Ohio legislators have recently begun deliberating over their 2015-2016 proposed budget, and vaping has again been targeted as a source of tax revenue. In this latest attempt to expand the pool from which cigarette revenue can be drawn to those attempting to quit, the state of Ohio plans to begin taxing e-liquid at a fixed rate based on a somewhat ridiculous equivalence between volume of e-liquid and a specific number of cigarettes.
This proposal would make it such that 10mL of e-liquid would be taxed at a rate equivalent to 100 cigarettes. At 0.1135 cents per cigarette, the new proposed Ohio cigarette tax rate, this would amount to a full $11.35 in taxes for a 10mL bottle of e-liquid. This, of course, does not include manufacturing and distribution costs.
Based on my reading of the law, this tax would be applied equally to all e-liquids, regardless of nicotine content and only dependent on volume or weight. According to the text of the law, “[t]he tax shall apply to the entire volume or weight, as applicable, of the vapor product, regardless of whether the product includes additives other than nicotine.” The fact that no lower limit of nicotine concentration is provided also indicates that lawmakers are trying to give themselves as much latitude as possible in regulating all e-liquid. Thus, the phrasing of the proposed regulation would subject e-liquids that only contain traces of nicotine, as might happen if they were produced in the same facility as nicotine-containing e-liquids, to the same levels of taxation as liquids with the highest nicotine concentration available.
In addition to these outrageous taxes, a provision of the revised law also instates a $1,000 fee to be paid at the time of application for a wholesale vapor product dealer license, while smaller business retailers will have to pay a $125 application fee per retail location. Since licenses are only valid for one year, these are recurring costs that, though negligible for high volume sellers, will nonetheless be pushed back onto the consumer.
Prima facie, it appears that what states like Ohio are doing by subjecting vapers to the same tax burden as cigarette smokers is attempt to replenish the tax revenue that was once provided by cigarette sales. As lawmakers have caught on to the fact that declining tax revenues from cigarettes are partially explained by many smokers’ switch to vaping, they have moved to grab a slice of the vaping pie.
This strikes me as short-sighted; surely the tax money saved by a high reduction in the number of smokers would at least partially offset the loss in tax revenues from tobacco products, and, more importantly, surely the quality of life of those who switched from smoking to vaping is not something easily dismissed in favor of a totally unjustified tax.
If you’re an Ohioan, you might want to consider writing to your local representative and challenging him or her on this subject. Much of why this kind of legislation has been pushed through in other places is due to the lack of organized opposition from proponents of vaping, while opposition to vaping has come from places much better equipped to influence lawmakers.