- 11 - taxpayer did not hold concrete materials for sale but rather consumed the materials in performing a service. See id. We further concluded: (1) The ephemeral quality of liquid concrete precluded such material from being considered merchandise; and (2) the remaining materials used by the taxpayer, including sand, drain rock, and hardware, were incorporated into the particular project to such a degree that they lost their separate identity, and likewise should not be considered merchandise within the meaning of the regulation. Id. at 225-229. Consistent with our analysis in RACMP Enters., Inc. v. Commissioner, supra, we hold that the flooring materials that Smith Floors purchases and installs in fulfilling its contracts do not constitute merchandise within the meaning of section 1.471-1, Income Tax Regs. Like the concrete contractor in RACMP Enters., Inc. v. Commissioner, Smith Floors is inherently a service provider. Smith Floors’ stock in trade is its expertise in installing flooring materials in a variety of unique applications and petitioner’s skill and craftsmanship in hand- cutting and incorporating specialized designs into flooring materials. The companies contracting with Smith Floors are primarily interested in the firm’s labor and contractual skills. Smith Floors purchases and takes delivery of the flooring materials required for a particular job to better manage thePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011