SERVICE ADDS BENZOIC ACID AND BENZALDEHYDE TO TAXABLE SUBSTANCES LIST.

Notice 94-44

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice.

SUMMARY: This notice announces a determination, under Notice 89-61, that the list of taxable substances in section 4672(a)(3) of the Internal Revenue Code will be modified to include benzoic acid and benzaldehyde.

EFFECTIVE DATE: This modification is effective July 1, 1993.

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) of the Internal Revenue Code, 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 March 16, 1994, the Secretary determined that benzoic acid and benzaldehyde should be added to the list of taxable substances in section 4672(a)(3) of the Internal Revenue Code, effective July 1, 1993.

The rate of tax prescribed for benzoic acid, under section 4671(b)(3), is $3.67 per ton. This is based upon a conversion factor for toluene of 0.7545.

The rate of tax prescribed for benzaldehyde, under section 4671(b)(3), is $4.22 per ton. This is based upon a conversion factor for toluene of 0.8682.

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

Benzoic Acid

HTS number: 2916.31.10.05 CAS number: 65-85-0

Benzoic acid is derived from the taxable chemical toluene. Benzoic acid is a solid produced predominantly by the continuous liquid-phase oxidation of toluene, using air as the oxygen source, in the presence of a cobalt containing catalyst.

The stoichiometric material consumption formula for benzoic acid is:

[Formula omitted]

Benzoic 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 65.7 percent by weight of the materials used in its production.

Benzaldehyde

HTS number: 2912.21.00.00 CAS number: 100-52-7

Benzaldehyde is derived from the taxable chemical toluene. Benzaldehyde is a liquid produced predominantly by as a co-product of benzoic acid by the continuous liquid-phase oxidation of toluene, using air as the oxygen source, in the presence of a cobalt containing catalyst.

The stoichiometric material consumption formula for benzaldehyde is:

[Formula omitted]

Benzaldehyde 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 74.1 percent by weight of the materials used in its production.

                                   Dale D. Goode,