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hereinafter refer collectively to all of the products sold by
Diehl as products.) In addition to its products, Diehl provides
to its customers free of charge access to its customer support
services.
Diehl sells some of its products within the United States
through its employees, dealers, and distributors. It sells the
remainder of its products outside the United States through
foreign distributors and resellers. Most of Diehl’s sales
(approximately 85 percent of them by revenue) are of a single
product (MiniCad5) that is sold to users of MacIntosh computers.
Diehl’s gross receipts for the subject year were $4,848,333.
All of these receipts were attributable to Diehl’s sale of its
products. Diehl’s sales were made as follows: (1) Ten percent
as direct sales between Diehl and end users, (2) 4 percent as
sales through dealers, and (3) 86 percent as sales through
distributors (both foreign and domestic). Diehl’s sales were
made either: (1) By delivering its products electronically
through an electronic code and serial number or (2) by delivering
its products in boxes containing the software (usually on a
disk), manuals, and any other item that Diehl considered
necessary for the particular market. In the latter case, the
boxes and the manuals were significant parts of the sales.
Upon its inception in 1985 and throughout the subject year,
Diehl used a hybrid method of accounting for book and tax
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Last modified: May 25, 2011