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The Purchase Tax

The Purchase Tax 194 AIRCRAFT ENGINEERIN G July, 1941 A n Explanatory Note for Manufacturers and Retailers Affected registrable, nor would they be registrable merely Where, on the other hand, the dat a consist not H E Purchase Tax is in essence a ta x which by reason of the fact that they may have to only of sales t o independent retailers, bu t also of is payable by the consuming public, procure and supply parts of other goods in sales to retailers under the same financial or Talthough the tax will generally be levied at connexion with such work, though it would be managerial control as the sellers, or of sales to some stage in the history of the goods, prior to otherwise if the supply of such parts or goods the public direct or of appropriations from the their delivery to the public. was actually a part of their business, in which wholesale t o th e retail side of the same business, I n order tha t the ta x should be leviable, two event they would be wholesale merchants with all transactions other than sales to the indepen­ main conditions must be present. The goods regard to such articles. dent retailer will be ignored. must come within the class of chargeable goods, In any case where in connexion with proces­ Where there are no records of similar sales to which will be found enumerated in detail in sing or repair work executed by an unregistered independent retailers, then it will be necessary Notice No. 78 issued by the Commissioners of person, such as a firm of repairers, to the order to establish, by such material as is available, Customs and Excise; and the transaction itself' of anothe r person, any article is supplied by them what should be the price charged on such a must constitute a chargeable purchase. in connexion with the work, it would have been sale. A chargeable purchase will be constituted in subject to ta x by the time it reached their hands I n the case of goods made for sale direct to the following circumstances:— for the purpose of being used in connexion with the public and without passing through a re­ 1. The seller must be a registered person. the work. tailer, the price will be calculated on the actual 2. The buyer must be an unregistered person, Retail traders arc not registrable, except in retail price to the public with a percentage e.g. a retailer, or, if he is registered, he must cases where they make large purchases of deduction to allow for th e wholesale price. This be purchasing the goods otherwise than as chargeable goods on a scale more appropriate percentage will usually be agreed with the stock or materials. appropriate trade association. t o the business of a wholesale merchant; 3. The sale must be by wholesale, tha t is to a multiple shops for example. I n some cases, moreover, where no dat a at all person who carries on the business of selling The advantage of registering will be obvious. arc available, an overall addition to the invoice goods of that class. By registration, purchases by the registered price, usually 2½ per cent, will be made. There is one other important circumstance in firm in general will not be subject to tax, In all these cases of assessment of wholesale which a chargeable transaction may be con­ though ta x would be chargeable where th e goods values it should not be forgotten that allow­ stituted, and that is when a registered person were not being bought as stock or as materials, ance must be made for these two important appropriates chargeable goods from the whole­ or where goods were appropriated to the retail items, viz.—cash discounts, and delivery sale to the retail side of his business. side of the business. In order to obtain the expenses. I t is, therefore, important to inquire who are necessary exemption, the prescribed statement In conclusion it might be useful to remember registrable, for such persons will not be liable to must be made by the registered purchaser when tha t if bad debts are incurred in respect of any th e tax on purchases made by them, as stock or buying the goods. chargeable transactions, and particularly if an materials, though, of course, they will be so allowance has been made for tax purposes in liable, if as already stated, they appropriate Sales as between registered persons when respect of such debts, the Purchase Tax itself chargeable goods from the wholesale to the th e goods are being purchased as stock or ma y be waived or reduced in respect of the retail side of their business. materials will not be subject to tax. As regards particular transactions. sales to Government Departments it should be There arc three classes of persons who are particularly noted that tax will be chargeable registrable, viz., wholesale merchants, manu­ unless the sale is being made direct to a Govern­ facturers and retail traders, such as multiple ment Department under a written order or firms, whose purchases of goods are in value and contract specifying that the price of the goods character akin to those made ordinarily by is exclusive of Purchase Tax . In the case of such wholesale merchants. tax-free purchases by Government Depart­ A "wholesale merchant" for this purpose ments the contractor should secure an indemnity means a person who sells goods not of his own from the Department in respect of the sale in manufacture to persons buying for the purpose th e event of the tax being imposed. If the of resale or to persons who arc going to use the contract docs not specify that the transaction goods as materials in the manufacture of other is tax free, the contractor will be liable for the goods. A wholesale merchant may also be a ta x on the transaction. manufacturer at the same time and might combine both businesses. The person who The tax will become due upon the first buys from the wholesale merchant may, of transaction having the characteristics of a course, be himself a registered person, and in chargeable purchase, e.g. sale by wholesale tha t case tax would not attach to the transac­ merchant or manufacturer to retailer or to tion if the purchase was of stock or materials, public from retail side of seller's business, and as the case may be, to be used by the purchaser it will also attach upon any appropriation of in his business. the goods from the wholesale to the retail BOO K REVIEW side of the registered person's business. The A manufacturer is a person who carries on the Plastic s in Industry. By "Plastes." capacity in which and the purposes for which business of making goods or applying any [Chapman & Hall. 12s. 6d.] process in the making of goods which are his the buyer is buying, are of course material. property, including the assembling of parts, Thus goods bought for use as tools, or equip­ This book deals very fully with the industrial with a view to the sale of the goods afterwards. ment in the buyers' factory, would be chargeable uses of plastics in all industries, considerable I t would be sufficient for this purpose that the with the tax, even though the buyer was a space being devoted to the uses in the aircraft actua l making or processing was done by a registered person; for as regards such a purchase industry, and at the end of the chapter entitled thir d person to the order of the manufacturer the buyer would in fact be in the same position "Aircraf t Construction" the applications of as any other member of the public. and not by the manufacturer himself. In such plastic materials are set out in tabular form; a case the person who did the work to the order which should prove very useful to designers The tax is calculated on the wholesale value of the manufacturer would not thereby be who wish to be sure that they are using the of the article on a sale to an independent a manufacturer himself, for the goods on which right plastic material in the proper place. In retailer in the open market, carriage paid. he did the work would not be his own property. addition, there are separate chapters on syn­ Questions as to wholesale value are generally Firms therefore which merely work on or process thetic rubber and synthetic glues, which should very difficult. But generally the following or repair the goods of other persons, and charge be of interest. In the chapter on synthetic basis of assessment will be adopted. only for their work and labour, would not be glues, there is a section dealing with urca- The simplest method is to take the wholesale formaldchyde resin glues, but it is necessary to price at which the goods have been invoiced to warn the reader that some of the facts and fig­ an independent retailer with any necessary * Previous articles in this series explanatory of recent British war ures given regarding the methods of use cannot legislation on insurance and kindred matters are: "Compensation allowances for cash discounts and delivery for War Damage," May, p. 138 and "The War Damage Act, 1941." be relied upon as being accurate expenses. June, p. 161. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Aircraft Engineering and Aerospace Technology Emerald Publishing

The Purchase Tax

Aircraft Engineering and Aerospace Technology , Volume 13 (7): 1 – Jul 1, 1941

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0002-2667
DOI
10.1108/eb030801
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Abstract

194 AIRCRAFT ENGINEERIN G July, 1941 A n Explanatory Note for Manufacturers and Retailers Affected registrable, nor would they be registrable merely Where, on the other hand, the dat a consist not H E Purchase Tax is in essence a ta x which by reason of the fact that they may have to only of sales t o independent retailers, bu t also of is payable by the consuming public, procure and supply parts of other goods in sales to retailers under the same financial or Talthough the tax will generally be levied at connexion with such work, though it would be managerial control as the sellers, or of sales to some stage in the history of the goods, prior to otherwise if the supply of such parts or goods the public direct or of appropriations from the their delivery to the public. was actually a part of their business, in which wholesale t o th e retail side of the same business, I n order tha t the ta x should be leviable, two event they would be wholesale merchants with all transactions other than sales to the indepen­ main conditions must be present. The goods regard to such articles. dent retailer will be ignored. must come within the class of chargeable goods, In any case where in connexion with proces­ Where there are no records of similar sales to which will be found enumerated in detail in sing or repair work executed by an unregistered independent retailers, then it will be necessary Notice No. 78 issued by the Commissioners of person, such as a firm of repairers, to the order to establish, by such material as is available, Customs and Excise; and the transaction itself' of anothe r person, any article is supplied by them what should be the price charged on such a must constitute a chargeable purchase. in connexion with the work, it would have been sale. A chargeable purchase will be constituted in subject to ta x by the time it reached their hands I n the case of goods made for sale direct to the following circumstances:— for the purpose of being used in connexion with the public and without passing through a re­ 1. The seller must be a registered person. the work. tailer, the price will be calculated on the actual 2. The buyer must be an unregistered person, Retail traders arc not registrable, except in retail price to the public with a percentage e.g. a retailer, or, if he is registered, he must cases where they make large purchases of deduction to allow for th e wholesale price. This be purchasing the goods otherwise than as chargeable goods on a scale more appropriate percentage will usually be agreed with the stock or materials. appropriate trade association. t o the business of a wholesale merchant; 3. The sale must be by wholesale, tha t is to a multiple shops for example. I n some cases, moreover, where no dat a at all person who carries on the business of selling The advantage of registering will be obvious. arc available, an overall addition to the invoice goods of that class. By registration, purchases by the registered price, usually 2½ per cent, will be made. There is one other important circumstance in firm in general will not be subject to tax, In all these cases of assessment of wholesale which a chargeable transaction may be con­ though ta x would be chargeable where th e goods values it should not be forgotten that allow­ stituted, and that is when a registered person were not being bought as stock or as materials, ance must be made for these two important appropriates chargeable goods from the whole­ or where goods were appropriated to the retail items, viz.—cash discounts, and delivery sale to the retail side of his business. side of the business. In order to obtain the expenses. I t is, therefore, important to inquire who are necessary exemption, the prescribed statement In conclusion it might be useful to remember registrable, for such persons will not be liable to must be made by the registered purchaser when tha t if bad debts are incurred in respect of any th e tax on purchases made by them, as stock or buying the goods. chargeable transactions, and particularly if an materials, though, of course, they will be so allowance has been made for tax purposes in liable, if as already stated, they appropriate Sales as between registered persons when respect of such debts, the Purchase Tax itself chargeable goods from the wholesale to the th e goods are being purchased as stock or ma y be waived or reduced in respect of the retail side of their business. materials will not be subject to tax. As regards particular transactions. sales to Government Departments it should be There arc three classes of persons who are particularly noted that tax will be chargeable registrable, viz., wholesale merchants, manu­ unless the sale is being made direct to a Govern­ facturers and retail traders, such as multiple ment Department under a written order or firms, whose purchases of goods are in value and contract specifying that the price of the goods character akin to those made ordinarily by is exclusive of Purchase Tax . In the case of such wholesale merchants. tax-free purchases by Government Depart­ A "wholesale merchant" for this purpose ments the contractor should secure an indemnity means a person who sells goods not of his own from the Department in respect of the sale in manufacture to persons buying for the purpose th e event of the tax being imposed. If the of resale or to persons who arc going to use the contract docs not specify that the transaction goods as materials in the manufacture of other is tax free, the contractor will be liable for the goods. A wholesale merchant may also be a ta x on the transaction. manufacturer at the same time and might combine both businesses. The person who The tax will become due upon the first buys from the wholesale merchant may, of transaction having the characteristics of a course, be himself a registered person, and in chargeable purchase, e.g. sale by wholesale tha t case tax would not attach to the transac­ merchant or manufacturer to retailer or to tion if the purchase was of stock or materials, public from retail side of seller's business, and as the case may be, to be used by the purchaser it will also attach upon any appropriation of in his business. the goods from the wholesale to the retail BOO K REVIEW side of the registered person's business. The A manufacturer is a person who carries on the Plastic s in Industry. By "Plastes." capacity in which and the purposes for which business of making goods or applying any [Chapman & Hall. 12s. 6d.] process in the making of goods which are his the buyer is buying, are of course material. property, including the assembling of parts, Thus goods bought for use as tools, or equip­ This book deals very fully with the industrial with a view to the sale of the goods afterwards. ment in the buyers' factory, would be chargeable uses of plastics in all industries, considerable I t would be sufficient for this purpose that the with the tax, even though the buyer was a space being devoted to the uses in the aircraft actua l making or processing was done by a registered person; for as regards such a purchase industry, and at the end of the chapter entitled thir d person to the order of the manufacturer the buyer would in fact be in the same position "Aircraf t Construction" the applications of as any other member of the public. and not by the manufacturer himself. In such plastic materials are set out in tabular form; a case the person who did the work to the order which should prove very useful to designers The tax is calculated on the wholesale value of the manufacturer would not thereby be who wish to be sure that they are using the of the article on a sale to an independent a manufacturer himself, for the goods on which right plastic material in the proper place. In retailer in the open market, carriage paid. he did the work would not be his own property. addition, there are separate chapters on syn­ Questions as to wholesale value are generally Firms therefore which merely work on or process thetic rubber and synthetic glues, which should very difficult. But generally the following or repair the goods of other persons, and charge be of interest. In the chapter on synthetic basis of assessment will be adopted. only for their work and labour, would not be glues, there is a section dealing with urca- The simplest method is to take the wholesale formaldchyde resin glues, but it is necessary to price at which the goods have been invoiced to warn the reader that some of the facts and fig­ an independent retailer with any necessary * Previous articles in this series explanatory of recent British war ures given regarding the methods of use cannot legislation on insurance and kindred matters are: "Compensation allowances for cash discounts and delivery for War Damage," May, p. 138 and "The War Damage Act, 1941." be relied upon as being accurate expenses. June, p. 161.

Journal

Aircraft Engineering and Aerospace TechnologyEmerald Publishing

Published: Jul 1, 1941

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