Rev. Rul. 75-219

Advice has been requested whether beet molasses produced in the manner described below comes within the meaning of "manufactured sugar" as defined in section 4502(3) of the Internal Revenue Code of 1954 so as to subject the molasses to the tax imposed on manufactured sugar by section 4501.

Certain companies manufacture raw sugar beets into granulated white sugar for human consumption. Successive crystallization processes are used in the manufacture of white sugar from beets. During the processing, additives are introduced for various purposes, such as, to minimize bacterial destruction of sugar, to minimize foam and juice lime salts, and to ensure a white sugar. These additives, constituting less than 1 percent of the total dissolved solids, remain in the residual liquid which is sold as beet molasses to the animal feed industry, fermentation industry, and industries concerned with the production of yeast, citric acid, and glutamic acid.

The beet molasses is sold without further processing and is not used for human consumption or for extraction of sugar. This beet molasses, exclusive of additives, contains approximately 80 to 86 percent total dissolved solids, 20 to 14 percent water by weight, with solids consisting of 48 to 52 percent sugar and 32 to 34 percent soluble nonsugar impurities.

Section 4501(a) of the Code imposes upon manufactured sugar manufactured in the United States, a tax, to be paid by the manufacturer at a rate based on total sugars per pound.

Section 4502(3) of the Code provides that the term "manufactured sugar" means any sugar derived from sugar beets or sugarcane, which is not to be, and which shall not be, further refined or otherwise improved in quality; except sugar in liquid form which contains nonsugar solids (excluding any foreign substance that may have been added or developed in the product) equal to more than 6 per centum of the total soluble solids and except also sirup of cane juice produced from sugarcane grown in the continental United States. The grades or types of sugar within the meaning of this definition include molasses.

Beet molasses is sugar in liquid form. Since the beet molasses in the instant case contains nonsugar solids (excluding any foreign substance that may have been added or developed in the product) equal to more than 6 percent of the total soluble solids it does not come within the scope of the term "manufactured sugar" as defined in section 4502(3) of the Code. Therefore, the tax imposed by section 4501(a) does not apply to such product.