- 4 - contract amount. If a customer requests only that petitioner transport the sand and gravel, petitioner charges the customer petitioner’s costs for transporting the sand and gravel and petitioner’s related profit for transporting the sand and gravel. Petitioner acquires the sand and gravel from various suppliers. During petitioner’s 1994 taxable year, 20 different entities (20 suppliers) provided petitioner with 60 percent (evaluated by weight in tons) of its sand and gravel needs, while the Unimin Corp. (Unimin) supplied petitioner with the remaining 40 percent. Unimin processes and sells a high grade of sand used primarily in the production of wine bottles. Processing this high grade of sand produces a byproduct consisting of water and a lower grade of sand, known as Byron sand. After the water is removed from the byproduct, the Byron sand can be used by petitioner’s customers. Because petitioner must provide and maintain all the equipment and personnel necessary to filter, gather, and remove the Byron sand from Unimin’s processing plant, Unimin charges petitioner a lower amount than what the 20 suppliers charge for the same grade of sand. When petitioner computes the cost to acquire 1 ton of the Byron sand, petitioner includes its costs in filtering, gathering, and removing the Byron sand from Unimin’s processing plant as well as the amount that Unimin charges petitioner for the Byron sand.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011