ELR Citation: ELR 20474
No(s). 98-4444 (6th Cir. Jan 30, 2002)

The court affirms a district court holding that a taxpayer who purchased an ozone-depleting chemical (ODC) from China and then processed and sold the ODC to customers in the United States is subject to federal excise taxes. The court first holds that the taxpayer cannot take advantage of an exemption that exempts from tax ODCs diverted or recovered in the United States as part of a recycling process. Because the removal of the ODC from its shipping containers in the United States did not occur during the servicing of machinery or in anticipation of disposal, the taxpayer does not qualify for the exemption. The court also holds that the taxpayer is not entitled to an exemption that provides that chemical mixtures should be taxed when created and not upon subsequent sale or use. The ODC at issue here was created in another country and is, therefore, an imported taxable product for tax purposes. The mixture exemption applies only to mixtures created within the United States.

The full text of this decision is available from ELR (3 pp., ELR Order No. L-440).

Counsel for Plaintiff
John J. McHugh III
McHugh, DeNune & McCarthy
5589 Monroe St., Toledo OH 43560
(419) 885-3597

Counsel for Defendant
Teresa T. Milton
Tax Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000