As one of the first states to tax vapor products, Minnesota has the rest of the states watching to see how far regulation can and will go in this new industry before it collapses. One of the most significant advantages that vapors had over the long established tobacco industry was their significantly cheaper price. But actual and attempted changes in the law have resulted in a loss of that competitive advantage.
This past year, Minnesota was on the verge of a $.30 per ml tax on vaping liquids, which those in the vapor industry claimed would result overall in up to an 800% tax on vapor products. Fortunately, May 2015, ended without passage of that bill. But those in the vapor industry know the battle is far from over. And while vapor tax reform may be on the backburner for now, Minnesota has continued to introduce harsh proposals for bans on the industry.
In September, Minnesota also proposed a new tobacco ordinance that would add vaping and e-cigarettes to the ban on smoking in public indoor spaces. While a ban on smoking can easily be justified with the smell and release of harmful chemicals into the air, e-cigarettes create no such problems. Why, then are legislators so aggressively pursuing this cause?
Most recently, on November 4, 2015, a proposal was introduced to ban nearly every available flavor of vapor products. Under this proposed legislation, only tobacco, menthol, mint, and wintergreen flavors would be available. No doubt under the guise of deterring children from nicotine consumption, this proposed ban further disadvantages an industry that provides a safer and healthier alternative to tobacco use.
While on one hand, the bans on particular products and uses seems to cut into the potential taxable base for states, an industry clean up could streamline the legislative process. Regulating and taxing a few products is easier than a wide variety of products, some of which could potentially fall through the cracks and avoid regulation.
If Minnesota is a good gauge of how far legislatures will regulate this new industry, manufacturers, wholesalers, and retailers across the country should prepare for regulation on the level of tobacco products. Only time will tell if the more tobacco-friendly states will remain vape-friendly as well. But with the decline in tobacco use and dramatic rise of vape use, the vaping industry remains a huge tax source for states, many of which are desperate to increase revenue.
In addition, if you are located in Connecticut, Delaware, Georgia, Illinois, Iowa, Kentucky, Maine, Maryland, Mississippi, North Dakota, Nebraska, New Hampshire, Ohio, Oregon, Virginia, and Wisconsin, or other states with similar laws then you might have a refund based on our theory and proprietary information. Give us a call to get started today!
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 [email protected] or phone at 954-639-4496.