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part of the rendering of its services, the materials are not
"merchandise" under section 1.471-1, Income Tax Regs.
Petitioner is inherently a service provider. Petitioner's
clients, real property developers, engage petitioner to complete
foundations, driveways, and walkways. It is the general rule in
this country for most areas of the law (including the Uniform
Commercial Code (UCC), the Uniform Sales Act (USA), State sales
tax laws, the statute of frauds, and the Robinson-Patman
Antidiscrimination Act) that a contractor is the consumer of
materials and a supplier of services, not the seller of personal
property; the courts have invariably found construction contracts
that provide for the furnishing of labor and materials to
constitute agreements for work, labor, and services rather than
the sale of goods.
For example, under the UCC, a highway construction contract
requiring a construction company to furnish gravel and other road
building materials in the quantities specified and to turn over
to the Commonwealth of Massachusetts a completed highway was a
contract for work and labor and not a contract for the sale and
purchase of personal property. See Saugus v. B. Perini & Sons,
Inc., 26 N.E.2d 1, 3-4 (Mass. 1940). The main objective of a
contract to construct a horse barn, which required the provision
of materials, was the construction of the barn, not the sale of
goods. See Hunter's Run Stables, Inc. v. Triple H Constr. Co.,
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