ABOLITION OF SALES TAX

Bay of Plenty Beacon, Volume 10, Issue 20, 4 September 1946, Page 4

ABOLITION OF SALES TAX

EFFECT ON BUILDING CONTRACTS

The removal of the sales tax on all building materials, which took effect as from August 16, applies to incompleted contracts let before that date, says a statement from the Reahibjltation Board. Thus ex-ser-vicemen who had building contracts let before August 16 are entitled to have the contract price reduced by the amount of the reduction in the sales tax, unless specific provision to the contrary was made in .the contract.

Taking as its authority the Sales* Tax Act of 1932-33, the statement quotes extracts from Section 62 of the Act, which said: “If after the passing of this Act any alteration in the law is made (whether by amendment of the Act or by virtue of an Order in Council under Section 12 hereof) whereby any goods are made liable to or exempt from sales tax or the rate of the sales tax on any goods is increased or reduced, every agreement for the sale of such goods made in New Zealand or elsewhere (whether made before or after the passing of this Act) shall, unless provision to the contrary is made by the agreement, be deemed to be modified, with the following provisions, namely . . .”

The statement then quotes the provision relevant to the case in. point: “If the alteration frees the seller from liability to pay sales tax on such goods as aforesaid, the purchaser may deduct from the agreed price the sales tax that the seller would have paid had the alteration not been made.”

Other points covered by the section of the Act are: (a) Unless there is a contrary provision in the contract, the person for whom the building is being done is entitled to a reduction in the contract price by the difference between the amount of the sales tax which the contractor would have paid had the alteration not been made and the amount of sales tax actually payable by the contractor; (b) if any sales tax has been incurred before August 16, 1946, on materials used before or after that date in connection with the building,., the contractor is entitled to this under his contract; and (c) in respect of materials on which sales tax has not been incurred, the person for whom the building is being erected is entitled to a reduction in the contract prjce by the amount of sales tax saved by the contractor, unless the contract provides otherwise. Under the Act the contractor is bound to give a statement in writing to his client showing the difference in price as a result of the alteration in the tax.