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question of Federal taxation, petitioner passed on the charges
for sales tax on all materials that were used in making the
walkways and driveways. No sales tax was charged on the labor.
The costs of the product sold included about two-thirds materials
and one-third labor. More importantly, we cannot consider the
Federal laws as being subservient to or dependent upon State
sales tax statutes. That would likely cause differing results
depending on the sales tax law and rulings in each State.
Although we might look to State law to determine the ownership of
property, we must apply the Federal tax statutes uniformly in
accord with our mandate.
(c) Galedrige Constr., Inc. v. Commissioner, T.C. Memo.
1997-240, Should Not Be Applied in This Case and Is Incorrect as
a Matter of Law--Galedrige Constr., Inc., is relied on by
petitioner and is foundational to the majority’s conclusion that
liquid concrete is “the only form of the material that provided
any value to * * * [petitioner, and it is] ‘used up’ or consumed
in providing service to the * * * [petitioner’s] client.”
Majority op. p. 25. From that premise, the majority reaches the
ultimate conclusion that the material has been consumed in the
performance of a service and that it is a supply and not
merchandise held for sale.5 Assuming, arguendo, that Galedrige
5 For purposes of comparison, the parties in this case
stipulated that the lumber that was used to construct the forms
and was removed from the final product and sometimes reused was a
supply and not merchandise. We note that the lumber constituted
approximately 1 percent of the cost of the materials.
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