Lawmakers mull tax on e-cigarettes

05/16/2013 12:00 AM

05/16/2013 9:49 AM

Like many other businessmen across the country, Jason Hagan of Greer thought the idea of starting a shop that would sell electronic cigarettes was a good idea.

So he plowed his life savings into the Vapor Room Cafe and opened its doors last month.

Lawmakers in the state House, though, want a piece of the action and are moving ahead with a bill that would levy a tax in addition to sales taxes on e-cigarettes for the first time.

“It’s really going to mess up my business,” he said. “I have my life savings in this business. It’s helped a bunch of my customers stop smoking cigarettes. The electronic cigarettes are my main business.”

South Carolina is among a handful of states considering special taxes for e-cigarettes, which use vapor instead of tobacco to deliver nicotine to users.

For lawmakers who are supporting the legislation, the issue is more than just a tax. It also involves questions of safety, regulation, definition and how states should respond to a host of innovative alternatives to traditional cigarettes.

Tobacco manufacturers now market thin cigars that look like cigarettes except for their wrappers, some smokers buy pipe tobacco to make their own cigarettes and some individuals are making their own liquid base for electronic cigarettes, worrying some about what may be in the mixture.

“A lot of it is to just get a discussion and awareness out there,” said Rep. Brian White, chairman of the House Ways and Means Committee and chief sponsor of the bill. “I’m not saying it’s good or bad. I’m just saying let’s have a conversation about it.”

Kevin Frija, CEO of Vapor Corp., one of the nation’s leading e-cigarette companies, said lawmakers aren’t looking at the big picture in trying to tax e-cigarettes.

“As far as we’re concerned as a company and as an industry, I think it’s a little premature to be looking at taxing until it’s very clear there is a standard method of taxing. We almost feel like the government should subsidize the product because at the end of the day, the benefit of having people smoke less tobacco cigarettes over the long run will probably save the taxpayers, the states and the government.”

South Carolina’s bill, White says, is modeled after legislation in Oklahoma, which passed its Senate but hasn’t passed in the House.

The bill would create a tax of five cents per milliliter of vapor liquid in an e-cigarette. It also assesses a tax of five cents per ounce of “tobacco-derived” products, though Frija says his company’s products don’t contain any tobacco.

The proposed tax would equal about five cents per electronic cigarette cartridge, according to Frija.

Though there are a variety of products, e-cigarettes generally are comprised of a battery and a cartridge of liquid that converts to vapor. Users can choose the level of nicotine they want or no nicotine at all.

One cartridge generally equals one pack of cigarettes.

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