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hand are clearly distinguishable. Petitioner is in the business
of laying emulsified asphalt, not in the business of
manufacturing emulsified asphalt. Petitioner acquires asphalt
from a producer of emulsified asphalt, has no yearend (or even
dayend) inventory of raw materials, and is unable to prevent or
even delay the asphalt from becoming rock hard and worthless
within 2 to 5 hours of its acquisition from the supplier. Thus,
Asphalt Prods. Co. is not dispositive of the issue of whether the
asphalt is merchandise sold by petitioner.
In Thompson Elec., Inc. v. Commissioner, supra, the taxpayer
used materials such as wiring, conduits, electrical panels, and
lighting fixtures in its electrical contracting business. The
taxpayer maintained an inventory of unassigned materials on its
premises that it used for small contracts, in addition to
delivering materials directly from the supplier to its large-
contract customers' sites. The taxpayer reported yearend
inventory of $68,617 and $74,876 for taxable years 1988 and 1989,
respectively. We concluded that the material at issue was
merchandise which was an income-producing factor even though the
taxpayer did not display the material to customers or to the
public, the material was not itemized on bids or invoices nor
separately charged to the customer, the taxpayer did not sell
material separately from its services, and the taxpayer’s
customers generally did not select the materials to be used.
Thus, the fact that petitioner did not sell emulsified asphalt
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