On May 31, 2024, the U.S. Internal Revenue Service announced that starting from October 1, 2024, Polyoxymethylene (CAS number: 9002-81-7) will be subject to a new tax. This tax, applied at $3.65 per ton on methane used in its production, will affect industries including automotive, electronics, industrial machinery, consumer products, and construction materials.
The tax on polyoxymethylene arises from its production method, which predominantly uses methanol derived from methane, comprising about 50% of the raw materials. In the U.S., both domestically produced and imported polyoxymethylene are subject to taxes if the taxed chemical content in their production exceeds 20%, as stipulated by IRC Section 4672(a)(2)(B). Importers and exporters must apply for inclusion on the taxable substances list or request removal if the content is below 20%, each requiring a separate application.
Target Audience for the Tax
Importers dealing in polyoxymethylene for commercial sale or application.
Effects on American Importers
Importer: Methane incurs a $3.65 per ton charge.
New tax guidelines set the methane tax at $3.65 per ton for producing polyoxymethylene, derived from multiplying the base rate of $6.88 by a 0.53 conversion factor ($6.88 × 0.53 = $3.65).New tax guidelines set the methane tax at $3.65 per ton for producing polyoxymethylene, derived from multiplying the base rate of $6.88 by a 0.53 conversion factor ($6.88 × 0.53 = $3.65).
List of Taxable Substances
Under Section 4672(a) of the U.S. Internal Revenue Code, only listed substances are taxed; unlisted ones are exempt.
Background
Celanese Ltd., an exporter of polyoxymethylene, submitted an application in December 2022, which was announced in the Federal Register on December 28. With no objections during the public review period, the IRS approved the application.
The upcoming tax adjustment is expected to impact various industries. Businesses should prepare in advance to adapt to the new policy changes.
