'POLYMERS EXTRUDED IN FIBER FORM' MAY BE TAXABLE SUBSTANCES.

Notice 95-39

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice.

SUMMARY: This notice modifies the definition of SUBSTANCE as that term relates to synthetic organic chemicals under Notice 89-61. It affect manufacturers and importers of taxable chemicals that are used in manufacturing taxable substances, and importers and exporters of those substances.

EFFECTIVE DATE: May 24, 1995.

FOR FURTHER INFORMATION CONTACT: Ruth Hoffman, Office of Assistant Chief Counsel (Passthroughs and Special Industries), (202) 622-3130 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

BACKGROUND

Under section 4672(a), an importer or exporter of any substance may request that the Secretary determine whether that 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, 1989-1 C.B. 717, sets forth the rules relating to the determination process. Under Notice 89-61, for synthetic organic chemicals the term SUBSTANCE excludes textile fibers, yarns, and staple, and fabricated products that are molded, formed, woven, or otherwise finished into end-use products.

Modification of Definition of Substance

Certain polymers (resins) are initially produced as intermediate products in pellet, powder, or fiber form. Under 89-61, a polymer in the form of pellet or power, but not fiber, is eligible for listing as a taxable substance. This Notice modifies the definition of SUBSTANCE to include polymers extruded in fiber form.

                                   Dale D. Goode,