Lawmakers back tax on e-cigarettes

Posted May 13, 2014

— North Carolina lawmakers this summer will debate a proposal to add an excise tax to the liquid used in vapor, or electronic, cigarettes.

E-cigarettes are a fast-growing segment of the U.S. tobacco products market. The state currently imposes a sales tax on the devices but does not collect an excise tax as it does on cigarettes and other tobacco products. 

Instead of burning tobacco, the electronic devices use a battery to heat a liquid containing nicotine, turning it into vapor.  The product itself doesn't contain tobacco, but the nicotine is derived from tobacco, so the U.S. Food & Drug Administration has classified the devices as tobacco products.

The draft legislation approved Tuesday by the Joint Revenue Laws Study Committee would tax the nicotine-collecting liquid at a rate of 5 cents per milliliter.

For comparison, Vuse, the new R.J. Reynolds electronic cigarette currently being test-marketed in Colorado and Utah, contains less than a milliliter of liquid, but it is equivalent to about a pack of traditional cigarettes. 

If implemented during the upcoming short session, the tax is projected to bring in about $2.1 million in the 2014-15 fiscal year and $5 million in the 2015-16 fiscal year. 

The proposal had strong support from R.J. Reynolds, which asked lawmakers not to tax the devices as either traditional cigarettes or other tobacco products.

"They're not the same," David Powers, vice president of government relations for Reynolds, told the committee.

The alternative, currently under consideration in several states, would be to tax e-cigarettes as traditional cigarettes, which would be far pricier. North Carolina's current tax on cigarettes is 45 cents per pack. Other tobacco products, from cigars to snuff, are taxed at 12.8 percent of cost. 

Powers said many smokers are switching from cigarettes to e-cigarettes, adding that the vapor devices carry less health risk because no tobacco smoke is produced.

"We don’t want to create disincentives for smokers to try it," he said.

Sen. Floyd McKissick, D-Durham, called the proposed 5 cent tax a "good place to start," but he added that lawmakers may  need to consider raising it in coming years as the state budget begins to lose revenue from people making the switch from traditional to electronic cigarettes.  

The draft legislation now goes to the full legislature for consideration.


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  • M1962 May 14, 2014

    First of all I wish the manufactures would quit advertising 1 ml of e-juice as a pack of cigarettes. It's not even close. 2 to 3 at the most.
    It's time for the lawmakers to find other ways to generate more revenue besides tobacco. It's crashing, and fast and they realize this. It's time for "all" to pay for pet projects, not just tobacco product users.
    It's a sad day when all of the government entities want to tax and stamp products that are saving lives and allowing people to make healthier choices.

  • Dana McCall May 14, 2014
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    What moral right does the government have in taxing this product? There is no documentation to show that it is a burden to society thus far, and just because it delivers the same agent tobacco does, it isn't tobacco and it isn't smoking.

  • Jeff Hardwick May 14, 2014
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    RJ Renolds has no viable product, and no real market prescence, yet they represented the industry in the committe meeting. RJ Renolds stated that all products are made in China, yet this is a growth industry in the USA with many manufacturers here and more everyday. RJ Renolds also stated that their product is a closed system that is tamper-proof and uses less than a milliliter of liquid. This is not the type of product in common use, and consumers have shown that they do not want this type of product. This is a bad, misleading and misrepresented comparision. Why not get the facts? It's not hard to do. Taxes that are not based on facts and reality are bad taxes.

  • berniwheeler May 14, 2014

    Its a money grab. Its that simple. Tax rev is down because less and less people are buying cigs, more and more are turning to ecigs. OMG the people are escaping?

    Wait... who is in charge anyway? The Big Brother Government... or We The People?

  • iopsyc May 14, 2014

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    What is your source for the compounds in cigarettes?

    I see propylene glycol as an approved additive, but not ethylene glycol.

  • Hal Price May 14, 2014
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    It's comical reading some of the post. People come across as tax, cigarette, government, medical, and scientific experts, which going on a huge assumption they aren't, and if they are, they don't know what they're talking about. This whole thing is absolutely nothing but a money grab, plain and simple, black and white, as simple as it gets. I realize there are people out there that have no problem allowing a government to take what is yours and someone else money, thievery is what it is. Then there are others who do care and think taxation is immoral and illegal which I proudly count myself in that group.

  • iopsyc May 14, 2014

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    Not weird.
    You presume that a synthetic would be classified as a therapeutic drug and require FDA approval following clinical trials. While it's a given that there would be some degree of regulation, especially around following CGMPs, I can't say if the FDA would classify it as a drug. I think there's enough of a gray area that an enterprising business person might be wise to look into it.

  • Don Dickerson May 13, 2014
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  • William Willets May 13, 2014
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    When you are smoking cigarettes, you're smoking more than nicotine laden tobacco. You're inhaling ammonia, ethylene glycol (radiator coolant), formaldehyde and numerous other compounds. These additives are intended to make the cigarettes burn more smoothly and stay lit. So I've always wondered what pare of the cigarette actually contributes the most to cancer.

  • William Willets May 13, 2014
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    It's like red light cameras because it's strictly about revenue. Although not specifically mentioned in this article, proposals such as these are often couched in terms of protecting human health and it's not about that at all. It's simply about revenue ... just like red light cameras. Safety is out the window on that as well since no license or insurance points are associated with the serious infraction of running a red light.