orders for goods required. Many storekeepers also send their orders direct, either in writing or by telephone, to the defendant company. The store-keepers are supplied by the defendant with a stock of colour cards. The travellers ensure that the storekeepers have a stock of colour cards available for buyers to inspect. An intending buyer or inquirer is at liberty to take away a card for the purpose of considering and making up his mind on the colour he thinks he would wish to have. The storekeepers sell the defendant's paints at prices the defendant prescribes by a retail price list which it furnishes. Their profit lies, as I understand it, in discounts that they are allowed. (at p573)

9. The goods in question in this case are some 26,100 colour cards, which were purchased by the defendant from a manufacturer, that is to say from the printer. The defendant being a registered person under the Act quoted its certificate. It thus became itself liable to tax if either it sold the goods to a person who did not himself have a certificate or applied the goods to its own use. (at p573)

10. Apparently at some stage, in May 1964 I think, some view was incautiously adopted by the taxpayer that it would be helpful to it to say that it sold the colour cards to the storekeepers along with the paint which it sold to them, and a statement to that effect - a statement that the price of the goods included colour cards - was put upon invoices and also, somewhat incongruously, upon the retail price list. Of course, in an economic sense the price of the paint sold does reflect all the things and services incidentally given and the cost of production of the goods together with the profit of the supplier; but I do not think that, on the evidence, it is correct to say that there was in any exact sense a sale of the colour cards to the retailers. As neither side urged me to adopt that view and I do not think the evidence supports it, I shall assume it to be incorrect. (at p573)

11. The question then is simply: did the defendant apply the goods to its own use within the meaning of the Act? The argument that it did not is based largely on the notion that they were given away to retailers for the purpose of their being then by them given away. In one sense that is so. But that does not conclude the question. It seems to me they were in fact essential aids to the effective marketing of the tins of paint that the defendant put upon the market and sold to the various storekeepers. The paints could not well be sold unless colour cards were provided for retailers. For example to read upon a tin of paint that it contained Arctic Sky paint or Calypso Blue without an indication of the colour so called would be quite uninformative (more particularly as I understand the colour Calypso Blue is green). (at p573)

12. Whether or not a thing is used by its owner or applied by him for his own use, he being a person conducting a business depends, it seems to me, upon the use to which that kind of thing is put in that kind of business. The idea connoted by the phrase "applied by him for his own use" is not inconsistent with a gratuitous disposal of the thing by its owner. The nature of the use to which the thing is designed to be put is a most material consideration. (at p573)

13. It may not be correct to say that all advertising material that is distributed is, by being distributed, brought within the description of goods applied by the distributor to his own use. But I think, and the Canadian cases to which I have been referred seem to me consistent with the view, that if free samples of goods be distributed in conjunction with a business carried on by their owner, distributed that is for his business purposes, they can be said to be applied by him to his own use. That is the use to which he puts them, the manner of use for which they were acquired by him. The fact that they would ultimately be used by somebody else is, as I see it, not a matter of critical importance. It cannot be said that a thing is not applied by a person to his own use because the use to which he puts it is to make it available to be used, according to its nature, by somebody else. A thing made available to be used by the owners, officers, servants or sub-contractors might well be said to be thereby applied by him to his own use. Sometimes it must be so too if it be made available to be used by other persons such as customers for example when containers, paper bags, cardboard boxes are provided for the carrying away of goods. (at p574)

14. The matter does not, I think, turn on whether or not a name is on the articles, that is the colour cards, or whether they were incidentally an advertisement. It turns on the nature of the use to which they were designed to be put by the defendant and to which they were put. (at p574)

15. In my view the defendant applied these colour cards to its own use in various ways. Some of them it used directly in connexion with its own advisory service, an arrangement by which persons were given advice as to colour schemes and so on. In other cases it applied them to its own use by making them available to those storekeepers who stocked its goods, so that they could provide prospective buyers of those goods with a means of selecting and knowing what they required. (at p574)

16. For those reasons I am of the opinion that the plaintiff's action succeeds, and I give judgment accordingly. I give judgment for the plaintiff for $315.44 and costs. (at p574)

Orders

Judgment for the plaintiff for $315.44 and costs.