IRS ADDS DIMETHYL TEREPHTHALATE TO TAXABLE SUBSTANCES LIST.

Notice 94-74

DEPARTMENT OF THE TREASURY Internal Revenue Service

TAX ON CERTAIN IMPORTED SUBSTANCES (DIMETHYL TEREPHTHALATE); 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 dimethyl terephthalate.

EFFECTIVE DATE: This modification is effective April 1, 1992.

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 dimethyl terephthalate should be added to the list of taxable substances in section 4672(a)(3), effective April 1, 1992.

The rate of tax prescribed for dimethyl terephthalate, under section 4671(b)(3), is $3.23 per ton. This is based upon a conversion factor for xylene of 0.547 and a conversion factor for methane of 0.165.

The petitioner is Cape Industries, 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: 2917.37.00.00

CAS number: 120-61-6

Dimethyl terephthalate is derived from the taxable chemicals xylene and methane. Dimethyl terephthalate is a solid produce predominantly by oxidation of xylene followed by esterification with methanol.

The stoichiometric material consumption formula for dimethyl terephthalate is:

              (xylene) + 2 (methane) + 4 (oxygen) ---->

                                   Dale D. Goode