The popularity of vaping devices and e-liquids is undeniable. Tobacco shops
are increasingly hard to find while vape shops are in every strip mall
across the country. The fruity, sweet smell of vapor liquid is becoming
more familiar than cigarette smoke outside of bars and restaurants. Clouds
of vape smoke shoot out above crowds at stadiums whose walls are plastered
with no smoking signs.
These dramatic changes in a smoking culture that’s remained largely
the same since its inception have not gone unnoticed by both the federal
and state governments. The “sin tax” on tobacco has historically
been high. Many states have nearly doubled the cost of tobacco in recent
years with taxes that have been largely supported by an increasingly health
conscious population. The decline in tobacco sales that resulted in large
part from vapors has lost states millions of dollars in revenue in recent
years. To combat this, states aggressively pursued new legislation to
regain the lost revenue by taxing a primary source of its loss: vaping
devices and e-liquids.
As of the beginning of the year, four states and Washington D.C.
 In most cases, states have tried to expand their tobacco tax statutes
in order to capture vapor products and impose tax on them at a similarly
high rate. But if the justification for high, “sin” taxes
on tobacco was that they were burdening the states with all the severe
health consequences of their use, is a tax on vapes equally justifiable?
Most medical professions would argue that it is not. In fact, “tests
show the levels of dangerous chemicals [vaping devices] give off are a
fraction of what you'd get from a real
cigarette.” Many have argued that vaping has helped people quit cigarettes
and other tobacco products. So is grouping vapor products into the same
category, and tax, as tobacco products the right thing to do? Is it even legal?
The FDA seems to think so. On May 5, 2016, the U.S. Food and Drug Administration
announced that e-cigarettes will be regulated the same way cigarette and tobacco
products are. Referring to vaping products as Electronic Nicotine Delivery Systems or
“ENDS,” the FDA claims on its website to have “finalized
a rule extending our regulatory authority to cover all tobacco products,
including vaporizers, vape pens, hookah pens, electronic cigarettes (E-Cigarettes),
e-pipes, and all other ENDS. FDA now regulates the manufacture, import,
packaging, labeling, advertising, promotion, sale, and distribution of
ENDS. This includes components and parts of ENDS* but excludes accessories.”
The FDA not only has determined that vapors are tobacco products, but they
have expanded the definition of “tobacco products” so greatly
as to subject even batteries to its intense regulation procedures. This
trend of grouping vaping devices and e-liquids under the definition of
“tobacco products” is an improper expansion of laws which
were designed originally to protect the health of the public. Even more
egregious, this comes at a time when medical professionals and researches
are developing products that not only help consumers quit tobacco use,
but also improve their quality of life. E-medicines and e-vitamins are
already appearing in stores and the market for them is
With states trying to gain tax revenue and the federal government trying
to expand its regulatory authority over the industry, the entire future
of vapors was at stake. On May 10, 2016, one vapor company had enough.
Nicopure Labs, LLC filed its complaint in the U.S. District Court for
the District of Columbia urging the court to set aside the FDA’s rule as
Nicopure Labs, LLC, argued that since none of its products contained tobacco,
it was completely ridiculous to include them under the FDA’s definition
of tobacco products and subject their products to the expensive and time
consuming regulatory process that was previously reserved for cigarettes.
Specifically, Nicopure Labs, LLC, stated that the FDA’s new Rule
“concludes that vaping devices (or the constituent parts of components
of vaping devices) are ‘tobacco products’ subject to the Act’s
provisions, even though vaping devices (or their parts) are not made or
derived from tobacco or intended for human consumption.” Under this
premise, Nicopure Labs, LLC, made two main arguments.
First, Nicopure Labs, LLC, argued that the new rule was an unlawful statutory
interpretation. The complaint alleges that the rule is unlawful because
“its definition of ‘tobacco product’ and attendant proposed
reach of its provisions is unambiguously foreclosed by, and is an unreasonable
construction of, the text of the Act.
Second, Nicopure Labs, LLC, argued that the rule was an arbitrary and capricious
agency action. By arbitrarily discounting the safety benefits offered
by vaping devices, subjecting vaping devices to a process similar to that
of new drugs, and preventing manufacturers from introducing new vaping
devices and e-liquids for several years, Nicopure Labs, LLC, stated that
the rule was arbitrarily “frustrating innovations and advances in
public health while preserving the status quo that existed in 2007, i.e.,
a market dominated by cigarettes.”
Only time will tell if Nicopure Labs, LLC, will be successful in their
case against the FDA. But it is certainly about time that someone stands
up to governments as they try to expand their authority over and industry
they have no business regulating.
About the Author: In his law practice Mr. Donnini's primary practice
is multi-state sales and use tax as well as state corporate income tax
controversy. Mr. Donnini also practices in the areas of federal tax controversy,
federal estate planning, Florida probate, and all other state taxes including
communication service tax, cigarette & tobacco tax, motor fuel tax,
and Native American taxation. Mr. Donnini obtained his LL.M. in Taxation
at NYU. Mr. Donnini is licensed to practice law in Florida. If you have
any questions please do not hesitate to contact him via email JerryDonnini@TobaccoTaxRefund.com
or phone at 954-639-4496.
 The FDA goes on to define “components” or “parts”
to include items such as software, batteries, and even glass or plastic vials.