A Massive Vaping Tax Is Killing Pennsylvania’s E-Cigarette Industry

Steve Birr | Vice Reporter

Small businesses selling electronic cigarettes continue closing their doors in Pennsylvania, forced into bankruptcy by a costly tax on their products.

Vaping industry advocates continue to fight against a 40 percent wholesale tax on e-cigarette products in the state that is responsible for closing at least 150 stores since implementation last October. A court rejected an effort by officials in Pennsylvania to toss out a lawsuit challenging the tax in July, but advocates say little progress is being made to save the industry from collapse, reports Philly.com.

While officials in Pennsylvania defend the tax, saying the annual $13 million in promised revenue is desperately needed for the state, critics argue that it is not economically viable in the long-term. Gregory Conley, president of the American Vaping Association, says lawmakers have “refused to take lost revenue from store closings into account in its revenue projections.”

“Regrettably, competing interests have kept Pennsylvania’s ridiculous 40 percent of wholesale tax on nearly every product sold in vape shops — including batteries, devices, and nicotine-free e-liquids — from being reformed,” Conley told The Daily Caller News Foundation. “As more and more stores close, it becomes harder to negotiate a new tax that will, at least on paper, generate the $13 million that this tax was supposed to raise. As such, the 5-cents-per-milliliter of e-liquid tax floated by a bipartisan coalition of legislators is unlikely to become law despite wide support from the industry and advocates.”

A bill has long been under review in the state legislature that would replace the wholesale tax with the 5-cent-per-milliliter sales tax on liquid nicotine; however, vaping advocates in the state say there is currently little momentum for reform. Amelia Rivera, leader of the Pennsylvania Vape Association, says “there’s really no conversation taking place.”

The industry is also fighting against the entrenched interests of the big tobacco companies. Tobacco giants, particularly RJ Reynolds, are advocating for a 10- to 15-cents-per-milliliter tax on liquid nicotine, which critics say is an effort to snuff out smaller competition under the guise of compromise.

Vaping devices made by RJ Reynolds typically contain far less fluid than devices sold at vape shops, meaning their products will be taxed at a lower rate than competing items. They are also better able to absorb costs from state taxes and fees than a small business.

“For them, keeping the 40 percent wholesale tax, as terrible as it is, is better than the replacement being floated by Reynolds,” Conley told TheDCNF. “This is a mess fully created by the Pennsylvania Legislature and, sadly, it appears unlikely that it will be settled this year in a way that makes anyone, particularly small businesses, happy.”

The tax is pushing consumers out of state to buy their vaping products. Nicotine liquid that now costs nearly $10 in Pennsylvania is available in New Jersey for $4.99. Proponents of vaping argue that critics are ignoring the positive impact the devices are having on current smokers. Public health experts also note that vaping devices offer smokers a viable way to reduce health risks to those around them.

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Steve Birr

Vice Reporter

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