D v Commissioner for the South African Revenue Service (VAT1390) [2016] ZATC 9; 79 SATC 105 (14 June 2016)

D v Commissioner for the South African Revenue Service (VAT1390) [2016] ZATC 9; 79 SATC 105 (14 June 2016)

The court found that the taxpayer supplies delivery services to its customers for consideration, regardless of whether the drivers are independent contractors or employees. The contractual arrangements, invoices, and business practices demonstrate that the taxpayer is the principal supplier of the delivery service, and the delivery charges ('drivers petrol money') are received by the taxpayer as part of its turnover. The drivers' right to appropriate the delivery charges arises from their contracts with the taxpayer, not with the customers. The economic reality of the taxpayer's business is that it could not function without the delivery service, which is integral to its enterprise....

Citation
[2016] ZATC 9
Parties
Appellant: D; Respondent: Commissioner for the South African Revenue Service
Court
Tax Court
Jurisdiction
South Africa
Judgment Date
14 June 2016
Case Number
VAT1390
Procedural Posture
Tax Appeal / Appeal From Tax Board Decision; Hearing De Novo Before Tax Court
Outcome
Appeal dismissed; taxpayer is liable for VAT on delivery charges.
Judges
Binns-Ward, P. Surtees, K. Hofmeyr
Legal Topics
Value Added Tax, Supply of Services, Agency Vs Principal, Consideration, Output Tax Liability
Tax Law Commercial and Corporate Value Added Tax Supply of Services Agency Vs Principal Consideration Output Tax Liability

Case Brief

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Parties

D

Appellant

Commissioner for the South African Revenue Service

Respondent

Procedural Posture

Tax Appeal / Appeal From Tax Board Decision; Hearing De Novo Before Tax Court

Legal Issues

  1. 1 Is the taxpayer liable for value-added tax on delivery charges ('drivers petrol money') received from customers?
  2. 2 Does the taxpayer supply delivery services to customers for consideration within the meaning of the Value-Added Tax Act?
  3. 3 Are the drivers independent contractors or agents, and does this affect VAT liability?

Ratio Decidendi

The court found that the taxpayer supplies delivery services to its customers for consideration, regardless of whether the drivers are independent contractors or employees. The contractual arrangements, invoices, and business practices demonstrate that the taxpayer is the principal supplier of the delivery service, and the delivery charges ('drivers petrol money') are received by the taxpayer as part of its turnover. The drivers' right to appropriate the delivery charges arises from their contracts with the taxpayer, not with the customers. The economic reality of the taxpayer's business is that it could not function without the delivery service, which is integral to its enterprise....

Court Disposition

Appeal dismissed; taxpayer is liable for VAT on delivery charges.

Orders

  • The appeal is dismissed with costs.
  • It is declared that the taxpayer is accountable for value-added tax on the delivery charges ('drivers petrol money') raised against its customers in terms of the invoices presented for payment when food orders were delivered during the taxpayer's 02/2008 – 02/2011 tax periods.