Small, family-owned vape shops are being snuffed out of existence in Pennsylvania under a massive tax responsible for decimating more than 25 percent of the state’s industry.
Vape shop owners continue to flounder under the weight of a 40 percent tax on all vapor products from wholesalers, a cost that many businesses simply cannot cover. Electronic cigarette advocates say the tax is already responsible for closing at least 150 stores since implementation last October, and the stores that have remained opened are struggling to sustain profits under the financial burden, reports Trib Live.
Officials in Pennsylvania are defending the tax, arguing the annual $13 million in promised revenue is desperately needed for the state. Critics, however, note that the tax is not economically sustainable, because annual revenue will diminish as more vape shops close their doors. Shop owners say the tax is forcing them to either “adapt or perish.”
“This virtually wiped me out,” Pennsylvania Vape Association President Charles Huff, who recently closed his online vaping business due to the tax, told Trib Live. “It just destroyed my business. It hurts a lot of people that our legislators are trying to balance the budget on the backs of small businesses.”
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. 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 of the Pennsylvania Vape Association said “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.
“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,” Gregory Conley, president of the American Vaping Association, previously 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.”
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