Legislators made waves in Olympia, Washington Tuesday. By a unanimous vote, a bill was passed introducing a sales tax or sin tax on vaporizer products. The bill was introduced by Rep. Gerry Pollett, and proposes new tax rates on both closed and open vaporizer systems on a per-milliliter basis.
According to Pollett and supporters of his bill, the tax revenue will be used in large part for the purposes of state public health services and cancer research. Teen tobacco and vaping prevention programs will also be funded with revenue from this bill.
Independent vape store owners have met this “sin tax” with protest and dismay. Some of who see the move as a form of collusion between big tobacco companies and the state legislature. In this post, we explore this position along with the potential effects a sin tax could have on the vaping industry at large.
Collusion From The Perspective of Independent Vape Store Owners
There are currently two types of vape systems: “Closed” or fixed systems such as JUULs and e-cigarettes, and “open” or unregulated systems comprised of interchangeable components. The former is manufactured by companies now largely owned by big tobacco – see the acquisition of Vuse by Reynolds American, the purchase of Blu E-Cigarette Co by Imperial Tobacco and the $12.8 billion investment into JUUL by tobacco juggernaut Altria.
On the other hand, components for open systems are sold at independent vape shops that stock items such as squonk mods, rebuildable tank atomizers and bottles of e-liquid manufactured by various smaller companies not owned by Big Tobacco. Because of the degree of customizability offered at independent vape shops, many of their customers are ex-smokers who vape without consuming any nicotine at all.
With Big Tobacco’s immense wealth of resources, closed systems are available just about everywhere. Pharmacies, convenience stores, and even some airport retailers, all of whom will be able to shrug off a tax hike. Unable to shrug off this tax hike are independent vape shops. They will ultimately have to either pass the cost down to customers or vaporize profits. In either scenario, Pollett’s sin tax is a huge win for Big Tobacco. It is a palpable loss of ground for small vape businesses.
The Impact of a Sin Tax On The Vape Industry and Consumer Behavior
For consumers, the introduction of a state-level sin tax is expected only to change the venue of sale. Vapers who already purchase their gear online won’t feel much of a change from the usual order of business. The biggest loser from this development will be brick and mortar vape shops. Their buyers will turn to online shopping to avoid price hikes.
If independent vape shops happen to have an e-retail presence. It’s still likely they will lose considerable traffic due to the presence of online retailers. Due to their superior logistical capabilities and buyer protection programs, such as eBay and Amazon.
Similar Proposals in Different Localities
While the idea of a sin tax is certainly unwelcome among family-owned vape retail businesses and smaller scale vape manufacturers. It seems to be gaining traction with legislators beyond Washington State. All major political parties in Canada’s British Columbia province are currently polishing their own version of a tax on vapor products. Governor Kate Brown of Oregon is already mulling the idea of using a sin tax. The tax would be used to help fund the Beaver State’s fledgling Medicaid program. The Beaver State’s fledgling Medicaid program will also benefit from the proposed “sin tax.”
It will be interesting to see how vape and e-cigarette advocacy groups plan to argue against further legislation against independent vape shops in other states.
