IRS ADDS MONOCHLOROBENZENE AND ETHYL CHLORIDE TO TAXABLE SUBSTANCES LIST.

Notice 94-81

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice.

SUMMARY: This notice announces determinations, under Notice 89-61, that the list of taxable substances in section 4672(a)(3) will be modified to include monochlorobenzene and ethyl chloride.

EFFECTIVE DATE: This modification is effective April 1, 1994.

FOR FURTHER INFORMATION CONTACT: Tyrone J. Montague, 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 such substance should be listed as a taxable substance. The Secretary shall add such 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 such 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.

Determination

On July 12, 1994, the Secretary determined that monochlorobenzene and ethyl chloride should be added to the list of taxable substances in section 4672(a)(3), effective April 1, 1994.

The rate of tax prescribed for monochlorobenzene, under section 4671(b)(3), is $4.22 per ton. This is based upon a conversion factor for chlorine of 0.315 and a conversion factor for benzene of 0.6939.

The rate of tax prescribed for ethyl chloride, under section 4671(b)(3), is $2.29 per ton. This is based upon a conversion factor for ethylene of 0.4379 and a conversion factor for hydrochloric acid of 0.5621.

The petitioner is PPG Industries, Inc., a manufacturer and exporter of these substances. No material comments were received on these petitions. The following information is the basis for the determinations.

Monochlorobenzene

HTS number: 2903.61.10.00

CAS number: 108-90-7

Monochlorobenzene is derived from the taxable chemicals chlorine and benzene. Monochlorobenzene is a liquid produced predominantly by the direct chlorination of benzene. The stoichiometric material consumption formula for monochlorobenzene is:

(chlorine) + (benzene) ---> (monochlorobenzene) + (hydrogen chloride)

Monochlorobenzene 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 100 percent by weight of the materials used in its production.

Ethyl chloride

HUTS number: 2903.11.00.20

CAS number: 75-00-3

Ethyl chloride is derived from the taxable chemicals ethylene and hydrochloric acid. Ethyl chloride is a gas produced predominantly by the hydrochlorination of ethylene.

The stoichiometric material consumption formula for ethyl chloride is:

(ethylene) + (hydrochloric acid) ---> (ethyl chloride)

Ethyl chloride 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 100 percent by weight of the materials used in its production.

                                   Dale D. Goode,