Proposed vape tax would ‘absolutely put us into bankruptcy,’ company warns

Business owners are pushing against a lawmaker’s bill to tax vapor products that contain nicotine.

An excise tax of 5 cents per fluid milliliter of consumable product would be imposed if lawmakers pass Assembly Bill 269, sponsored by Assemblywoman Irene Bustamante Adams, D-Las Vegas. Members of an Assembly taxation committee heard comments for and against the measure on Tuesday.

She said the bill is not about whether vapor products are healthier than tobacco products, but simply taxing a new product that’s come into the tobacco market through technology. Vapor products do not contain tobacco but do often have varying levels of nicotine.

“This is not a health bill,” Bustamante Adams said. “This is about a tax conversation.”

Bustamante Adams said the FDA will begin implementing regulations on vapor products and e-cigarettes, including a requirement going into effect Aug. 8 that limits these purchases to buyers who are at least 18 years old.

Nevada’s current excise tax charged on all tobacco products is $1.80 for a pack of 20 cigarettes or $2.25 for a pack of 25. Other tobacco products are at 30 percent of the wholesale price, which is what Bustamante Adams said she initially was going to propose for vapor products that contain nicotine.

She told members of the Assembly committee on taxation that she negotiated with industry representatives and decided to use the same tax rate that was implemented in North Carolina in 2014. Louisiana also uses this rate, she said.

Bryan Wachter of the Retail Association of Nevada spoke in support.

“We tax nicotine in the state of Nevada, and we should continue taxing nicotine in all its new and evolved forms,” he said.

Business owners and representatives of associations in the vapor product industry spoke against the measure. Some said that there would be inequity under the tax when compared with tobacco taxes and that retailers such as gas stations that sell tobacco products would benefit.

Opponents said consumers would be dissuaded from buying a product that could cost them $3 to $8 more, depending on the product size.

William Wilson, CEO of eCig Distributors, said his business is moving to Nevada to avoid California’s recently approved vapor products tax starting in April, but this new measure would cost the company about $600,000 per month.

Wilson said the business works with 850 suppliers in the United States and sells about 12 million milliliters of this liquid product per month.

He said the proposed tax “would absolutely put us into bankruptcy.”

Bustamante Adams said the tax is not intended to be onerous and that she would be open to other suggestions.

Assemblyman Al Kramer, R-Carson City, was among those to point out the use of taxes as a tool to curb behavior, such as in gambling or drinking. Some business owners said that many turn to vapor products to quit smoking tobacco and that the tax would drive customers to traditional cigarettes.

Concerns were also raised about customers turning to online sales to avoid in-state taxes, an issue Bustamante Adams said she hopes Congress addresses.

The Legislature’s Fiscal Analysis Division used North Carolina’s fiscal year 2016 collections on a per-capita basis to estimate that the tax in Nevada could generate about $1 million to start, maybe more.

Bustamante Adams said groups have approached her to express interest in those funds if the tax is approved. Some opponents of the bill argued that an added revenue stream was the primary goal and that this emerging industry should be allowed to adjust to new federal regulations.

No action was taken during the hearing.

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