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its skill to do the work involved. Do we thus conclude that the
essential constituent of a service business is the requirement of
some level of skill or the necessity of some Government license
to carry it out? Do we not make a distinction without a
difference when we suggest that we can divide the class of
businesses that deliver a mix of goods and services on the basis
of those that are inherently service businesses and those that
are not?
In Rev. Rul. 74-279, 1974-1 C.B. 110, the Commissioner dealt
with a taxpayer engaged in business as an optometrist. The
taxpayer not only examined eyes and prescribed corrective lenses
(which requires a license) but also sold frames and eyeglasses.
The ruling holds that, although the taxpayer provides various
services, there is also a substantial amount of merchandise sold,
and, therefore, inventories are required. Not surprising. But
how does the optometrist fare under the integral-to-service test?
I assume that the business of optometry (at least when limited to
examining eyes, diagnosing defects, and prescribing corrective
lenses) is inherently a service business under that test. Cf.
Osteopathic Med. Oncology & Hematology, P.C. v. Commissioner,
supra. But the business of filling the prescription for the
corrective lenses also involves the optometrist’s performing a
service. The service requires skill and, in some jurisdictions,
it requires a license. See, e.g., Cal. Bus. & Prof. Code sec.
2550 (West 1990 & Supp. 1999). Therefore, filling the
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