Vape Radio 89: PA Vape Tax Update - Interview With Chuck Huff From The Pennsylvania Vape Association

May 15, 2017

Chuck Huff, the president of the Pennsylvania Vape Association tells us the effects on the vape industry in my old home state and how it has decimated the vape industry there. Entrepreneurs that risked their hearts, souls and money have been ruined in some cases and it ain’t over yet. The worse may still be yet to come.

Last year the state of Pennsylvania approved a 40% floor tax, which is what we’ll be speaking about today.

And in my current state of California, the deal breaker just passed last year known as Prop 56 which is even worse. On top of the legal age to vape being raised to 21, we haven’t quite seen the effect, but the tidal wave is closer and growing. We’ll explore that one in future shows.

But for now, sit back and listen to the tale of PA. It’s not Halloween, but this story may scare you worse than any manufactured terror.

The free and easy days of the vape industry are behind us, and aside from the challenges of competition and negative press, we have two major foes when it comes to regulations. One is the Fed, the FDA, who lowered the hammer last August with the deeming regulations. On top of that we have 50 more enemies in our midst. They are the individual states and the challenges of dealing with some of their actions.

Starting early out of the gate was Minnesota who instituted an insane tax on nicotine. That was followed by others and one that we spoke about in detail in show # 87. The state of Indiana. They pretty much eliminated all out of state suppliers into the state, but recently that law was overturned and ruled unconstitutional by the federal Appellate court

 Links Discussed:

www.PAvape.org

What You'll Hear Today:

  • Chuck Huff is the President of the Pennsylvania Vape Association. They are affiliated with VTA and work closely with many other advocacy organizations
  • Any seller from out of state that sells to PA residents must be licensed
  • A consumer who purchases online from an unlicensed seller is considered an “unclassified importer” and required to pay the 40% tax directly to the Department of Revenue.
  • The PA Vaping Association is dedicated to education and later added on advocacy due to threatening regulation
  • The 40% “floor tax” was introduced in 2014-15, but removed. It was brought back the following year and is now law, effective June 31, 2016. The state allowed a grace period to make payment until December 31, 2016.
  • The “wholesale value” of all standing inventory is taxed, whether sold or not. Unsold products are taxed as well.
  • The state has the right to audit for misrepresented amounts.
  • The vape shops still pay a 6% sales tax BEFORE the floor tax is implemented
  • The floor tax is rarely used in any industry.
  • The tax was designed to offset budget shortfalls but may backfire due to shop closures. Some regulators have said that the tax may have been a mistake and is destroying small businesses. This creates empty storefronts and unemployment.
  • Consumers are required to pay the tax on out of state purchases, too.
  • Any seller from out of state that sells to PA residents is an “unclassified importer”.
  • There were 450 “active” vape businesses in the state before the tax went into effect. Since then over 100 stores have closed. These closures cannot be directly attributed to the tax, but it’s a serious impact. Stores continue to close…
  • Anecdotal evidence shows that some vapers have gone back to smoking…and shops have seen up to a 40% drop in sales.
  • There is a movement to overturn these laws and show that less taxes are collected rather than more.
  • Contact Chuck at chuff@pavape.org or visit www.PAvape.org
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