# Prop. Treas. Reg. § 52.4662-1: Taxable chemical; other definitions. Proposed regulation, not in force. REG-105954-22, 88 FR 18446, published 2023-03-29 . Interprets 26 U.S.C. § 4662. Par. 3. Section 52.4662-1 is added to read as follows: (a) Overview. This section provides definitions for purposes of sections 4661 and 4662 of the Internal Revenue Code (Code), § 52.4661-1, this section, and §§ 52.4662-2 through 52.4662-5. (b) Taxable chemical —(1) In general. (i) Except as provided in section 4662(b), the term taxable chemical means any substance that is: (A) Listed in the table under section 4661(b); and (B) Manufactured or produced in the United States, or entered into the United States for consumption, use, or warehousing. See section 4662(a)(1). (ii) A substance is a taxable chemical only if it satisfies both paragraphs (b)(1)(i) and (ii) of this section. For rules regarding paragraph (b)(1)(i) of this section, see paragraph (b)(2) of this section. For the definition of entered into the United States for consumption, use, or warehousing as it relates to the second prong of the definition, see paragraph (c)(2) of this section. (2) Substances listed in the table under section 4661(b). A substance is listed in the table under section 4661(b), and therefore satisfies paragraph (b)(1)(i) of this section, if it has the same name and molecular formula as a substance listed in the table under section 4661(b). All isomeric forms of a substance listed in the table under section 4661(b) are treated as having the same name and molecular formula of the substance. Therefore, except as provided in section 4662(b)(7) with respect to xylene, an isomer of a substance listed in the table under section 4661(b) is a substance listed in the table under section 4661(b). The physical state of a substance (that is, solid, liquid, or gas) is immaterial. See paragraph (b)(3) of this section for the name and the molecular formula, or chemical symbol, of each substance listed in the table under section 4661(b). (3) Molecular formulas and chemical symbols. The following table provides the name and molecular formula or chemical symbol for each substance listed in the table under section 4661(b): **Table 1 to Paragraph ( b )(3)** | Name | Molecular formula or chemical symbol | | --- | --- | | Acetylene | C 2 H 2 | | Benzene | C 6 H 6 | | Butane | C 4 H 10 | | Butylene | C 4 H 8 | | Butadiene | C 4 H 6 | | Ethylene | C 2 H 4 | | Methane | CH 4 | | Naphthalene | C 10 H 8 | | Propylene | C 3 H 6 | | Toluene | C 7 H 8 | | Xylene | C 8 H 10 | | Ammonia | NH 3 | | Antimony | Sb | | Antimony trioxide | SbO 3 | | Arsenic | As | | Arsenic trioxide | AsO 3 | | Barium sulfide | BaS | | Bromine | Br | | Cadmium | Cd | | Chlorine | Cl | | Chromium | Cr | | Chromite | FeCr 2 O 4 and MgCr 2 O 4 | | Potassium dichromate | K 2 Cr 2 O 7 | | Sodium dichromate | NaCr 2 O 7 | | Cobalt | Co | | Cupric sulfate | CuSO 4 | | Cupric oxide | CuO | | Cuprous oxide | Cu 2 O | | Hydrochloric acid | HCl | | Hydrogen fluoride | HF | | Lead oxide | PbO | | Mercury | Hg | | Nickel | Ni | | Phosphorus | P | | Stannous chloride | SnCl 2 | | Stannic chloride | SnCl 4 | | Zinc chloride | ZnCl 2 | | Zinc sulfate | ZnSO 4 | | Potassium hydroxide | KOH | | Sodium hydroxide | NaOH | | Sulfuric acid | H 2 SO 4 | | Nitric acid | HNO 3 | (4) Special rule for ores. Except for chromite, an ore is not a taxable chemical. (5) Special rule for methane and butane. For rules regarding the treatment of methane and butane as taxable chemicals, see section 4662(b)(1) and § 52.4662-2(a). (6) Special rule for substances derived from coal. For rules regarding the exclusion from the definition of taxable chemical for substances derived from coal, see section 4662(b)(4) and § 52.4662-2(d). (7) Special rule for xylene. For a special rule regarding separated isomers of xylene, see section 4662(b)(7). (8) Example. X, a domestic corporation, produces isobutylene in the United States. Isobutylene is an isomer of butylene and has the molecular formula C 4 H 8 . The isobutylene is a taxable chemical because it is a substance listed in the table under section 4661(b) as required by section 4662(a)(1)(A), and it is produced in the United States as required by section 4662(a)(1)(B). (c) Other definitions —(1) Chemical mixture. The term chemical mixture means a substance composed of two or more physically-combined components that are not chemically bonded. Chemical mixtures include alloys, solutions, suspensions, and colloids. (2) Entry for consumption, use, or warehousing —(i) In general. Except as otherwise provided in this paragraph (c)(2), the term entry for consumption, use, or warehousing, when used with respect to any goods, means: (A) Brought into the customs territory of the United States (customs territory) if applicable customs law requires that the goods be entered into the customs territory for consumption, use, or warehousing; (B) Admitted into a foreign trade zone for any purpose if like goods brought into the customs territory would be entered into the customs territory for consumption, use, or warehousing; or (C) Imported into any other part of the United States for any purpose if like goods brought into the customs territory would be entered into the customs territory for consumption, use, or warehousing. (ii) Entry for transportation and exportation. Goods entered into a customs territory for transportation and exportation are not goods entered into the customs territory for consumption, use, or warehousing. (iii) Multiple entries. In the case of multiple entries described in paragraph (c)(2)(i) of this section, only the first entry is taken into account. (3) Exportation. The term exportation means the severance of a taxable chemical from the mass of things belonging within the United States with the intention of uniting it with the mass of things belonging within a foreign country. (4) Exporter. The term exporter means the person named as shipper or consignor in the export bill of lading. (5) Importer —(i) In general. The term importer means the person entering the taxable chemical for consumption, use, or warehousing. See section 4662(a)(3). If the person entering the taxable chemical for consumption, use, or warehousing is merely acting as an agent or a customs broker for another person, then the agent or customs broker is not the importer and the importer is the first person in the United States to sell or use the taxable chemical after entry of the taxable chemical for consumption, use, or warehousing. (ii) Drop ship businesses. If a drop ship business in the United States purchases or otherwise arranges for a person outside the United States to ship a chemical listed in the table under section 4661(b) directly to a purchaser in the United States, the drop ship business is the importer of the chemical. If a drop ship business outside the United States purchases or otherwise arranges for a person outside the United States to ship a chemical listed in the table under section 4661(b) directly to a purchaser in the United States, the purchaser in the United States is the importer of the chemical. For purposes of this paragraph (c)(5)(ii), the term drop ship business means a person that sells the chemical or arranges for purchasers to purchase the chemical, and uses a third party to fill the order by shipping the chemical directly to the purchaser. The determination of whether a person is a drop ship business is made on a sale-by-sale basis. (6) Manufacturer —(i) In general. The term manufacturer includes a producer. A manufacturer is any person that produces a taxable chemical from new or raw material, feedstocks, or other substances, or from scrap, salvage, waste, or recycled substances. A manufacturer includes any person that produces a taxable chemical from the mining process, or extracts, isolates, separates, or otherwise removes a taxable chemical from an ore or from another substance. A manufacturer also includes any person that produces a taxable chemical by processing or manipulating a substance, such as through the oxidation process. The term manufacturer does not include a person that dilutes a chemical mixture comprised of one or more tax-paid chemicals with a solvent that is not a taxable chemical. (ii) Contract manufacturing. If a person manufactures or produces a taxable chemical for a second person, pursuant to a contract, order, or agreement and in accordance with the second person's specifications, or if a person manufactures or produces a taxable chemical for a second person from materials owned by the second person, the second person is treated as the manufacturer of the taxable chemical manufactured by the first person. (7) Molecular formula. The term molecular formula means a chemical formula that shows the number and kinds of atoms in the substance. (8) Sale. The term sale means the transfer of title or substantial incidents of ownership (whether or not delivery to, or payment by, the purchaser has been made) in a taxable chemical for a consideration, which may include, but is not limited to, money, services, or property. (9) Section 4661 tax. The term section 4661 tax means the excise tax imposed by section 4661(a) of the Code on any taxable chemical sold or used by the manufacturer, producer, or importer of the taxable chemical. (10) Taxable substance. The term taxable substance has the meaning given to such term by section 4671(a) of the Code and § 52.4672-1(b)(8). (11) Taxable chemical registrant. The term taxable chemical registrant means a person that is registered by the Internal Revenue Service (IRS) under Activity Letter “G.” A person may apply for “G” registration by completing Form 637, Application for Registration for Certain Excise Tax Activities, and submitting the completed form to the IRS. (12) Tax-paid chemical. The term tax-paid chemical means a taxable chemical on which the section 4661 tax has been paid. (13) Ton. The term ton means 2,000 pounds. In the case of any taxable chemical measured by volume, the term ton means the amount of such taxable chemical, in cubic feet, that is the equivalent of 2,000 pounds on a molecular weight basis. See section 4662(a)(4) and § 52.4661-1(f)(2)(iii). (14) United States. The term United States has the meaning given to such term by section 4612(a)(4) of the Code. See section 4662(a)(2). (15) Use. Except as otherwise provided in section 4662 and § 52.4662-2, a taxable chemical is used when it is consumed, when it functions as a catalyst, when its chemical composition changes, when it is used in the manufacture or production of a chemical mixture or other substance (including by mixing or combining the taxable chemical with other substances), or when it is put into service in a trade or business for the production of income. The loss or destruction of a taxable chemical through spillage, fire, natural degradation, or other casualty is not a use of the chemical. The mere manufacture or production of a taxable chemical is not a use of that chemical. (d) Applicability date. This section applies to sales or uses in calendar quarters beginning on or after [date of publication of final regulations in the Federal Register ].