Taxing Electronic Cigarettes

E-Cigs and TaxationBy 2017, it is expected that the electronic cigarette industry will be raking in around $10 billion yearly. Presently lingering around $2 billion, a 5 times increase is not a trend to be balked at. What these numbers also spark discussion of is taxes, because like any product industry that gets hot, it’s going to get taxed.

The ongoing debate on how electronic cigarettes are classified in regards to being considered “tobacco” products is a direct indicator of how they may or may not be taxed in the near future. Especially relevant to the discussion of “special taxes,” it is rather apparent that e-cigarettes should not be considered tobacco products, because simply, they do not contain tobacco.

The “special taxes” in question are what are known as “excise” taxes, and they have been implemented in recent years, particularly by interests of the anti-e-cigarette movement, who see the income potential of these products, particularly because so many smokers have switched to using them instead of traditional cigarettes.

While currently the only state taxing e-cigarettes in the same methods as traditional cigarettes is Minnesota, there are several more considering taking the same action, including Indiana, Kentucky, New York, New Jersey, Oregon, Rhode Island, South Carolina, and Washington. In the past, Hawaii, Oklahoma, and Utah attempted the similar measures of e-cigarette taxation, however their efforts were not successful.

In Minnesota, their Department of Revenue has estimated that their taxation of e-cigarettes is slated to be bringing in somewhere in the proximity of $1.16 billion due to the combined taxation of e-cigarettes and tobacco products in the 2014 – 2015 fiscal year. Not a figure to be taken lightly, and it is certainly setting an example for other states to compare notes on.

And though the money looks great, there is the moral side of the story to consider. And the fact that vapers will not go down without a fight. And that there are many thousands of small businesses that will be majorly impacted by such taxation. So, as attractive as taxing e-cigarettes may appear, for cities and states that implement such measures, it will not be a clear-cut or easy road ahead.