Von Euw & L.J. Nunes Trucking, Inc. - Page 13

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          accounting.  See Wilkinson-Beane, Inc. v. Commissioner, supra.              
          In Wilkinson-Beane, Inc., we held that merchandise, the cost of             
          which (in different taxable years) constituted 14.7 percent and             
          15.4 percent of the taxpayer’s gross receipts, was an income-               
          producing factor in the taxpayer’s business.  See also Knight-              
          Ridder Newspapers, Inc. v. United States, 743 F.2d 781, 791 (11th           
          Cir. 1984) (wherein newspapers, the cost of which constituted               
          17.6 percent of the taxpayer’s total revenues, were considered an           
          income-producing factor).                                                   
               For its 1994 taxable year, petitioner reported cost of goods           
          sold in the amount of $1,867,497.  Petitioner argues that                   
          $786,723 of the $1,867,497 amount relates to petitioner’s                   
          transportation activities, thereby leaving $1,080,774 for the               
          cost associated with petitioner’s acquisition of the sand and               
          gravel.  Assuming arguendo that petitioner’s figures are correct,           
          because the cost of the sand and gravel constitutes at least 31             
          percent of petitioner’s gross receipts ($1,080,774 � $3,483,206),           
          we conclude that the sand and gravel is an income-producing                 
          factor in petitioner’s business.9                                           
               On brief, petitioner does not address whether it acquires              

               9  Petitioner does not include in cost of goods sold the               
          costs involved in filtering, gathering, and removing the Byron              
          sand from Unimin’s processing plant.  These costs would                     
          significantly increase the cost of goods sold and the percentage            
          that cost of goods sold would constitute of petitioner’s gross              

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