McKay v Commissioner of Taxation (Cth)

High Court of Australia MURPHY J McKay v Commissioner of Taxation (Cth)

Murphy J

The appellant, Mr McKay, a photographer specializing in children's portraits, has appealed against a decision of the Commonwealth Taxation Board of Review No 2 confirming a decision of the Commissioner of Taxation. The Commissioner had disallowed Mr McKay's objection against assessment of the sale value of goods he had manufactured and sold in December 1970. During that month, he photographed children at baby shows, developed negatives and made contact proofs which he showed to the parents. Then, only on the parents' orders, he prepared and supplied them with framed 12 inch x 10 inch prints and two cabinet-size mounted prints.

For some years, Mr McKay has disputed with the Commissioner any liability to pay sales tax on the basis that he is not a seller of any goods but that he creates and disposes of intellectual property and the fact that this appears in a material form such as film or paper is unimportant.

Mr McKay made a sales tax return for December 1970 showing "Total gross sales $612", but in the description of the goods, he set out "Photographs, negatives, prints, frames — nil". The Commissioner was not satisfied with the return and, pursuant to s 25(2A) of the Sales Tax Assessment Act (No 1) 1930-1960, caused an assessment to be made of the amount upon which, in his judgment, sales tax should be levied. The assessment was "in respect of goods manufactured and sold" and was in these terms: Total sale value (as per Schedule attached) $244.80 Total amount of tax payable thereon at 27 ½% 67.32 Less tax provisionally paid Nil Amount of tax now payable 67.32 Total amount due $67.32

The Schedule to this notice of assessment was expressed as Sales of photographs covered by Item 39 in the Second Schedule of the Sales Tax (Exemptions and Classifications) Act 1935-1970 which were manufactured and sold during the month of December 1970 $612.00 Less 60% in accordance with Sales Tax Regulation 26(b) 367.20 $244.80