Following the lead of other states, South Carolina lawmakers are pulling back on plans to tax and regulate electronic cigarettes until they see what the federal government will do.
And the spokesman for R.J. Reynolds Tobacco Co. told GreenvilleOnline.com that he believes federal regulations are coming “but nobody knows when.”
The House Ways and Means Committee has adjourned debate on a bill that would have created a tax for e-cigarettes, meaning the proposal likely is dead for the year, said Rep. Brian White of Anderson, chairman of the committee and chief sponsor of the bill.
Rep. Rita Allison, a Spartanburg County Republican who was among the bill’s early sponsors and chaired a subcommittee which handled the bill, said lawmakers have too many questions, especially about what the federal government will do.
“We were going to be the only state to put on an excise tax and then the feds could come down with another tax,” she said. “There were just a lot of questions. This is the first year of a two-year term, and it’s not like it’s lost.”
Rep. Garry Smith of Simpsonville, a member of the panel, told GreenvilleOnline.com that he wants to see whether the federal government taxes the cigarettes before supporting any plan for South Carolina to do so.
“I don’t think it would have any impact upon them whether we do it or not,” he said of the federal government. “I think they’ll go ahead with whatever they want to do. If they want to institute a tax that’s probably what they’ll do.”
Jason Hagan, the owner of the Vapor Room Cafe in Greer, said he and other electronic cigarette dealers in the state banded together when news of the proposed tax first surfaced.
“I guess a little pressure helped,” he said. “We’re just going to keep pushing them until they decide they don’t want to pursue it any more.”
South Carolina’s bill, White says, was modeled after legislation in Oklahoma, which passed its Senate but didn’t pass 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 Kevin Frija, the CEO of Vapor Corp., 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.
Overall, the bill would raise an estimated $2.57 million for the next fiscal year, according to an estimate by the state Board of Economic Advisers, which estimated e-cigarette sales in the state of $15 million.
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.
A one-milliliter cartridge generally equals one pack of cigarettes.
Although the plan initially received bi-partisan support, that support waned after opposition from businesses that would be affected and from anti-tax groups, which themselves were initially divided on the issue.
Bryan Hatchell, a spokesman for R.J. Reynolds, said his company supports the bill.
“We are disappointed that further discussion about this bill did not occur,” he said.
“We supported Rep. White’s bill because it was the right thing to do in that it created a reasonable regulatory and tax structure for a new and emerging tobacco category.”
Hatchell said federal involvement on the issue is inevitable. The U.S. Food and Drug Administration is expected to eventually regulate electronic cigarettes.
“We do think that federal regulation of e-cigarettes is coming, but nobody knows when and to what degree,” he said.
“States have an opportunity to protect this important tobacco category by establishing their own regulatory structure outside of what the federal government chooses to do. So far, only one state in the country has regulated this product and they got it very wrong.”
That state, he said, is Minnesota, which he said taxes e-cigarettes at 95 percent of the wholesale price.
The South Carolina bill would have prevented that from happening, he said.
White, who initially said the bill was more about generating a conversation about e-cigarettes than revenue, said it had no chance of passage this year anyway because it didn’t pass the House by the May 1 crossover deadline. But he said the bill isn’t dead because this is only the first of a two-year session.
“I think there is dialogue still going on about the subject matter,” he said. “Obviously the feds are still working on it.”
Hagan said he’s not against regulation of his industry.
“I don’t have any problem with some sort of regulation,” he said. “But I heard one lawmaker say, ‘We had to tax it to regulate it.’ Well, that is a complete farce. That’s two separate things. You just want to make money, that’s what you’re really saying.”