New Vape Tax Proposals Could Harm Industry
A proposed law in Nevada is targeting vape companies and businesses, and the market in the state is banding together to protest it.
The Las Vegas Sun is reporting that the bill, known as Assembly Bill 269, is an excise tax of five cents for each fluid milliliter of vape liquid. An excise tax is an indirect tax, meaning that vape businesses are responsible for paying the tax; in turn, businesses will pass on the tax to consumers in order to keep their profit margins the same.
If the bill passes, it is estimated that the state of Nevada will receive $1 million in extra revenue each fiscal year, a number that comes courtesy of the fiscal analysis provided by the Legislative Counsel Bureau.
Vape liquids often come in bottles that contain 30 ml or 60 ml. This means that vape bottles could cost $1.50 or $3 more, depending on the size of the bottle. This is on top of the $20 minimum that customers pay for the bill, leaving many vapers with the choice to either stop vaping altogether or move back to tobacco products, which are less expensive.
The Nevada Independent is reporting that Assemblywoman Irene Bustamante Adams, a Democrat representing District 42 that includes the city of Las Vegas, is the sponsor of the bill. She maintains that the bill is not an attack on the vape market, but rather a pragmatic approach to a burgeoning industry.
“This is not a health bill,” Bustamante Adams said when asked about the bill. “This is about a tax conversation and whether this should be included or not.”
Nevada previously tried to pass a taxation bill on the vape industry during the last session but could not find consensus on what vape products should be allowed to be taxed. The debate revolved around the fact that a growing number of vape liquids do not actually contain nicotine derived from tobacco, and therefore should not be taxed under the same tobacco taxation laws that the previous bill had used as precedent. That bill died in the hearings.
Still, the supporters of the bill state that all vape products should be taxed just like tobacco products are taxed in the state. The Retail Association of Nevada, which previously had provided campaign donations to Bustamante Adams for her 2014 for the state legislature in association with the Nevada Association of Realtors, claims that vape products are close enough to tobacco products that they ought to be included. The association also pointed to the fact that at least four other states have authorized taxes on vaping products, including California, the most recent addition to the list.
However, the Retail Association of Nevada failed to disclose that the taxation laws passed in other states have met with varying degrees of success: vape companies have simply moved across state lines to avoid the tax or have gone out of business. Many businesses as well have closed prior to the outrageous taxation in Pennsylvania could take effect, leaving the state short of its profit estimations for the fiscal year. And the vape legislation in Indiana, which included a tax, is in the midst of an FBI probe into allegations that the bill resulted in a monopoly.
Opponents to the bill also took a swipe at the misinformation campaign that surrounds vaping. This year’s session sees the same discussion and debate around the health effects and implications of vaping and how it is seen as a smoking cessation tool by most of the vapers who use it. In fact, the bill’s opponents point to the 2016 study done by the Royal College of Physicians and that is supported by Public Health England that found that vaping was 95 percent safer than traditional cigarettes.
One vape shop owner, Natasha Supancheck, who owns Nevada Vapor and operates three stores in the Reno area, spoke about the proposed bill, stating that:
“When you’re presented with a harm reduction technology such as an e-cigarette, why would you want to go after that technology? To me it’s akin to going after other harm-reduction technologies like seat belts, lifesaving medicines. When you tax those kinds of things, it’s sending a clear message that these projects are wrong or a vice.”
The bill has been seen as a death knell for California-based vape companies who have recently relocated to Nevada to avoid California’s tax bill. It is estimated that in California, the tax rate could be as high as $68 percent, although the legal minutiae of the law have yet to become clear to vapers in that state.
Bill Wilson, who serves as CEO of eCig Distributors, moved his company and dozens of his employees to the Las Vegas area after California voters approved a vape tax hike that is expected to bring $1 billion in revenue to the state. He has plans of starting a worldwide shipment distribution company of vape products when the company made the move to its new facility located near the McCarran International Airport in April.
Now Wilson is regretting his decision to move to Nevada following the news of this tax. His business would be set lose about $600,000 a month if the bill becomes law. Wilson also stated that the proposed law would put him out of business.
“If we had found out about this in December or January, we would’ve been moving to Texas,” Wilson told reporters Tuesday after testifying before Nevada lawmakers.
Supporters of the vape industry, including lobbyists and former legislators, are coming to the defense of vaping as well: William Horne, who formerly held the Assembly majority leader position in Nevada and who now works as a lobbyist for the Nevada Vaping Association, has been one of the most vocal. He stated, as many proponents have, that the state could make more than a $1 million just by attracting vape businesses that are looking for a new home after their home states imposed egregious tax hikes.
“The most compelling argument made by the opposition is a burgeoning industry that’s taking hold in Nevada. I would say that in that regard, that we should embrace this industry and allow it to flourish,” said William Horne said when asked about the future of the vape industry. “I believe that economic impact is going to be far greater than $1 million.”
For her part, Bustamante Adams says that she is and has always been willing to compromise on aspects of the bill. She pointed to the fact that she had amended her legislation to exclude vape products from the wholesale tax imposed on other tobacco products, a choice that is arguably rational, considering that vape products are not tobacco products.
Still, the Assemblywoman stated that taxing the vape industry was logical and that often, taxation bills bring out businesses that oppose the tax and say they won’t be able to thrive under the new bill. She used the recent overhaul of Nevada’s live entertainment tax as an example.
“Golf courses didn’t want to be included. Outdoor concerts threatened to leave Nevada. And we’re still doing well. If not now, then when?”
What Bustamante Adams is leaving out of her argument is that live entertainment is not akin to vaping; one is a choice that customers make to have a good time, and one is saving the lives of traditional smokers. Her reasoning on this matter is also left open for debate, as campaign donations from the Nevada Association of Realtors, which supports the tax, could be viewed as an influence.
AB269, as the bill is called, is currently going through hearings and debates, including a recent hearing with members of the Assembly taxation committee. It has not yet been put to the floor for a vote.