Pennsylvania legislators may have just placed the final nail in the coffin of the state’s vaping industry by passing a 40% e-cig tax that threatens over 300 vape shops and small businesses. The tax was hidden inside a $1.3 billion bailout package earmarked to resolve the state’s massive budget deficit. It is also the largest tax increase approved during a presidential election year in the recent history.

The date in which the new regulations will take effect is still unclear, but most political insiders expect the tax increase to officially take hold is less than 90-days. Once implemented, all retailers of electronic cigarettes and vaping products will be required to pay an immediate “floor tax” at a rate of 40% of their current inventory. With one fell swoop, the Pennsylvania vaping industry may have just been completely wiped out overnight.

PENNSYLVANIA 40% E-CIG TAX RECEIVES BI-PARTISAN SUPPORT.

The state’s budget deficit is so severe that Gov. Tom Wolf (D) had originally asked the Pennsylvania State Assembly for over double the received funds, or a whopping $2.7 billion. Yesterday, the newly modified budget with the included 40% e-cig tax was approved by a margin of 116-75 in the House and 28-22 in the Senate. A combination of both Democrats and moderate Republicans voted in favor.

ONLINE RETAILERS MAY FACE EXTINCTION, AS WELL.

Even if vape shop owners in Pennsylvania can cough up the 40% floor tax, they will still have trouble competing with online retailers. Why would a consumer want to pay $120 for a vape mod from a “brick and mortar” establishment when they can go online and get it for about $80 and with overnight delivery?

Meanwhile, even e-commerce sites based in Pennsylvania will be forced to pay the floor tax on all inventory. As a result, online prices will see a significant increase, and customers will likely head to an out-of-state alternative as a resort. Either way you look at it, vaping in Pennsylvania seems to be heading towards extermination.

CONTACTING PENNSYLVANIA LEGISLATORS IS ENCOURAGED.

However, a last ditch effort to reach a new compromise is underway by many of the vaping advocacy groups, including SFATA and CASAA. All members of the vaping community are encouraged to contact Pennsylvania officials to express their outrage. If it can happen in Pennsylvania, it can happen anywhere. Contact information can be found on the SFATA and CASAA websites.

On Wednesday, July 13th, 2016, the Pennsylvania legislature chose to protect the state’s cigarette tax revenue stream by voting to pass HB 1198 — the revenue half of Pennsylvania’s budget — without removing a disastrous tax on vapor products.

HB 1198 (now Act No. 84), Article 12-A requires retailers to pay an outrageous 40% tax on the purchase price of all vapor products — devices and liquids. Part of implementing this tax includes a 40% floor tax (§1203-A) on any products on the shelves of vapor retailers on October 1st, 2016. This bill also enacts a new 55¢/oz tax on smokeless tobacco.

Here are some important dates and points to remember regarding this new tax:

This tax is imposed on ALL vapor products, which includes devices, nicotine liquids, and non-nicotine liquids.

A consumer who purchases vapor products from an unlicensed dealer over the internet or through the mail is liable for paying a tax of 40% of the retail price . Anyone who possesses “tobacco products” for which the tax has not been paid commits a summary offense which can result in fines and up to 30 days in jail (Section 1207-A(a)).

Manufacturers, Distributors, and Retailers must obtain licenses from the state in order to sell products in Pennsylvania.

Retailers must purchase products from licensed distributors or wholesalers.

The effective date of the tax is October 1st, 2016

Payment of the floor tax is due by December 30th, 2016 (90 days after the effective date)

Failure by any party to pay the required tax could result in hefty fines or up to five years in prison.

Although there is time built into the implementation of Article 12-A for some retailers to cover the floor tax, there will be many in Pennsylvania that find this tax to be insurmountable. Moreover, consumers in Pennsylvania will see a dramatically diminished cost advantage that vapor products once had over cigarettes. In turn, more smokers are likely to continue smoking and it is likely that some vapers will return to cigarettes.

The effect of this tax on consumers will be both an increase in purchase price and a noticeable decline in the variety of products.

This tax will most likely be passed along directly to consumers and will make it difficult for retailers in border counties to remain competitive with vapor shops just over the state line. Consumers can expect to pay anywhere from $4.00 to $6.00 more for a 30ml bottle of e-liquid. The aforementioned difficulty that vapor retailers will have in competing with cigarettes and retailers just over the state line means that many will be facing the prospects of closing their doors. For consumers this means a loss of variety and in many cases will mean a loss of access to advanced or specialty vapor products.

Vapor industry advocates in Pennsylvania have described this tax as unworkable. CASAA agrees with this analysis both as it relates to businesses and consumers. In the coming months, we will be working cooperatively with groups in Pennsylvania as well as national organizations to find a tenable solution. However, the fact that the legislature left a proposal on the table that would have allowed hundreds of PA vapor businesses to remain open, providing jobs, sales tax revenue, and life-saving products to hundreds of thousands of residents is astonishing. It is a sickening consideration that many in Pennsylvania will be forced to suffer the consequences of the legislature’s lack of vision before any meaningful change to this law is made.

For Sfata

http://sfata.org/

For Casaa

http://blog.casaa.org/2016/05/pa-take-action-to-oppose-40-percent.html#more

This article will be updated as time goes on.

Update#1 Change.org is collecting signatures to amend this insane law.

Link to Petition

Update#2 Fixed font color

Update #3

Update #4

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