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Pittway Corporation v. United States

December 18, 1996

PITTWAY CORPORATION, AND SUBSIDIARIES, PLAINTIFF-APPELLANT,

v.

UNITED STATES OF AMERICA, DEFENDANT-APPELLEE.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division.

No. 95 C 3181

Before HARLINGTON WOOD, JR., RIPPLE, and MANION, Circuit Judges.

MANION, Circuit Judge.

Charles R. Norgle, Sr., Judge.

ARGUED OCTOBER 30, 1996

DECIDED DECEMBER 18, 1996

Pittway Corporation inserted butane into containers as an aerosol propellant. Section 4661(a) of the Internal Revenue Code taxes the manufacturer of certain chemicals, among them butane. The IRS taxed Pittway for using the butane in the manufacturing of the various aerosol products. Pittway claims that its customers are the manufacturers who should pay the tax and seeks a refund of $236,056 in taxes it paid to the government under Section 4661(a). The district court granted summary judgment in favor of the government. We affirm.

I. Background

Pittway was a "contract packager." Through a subsidiary, Pittway contracted with other companies to assemble and package those companies' consumer products. Many of the products it assembled and packaged required the addition of aerosol-grade isobutane as an ingredient. The isobutane served as a propellant in the aerosol containers.

Pittway purchased its own supply of isobutane from suppliers and maintained its supply in storage tanks at its packaging facilities. Pursuant to its customers' formulas, Pittway inserted isobutane, along with other ingredients, into the customers' trademarked containers. When Pittway had assembled and packaged the product, a common carrier delivered the product to Pittway's customers.

At issue are two sections of the Internal Revenue Code promulgated by the Hazardous Substance Response Revenue Act of 1980. Section 4661(a) states:

There is hereby imposed a tax on any taxable chemical sold by the manufacturer, producer, or importer thereof. 26 U.S.C. sec. 4661(a).

Section 4662(b)(1) states:

Under regulations prescribed by the Secretary, methane or butane shall be treated as a taxable chemical only if it is used otherwise than as a fuel or in the manufacture or production of any motor fuel, diesel fuel, aviation fuel, or jet fuel (and, for purposes of section 4661(a), the person so using it shall be ...


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