- 49 - when purchased by petitioners' hospitals; and that the medical supplies therefore are merchandise which must be inventoried and are subject to section 471. Respondent posits that the test for distinguishing merchandise inventory from supplies inventory is whether the applicable item has been separately charged to a patient. Petitioners disagree with respondent's definition of merchandise. They assert that the hospitals do not acquire medical supplies for sale to patients, the transactions between hospitals and patients are not intended as sales, the transactions are not viewed as sales, and sales do not occur. Petitioners contend that the hospitals' patients obtain no right to select, control, transfer to others, dispose of, or otherwise exercise normal ownership rights over the supplies used in providing services to them. Petitioners argue that even such items as crutches or admission kits are provided by a hospital because of the particular treatment needs of the patient while in the hospital, and not as a means of selling those items to the patient. In support of their respective positions, the parties presented the opinions of various experts. Because we conclude below that petitioners’ use of the hybrid method clearly reflects the income of the hospitals, we do not decide the question of whether the furnishing of medical supplies by petitioners’ hospitals as a part of the rendering ofPage: Previous 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 Next
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