IRS ADDS GLYCERINE AND PHENOL TO TAXABLE SUBSTANCES LIST.

Notice 94-75

TAX ON CERTAIN IMPORTED SUBSTANCES (GLYCERINE, ET AL.); NOTICE OF DETERMINATIONS

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 glycerine and phenol.

EFFECTIVE DATE: This modification is effective January 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).

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 June 10, 1994, the Secretary determined that glycerine and phenol should be added to the list of taxable substances in section 4672(a)(3), effective January 1, 1991.

The rate of tax prescribed for glycerine, under section 4671(a)(3), is under $9.52 per ton. This is based upon a conversion factor for propylene of 0.67, a conversion factor for chlorine of 2.16, and a conversion factor for sodium hydroxide of 1.54.

The rate of tax prescribed for phenol, under section 4671(b)(3), is $6.33 per ton. This is based upon a conversion factor for benzene of 0.9 and a conversion factor propylene of 0.4.

The petitioner is Dow 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.

GLYCERINE

     HTS number: 1520.90.00.00

The stoichiometric material consumption formula for glycerine substance is:

(propylene) + 2(chlorine) + 2(sodium hydroxide) + (water) ---> (glycerine) +2(sodium chloride) + 2(hydrogen chloride)

Glycerine 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 93.5 percent by weight of the materials used in its production.

PHENOL

     HTS number 2907.11.00.00

The stoichiometric material consumption formula for phenol is:

(benzene) + (propylene) + (oxygen) ---> (phenol) + (acetone)

Phenol 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 78.9 percent by weight of the materials used in its production.

                                   Dale D. Goode,