Opinion ID: 1785560
Heading Depth: 1
Heading Rank: 1

Heading: Building Materials Manufactured by Contractor

Text: Section 1 (m) provides that the use of building materials in the performance of a contract by the person who manufactures them is equivalent to making a retail sale of such materials and that such use must be reported by such persons as subject to sales tax to be measured by the reasonable and fair market value at the time and place where used.       Section 1(m) applies to metal awnings (A23-012), metal car ports, and other similar permanently attached additions to buildings when the components are prefabricated at the shop, plant, or mill of the contractor. This subsection does not apply when the materials are cut and fitted on the job site for attachment as construction progresses. Examples of materials not coming within the provisions of Section 1(m) are siding, roofing, flooring, inside trim, except where the contractor is the manufacturer from raw materials of such siding, roofing, flooring. It is clear under these rules that one manufacturing a standard finished product, and who as a contractor installs such finished product is liable for a sales tax on the value of the completed and finished product. The examples set forth in the rule of metal awnings, car ports, etc., which are completely finished and standard items, represent the ideas of the Revenue Department, and distinguish such products completely from items only partially fabricated, and entirely unusable until integrated into a completed whole, and usable product, in this case a completed air duct system. It appears that the above mentioned Rules and Regulations, promulgated by the Department of Revenue can only be rationally considered as reinforcing the correctness of the trial court's conclusions. The appellant argues that because the appellee kept no record as to the market value of the partially fabricated components of the air duct system, the appellee should suffer the penalty of non-compliance in the matter of keeping such tax records, a burden placed upon the taxpayer by Section 786(8), Title 51, Code of Alabama 1940. Mr. Wayne L. Long, a Revenue Examiner for the State Revenue Department, and who audited and examined appellee's records, testified that the records kept by the appellee were excellent, except in their failure to show the market value of the component parts of the air duct system in their partially completed state. Since these parts are not to be considered as manufactured and since under the undisputed evidence these parts are useless until they become a part of a completed air duct system, and in their individual state have no market value, there was no duty on the part of the appellee to reflect a non-existent market value on such items in its records. The decree of the lower court is due to be affirmed, and it is so ordered. Affirmed. LIVINGSTON, C. J., and SIMPSON and MERRILL, JJ., concur.