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TOBACCO BUSINESS INTERNATIONAL
MAY/JUNE 2015
T
he e-cigarette taxman waits for
no one, not even the federal
government. While the FDA
still considers a national approach to
regulating electronic smoking and
vapor devices, several state and local
governments are pressing ahead with
their own agendas for taxation, mostly
racing to regulate them as a new source
of desperately-needed revenue. But
as more states attempt taxation, more
are questioning their hasty actions and
faulty reasoning in an attempt to thwart
them.
Minnesota led the charge in 2012
placing a tax on e-cigarettes that
is 95 percent of the wholesale cost.
Distributors in that state are required
to pay the tobacco tax or risk losing
their license. Retailers must purchase
e-cigarettes from distributors licensed
by the state and are expected to “collect
and remit sales tax on e-cigarette sales,”
according to the Minnesota Department
of Revenue.
For the e-cig/vape user, the Minnesota
tax effectively doubles the price of the
product, according to Thomas Briant,
the executive director of the National
Association of Tobacco Outlets (NATO).
“A standard e-cigarette in Minnesota
is now $14.99 to $16.99, but in states
without a tax they are $6.99 to $7.99,”
Briant tells
Tobacco Business International
(
TBI
). “So that gives you an idea [of ]
what a 95 percent tax rate does.”
Last year, 11 states looked at taxing
e-cigs, including North Carolina, where
the bill was met with opposition from
groups like Americans for Tax Reform.
In a letter to the Senate Finance
Committee, Grover Norquist, president
of Americans for Tax Reform, stated
“Imposing additional taxes on these
innovative products will chase business
out of the state and onto the Internet,
which is already a significant market
to e-cigarettes and vapor products.”
Norquist also cited studies showing that
electronic cigarettes stand to improve
The Hasty
Taxman Cometh
Minnesota and
North Carolina
already tax e-cigs,
and 14 other states
have introduced bills
to follow suit, but
lawmakers are being
accused of not fully
grasping the industry
or the true effects of
their proposals.
By Renée Covino
electric
ALLEY