Adipic Acid Is Added To List Of Taxable Toxic Substances.

The Service has announced that adipic acid has been added to the list of taxable substances in section 4672(a)(3). This determination is effective July 1, 1990.

The Service stated in Notice 94-8 that the rate of tax prescribed for adipic acid under section 4671(b)(3) is $4.03 per ton.

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This notice announces a determination, under Notice 89-61, 1989- 1 C.B. 717, that the list of taxable substances in section 4672(a)(3) of the Internal Revenue Code will be modified to include adipic acid. This modification is effective July 1, 1990.

BACKGROUND

Under section 4672(a), an importer or exporter of any substance may request that the Secretary determine whether the substance should be listed as a taxable substance. The Secretary shall add the substance to the list of taxable substances in section 4672(a)(3) if the Secretary determines that taxable chemicals constitute more than 50 percent of the weight, or more than 50 percent of the value, of the materials used to produce the substance. This determination is to be made on the basis of the predominant method of production. Notice 89-61 sets forth the rules relating to the determination process.

DETERMINATION

On December 10, 1993, the Secretary determined that adipic acid should be added to the list of taxable substances in section 4672(a)(3), effective July 1, 1990.

The rate of tax prescribed for adipic acid, under section 4671(b)(3), is $4.03 per ton. This is based upon a conversion factor for methane of 0.11, a conversion factor for benzene of 0.72, and a conversion factor for nitric acid of 0.63.

The petitioner is Monsanto Company, a manufacturer and exporter of this substance. No material comments were received on this petition. The following information is the basis for the determination.

HTS number: 2917.12.00.00

Adipic acid is derived from the taxable chemicals methane, benzene, and nitric acid. Adipic acid is a solid produced predominantly by oxidation of cyclohexane using sir and nitric acid in a two-step process. The cyclohexane is produced by the reaction of hydrogen (derived from methane in natural gas) and benzene.

The stoichiometric material consumption formula for adipic acid is:

3 CH4 (methane) + 1.66 (H2O (water) + 2 C6H6 (benzene) + 1.5 O2

Adipic acid has been determined to be a taxable substance because a review of its stoichiometric material consumption formula shows that, based on the predominant method of production, taxable chemicals constitute 86.4 percent by weight of the materials used in its production.

The principal author of this notice is Tyrone J. Montague of the Office of Assistant Chief Counsel (Passthroughs and Special Industries). For further information regarding this notice contact Tyrone J. Montague on (202) 622-3130 (not a toll-free call).