In a proposed regulation issued on June 30, 1998, the IRS imposed the 24.4¢ tax on kerosene that met the definition of ASTM specification D-3699. The specification covers a broad spectrum of materials, including products such as mineral spirits that are not sold or used as kerosene fuel. The NPCA argued that such products were unlikely to be used as motor fuels, since they usually cost more to produce as raw materials for coatings and other products.
In its revised ruling, the IRS said mineral spirits are “excluded liquids” that are not subject to the motor fuels excise tax. In addition, the ruling was made retroactive to June 30, 1998, ensuring that mineral-spirit solvents meeting the excluded-liquids definition were not taxable after that date.