# Prop. Treas. Reg. § 52.4672-1: Definitions. Proposed regulation, not in force. REG-105954-22, 88 FR 18446, published 2023-03-29 . Interprets 26 U.S.C. § 4672. Par. 10. Section 52.4672-1 is added to read as follows: (a) Overview. This section provides definitions for purposes of sections 4671 and 4672 of the Internal Revenue Code (Code), §§ 52.4671-1 and 52.4671-2, this section, and § 52.4672-2. (b) Definitions —(1) Conversion factor. The term conversion factor means the ratio of the weight of an individual taxable chemical used in the production of a substance to the total weight of the substance. (2) Entry for consumption, use, or warehousing. The term entry for consumption, use, or warehousing has the meaning given such term by § 52.4662-1(c)(2). (3) Importer —(i) In general. The term importer means the person entering the taxable substance for consumption, use, or warehousing. See section 4662(a)(3). If the person entering the taxable substance 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 substance after entry of the taxable substance 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 taxable substance directly to a purchaser in the United States, the drop ship business is the importer of the taxable substance. If a drop ship business outside the United States purchases or otherwise arranges for a person outside the United States to ship a taxable substance directly to a purchaser in the United States, the purchaser in the United States is the importer of the taxable substance. With regard to any sale of a taxable substance, the term drop ship business means a person that sells the taxable substance or arranges for purchasers to purchase the taxable substance, and uses a third party to fill orders by shipping the taxable substance directly to the purchaser. The determination of whether a person is a drop ship business is made on a sale-by-sale basis. (4) Predominant method of production. The term predominant method of production means the method used to produce the greatest number of tons of a particular substance worldwide, relative to the total number of tons of the substance produced worldwide. (5) 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 substance for a consideration, which may include, but is not limited to, money, services, or property. (6) Section 4671 tax. The term section 4671 tax means the excise tax imposed by section 4671(a) of the Code on any taxable substance sold or used by the importer of the taxable substance. (7) Taxable chemical. The term taxable chemical has the meaning given such term by section 4662(a)(1) of the Code and section § 52.4662-1(b). (8) Taxable substance. The term taxable substance means any substance, which at the time of sale or use by the importer, is listed in section 4672(a)(3) or has been added to the list of taxable substances pursuant to section 4672(a)(2) or (4). The term does not include any substance that the Secretary of the Treasury or her delegate has removed from the list of taxable substances through the process described in section 4672(a)(2) or (4). A substance that satisfies the weight or value test, but that is not listed in section 4672(a)(3) and has not been added to the list of taxable substances pursuant to section 4672(a)(2) or (4), is not a taxable substance. (9) Use. A taxable substance 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 another substance (including by mixing or combining the taxable substance 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 substance through spillage, fire, natural degradation, or other casualty is not a use. The mere manufacture or production of a taxable substance is not a use of that taxable substance. (10) United States. The term United States has the meaning given such term by section 4612(a)(4) of the Code. See sections 4672(b)(2) and 4662(a)(2). (11) Weight or value test. The term weight or value test means the test under section 4672(a)(2)(B) for determining whether taxable chemicals constitute more than 20 percent of the weight or more than 20 percent of the value of the materials used to produce a substance, based on the predominant method of production. (c) Applicability date. This section applies to calendar quarters beginning on or after [date of publication of final regulations in the Federal Register ].