Federal Commissioner of Taxation v Riley [1935] HCA 47; (1935) 53 CLR 69 (20 June 1935)

This is a special case stated by the parties in an action brought by the Commissioner of Taxation to recover sales tax from a photographer conducting a portrait studio.

The course of business is elaborately stated in the special case, which gives prominence to the part played by the individual consideration and treatment of the client, the arranging of the pose, setting and lighting, and the operations in the studio and retouching room. The business side of the transaction is more briefly dealt with. It is said that when the client comes to be photographed he may then order a certain number of photographs, or he may decide to view the proofs before ordering any; but it is usual to obtain a deposit from the client before taking his photograph. Before the photographs are delivered to him payment is made or arranged.

Under the Sales Tax Assessment Act (No. 1) 1930-1935, sales tax is levied and paid upon the sale value of goods manufactured in Australia by a taxpayer and sold by him or treated by him as stock for sale by retail or applied to his own use (sec. 17).

The special case raises no question as to the sale or sale value of the photographs, and this, no doubt, accounts for the economy of statement in reference to the terms upon which the clients' requirements are supplied. That the transaction is a sale is not, and doubtless could not, be disputed. What is in question is whether photographs are goods manufactured in Australia.

By the statutory definition, manufacture includes production. This description is very wide. It appears to cover all operations conducted for the purpose of bringing tangible things into existence for sale. But there are many vocations and pursuits in the exercise of which physical things incidentally come into existence, and become the property of the client or customer, although the essential character of the work is the performance of skilled services and not the supply of things. A conveyancer who makes a will and hands it over to the testator, a writer who composes an article for a journal and sends in the typescript, a shorthand writer who transcribes his notes and supplies a transcript are examples. The last was dealt with by this Court in Rau's Case[1]. To such cases the language of sec. 17 is inapplicable; one or other of the elements is lacking that are required to satisfy the description sale value of goods manufactured, or produced and sold by the taxpayer, or treated as stock for sale by retail or applied to his own use.

In the present case, it is the element of "manufacture" or "production" which the taxpayer says is not present. The argument in support of his contention is, in effect, that the photographer is employed to exercise his art to obtain a portrait possessing the qualities that are demanded by the taste it is his purpose to consult, and that the end of his labours is not the production of so many material objects regarded as vendible articles. The contention is open to the observation that it does not strictly adhere to the question in the special case, which assumes the sale of the photographs as goods, and inquires, are they produced or manufactured? But it is right, perhaps, that the taxpayer should not be tied down to that question as one isolated from the remainder of sec. 17. In any case, we think the contention cannot prevail. The end of the organized business of a portrait photographer is to produce as many copies of a picture as his customer will buy, and to sell them to him with a view to profit. It differs from many other productive arts in the fact that its products must be designed in each case for one individual, and in its attempt to secure some aesthetic value. But it is a process practised commercially to produce an article which will be bought. A tailor must attempt to fit his individual customer and the manufacturer of ornaments might claim that his designs had an aesthetic purpose.

The second question seeks to distinguish tinting and colouring when that is practised, a distinction we are not prepared to admit. It also should be answered: Yes.

We think the order should be:—Questions in the special case answered: Yes. Pursuant to the agreement of the parties, enter judgment in the action for the plaintiff for £7 15s. 9d. with costs.

Sales tax is imposed upon the sale value of goods manufactured in Australia by a taxpayer and sold by him, or treated by him as stock for sale by retail, or applied to his own use (Sales Tax Acts, 1930 No. 26; 1930 No. 63; Sales Tax Assessment Act (No. 1) 1930-1935). Goods includes commodities. Manufacture includes production; manufactured has a meaning corresponding to that of manufacture. Manufacturer means a person who engages, whether exclusively or not, in the manufacture of goods, and includes a printer, publisher, lithographer, or engraver, and a person (not being an employee) who makes up goods, whether or not the materials out of which the goods are made are owned by him (Sales Tax Assessment Act (No. 1) 1930-1935, sec. 3).

The taxpayer carries on the business of a photographer; clients go to him and sit for their photographs; the taxpayer takes the photographs, and supplies copies in a finished condition, tinted or untinted, to his client as ordered. A charge is made for the photographs supplied to the client, and the charge is greater for a tinted than for an untinted photograph. The question is whether photographs so taken by the taxpayer and supplied to clients are goods manufactured in Australia, within the meaning of the Sales Tax Acts.

The primary meaning of the word manufacture is something made by hand as distinguished from a natural growth. But machinery has largely supplanted the manual method, and a manufacture is thus any article or material produced by the application of physical labour or mechanical power (Oxford English Dictionary, s.v. "manufacture"). It is said that a photograph cannot fall within such a description, any more than could a painting or a statue or any other work of art the result of an artist's skill or genius. But we must turn to the Act itself (Dominion Press Ltd. v. Minister of Customs and Excise[2]). It is framed in comprehensive terms and the exemption of certain works of art in 1931 and 1933 indicates in no uncertain manner the scope of the legislation. Again, as already stated, manufacture includes production, which would cover coal, gas or electric current, but for their exemption in the Schedule; and the term manufacturer includes a printer, publisher, lithographer, or engraver, who may do no more than change the condition of an article already manufactured. The taxpayer produces an article—a photograph—and supplies it to his client for a price.

Having regard to the various provisions of the Acts, the production of photographs and supplying them to clients for a price in the ordinary course of the taxpayer's business constitutes, in my opinion, a manufacture of goods within the meaning of the Sales Tax Acts above referred to.

The questions submitted in the special case should be answered in the affirmative, and judgment entered as agreed between the parties.

In certain circumstances, photography may be part of the process of manufacture, but, on the facts, it is not possible to regard the photographer as a "manufacturer" of goods or a "producer" of commodities. Certainly, the service he performs for his client is finally embodied in the photograph, and payment has to be made for the actual chattel delivered as well as for the service rendered. But, having due regard to the whole of what is done, it is properly regarded as being in the nature of an artistic service of a personal character. The service is so confidential that, without the client's consent, the law prevents the further reproduction of the photograph. In applying the general words of the Sales Tax Assessment Act to the present case, little or no assistance is derived from the list of exemptions, and we are remitted to the general question whether the personal service performed is included in the denotation of "manufacture" or "production." If the matter were left in doubt, presumably the doubt should not be resolved in favour of the tax-gatherer. But, in my view, the application of the words "goods manufactured" to cases like the present is unreal, and almost whimsical.

Questions in the special case answered: Yes. Pursuant to the agreement of the parties, enter judgment in the action for the plaintiff for £7 15s. 9d. together with an additional tax upon the amount of the tax unpaid at the rate of ten per cent per annum from 22nd November 1934 until payment. Defendant to pay costs.

[1] [1931] HCA 43; (1931) 46 C.L.R. 572.

[2] (1928) A.C. 340.

High Court of Australia

Federal Commissioner of Taxation v Riley [1935] HCA 47; (1935) 53 CLR 69 (20 June 1935)

HIGH COURT OF AUSTRALIA