ALEXANDRIA, Va.—A proposal to tax vaping products has been dropped by Senate Democrats from the party’s health care, education and climate-change bill in an attempt to get through the Senate before Christmas, reports the Wall Street Journal. The provision would have taxed vaping products, including e-cigarettes, vaping liquids and oral nicotine pouches, similar to the existing federal cigarette tax rate of $1.01 a pack. However, it would have based the tax on volume of nicotine in the products, meaning in many cases they would have been taxed even higher than cigarettes.
The $9 billion tax increase was included in the bill the House passed last month, and it is much smaller than a broader tobacco-tax increase that House members had advanced earlier in the year that NACS strongly opposed.
Similarly, NACS opposed the proposed tax on e-cigarettes, oral nicotine pouches and vaping products, which are not currently taxed at the federal level.
“While proponents of the vapor tax intend for it to ultimately dissuade users and provide additional revenue, an increase of such substantial proportion will have the opposite effect and push users to a burgeoning illicit market,” said Anna Ready Blom, NACS director of government relations. “Operating completely outside of the law, illicit sellers through their channels distribute unregulated products to users of all ages.”
Vape products are not currently taxed at the federal level. NACS does not oppose reasonable adjustments to the taxes imposed on vaping products, Ready Blom notes. “But, when the price of a product rises too much too fast, illicit sellers will seize the opportunity to exploit and take advantage of current users and entice new users. This undermines the investments our members have taken to be responsible retailers and creates a problem for society as a whole,” Ready Blom said.
NACS member companies invest millions of dollars each year in compliance efforts and training for employees in responsibly selling age-restricted products. What’s more, NACS has launched TruAgeTM, the new digital solution that enhances current age-verification systems and protects user privacy.
In October, the White House released its “Build Back Better” framework, along with the House legislative text, which did not include any increase in the Federal Excise Tax on Tobacco (FET). Originally, the House’s version included language to double the FET on cigarettes and apply tax parity to all other tobacco and nicotine products.
NACS strongly opposed the increase and organized a coalition of retail groups to publicly oppose it. NACS met with moderate Democrats in the House and Senate and encouraged them to go to their leadership and ask that it be removed from the bill, which a number of them did. Additionally, NACS called the industry to action sending hundreds of retail letters to the Hill. These efforts appear to have been successful as there is no FET increase in the latest text of the bill.