The IRS has provided data on federal Superfund excise taxes, which started hitting hit resin buyers' invoices July 1.
The net result for many plastics processors likely will be higher prices — close to half a cent per pound on some resins — since resin makers and suppliers are likely to pass the cost of the taxes on to their customers.
Resins on the taxable list include polyethylene, polypropylene, homopolymer polystyrene, PVC, polybutadiene, synthetic rubber, phenolics and melamine.
The American Chemistry Council had requested the data, including guidance and tax rates. The excise taxes target chemicals primarily found in hazardous waste sites and are designed to tax those chemicals at the earliest point possible in the process.
The Infrastructure Investment & Jobs Act, which was passed in November, reinstated those taxes effective July 1. They had expired in 1995.
In addition to the reinstatement of the taxes, the bill doubled the prior tax rate on 42 listed chemicals. This effectively doubled the tax rate of the imported taxable substances as well.
The Superfund excise taxes are set to expire at the end of 2031. They're expected to generate $14.4 billion of revenue in total, or about $1.2 billion annually, the report said.
The tax directly applies to feedstocks. Common plastics feedstocks ethylene and propylene are taxed at $9.74 per ton, or 0.487 cents per pound (less than a half cent). The tax rate for related substances is dependent on individual chemical composition. For example, a PP resin, if made of 50 percent propylene, would be taxed at half that rate, or 0.22 cents per pound.
On a June 29 webinar hosted by the Manufacturers Alliance for Plastics Processors (MAPP), resin market veteran Bruce Flannery said that "many resin makers appear ready to add the tax as a surcharge to invoices."
"There's a lot of confusion about it," added Flannery, commodities product director with resin distributor Amco Polymers in Orlando, Fla. "We're trying to figure out how to do it with our customers. In most cases, [the tax] is going to be around half a cent a pound."
Part of the new data supplied by the IRS confirms that a substance is listed under the tax if taxable chemicals constitute more than 20 percent of the weight or more than 20 percent of the value of the materials used to make the substance.
Consulting firm Tecnon OrbiChem Ltd. of London cited some examples in a report on the excise taxes. “Under the new legislation ... butadiene is a taxable chemical that cannot be imported to the U.S. without payment of the infrastructure tax levy,” the report said. “Importing polybutadiene in the hope of avoiding the tax by asserting it as a different chemical will not be possible.
“In this way, the taxable substances excise tax establishes a backstop.”
The Tecnon OrbiChem report added that failure to comply with the new taxes will incur a default rate penalty of 10 percent of the appraised value of the substance.
The excise taxes are being opposed by many members of the plastics and chemical industries. In a June 3 letter to the IRS, ACC President and CEO Chris Jahn asked for a delay in implementation because of unanswered questions.
He also noted ACC's "continuing opposition to the reinstatement of this tax, given its negative impact on our members and the adverse downstream impact on consumers as the price of many goods will increase."
ACC declined further comment on June 29.
In a statement to Plastics News, Plastics Industry Association President Matt Seaholm said that, despite the bipartisan commitment to invest in infrastructure, the trade group "was disappointed with the reinstatement of this tax that will increase costs for consumers."
Officials with Dow Inc., a major producer of PE and other specialty plastics based in Midland, Mich., said in a statement to PN that their firm will comply with the new taxes. But they added that Dow "disagrees with the imposition of this counterproductive tax, because it increases prices for chemical building blocks that support the maintenance and construction of important infrastructure."