Use of uncommercial indirect marketing arrangements to reduce wine equalisation tax (WET)

A retailer either purchased, or would purchase, wine directly from suppliers to on-sell directly to customers through its retail outlets. WET would be imposed on the supplier calculated on the wholesale selling price. 2. An entity is interposed ('the marketer') between the suppliers and the retailer purportedly to purchase the wine that is to be sold by the retailer. The retailer then sells the wine through its retail outlets as agent for the marketer. WET is now imposed on the marketer for a lesser amount (under the half retail price method). 3. Under the terms of the arrangement, there are minimal requirements placed upon the marketer and the marketer bears little or no economic risk. 4. Suppliers are aware that they are contracting with the marketer and invoice the marketer for their supplies of wine. 5. The wine may be transported directly from the suppliers to the retailer's premises. 6. The retailer selects the wine to be purchased, and negotiates the prices to be paid, by the marketer. The retailer also sets the sale price of the wine sold from its retail outlets on behalf of the marketer. 7. The retailer guarantees that the marketer will pay the suppliers for the wine. 8. The marketer is entitled to receive some percentage of the sale price charged at the retailer's outlets. A significant part of this amount may be retained by the retailer as an agent's commission, and/or other charges making the actual amount received by the marketer relatively small. 9. Where the retail price mark up is relatively low, calculating WET using the half retail price method can result in a lower WET liability than if the WET liability arose on the prior wholesale sale. This enables the retailer to sell the wine to its customers at a lower price and/or retain a higher profit.