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Vape stores wary of newly proposed tax

The walls of Delaware Vapor are lined with hundreds of bottles of e-juice – liquid nicotine in any flavor you can imagine that you pour into a handheld machine.

“They all just do the same thing: it applies heat through a metal coil and then applies that heat to a saturated wick and that produces your vapor,” said Brenden Styles, the store’s operations manager.

Gov. John Carney’s (D) proposed budget would add all e-juice under the tax code, charging retailers a 30 percent wholesale fee.

As it’s currently proposed, Styles says 30 percent is far too high to suddenly drop on business owners.

But he says he and others are willing to chip in.

“With a good definition, 15 percent is totally doable. I don’t think we’d even have to get excited about that. It would just be doing our part. I mean, just look at this budget deficit. We understand.”

Styles notes the 30 percent tax wouldn’t shut down either his Claymont or Newark locations, but it would significantly affect his profit margins.

For the past decade, e-cigarettes have been propelled from their early beginnings as a niche subculture to commanding $8 billion worth of global trade in 2015.

It’s projected to grow to more than $27 billion worldwide by 2022 and states - including Delaware - have been looking to tax the fledgling industry.

State Rep. Debra Heffernan (D-Bellefonte), who’s been one of the main drivers behind recent vaping regulations, says there has to be some kind of tax on these products.

“In some ways, there should be more equity [between vaping and cigarettes] so that kids are not attracted to buying the lower priced other tobacco products,” Heffernan said.

She says she and others are looking into other alternatives and may not ultimately settle on a wholesale tax, but wouldn’t elaborate on possible options.

But Styles says his fear is that Delaware will adopt a tax policy similar to one in Pennsylvania enacted in 2016.

About 140 vape shops have closed since the Keystone State implemented a 40 percent wholesale tax in October, according to Charles Huff, president of the Pennsylvania Vape Association.

They also levied a one-time 40 percent fee on all existing inventory.

Huff says the results have been devastating for his industry.

“Most of the shops that I have personally talked to have indicated a reduction in sales somewhere between 40 and 50 percent and many of those shops have had to lay off staff.”

He and other pro-vape advocates have picketed the Harrisburg capitol building since the law went into effect.

They want a flat tax on the volume of e-liquid stores buy.

Huff’s warning to Delaware officials is that such a heavy-handed, wholesale approach may not help them fill the projected $386 million budget gap as much as they think.

“You’re either going to kill the industry or you’re going to severely cripple it and you’re not going to get the money that you projected that you would get at 30 percent,” he said.

State officials say a 30 percent tax would raise about $200,000 next fiscal year, doubling in 2019.

Carney’s plan would also hike Delaware’s cigarette tax by a dollar per pack and include all “other tobacco products” like snuff and chewing tobacco under the same 30 percent wholesale tax.

Combined, the state would take in an extra $16 million annually.

No bill has been introduced so far.

Until then, Styles says he’s anxiously awaiting a fleshed out proposal.

“We are a part of the community – we already are – and we want to do our part and help the state out in any way we can but we just want to make sure that if there’s going to be a tax on something that’s clearly trying to help people, it’s a reasonable tax,” he said.

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