SERVICE ADDS ACETYLENE BLACK TO TAXABLE SUBSTANCES LIST.

Notice 94-32

TAX ON CERTAIN IMPORTED SUBSTANCES; NOTICE OF DETERMINATION

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 acetylene black.

EFFECTIVE DATE: This modification is effective October 1, 1991.

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

SUPPLEMENTAL 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 chemicals constitute 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 717, sets forth the rules relating to the determination process.

DETERMINATION

On March 10, 1994, the Secretary determined that acetylene black should be added to the list of taxable substances in section 4672(a)(3) of the Internal Revenue Code, effective October 1, 1991. However, if this substance is produced from acetylene derived from coal it is not a taxable substance.

The rate of tax prescribed for acetylene black, under section 4671(b)(3), is $5.50 per ton unless it is produced from acetylene derived from coal. This is based upon a conversion factor for acetylene of 1.13.

The petitioner is Chevron Chemical 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: 2903.00.00.50

The stoichiometric material consumption formula for acetylene black is:

C2H2 (acetylene) --> 2 C (acetylene black) + 2 H (hydrogen)

Acetylene black 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,