HR 2342 is advancing for a full congressional vote in Pennsylvania after passing the House Finance Committee by a vote of 19-4 this week. Proposed as an alternative to the 40 percent e-cig tax on all retroactively purchased inventory, the bill would instead implement a 5-cents per milliliter tax increase on all e-liquids. Sponsored by Rep. Jeff Wheeland, the hope is that the new legislation will help the over 300 vape shops around the state to avoid bankruptcy.
The 40 percent inventory tax was approved by the Pennsylvania Legislature and signed into law by Gov. Wolf earlier this summer as part of a $650 million tax increase meant to overcome a growing budget deficit. After further review, Wheeland believes that only about $13 million will be raised from vaping products while threatening bankruptcy for hundreds of small businesses. If vape shops go bankrupt, then the state of Pennsylvania would lose even more money in convention taxes than the estimated $13 million. It just doesn’t make sense.
A senior policy analyst with the Commonwealth Foundation, Bob Dick, agrees.
“Vape shops owners don’t deserve to be taxed out of business to enable Harrisburg’s out-of-control spending…This tax unfairly targeted one industry to the point of near extinction. We’ve already seen approximately 50 vape shops close their doors because of this tax, and more will follow unless it is repealed.”
(Related Article: PENNSYLVANIA PASSES 40% E-CIG TAX; 300 VAPE SHOPS FACE IMMINENT CLOSURE)
40 percent inventory tax threatens bankruptcy
The 40 percent inventory tax officially goes into effect on October 1, but retailers have a full 90 days to comply. Can HB 2342 pass both houses of the Pennsylvania Congress in this short window of time? That remains to be seen.
In the meantime, vape shops around the state have been trying to deplete their in-house inventory to eliminate the need to pay these hefty taxes. However, this comes with the risk of annoying many of their long-term, loyal customers. Owners of Vapor Café in Lancaster County, Kerry and Raymond Medina, are already witnessing some customer backlash.
"We're hoping that it doesn't close us down. Yes, we're worried about it absolutely, our customers are worried about it. This is not just going to affect the vape shops it's affecting the consumers as well…We're trying to deplete our inventory to zero, which is hard on customers because they're used to their ‘Apple Jacks’ and ‘3-Milligrams’ being on the shelf and I'm like 'I'm sorry I don't have it, here let's try something else.'"
Other customers are concerned about what they would do if the 40 percent tax drives all Pennsylvania vape shop out of business. But Rep. Wheeland remains optimistic. HB 2342 already has 60 co-sponsors, and its passage seems possible. But the real question is, will the bill pass in time?
With less than 90-days until the inventory taxes are due, and some 50 vape shops already closed for business, can the Pennsylvania vaping community wait that long for HB 2342 to pass? And is a 5-cent per milliliter tax really the answer? Either way you slice it, a big chuck of revenues is coming out of the coffers of Mom and Pop vape shops and falling into the hands of Pennsylvania politicians.
(Related Article: PENNSYLVANIA E-CIGS ‘SIN TAX’ INCLUDES POSSIBLE 5-YEAR PRISON TERM)
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