The NSW Court of Appeal has unanimously allowed a taxpayer’s appeal against an earlier decision, which had ordered that the Commissioner reassess the taxpayer for payroll tax in accordance with its reasons.

The taxpayer sold snack foods and drinks through vending machines and engaged independent contractors to store, transport and restock the vending machines. The contractors also removed and transported goods, which have passed their use-by date, collected the money paid by purchasers of the goods, and delivered the money to cash handling companies that credited the taxpayer. The contractors provided their own space and equipment and were paid a percentage of retail sales through the vending machines.

The Commissioner had assessed the taxpayer to payroll tax on the commissions paid to NSW contractors except for a 25% allowance for the non-labour component of the payments. The obligations of the contractors were specified in “Goods Distribution Agreements”. At first instance, the NSW Supreme Court remitted the matter to the Commissioner for redetermination (among other things, the Court suggested a figure of 35% as a “better estimate of non-labour costs”).

The Court of Appeal allowed the taxpayer’s appeal. It held the Agreement was exempted from the definition of a “relevant contract” because the taxpayer was supplied with “services ancillary to the conveyance of goods by means of a vehicle provided by the person conveying them” (per the exception from the definition of “relevant contract” contained in s 32(2)(d)(i) of the Payroll Tax Act 2007 (NSW), and s 3A(1A)(a) of the 1971 Act). The Court of Appeal also allowed the Commissioner’s cross-appeal in part as to Ground 1 (that the primary judge erred in dividing or slicing the “relevant contract” into exempt and non-exempt parts), but otherwise dismissed the cross-appeal. In conclusion, the Court of Appeal ordered that the relevant payroll tax assessments be set aside.

(Smith’s Snackfood Company Ltd v Chief Comr of State Revenue (NSW) [2013] NSWCA 470, NSW Court of Appeal, Beazley P, Gleeson JA, Sackville AJA, 23 December 2013.)

[LTN17, 28/1/14]