SERVICE ADDS PARA-NITROPHENOL, ORTHO-NITROCHLOROBENZENE, AND PARA- NITROCHLOROBENZENE TO TAXABLE SUBSTANCES LIST.

Notice 94-66

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 para-nitrophenol, ortho-nitrochlorobenzene, and para-nitrochlorobenzene.

EFFECTIVE DATE: This modification is effective July 1, 1990.

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 May 23, 1994, the Secretary determined that para-nitrophenol, ortho-nitrochlorobenzene, and para-nitrochlorobenzene should be added to the list of taxable substances in section 4672(a)(3), effective July 1, 1990.

The rate of tax prescribed for para-nitrophenol, under section 4671(b)(3), is $4.85 per ton. This is based upon a conversion factor for chlorine of 0.54, a conversion factor for benzene of 0.60, a conversion factor for sodium hydroxide of 0.75, a conversion factor for nitric acid of 0.47, and a conversion factor for sulfuric acid of 0.59.

The rate of tax prescribed for ortho-nitrochlorobenzene, under section 4671(b)(3), is $3.89 per ton. This is based upon a conversion factor for chlorine of 0.47, a conversion factor for benzene of 0.52, and a conversion factor for nitric acid of 0.41.

The rate of tax prescribed for para-nitrochlorobenzene, under section 4671(b)(3), is $3.89 per ton. This is based upon a conversion factor for chlorine of 0.47, a conversion factor for benzene of 0.52, and a conversion factor for nitric acid of 0.41.

The petitioner is Monsanto 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.

PARA-NITROPHENOL

HTS number: 2908.90.04.00 CAS number: 100-02-7

Para-nitrophenol is derived from the taxable chemicals chlorine, benzene, sodium hydroxide, nitric acid, and sulfuric acid. Para- nitrophenol is a solid produced predominantly by the reaction of para-nitrochlorobenzene with aqueous sodium hydroxide, followed by reaction with sulfuric acid to form para-nitrophenol from the resulting para-nitrophenoxide.

The stoichiometric material consumption formula for para- nitrophenol is:

(chlorine) + (benzene) + (sodium hydroxide) + (nitric acid) + 0.5 (sulfuric acid) ---> (p-nitrophenol) + (sodium chloride) + (water) + 0.5 (sodium sulfate) + (hydrogen chloride).

Para-nitrophenol 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.

ORTHO-NITROCHLOROBENZENE

HTS number: 2903.69.00.00 CAS number: 88-73-3

Ortho-nitrochlorobenzene is derived from the taxable chemicals chlorine, benzene, and nitric acid. Ortho-nitrochlorobenzene is a solid produced predominantly by the nitration of monochlorobenzene.

The stoichiometric material consumption formula for ortho- nitrochlorobenzene is:

(chlorine) + (benzene) + (nitric acid) ---> (onitrochlorobenzene) + (water) + (hydrogen chloride)

Ortho-nitrochlorobenzene 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.

PARA-NITROCHLOROBENZENE

HTS number: 2903.69.00.00 CAS number: 100-00-5

Para-nitrochlorobenzene is derived from the taxable chemicals chlorine, benzene, and nitric acid. Para-nitrochlorobenzene is a solid produced predominantly by the nitration of monochlorobenzene.

The stoichiometric material consumption formula for para- nitrochlorobenzene is:

(chlorine) + (benzene) + (nitric acid) ---> (p- nitrochlorobenzene) + (water) + (hydrogen chloride)

Para-nitrochlorobenzene 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,