SERVICE ADDS POLYCARBONATE TO TAXABLE SUBSTANCES LIST.

Notice 94-82

TAX ON CERTAIN IMPORTED SUBSTANCES (POLYCARBONATE); 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) will be modified to include polycarbonate.

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).

SUPPLEMENTAL 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 30, 1994, the Secretary determined that polycarbonate should be added to the list of taxable substances in section 4672(a)(3), effective July 1, 1993.

The rate of tax prescribed for polycarbonate, under section 4671(b)(3), is $4.91 per ton. This is based upon a conversion factor for methane of 0.083, a conversion factor for chlorine of 0.276, a conversion factor for benzene of 0.614, a conversion factor for propylene of 0.165, and a conversion factor for sodium hydroxide of 0.315.

The petitioner is Miles Inc., 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: 3907.40.00.00

CAS number: 127133-67-9

Polycarbonate is derived from the taxable chemicals methane, chlorine, benzene, propylene, and sodium hydroxide. Polycarbonate is a solid produced predominantly by the interfacial polycondensation reaction of the sodium salt solution of bisphenol-A in an aqueous phase and phosgene in an organic phase.

The stoichiometric material consumption formula for polycarbonate is:

(methane) + (chlorine) + 2(benzene) + (propylene) + 2(sodium hydroxide) + 3(oxygen) ---> (polycarbonate) + 5 (water) + 2(sodium chloride)

Polycarbonate 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 79.1 percent by weight of the materials used in its production.

                                   Dale B. Goode,