High Court Judge Justice Edelman dismantled Victoria’s central constitutional defense, namely, that a tax imposed on the use of goods by a consumer cannot be an excise because it occurs after sale and falls legally on the user rather than the producer or seller.
His Honour rejects that proposition.
The reasoning proceeds from the principle that an excise is fundamentally a tax on goods as “articles of commerce.” Once that is accepted, there is no principled basis for excluding a tax merely because it is imposed later in the commercial lifecycle of the goods, including at the point of ownership, possession, or use.
The Court says the constitutional question is one of characterisation:
Is the tax sufficiently closely connected to the goods?
Does it operate upon the goods in a commercial sense?
Does it tend to affect supply, demand, price, distribution, ownership, or use of the goods?
If so, the tax may properly be characterised as an excise under s 90.
Importantly, the High Court rejects rigid “temporal” distinctions:
production taxes validly within excise;
sale taxes within excise;
but use taxes supposedly outside excise.
The majority viewed that distinction as formalistic and inconsistent with modern constitutional interpretation. A State cannot avoid s 90 simply by shifting the taxing point further along the lifecycle of the goods.
At the same time, the Court was careful not to say that every tax affecting goods is automatically an excise. Payroll tax, land tax, and many other taxes may indirectly affect prices or markets, but they are not taxes on goods themselves. The connection is too remote.
What matters is the closeness and immediacy of the relationship between:
the legal operation of the tax; and
the goods as articles of commerce.
Justice Edelman also places strong emphasis on economic union under Chapter IV of the Constitution. Section 90 exists to ensure national uniformity in taxation of goods and to prevent States from fragmenting the national market through their own goods-based taxation regimes.
That leads to the key constitutional conclusion:
the ZLEV charge was not merely a regulatory fee;
it was not payment for a service;
it was not a licensing regime;
it was, in substance, a tax imposed directly upon the use of specific goods (electric vehicles).
Because the connection between the tax and the goods was “direct and immediate,” and because the tax affected those goods as articles of commerce, the charge was held to be an excise and therefore constitutionally invalid under s 90.
The High Court Ruling dramatically broadens the conceptual reach of excise beyond older doctrine confined largely to production and sale. The judgment expressly contemplates that taxes imposed at later stages, including ownership, control, use, resale, reuse, or destruction of goods, may also fall within the constitutional prohibition if their relationship to the goods is sufficiently close.
