- 16 -
separately from its services is not a fact that would preclude
asphalt from being merchandise inventory.
The facts of Thompson Elec., Inc., however, are so different
from the facts of the instant case that it is not dispositive of
the issue of whether asphalt is merchandise. In contrast to the
durable quality of the electrical materials that allowed Thompson
Electric, Inc., to maintain yearend inventories on its premises,
the peculiar physical properties of emulsified asphalt make it
impossible for petitioner to have any item to hold for sale at
the end of the day at either its clients' sites or its own
premises.10
The seminal case on the issue of whether material provided
in conjunction with the sale of a service is merchandise is
Wilkinson-Beane, Inc. v. Commissioner, 420 F.2d 352 (1st Cir.
1970). In Wilkinson-Beane, Inc., the taxpayer was an undertaking
establishment that sold caskets as part of its funeral service.
In construing the word "merchandise", the court used the ordinary
meaning of the word and found that the common denominator in all
the definitions was that the items in question are merchandise if
they are held for sale. Id. at 354-355. In finding caskets were
10 Similarly, the instant case is factually
distinguishable from J.P. Sheahan Associates, Inc. v.
Commissioner, T.C. Memo. 1992-239, on the quality of the material
used in the performance of the contracts. In J.P. Sheahan
Associates, Inc., the record showed that excess roofing materials
were either returned to the seller for credit or held for use on
another job.
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