Small neighborhood vape shops might have a harder time staying open now that Pennsylvania will tax their products in the same way as other tobacco products.

Vapers aren't the only ones singled out for new taxes in a sweeping budget bill signed by Gov. Tom Wolf on Wednesday. Starting Sept. 1, the state sales tax of 6 percent will apply to digital downloads such as software, television shows and music. Some tobacco products, such as smokeless and loose tobacco, also face new taxes.

Smoking substitutes, such as vaping and e-cigarettes, already are subject to the sales tax and now will be hit with the 40 percent tax on wholesale prices paid by the vendor. That would result in an increase in their prices, although how the additional cost will be passed on will vary store to store.

"Some shops are barely making it, with the owner trying to do it for a paycheck, but not really getting by," said Dante Reyes of Xhale Vapor Lounge in Scranton. "These hobbyists, who are committed to the movement, aren't going to have the extra money."

There is a cash flow problem for shops, he noted. If a Vape shop carries $100,000 of inventory, that cash is tied up until someone buys the product. After the tax goes into effect, such a shop would tie up $140,000.

Vape shops sell many oils, or "juices" in vape parlance, that don't contain any nicotine at all under brand names such as Lung Candy and Cosmic Fog. Taxing them at the same rate of chewing tobacco or loose tobacco used to roll your own cigarettes seems ridiculous to Mr. Reyes.

"I have products with zero nicotine," he said. "So, why am I paying a 40 percent tax on something made of vegetable glycerin, glycol and flavoring — something that someone could make in their kitchen?"

Cigarette smokers bear an even greater burden on their habit. State tax on a pack will increase $1 to $2.60. On loose tobacco, the tax will translate to about 56 cents an ounce. Smokeless tobacco will cost about 55 cents more.

Download tax

If you want to stream a season of "Game of Thrones" from Amazon.com for $19.99, you'll have to toss $1.19 cents to Harrisburg. The price of the Justin Timberlake tune "Can't Stop the Feeling!" won't stop at $1.29. Apps, movies, streaming service subscriptions such as Netflix and Spotify, and other digital items and services will also be taxed at 6 percent.

No one likes to pay new taxes, but entrepreneur Kristopher Jones of Shavertown said the tax will be fair to competing formats and business models. Why should a downloaded book on Kindle or movie from Hulu be sales-tax exempt when customers pay taxes on books purchased at local bookstores or rent a DVD from RedBox?

"The tax laws make it a more level playing field for brick-and-mortar stores to compete on price with the big online discounters since both online and offline sales are taxed equally," said Mr. Jones, who founded and sold the internet marketing agency Pepperjam.

Cigars squeak by

For the third time in the last decade, a threatened tax on cigars was avoided. While a wholesale cigar tax was discussed as part of the state budget, it was pulled before reaching the governor's desk. Only two states — Pennsylvania and Florida — do not tax cigars beyond a sales tax.

Cigars are a big piece of Pennsylvania's economy. The state is home to three major online retailers — Cigars International, Famous Smoke and Best Cigar Prices, that make up more than half the U.S. premium retail cigar market. Also, Pennsylvania produces more than 20 million pounds of tobacco annually for cigar filler and wrappers and some rolling operations remain.

"Cigars are an important part of the state economy and few people may be aware of it," said J.J. Fadden, who owns Big House Tobacco, a cigar bar in Scranton. "Not only do we have growers and small shops like mine, we have those large entities whose lobbying makes a difference."

Contact the writer:

dfalchek@timesshamrock.com